This Spring 1995 article is excerpted with permission of the author and Transnational Organized Crime Journal. Copyright (c)1995. All rights reserved. For other material related to international organized crime go to Transnational Organized Crime

Under the Volcano: Narco Investment in Mexico

While President Clinton worked to create sand castles on the tidal flat that is Haiti, on the great and vital landmass to the south volcanic pressures and violent eruptions squeezed and shook a political system that is critical to US national interest.

Haiti sits near the bottom of any rational listing of US vital interests, while Mexico stands at the apex of any hemispheric agenda. Mexico is the gateway to Central and South America. As we go beyond NAFTA, Mexico is the hinge on which The South America Free Trade Agreement (SAFTA) will turn.

President Carlos Salinas de Gortari recognized this, and his foreign policy genius placed him in the front rank of hemispheric leaders. He and his aides brilliantly orchestrated Mexico's interaction with the United States in the NAFTA negotiations, spending millions on Congressional lobbying and persuasion and targeting the US-Mexican community with a huge public relations outreach campaign. he also made important structural changes, investments and infrastructure development in ports, highways and airports to lure US financial and investor support. Finally, almost single handed, he sold NAFTA to the Central American nations and South America. Not only did he open Mexico's southern door to smoother trade relations with the Central American nations, he opened the door further south with Colombia and Venezuela in the G-3. No President in Mexico's history has had greater hemispheric foreign policy successes than Salinas de Gortari.

To create strength in this area, however, he had to deal with the entrenched and often corrupt power centers in the 'old guard' in the PRI. He had to maintain the Presidential office structure and staff (EMP), and he appointed Fernando Gutierrez Barrios to Gobernacion and named Enrique Alvarez-Castillo to head the Attorney General's Office (PGR). Such key first appointments facilitated continued to flourish despite his attempts at change. Salinas appointed five different Attorneys General during his term, and only one, Jorge Carpizo McGregor, had any impact on narco-penetration and corruption. According to El Financiero, Carpizo controlled by the large drug trafficking organizations. Under other Attorneys General, as much as 95 percent of the PGR was under narco-control. Thus, Mexico's justice agency was in reality an arm of drug trafficking, and organized crime's government intermediary.

This lack of vigilance not only led to the death of Cardinal Juan Jesus Posadas Ocampo, it resulted in the assassination of Salinas de Gortari's political son and heir, Institutional Revolutionary Party (PRI) presidential candidate Luis Donaldo Colosio. For both fell victim of the complacency and/or complicity of politicians corrupted by drug trafficking, or were overwhelmed and intimidated by narco-power.

Lorenzo Meyer, Colegio de Mexico historian and international relations specialist, has noted that Mexico has contributed very little to political theory. For the reality that applies to actual power in Mexico is: 'caudillo, power, cacique power, authoritarianism, patrimonialism or patronage.' Thus, Mexico's contribution to political theory, he says, 'is but a footnote and nothing to be proud of. The 'morbida', [bribe]; the 'tapado', [the as yet unrevealed official candidate], and the 'dedazo' [hand picking of political candidates].' To this list he might have added 'palanca' [influence], pezgordo [influential], who is often 'intocable' [untouchable], and the 'madrinos' [godmothers'], Federal and State Judicial Police (PJF & PJE) and commissioned agent-informers, who frequently work for both the drug trafficking organizations and the state. All of the above work to assist and support the infrastructure of narco corruption and narcopower in Mexico.

According to Meyer, Mexico's key theoretical contributions to our political future will be the post-modern 'indigenous' guerrilla force, and the post-modern party of the state born in the Presidential election of August 21, 1994. As volcanic tremors continue, Meyer may be proven correct, and in ways that even he did not dare contemplate.

A Brief History of Recent Drug Trafficking in Mexico

The U.S. government estimates that 50 percent of the cocaine shipped by Colombian organized crime groups towards the United States transits through Mexico. This reflects the fact that since the 1970s Colombian drug trafficking groups have been developing working relationships with their Mexican counterparts.

