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Stratfor

Mexico: 37 Bodies Dumped on Highway
May 13, 2012 | 1437 GMT

Mexican authorities found 37 dismembered bodies stuffed in bags and dumped on a highway near Monterrey on May 13, Reuters reported. Local media reported that it appeared to be part of a series of drug gang killings.

Mexico Security Memo: Sinaloa Struggle Continues
May 9, 2012 | 1248 GMT

Unusually long fighting between organized criminal elements and the Mexican military that began early April 28 continued in several areas in and near the Choix, El Fuerte and Guasave municipalities of northern Sinaloa state. Narcomantas appeared May 7 in various areas of Sinaloa state, including Culiacan, Guasave and Los Mochis, accusing Sinaloa Federation leader Joaquin "El Chapo" Guzman Loera of colluding with the 89th Infantry Battalion, the military unit primarily operating in Choix. It has become clear that the military's primary adversaries in this conflict are the remnants of the Beltran Leyva Organization (BLO).

Why extended fighting erupted simultaneously in multiple locales remains unclear. On occasion, Mexico's criminal organizations intentionally engage authorities to divert attention from high-value targets, such as areas of drug production and high-level leaders' hideouts. However, these conflicts typically last no more than a day. The military's willingness to continue pursuing the gunmen into such remote mountainous terrain, which heavily favors the gunmen, also stands out. The conflict indicates that the dynamic between organized crime and the military in northern Sinaloa state may have undergone a significant change: The BLO, which has seen its operational capabilities diminish greatly since its split with the Sinaloa Federation, has now shown it can engage the Mexican military in a protracted conflict.

The death of the group's leader, Marcos Arturo Beltran Leyva, and the arrest of his successor and brother, Alfredo Beltran Leyva, greatly weakened the BLO. As it splintered into several groups, such as the Cartel del Pacifico Sur, one of its larger successors, many of these new factions aligned with Los Zetas, which allowed them to survive in the mountains of northern Sinaloa with its lucrative concentration of marijuana and poppy fields and maintain their illicit drug production and distribution capability. 

According to Stratfor sources, some of the gunmen in Choix belonged to Los Zetas. While this has not been corroborated, the insurgent-style tactics and brazen standoff with the military fits with Zetas behavior in states like Coahuila and Tamaulipas, where engagements with the military are common. The continued existence of the BLO and its alliance with Los Zetas presents the Sinaloa Federation with a rival close to its home territory in the Sierra Madre Occidental and could obstruct Sinaloa's trafficking corridors northward toward the U.S.-Mexican border. Guzman thus stands to benefit from aggressive military operations in the mountains of northern Sinaloa.

The high value of the region's poppy cultivation, the possible existence of hideouts for high-value targets, such as Hector Beltran Leyva, and the presence of several drug-trafficking organizations, including Los Zetas, mean the area is likely inundated with gunmen. As stated by the Military Region III commander, the military is deploying an additional 300 troops to the area in response to the conflict. There is no shortage of gunmen willing to defend the valuable territory, so continued pursuit of organized criminal elements in the mountatins likely will lead to increased violence. 

May 1

  • Gunmen killed three people sitting at an outdoor candy stand in Ciudad Juarez, Chihuahua state.
  • Authorities discovered the body of a police officer in Tlaquepaque, Jalisco state, likely killed the previous day.

May 2

  • Gunmen hiding in a motel in Estacion Bamoa, near Guasave, Sinaloa state, engaged a military convoy in a firefight that lasted two hours and left 15 gunmen and two soldiers dead.
  • Five gunmen and one federal police officer died in Sain Alto, Zacatecas state, after a car chase.
  • The Mexican navy arrested Luis Alberto "El Casanova" Perez Casanova in Xalapa, Veracruz state. Perez allegedly served as Los Zetas' security chief for Xalapa.

May 3

  • Authorities found two photojournalists for local media outlet Notiver in black bags in a river in Boca del Rio, Veracruz state. The journalists were reported missing April 27.
  • A newspaper vendor was shot dead on a street in Chihuahua, Chihuahua state.

May 4

  • Nine individuals were hung from a bridge in Nuevo Laredo, Tamaulipas state. Along with the bodies, a narcomanta was displayed denouncing individuals coming to Nuevo Laredo "to heat up the plaza" and singling out Gulf cartel leaders such as Metro-4 and Juan Mejia "R1" Gonzalez.
  • Authorities discovered 14 headless bodies stored in a van in front of the Association of Customs Agents building in Nuevo Laredo, Tamaulipas state, along with a narcomanta signed "El Chapo." The message demanded the Mayor of Nuevo Laredo recognize the presence of the Sinaloa Federation in the city. The same day, authorities discovered 14 severed heads in three coolers in front of the city hall.
  • Several gunfights in the Iztapalapa neighborhood of Mexico City left six dead and four wounded.
  • Gunmen opened fire on a police patrol in San Nicolas de los Garza, Nuevo Leon state, killing one police officer and wounding another.

May 5

  • A firefight between two groups left eight gunmen dead in Jerez de Garcia Salinas, Zacatecas state.
  • At least two gunmen in a vehicle shot and killed a strip club bouncer in Monterrey, Nuevo Leon state, in front of the club.
  • Gunmen traveling in a vehicle shot a man walking home in the Azcapotzalco neighborhood of Mexico City.
  • Federal police detained alleged La Linea leader Javier "El Dientes de Ajo" Hernandez Marquez in Chihuahua state. According to authorities, Hernandez assumed the leadership of the group after the arrest La Linea's previous leader 10 days before.

May 6

  • Authorities discovered three dead men along a highway in Atoyac de Alvarez, Guerrero state.
  • Federal police announced the arrest of 12 La Barredora members in Acapulco, Guerrero state.

