Stratfor: Mexico’s entrepreneurs provide the fentanyl that America wants!

Summary: Stratfor explains one aspect of our free market globalized world — the export of fentanyl to America by Mexico’s capitalist cartels. They saw the market and successfully met its demands, despite powerful opposition. As for Mexico, for a decade geopolitical experts have prophesied its doom from the growing power of the cartels. So far the cartels are rolling in money from America and Mexico still stands.

Danger: Fentanyl
Drew Angerer – Getty Images.

“Mexico’s Cartels Find Another Game Changer in Fentanyl”

By Scott Stewart at Stratfor, 3 August 2017.

In my July 13 On Security column about the Mexican government’s anti-cartel policy, I discussed how the dynamics of the cocaine trade affected the historical trajectory of Mexican organized crime. In short, cocaine provided cartels with unprecedented quantities of cash that they then parlayed into power. Starting in the 1980s, Mexican criminal organizations began fighting over the immense profit pool produced by the lucrative trade in powder, and this infighting has continued in one form or another to this day.

But cocaine was merely the first of several drugs that were game changers for Mexican organized crime groups. The latest of them, fentanyl (and related synthetic opioids), is the most profitable yet, and is rapidly becoming the deadliest drug for users north of the border.

Disruptive Drugs.

Mexican criminals have been incredibly flexible and adaptive in terms of the drugs they supply to the massive illegal narcotics market in the United States. Much of this flexibility naturally comes in response to consumer demand for certain types of drugs. But enforcement and interdiction also heavily influence the activities of Mexican drug-trafficking organizations. Increased disruption of Caribbean cocaine-trafficking routes, for example, led Colombian cartels to rely more heavily on Mexican groups to move their product over land into the United States. This change transformed the Mexicans into a critical link in the cocaine supply chain and allowed figures such as Gulf cartel leader Juan Garcia Abrego to demand larger profit cuts.

Methamphetamine is another good example of Mexican cartels recognizing and seizing business opportunities created by market forces and enforcement activity. U.S. law enforcement action targeting industrial-scale methamphetamine labs in California’s Central Valley, and state and federal legislation such as the Combat Methamphetamine Epidemic Act of 2005, made it increasingly difficult to manufacture methamphetamine in the United States. Mexican criminal organizations, especially several Sinaloa cartel affiliates, recognized the opportunity presented by these developments and dramatically expanded their methamphetamine production in response. They also improved the quality and purity of the drug, compared to the product made by smaller operations in the United States. As a result, methamphetamine for sale on American streets became better, cheaper and more widely available.

Sinaloa cartel lieutenant Ignacio “Nacho” Coronel even became known as the “king of crystal” due to the large quantities of methamphetamine his organization produced. Unlike cocaine, which they had to purchase from Colombian producers or, more expensively, Central American middlemen, Mexican cartels could produce methamphetamine from relatively inexpensive dual-use precursor chemicals. So, though the cartels had been making good money in the cocaine trade, methamphetamine was even more profitable, since the cartels could control the lion’s share of the profit pool. And groups that had strong connections to Chinese chemical providers and could oversee the flow of chemicals through Mexico’s ports had a competitive advantage.

Indeed, the rise of Tierra Caliente organized crime groups such as La Familia Michoacana, the Knights Templar and the Cartel de Jalisco Nueva Generacion occurred largely because they controlled Mexico’s ports and the methamphetamine trade.  {Click to enlarge the map.}

Areas of Cartel Influence in Mexico

Fentanyl: Low Costs, Big Profits.

Lately, the U.S. Drug Enforcement Administration (DEA) has cracked down on pill mills prescribing opiates in the United States. As a result, people addicted to opiates have turned to alternatives such as Mexican black tar heroin. Mexican growers have planted record amounts of opium poppies in recent years, and the large influx of Mexican heroin to the United States has filled the coffers of growers and traffickers. Mexican heroin was strong, plentiful and inexpensive. And Mexican organizations also pioneered new distribution methods, even delivering heroin to the homes of users. One no longer had to travel into inner cities to obtain the drug, and heroin use expanded in all strata of society.

However, poppy cultivation is limited by geography. In Mexico, poppies grow best along the Sierra Madre Occidental mountain chain, on ridges above the 1,000-meter mark (3,280 feet) where the air is dry. So, there is a finite amount of space where opium poppies can be planted, and these locations are not difficult for the Mexican government to find and eradicate. Mexico has a relatively gentle climate and poppy growers ordinarily can manage two harvests of opium gum a year, but heroin production is nevertheless limited. It takes about three months for an opium poppy to mature and produce opium gum.

Fentanyl and other synthetic opiates, on the other hand, are not bound by geography or growing cycles. Fentanyl can be produced anywhere a laboratory can be set up, such as a warehouse in an industrial park, a home in a residential area or a clandestine lab in the mountains. It can be synthesized as long as there is access to the required precursor chemicals, which are almost exclusively imported from China.