Honduran, Juan Ramon Matta Ballesteros connected Alberto Sicilia Falcon to Colombian, Benjamin Herrera Zuelta known in Colombia as 'the Black Pope of Cocaine', is intellectual father of the current Cali cartel leaders, and paternal father of Helmer 'Pacho' Herrera Buitrago of that group. After Sicilia Falcon's arrest, Matta Ballesteros became the contact to Miguel Angel Felix Gallardo, who via Matta's Colombian connections became 'El Padrino', the cocaine czar of Mexico, and premier leader of the Guadalajara Cartel of the 1980s.

The other leaders if the group, Ernesto Fonseca Carrillo and Rafael Caro Quintero, and their associates, never possessed the high level contacts of Felix Gallardo. Only Juan Jose Esparragoza Moreno ('El Azul') is now free and a very important 'statesman' in Colombian/Mexican drug trafficking circles. This cartel controlled high-level Mexican cocaine and marijuana trafficking until 1985, when the murders of DEA agent Enrique Camarena Salazar and his Mexican pilot brought international attention and pressure to the cartel and the eventual arrests of the leadership.

Miguel Angel Felix Gallardo was only arrested in 1989. And even after his imprisonment, he remained one of Mexico's major traffickers, maintaining his organization via cellular phone. It was only when prison authorities finally cracked down in the 1990s with a new maximum security prison--known as Almoloya de Juarez--for major narcotics offenders that his old organization broke up into two factions. One known as the 'Tijuana Cartel' is led by his nephews, the Arellano-Felix brothers, who are accused of the murder of Cardinal Juan Jose Posadas Ocampo. The other, led by his old lieutenants, Hector Palma Salazar and Joaquin Guzman Loera, is commonly called the 'Sinaloa Cartel.'

Max Mermelstein, a key manager of the Medellin cartel in the United States, once said that he and Fabio Ochoa were searching out landing sites in northeastern Mexico in January of 1982. Their negative experiences with corrupt and brutal Mexican federal Judicial Police were, however, off-putting. They, like Cali's transport representatives, quickly learned that if they were going to work in Mexico, they needed connections with Mexican traffickers as middlemen and intermediaries to the Mexican PJF and PGR, if they were to be successful.

In the late 1980s, into the vacuum caused by the arrest of the Guadalajara cartel leadership, stepped men like Rafael Aguilar and Rafael Munoz Talavera, who formed the Juarez Carel and moved some 77 metric tons of cocaine across the border to El Paso and Sylmar California. On Mexico's eastern border (Matamoros-Brownville) border, Juan N. Guerra, initially battled with Olivero Chavez Araujo for control. He won, but was eclipsed by his nephew Juan Garcia Abrego, who changed the equation and raised Mexican drug trafficking to new heights.

Juan Garcia Abrego offered the Colombians, who were suffering interdiction losses to US law enforcement in Florida and the Middle Atlantic states, a deal they could not refuse. He would guarantee delivery anywhere in the United States for 50 percent of the load. He would assume all risks. to do this meant he had to stockpile and stash loads in Mexico to replace shipments that might be interdicted by US law enforcement. As a result, as much as 100 tons of cocaine would be stockpiled south of the border. Stockpiling, however, necessitated higher and broader levels of corruption to minimize risks, and protect warehouse and transit methods.

According to reports of the Mexican Attorney General's office, 'Juan Garcia Abrego is bringing between 150 and 200 metric tons of cocaine a year into this country, and is doing so even though he is under pressure now.' At the end of the 1980s and in the early 1990s PGR spokesman claim 'he was smuggling in 300 metric tons.' During this period, a kilo of cocaine sold for between $8,000 and $9,000 at the Matamoros or Reynosa border. In Houston, it could be resold for around $16,000, although Cali operatives sold to their own organization at $12,000 to $13,000 in order to give them a competitive edge over other distribution groups.

At border prices--a conservative figure--the Garcia Abrego organization was wholesaling between $1.1 and $1.6 billion a year, of which around $500 to $800 million would be gross profit. The PGR currently estimates the net worth of Garcia Abrego group's, now called the 'Gulf Cartel', to be $10 billion dollars.

