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TRANSNATIONAL CRIME, LOCAL CRIMINALS

Rethinking the size and shape of Mexican organized crime

December 2011

http://www.mexicoevalua.org/index.php

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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

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Source: Kilmeret 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

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Source: IMCO / Mxico Evala (2011, unpublished)Note: estimates within 90% confidence interval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

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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

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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

6.0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

(USDb

n,

invertedscale)

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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-00

May-00

Sep-00

Jan-01

May-01

Sep-01

Jan-02

May-02

Sep-02

Jan-03

May-03

Sep-03

Jan-04

May-04

Sep-04

Jan-05

May-05

Sep-05

Jan-06

May-06

Sep-06

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

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Evidence in banking system?

Mexico: Commercial bank deposits, 2000-2010

(% GDP)

Source: CNBV, BBVA-Bancomer

16.1 16.4 16 16.1 15.9 15.915.2

16

18

19 18.9

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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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

Tabasco

Campeche

Puebla

Veracruz

Hidalgo

SLP

DistritoFederal

Moralos

Chiapas

Oaxaca

Guerrero

Mxico

QuintanaRoo

Yucatn

Nayarit

Tlaxcala

Colima

Nacional

Sinaloa

Michoacn

Quertaro

Coahuila

Tamaulipas

Durango

NuevoLen

Sonora

Aguascalientes

Chihuahua

Guanajuato

BajaCaliforniaSur

Jalisco

BajaCalifornia

Zacatecas

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Evidence in stock market?

Selected LATAM stock markets, 2000-2011

Source: Bloomberg

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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 ro le and

national/ethnic origin, 2004 (%)

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

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A taxonomy of criminal groups

Illicit traffic

Rent extraction

Local Transnational

Sinaloa

AFOBLO

Jurez /

BAZetas

Templarios

Prison

gangs

Human

traffickers

Migrantkidnappers

Local

kidnappers

Acapulco

gangs

Fuel

thiefs

Fakers

Local drug

distributors

Traditional

smugglers

Domestic

traders

Gulf

Muscle men

Piracy

rings

Borderextortionists

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Three conclusions and some implications

Conclusions CW about size, most likely wrong

Network, not vertically-integrated structure

Highly diversified criminal forms: TCO denominationobscures 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)

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Thank youAlejandro HopeProyecto MC2 (Menos Crimen, Menos Castigo)Blog: http://www.animalpolitico.com/blogueros-plata-o-plomo

Twitter: @ahope71

http://www.mexicoevalua.org/index.php