Fentanyl is also relatively inexpensive to produce — the DEA estimates it costs about $3,300 to produce 1 kilogram (2.2 pounds). It is also very potent, so a little goes a long way. According to the DEA, fentanyl is some 50 times more potent than heroin — and carfentanil is 100 times stronger than fentanyl. This makes the drug a smuggler’s dream due to its compact nature. Smuggling 1 kilogram of fentanyl into the United States is, from a dosage standpoint, essentially the same as smuggling in 50 kilograms of heroin, and 1 kilogram of carfentanil is roughly the equivalent of 5,000 kilograms of heroin.

Due to fentanyl’s strength, 1 kilogram can fetch more than $1 million on the retail drug market, making fentanyl the most profitable drug the Mexican cartels are trafficking. Fentanyl’s inexpensive nature is why drug dealers have attempted to pass it off as various more expensive narcotics, such as “China White” heroin for example, or pressed it into pills to mimic pharmaceutical opiates such as oxycodone or hydrocodone.

The potency of fentanyl, carfentanil and other derivatives also seriously increases the risk overdose. Dealers processing the drugs for sale on the street often struggle to accurately dispense the very small doses required — and small mistakes in dosage can be deadly. In fentanyl, a deadly dose is measured in milligrams — one thousandth of a gram. In carfentanil, a deadly dose is in micrograms — one millionth of a gram. When dealing with such microscopic amounts placed into a medium purporting to be heroin or a pharmaceutical pill, it isn’t hard to see why miscalculations are made and why so many users are overdosing.

One of America’s leading exports.

Bag of Cash

Lucrative Ports.

Fentanyl is also relatively easy to synthesize; the chemists who work in Mexico’s more complex methamphetamine labs have little problem manufacturing it. And given America’s appetite for opioids, fentanyl is poised to become the latest in a line of drugs offering a competitive advantage to the organizations that produce them. As in the methamphetamine trade, those that control Mexico’s ports are in the best position to benefit from the fentanyl trade: The same networks that produce and smuggle methamphetamine precursors can be used to bring fentanyl precursors into the country.

All Mexican cartels are able to smuggle some finished fentanyl from China and some quantity of the drug’s precursors, but as fentanyl’s popularity grows, the organizations that control the ports and have close ties to Chinese chemical providers will be able to produce the largest quantities with the most consistency. In terms of the current cartel landscape, this means that Tierra Caliente-based organized crime groups are the largest beneficiaries of the fentanyl trade — much as they have benefited the most from the methamphetamine trade. Indeed, synthetic drugs have largely fueled the rapid growth of the Cartel de Jalisco Nueva Generacion.

The Mexican navy assumed security responsibility for Mexico’s ports in June, but the ports are rife with corruption and it is going to be a tall task for the navy to put a substantial dent in the flow of precursor chemicals and other contraband. Thus the ports will continue to be valuable possessions.

As with the fighting we have seen over lucrative smuggling corridors on the border, it is likely that other organizations will attempt to challenge the Cartel de Jalisco Nueva Generacion’s control of Pacific coast ports such as Manzanillo and Lazaro Cardenas, as well as Veracruz on the Gulf Coast. With the amount of money at stake, any challenge is likely to be met with force and could result in significant intercartel violence. And of course, such potential for violence is of major concern to the many legitimate businesses that use Mexican ports for shipping.

Mexico’s Cartels Find Another Game Changer in Fentanyl
is republished with permission of Stratfor.

————————————————-

Scott Stewart of Stratfor

About the author

Scott Stewart is Stratfor’s VP of Tactical Analysis, supervising their analysis of terrorism and security issues. Before joining Stratfor, he was a special agent with the U.S. State Department for 10 years and was involved in hundreds of terrorism investigations. He is regularly featured as a security expert in leading media outlets. See other articles by Scott here.

Stratfor-Worldview

About Stratfor

Founded in 1996, Stratfor provides strategic analysis and forecasting to individuals and organizations around the world. By placing global events in a geopolitical framework, they help customers anticipate opportunities and better understand international developments. They believe that transformative world events are not random and are, indeed, predictable. See their About Page for more information.

For More Information

For more about this problem see “Opioid Addiction: 2016 Facts & Figures” by the American Society of Addiction Medicine.

If you liked this post, like us on Facebook and follow us on Twitter. See all posts about Mexico, about drug cartels, about the war on drugs, and especially these …

  1. STRATFOR gives A New Way to Think About Mexican Organized Crime.
  2. America’s rising tide of drug overdoses, a symptom of deeper problems.
  3. Stratfor looks at the drug cartel’s insurgency against Mexico.

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10 thoughts on “Stratfor: Mexico’s entrepreneurs provide the fentanyl that America wants!

    1. FM,

      This question has bothered me all day. It’s not an easy one to answer, but here are some thoughts.

      The War on Terror got started almost by chance, the combination of an aggressive neoconservative regime in power, an existing set of grudges against Iraq and Iran, and a conveniently lethal terror attack, but a series of perverse incentives have ensured it’s continuation. The military-industrial complex got a new raison d’etre, replacing the Soviet Union with “terror” as an expensive bogeyman to justify trillions in defense dollars. That strong financial motive would seem the most likely reason to me.