The full scope of Garcia Abrego's activities surfaced in February 1993 when officials of the Beverly Hills, California, branch of American Express Bank International, a subsidiary of the American Express Co., were indicted for laundering over $100 million dollars of his money. The federal government sought some $60 million, but only seized $30 million that moved through McAllen, Texas and New York banks. Meanwhile, the Federal Reserve fined American Express Bank International $950,000 for its compromised behavior. This case quietly rocked the U.S. banking and financial communities, for it was the first time the depth of the emerging symbiosis between the legitimate financial sector and international organized crime was officially acknowledged.

Similar tremors occurred in Mexico in 1994 when the PGR froze 200 million in new pesos that Garcio Abrego had laundered through three currency exchange houses and Civilian Association and the Monterrey Chamber of Commerce petitioned the government for release of the money on the grounds that it was adversely affecting local businesses and commerce.

But the fractures in the surface of banking and narco power in Mexico are only beginning to emerge. This can be seen in the flight of Cremi and Union Banking Corporations entrepeneur, Carlos Cabal Peniche, who granted himself a $700 million loan. As Deputy Alejandro Encinas of the Mexican Chamber of Deputies Mixed Commission investigating the assassination of Donaldo Colosio told El Financiero, Cabal Peniche was made rich by the same group of narco-politicians responsible for the presidential candidate's murder. Also noteworthy, Cabal Peniche is the protege of Mexican Communications and Transportation Cabinet Secretary, Emilio Gamboa Patron who, when he was private secretary to President Miguel de la Madrid Hurtado, became the young man's patron. Gamboa, or his office, appears to be a key target for corruption in the cali cartel's plan for Mexico.

Of course, organized crime corruption of banking systems is not new. Miguel Angel Felix Gallardo sat on the board of Directors of SOMEX Bank's northern regional center. And, Tijuana and San Diego Italian-American organized crime figure John Alessio had deep connections in both communities' banking sectors when he owned the race and dog track in Tijuana. Today, that track's current owner, Jorge Hank-Rohn, a Mexican elite member, influential and 'intocable', maintains strong connections to Baja California banking, politics, and apparently narco power politics in Mexico.

Amado Carilo Fuentes, who also has a close relationship with Miguel Rodriguez Orejuela of cali, is Juan Garcia Abrego's main competitor. He is referred to in the press as a leader of the 'Pacific' and 'Juarez Cartel.' Operating out of Guadalajara and Sonora, he has taken the place of Rafael Aguilar of Torreon, a leader of the Juarez Cartel who was assassianted in Cancun, Mexico in 1993. Amado Carillo Fuentes approaches the pivot, Juarez, from the west, while Garcia Abrego operating out of Tamulipas and Nuevo Leon (Monterrey) contests it from the east. This could result in bloody conflict, but if Juan Jose Esparragoza Moreno, 'El Azul', the remaining free member of the Guadalajara cartel, is able to mediate this and create a 'Paz del Norte' among the major trafficking organizations, then a further symbiosos of narco power into the Mexican economic and political system will likely occur.

In all there are 11-14 major Mexican drug trafficking cartels, and many more minor ones. In other writings I have discussed this; it is simply worth noting that the big four discussed here are the key ones with connections to the top of the Mexican political system and the Colombian and Peruvian cartels.

Mexico: An Emerging Narco-Democracy?

Leaked DEA and PGR reports show phone calls from Garcia Abrego's 'Gulf Cartel' to the Office of President Salinas de Gortari, as well as to key Cabinet Secretaries, such as Emilio Gamboa Patron, Secretary of Communication and Transportation (SCT). This latter office is as critical to the evolution of the Cali cartel's drug transportation system as it is to NAFTA. Its portfolio includes the administration of airports, seaports, highways, communication lines, and the Federal Highway Police.

Data collected by the Mexican Public Opinion Institute shows the 1994 election of PRI candidate Ernesto Zedillo as Mexico's next president in the wake of the assassination of President Salinas de Gortari's handpicked political heir, Donaldo Colosio, cost $1.25 billion (US) or $4.25 billion new pesos. Of that total, some 3.23 billion new pesos were contributed by the domestic and foreign private sector. The legal ceiling is 992 million.

