TRANSNATIONAL CRIME, LOCAL CRIMINALS Rethinking the size and shape of Mexican organized crime

December 2011

DTO revenues: USG estimates

Source: ONDCP, NDIC, ICE */ Includes revenues accruing to Colombian DTOs

USG estimates of Mexican DTO revenues (USD bn)

Agency Date Low High

ONDCP 2006 13.8 13.8

NDIC */ 2009 18 39

ICE 2010 19 29

Source: Kilmer et al 2010

DTO export revenues: RAND estimate (2010) Mexican DTOs: Best estimate of gross export revenues, 2010 (USD bn)

3.4

1.5

1.1

0.6

Cocaine Marijuana Heroin Meth

Source: IMCO / México Evalúa (2011, unpublished) Note: estimates within 90% confidence interval

DTO export revenues: Our estimate (2011) Mexican DTOs: Estimates of gross export revenues, 2011 (USD bn)

Drug Low Best High

Marijuana 1.4 1.9 2.5

Cocaine 2.1 2.8 3.6

Meth 0.5 0.6 0.8

Heroine 0.7 0.9 1.2

Total 4.7 6.2 8.1

DTO income: missing pieces GROSS EXPORT REVENUES

- COST OF DRUGS

= NET DRUG EXPORT REVENUES + NET DOMESTIC DRUG REVENUES + US DOMESTIC DISTRIBUTION REVENUES

= TOTAL DRUG INCOME

+ NON-DRUG INCOME

= TOTAL INCOME

Source: INEGI

Evidence from BOP? Mexico: Errors and omisssions account , 2000-2010 (USD bn)

-14.0

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.02000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

(USD

bn,

inve

rted

scal

e)

Source: Banxico

Evidence of “Dutch disease”? MX Peso: Trade-weighted exchange index, 2000-2011

(100=Jan. 2000)

60.0

70.0

80.0

90.0

100.0

110.0

120.0

130.0

Jan-

00M

ay-0

0Se

p-00

Jan-

01M

ay-0

1Se

p-01

Jan-

02M

ay-0

2Se

p-02

Jan-

03M

ay-0

3Se

p-03

Jan-

04M

ay-0

4Se

p-04

Jan-

05M

ay-0

5Se

p-05

Jan-

06M

ay-0

6Se

p-06

Jan-

07M

ay-0

7Se

p-07

Jan-

08M

ay-0

8Se

p-08

Jan-

09M

ay-0

9Se

p-09

Jan-

10M

ay-1

0Se

p-10

Jan-

11M

ay-1

1

Evidence in banking system? Mexico: Commercial bank deposits, 2000-2010

(% GDP)

Source: CNBV, BBVA-Bancomer

16.1 16.4 16 16.1 15.9 15.9 15.2

16

18 19 18.9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Evidence in housing market? Mexico: Real housing price index by state, 2005-2010

( average annual real growth)

Source: SHF, Banxico

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Taba

sco

Cam

pech

ePu

ebla

Vera

cruz

Hida

lgo

SLP

Dist

rito

Fede

ral

Mor

alos

Chia

pas

Oax

aca

Guer

rero

Méx

ico

Qui

ntan

a Ro

oYu

catá

nN

ayar

itTl

axca

laCo

lima

Nac

iona

lSi

nalo

aM

icho

acán

Que

réta

roCo

ahui

laTa

mau

lipas

Dura

ngo

Nue

vo L

eón

Sono

raAg

uasc

alie

ntes

Chih

uahu

aGu

anaj

uato

Baja

Cal

iforn

ia S

urJa

lisco

Baja

Cal

iforn

iaZa

cate

cas

Evidence in stock market? Selected LATAM stock markets, 2000-2011

Source: Bloomberg

Vertical integration?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Importer

Producer

Money laundering

Wholesaler

Retailer

Mule

Possession

Unspecified

US, Non-Mexican Mexican-American Mexican Other nationals

Drug-related state and federal inmates by self-specified role and national/ethnic origin, 2004 (%)

Source: Caulkins/Sevigny 2010, with data from Survey of Inmates in State and Federal Correctional Facilities (2004)

A taxonomy of criminal groups Illicit traffic

Rent extraction

Local Transnational

Sinaloa

AFO BLO

Juárez / BA Zetas

Templarios

Prison gangs

Human traffickers

Migrant kidnappers

Local kidnappers

Acapulco gangs

Fuel thiefs

“Fakers”

Local drug distributors

Traditional smugglers

Domestic traders

Gulf

Muscle men

Piracy rings

Border extortionists

Three conclusions and some implications

Conclusions CW about size, most likely wrong

Network, not vertically-integrated structure

Highly diversified criminal forms: TCO denomination obscures the issue!

Implications No long-term threat to Mexican national security

Key issue: law and order

Need for local responses (while leveraging federal + US resources)

Thank you Alejandro Hope Proyecto MC2 (Menos Crimen, Menos Castigo) Blog: http://www.animalpolitico.com/blogueros-plata-o-plomo Twitter: @ahope71