      The War on Drugs has pretty clear origins in racism, xenophobia, and establishment resentment over the counter-culture. And like the GWOT, a plethora of perverse incentives have arisen, from banks benefiting from laundering cartel cash to private prisons being subsidized by our tax dollars and their owners skimming profits off the top. This Truth-Out article has a decent summary of who potentially benefits from the Drug War: http://www.truth-out.org/news/item/9937-how-the-us-government-banks-prison-industrial-complex-corrupt-officials-businesses-law-enforcement-racists-and-the-cia-benefit-from-illegal-drugs

      But unlike the GWOT, there seems to me to be a very strong incentive to end it and liberalize: the potential profits from legalized recreational drugs and the government revenue from the taxation of drugs. Perhaps we’ll see that motivation become stronger, as states like Colorado are starting to top $1 billion in legalized marijuana sales.

      Like

    2. ch1kpee,

      You raise good points about these complex and mysterious matters.

      “The War on Drugs has pretty clear origins in racism, xenophobia, and establishment resentment over the counter-culture.”

      Are you sure about that? American’s fear of drugs goes back to the 1930s — long before the 1960’s “counter culture”. For example, see “Reefer Madness” (1936). Drug users, white or black, native or foreign, were demonized.

      What is the origin of our fear of drugs? I don’t know.

      Like

    3. “Are you sure about that? American’s fear of drugs goes back to the 1930s — long before the 1960’s “counter culture”. For example, see “Reefer Madness” (1936). Drug users, white or black, native or foreign, were demonized.

      What is the origin of our fear of drugs? I don’t know”

      I am no advocate for the current “war on drugs” but isn’t obvious why a fear of drugs exist? There are more tame drugs like weed that people can more or less deal with, but even alcohol which is legal plunges thousand of people a year into cycles of dependency and self-destruction.

      Alcohol was a target of prohibition campaigners long before drugs like cocaine were seen as an issue. The Chinese fought a war over an opium epidemic that was threatening to unravel their society and there are many more examples of the dangers of substance abuse in societies.

      I think sometimes those of us who are skeptical of current efforts go too far in minimizing the danger these things pose and have a somewhat naive view of the alternatives.

      There is only one thing though that will every minimize the problem and that is strong families and strong societal norms against getting “high” or “wasted” regardless of the means used to do so. There is also a spiritual and moral vacuum that people are trying to fill with these things, their own lack of meaning and purpose in life is being replaced by short term pleasure seeking, be that drugs, alcohol or even pornography.

      The evidence is clear that psychologically stable individuals with high levels of personal satisfaction and meaning, be that from communal purpose or religion do not abuse substances at the same rate as those that lack those things, not even close.

      If we want to curb demand and solve this problem long term we are going to have to look deeply at our society and what sorts of behaviors we are promoting in terms of families and local communities, not to mention economic opporunities.

      Like

    4. dfocil,

      No, I don’t believe America’s fear of drugs is rational. The cost and many kinds of damage done by the War on Drugs is grossly disproportionate to the potential damage. As is obvious, since our peers don’t wage this multi-generational internal war — yet don’t suffer massive damage from drugs. Some nations have few drug controls, yet show little damage.

      “There are more tame drugs like weed that people can more or less deal with”

      Yes, that is the best example of our irrationality. Since 1960 how many people have had their lives ruined for possession of small quantities of weed? At fantastic and immeasurable cost. To what gain?

      Like

    5. FM, but the irrationality is as you point out in the response rather than in the fear itself. Its like terrorism, there is nothing wrong with being afraid of people wanting to blow us up, there can be a healthy fear of something without going too far. The problem is overreacting or reacting in a counterproductive way.

      My point is that drug abuse remains a major societal problem, regardless of how stupid and damaging the drug war itself is. We could for example do what Portugal did and treat it as a public health crisis rather than a “war” and probably help far more people without creating the horrible violence and trampling of rights our current situation entails.

      As someone though who has seen his father’s life be torn apart by addiction and consequently negatively affect our entire family, I can’t really accept that the problem is “all in our head” so to speak. Same goes for alcohol btw, the fact that prohibition was a big mistake doesn’t mean alcohol abuse is not a problem that requires the marshaling of resources in society to combat.

      Like

    6. dfocil,

      “My point is that drug abuse remains a major societal problem, regardless of how stupid and damaging the drug war itself is.”

      My point is that our reaction to the drug abuse problem makes it worse — much worse — not better.

      “I can’t really accept that the problem is “all in our head” so to speak.”

      I said nothing even remotely like that. This is why I reply to direct quotes.

      Like

  1. I wonder if there is any study on the political slant of drug users? or at least drug usage per 1000 people at the state level? or overdoses per 1000 at the state level? it will be funny to find out neocons from red states are trying to help addicts in blue states cut their habit. why not let them self destroy??

    Like

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