Usually reliable sources say that one of the major contributors from the foreign private sector to this campaign was the Cali drug trafficking cartel. During the late spring and summer of 1994, they report, Miguel Rodriguez-Orejuela of the Cali group sent $40 million (US) dollars, in two shipments, to Mexico. While this could have been for economic investment, they hypothesize it was for political corruption, to guarantee Cali a superior, favored, and protected position in the new administration.

Alan Riding, a long-term observer of Mexico, wrote corruption is 'both the glue that holds the Mexican system together and the oil that makes it work.' As 'glue' it 'seals political alliances', as 'oil' it 'makes the wheels of bureaucracy turn.' Mexican public life he described as 'the abuse of power to achieve wealth and the abuse of power to achieve power.' If this analysis of the Mexican political system is accurate, one can readily see why the Cali cartel would want preferred seating at the table.

In light of events in Mexico during 1994, Riding's view has been reinforced by numerous high level political figures and elite members within the Mexican system and even the Catholic Church. But perhaps the most vocal and direct confirmation has come from Eduardo Valles Espinoza, a deputy to two Mexican Attorney Generals in the PGR and the man in charge of investigating Juan Garcia Abrego. In his published letter of resignation from the PGR in May 1994 he wrote:

I ask: When will we have the courage and political maturity to tell the Mexican people that we are living in a narco-democracy. Will we have the intellectual capability abd ethical strength to say that Amado carrilo, Arellano Felix and Juan Garcia Abrego are, inconcievably and degradingly, the promoters and even the pillars of our socioeconomic growth and development...Nobody can conceive of a political project in which the narco-trafficking lords and financiers are not included, because if he does so he is dead.

Later in Proseco, he commented:

'Narco-pwer' has deformed the economy; it is a cancer that has generated economic, financial, and political dependence, which instead of producing goods has created serious problems and distortions ultimately affecting honest businessmen.

Deep Fractures: Narco Power in Northeastern Mexico Strata

Northeastern Mexico, Monterrey, Nuevo Leon, Tamaulipas, Matamoros, and Reynosa have always been important narco gateways to the United States.

In recent years, however, Juan Garcia Abrego's Gulf Cartel appears to be playing a more visible role in narco power politics. His brother, Humberto Garcia Abrego, is said to have helped organize Luis Donaldo Colosio's prime Presidential fund-raiser in Nuevo Leon/Tamaulipas and was invited to sit at the head table.

Colosio's route coordinator on the day of his assassination was Federal Highway Police Commander, Jorge Vergara Verdejo, from Monterrey and Tamaulipas. A second key security official that day was ex-federal Security Directorate (DFS) agent, Fernando de la Soto, who had been fired for alleged narco-corruption by Attorney General Ignacio Morales Lechuga. He had been hired by Colosio's security chief of President Salina's security staff (EMP).

The states of Nuevo Leon and Tamaulipas, and individuals connected to Juan Garcia Abrego's organization, also surfaced after the assassination of PRI General Secretary Jose Francisco Ruiz Massieu. One alleged intellectual author of the crime is Abraham Rubio, the jailed former director of the Acapulco Trusteeship, and the Punta Diamante tourist project, ordered closely by the government. He is the father-in-law of Raul Vallardes del Angel, a key lieutenant of Juan Garcia Abrego. Abraham Rubio also has ties to the 'old guard' as a godparent, with Joaquin Hernandez Galicia, aka 'La Quina', the infamous oil workers' union leader ousted by Salinas eralier in his administration. The other alleged author of the crime is PRI Congressman Manuel Munoz-Rocha, who is from Ciudad Victoria, Tamaulipas another Garcia Abrego stronghold.

Published PRG reports indicate that Juan Garcia Abrego's key money laundererd are Carlos Resendez Bertolousi abd Oscar Malherve of Monterrey. They work with and through Marcelino Guerrero and his wife, Marcela Bodenstedt Perlick. Both Marcelino and Marcela are ex-PJF agents, and she was a protege of ex-DFS Commander, Premier Commandante of the PJF, and one time INTERPOL chief, Miguel Aldana. Aldana's connections to drug trafficking were revealed in detail during the Camarena murder investigation and trials.

Depositions from arrested traffickers showed that Miguel Aldana was the key protector of Caro Quintero, Jaime Figueroa Soto and other traffickers. He was present, along with other high level Mexican law enforcement officials, at a meeting with the leadership of the Guadalajara cartel to discuss options for dealing with the DEA. Out of this meeting came the decison to murder DEA agent, Camarena. Thus, Marcela Bodenstadt received an excellent early education in high level drug corruption and narco power in Mexico.

She apparently learned her lessons well. DEA and Mexican drug intelligence CENDRO (Planning Center for Drug Control) reports indicate that she and her husband are 'cut-outs' and 'fronts' for Juan Garcia Abrego and the Cali cartel to high level political figures in Mexico City, including the Mexican Secretary of Communication and Transport, Emilio Gamboa Patron, and his clerk, Arturo Morales Portas. They are alleged to have leased houses in Mexico City for drug trafficker Luis Medrana Garcia, a Garcia Abrego capo, and they were the leaseholders on ahouse in Juarez, where several members of Garcia Abrego's group were later arrested. In 1993 they helped transfer the body of drug trafficker Rafael Aguilar, after he was assassinated in Cancun. They were also named as 'end recipients' in two large cash transfers $421,950 (US) and $432,509 (US)--Monterrey to Mexico City--according to 'mules' arrested by the PJF. Marcilino Guerrero is also alleged to control 640 hectares in the Cancun-Tulum corridor and is proposing a $160 million dollar rsort-casino tourism project linked to Jorge Hank Rohn, son of Mexican elite member Carlos Hank Gonzalez.

Tourism projects have always been a prime venue for money laundering investment by Mexican drug traffickers. Felix Gallardo invested in Hermosillo and Puerto Vallarta, as did Chapo-Guzman in Southern Nayarit and Banderas Bay in Nuevo Vallarta. In time, we may discover that Juan Garcia Abrego has investments in Punta Diamante, as he does in Monterrey and Matamoros, and that the Cancun-Tulum project is another example of money laundering symbiosis between narco-power and elites in Mexico.

The interest of the drug traffickers and their associates in the Cabinet office of the Communications and transport is critical because of the evolution in the transportation patterns and methods of the Cali cartel. In 1991, Cali aircraft transit patterns shifted from northern to southern Mexico. In 1992, Cali increased the shift from small general aviation aircraft and air drops to maritime containerized loads, to commerical air via Panama and San Andres Island, and to low profile vessels (LPV) and semi-submersibles. Cali's influence over San Andreas Island offers transport opportunities to Nicaragua and Honduras as well as Mexico. Using San Andres, and Panama's Free Trade Zone at Colon, 1,000 to 1,700 kilos could be sent by LPV, while 2 to 10 metric tons could be moved by maritime containers, or by 727 type and larger commerical aircraft filing flight plans to avoid surveillance. This shift in transport modalitites, however, requires large airports such as La Pesca, near Soto La Marina, Tamaulipas which has over 3 kilometers of paved runway.

Cali's new transportation methodology also requires commerical airports, business frinst, use of ports, free trade zones, container facilities, trailer trucking firms, and railroads. In short, it requires acess, information, official forms, and seals taht only an Office of Communication and Transport can provide.

One direct impact of this shift in Cali transportation patterns can be seen in the economic decline of border areas like Nuevas Casas Grandes, the Juarez valley, and Ojinaga where, a few years ago, narco-dollars drove the economy. Today as the town hall secretary of Guadalupe, once a key landing site for drug planes, Eduardo Ramos put it, 'It so peaceful here that we don't even know the federal police.' While Nuevas Casas Grandes, Ascension, Janos, and parts of Juarez, Federsal Jurisdiction Police (PJF) Commander Javier Norona Guerrero declared, 'People are complaining there is no money because traffickers have stopped circulating their cash through various establishments. Drug dealing has been reduced and, in some towns, businesses are operating with very little money too, because of the lack of drug trafficking.' Reports from other areas of Chihuahua and eastern Sonora reinforce this, indicating jewelry stores, discos, bars and restaurants are suffering from a decline in narco-dollars. All of this is an outgrowth of Cali's transportation shift to containers and commercial air, as well as shifting narco power relations in Mexico. It also illustrates the effects of narco power on local economies.

A new level or stage of narco relations and symbiosis in drug trafficking in Mexico is currently underway. As I have writen elsewhere, in the early years it was control of a local area, 'La Plaza', that mattered. Then, it was key towns, cities, governors and states. For a while in the mid and late 1980s trafficking could be tracked by simply watching where various corrupt PJF officials were transferred.

Key traffickers and trafficking nodes in a centralized authoritarian system like Mexico always needed the 'con permiso' of those within the Federal District. But today, rather than protection percolating up through the PJF, PGR, or military to the party and the private secretaries and bag men around 'Los Pinos', it now appears transnational organized crime and narco power are attempting to operate directly in public and private sector board rooms, with Cabinet level staff and secretaries to plan and coordinate activities for mutual benefits, development, and free trade. Should legitimate and honest elite sector private capitalists object to these new players and arrangements, then a wave of kidnappings can occur to intimidate them back into silence.

There is another reason why cali cartel planners need the high level penetration of the Mexican government at this time. With demand decline and cocaine market saturation in the U.S., Cali has had to find new production efficiencies, as well as product diversification (heroin and marijuana oil) to maintain profits. With high level internal Mexican government support, however, Cali would be in a position to lean on certain Mexican trafficking groups to lower their per kilo share to a more reasonable level.

The Ground is Shaking: US Policy is Calculated Avoidance

Mexico is the key geopolitical funnel for the United States economic well being in the hemisphere in the 21st Century. It is also a key partner in emerging trade developments, as well as a vital market and labor pool for the United States. Yet, the Clinton administration foreign policy and national security eyes appear to focus more raptly on Haiti, rather than Mexico. The tremors that rocked the Mexican political system in 1994, which have deep roots in the political structure and strata of Mexico's authoritarian democracy, had little visible reverberation in Washington, until the collapse of the peso in early 1995 compelled US aid.

In Fall 1994 Secrerary of the Treasury, Lloyd Bensten, led delegations to Mexico where both trade and Mexico's faltering 'War on drugs' were discussed, and incoming President Zedillo was given a personal invitation from President Clinton to visit the White House. After the assassination of Donaldo Colosio the United States offered, and private sector banking and financial community acted, to shore up and support Mexican financial markets. After the assassination of PRI General Secretary Jose Francisco Ruiz Massieu, US National Security Advisor Anthony Lake offered condolences, and noted, [it] appears to be part of a continuing pattern of violence in Mexico. US Ambassador James Jones described it as 'a senseless act of violence.' The Ambassador's reaction recalled that of his predecessor, John Negroponte, who after cold blooded murders of seven Mexican drug agents gunned down in ambush by 100 members if the Mexican army employed by drug traffickers called the event 'a regrettable accident.'

For recent Washington administrations, whether they be President Bush's or President Clinton's, free trade, investment, development and othe economic issues are paramount. Drug trafficking, immigration, environmental concerns, unrest in Chiapas, or the volcanic power struggle currently occurring in Mexico are all issues to be swept under the rug and ignored, so long as they do not affect domestic politics and the US elections. One can, of course, argue that these non-recognitions, avoidance behaviors, and reserved postures by Washington are but good neighbor politics, especially given Mexican sensitivities and historic poor relations between the US and Mexico. That may be. But such mannered myopia and reserve jeopardizes the long run national interests of both nations.

A knowledgeable Mexican official, Eduardo Valles Espinosa, before fleeing into exile, cried out that Mexico had become a 'narco-democracy.' In Washington, despite all the rhetoric to the contrary, such chilling words appear to fall on deaf ears and are subject to be discussed only in 'executive session.' For the Clinton Administration, drugs, organized crime and drug trafficking are but minor priorities in the long term game of global trade, economics, and power politics.

The drug policies of the Clinton Administration appear to be little more than 'Vietnamization', a turning over of the 'War on Drugs' to the Andean nations and a pulling back of US forces and resources within the borders of the United States. What is happenign in Mexico should show us such a neo-isolationism on these issues is neither in the national interest of the United Staes nor those of our trading partners. Drug trafficking today is a lot more than traetment of what is happening on the streets of Detroit.It is transnational organized crime, narco-corruption, and destabilization, that confront the US and the world's democracies.