May 7

  • Authorities discovered the bodies of two executed men in the La Draga neighborhood of Mexico City.
  • Gunmen shot and killed an individual inside his vehicle in Cajeme, Sonora state.
  • Mexican authorities announced the arrest of Maria "La Tosca" Jimenez, the leader of a Los Zetas cell of sicarios (assassins), along with eight other people in Monterrey, Nuevo Leon state. Jimenez was arrested with three male sicarios the week before.
Mexico: Barrio Azteca's Fraying Ties with the Vicente Carrillo Fuentes Organization
May 4, 2012 | 1301 GMT

Summary

ALFREDO ESTRELLA/AFP/Getty Images

Reported leader of Barrio Azteca, Arturo "El Farmero" Gallegos Castrellon, with police in Mexico City

Barrio Azteca, an El Paso-based gang originally formed in a Texas prison in the mid-1980s, has long been involved with Mexican drug cartels. Around 2008, the group appeared to enter an exclusive partnership with the Vincente Carrillo Fuentes organization, aka the Juarez cartel, via an alliance with that group's enforcement arm, La Linea. However, the dismantling of La Linea by law enforcement and the Sinaloa Federation since 2011 and the overall weakening of the Juarez cartel likely mean Barrio Azteca will begin partnering with other criminal groups in Mexico, if it has not already done so.

Analysis

Barrio Azteca, or "Aztec Neighborhood," originated in 1986 as a Hispanic prison gang. It was started by a group of inmates in a Texas state prison who were looking for protection from gangs like the Texas Syndicate and the Texas Mexican Mafia. In the 1990s, the group expanded from a prison gang to a nationwide U.S. street gang, though it operated primarily in El Paso, Texas, and across the Mexican border in Ciudad Juarez, Chihuahua state.

El Paso is one of the most valuable ports of entry into the United States, allowing Barrio Azteca, known in Mexico as Los Aztecas, to work closely with Mexican cartels. It worked with several cartels, including the Sinaloa Federation and the VCF, to traffic and distribute narcotics, and it engaged in other criminal enterprises, such as assassinations, extortion, car theft and kidnapping. Notably, Barrio Azteca is not the only U.S. gang with operational ties to Mexican organized crime. Mexico's drug trafficking organizations often use U.S. street gangs to deliver illicit drugs into the U.S. market. Other U.S. gangs with known ties to Mexican cartels include Mara Salvatrucha (MS-13), the Texas Syndicate and Texas Mexican Mafia and others. 

But unlike many U.S. street gangs, by 2008 Barrio Azteca had developed exclusive ties with one group: the VCF. This development coincided with the battle between the VCF and the Sinaloa Federation for control of Ciudad Juarez. The VCF controlled Ciudad Juarez plaza until the Sinaloa incursion dramatically weakened the VCF and led it to look for outside assistance. Employing Barrio Azteca to work exclusively under La Linea was part of that effort.

The alliance between Barrio Azteca and the VCF made sense for both parties. By supporting what had been (and still was, to a lesser degree) one of the country's most powerful cartels, Barrio Azteca received a discount on narcotics and used its alliance with the Juarez cartel to become the dominant U.S. gang in El Paso. In turn, Barrio Azteca gave the VCF a dedicated organization to distribute illicit drugs across the border and more manpower to conduct attacks against its rivals. Since Barrio Azteca is one of the largest street gangs operating in Ciudad Juarez, this pool of individuals provided a significant force for the VCF to counter the Sinaloa Federation's incursion.  

Beginning in 2010, however, La Linea suffered heavy losses from law enforcement and military operations as a result of its brazen threats against U.S. assets. Following the March 13, 2010, murder of U.S. consulate employees by La Linea and Barrio Azteca, Mexican and U.S. authorities arrested 35 Barrio Azteca members, 10 of which were charged with the murders. Later in July 2011, La Linea leader Jose Antonio "El Diego" Acosta Hernandez was captured by the Mexican military in Chihuahua, Chihuahua state. Acosta said that he had united Barrio Azteca with the Juarez cartel. His capture likely strained the groups' ties. La Linea currently operates under the name New Juarez cartel, but its operational capabilities have been greatly diminished and its level of cooperation with Barrio Azteca is unclear.

At the same time that the Juarez cartel was dealing with an attack on its enforcement arm by the Mexican military and police, it was also under attack by the Sinaloa Federation. Sinaloa's efforts to take Ciudad Juarez began with gathering intelligence on the group and paying off locals for information. This escalated to subverting elements of Barrio Azteca with bribes for information on the Juarez cartel and its own members working on Juarez's behalf, creating factions within the gang and between the gang and its employer. After sowing these divisions, Sinaloa sent in its own enforcement arm, La Gente Nueva, to launch attacks on Juarez operatives. These attacks largely succeeded in seizing control of the Juarez-El Paso port of entry that was once controlled by the VCF. The extent of the subversion is unclear, but since Sinaloa has the VCF on the defensive already, its goal is likely not to foster internal turmoil but simply to have Barrio Azteca members switch over to its side. It should be noted, however, that Barrio Azteca still has not officially split from the VCF.

Because of the weakened state of the VCF and the surge of Sinaloa's operations in Ciudad Juarez, Barrio Azteca probably will stop being the exclusive allie of the VCF. Barrio Azteca likely will turn to any cartel that can replace the financial or operational resources it previously received from the VCF. With Sinaloa already in control of much of the Ciudad Juarez plaza and emerging unconfirmed reports saying that Barrio Azteca is working with Los Zetas, it is likely that Barrio Azteca already is operating with other cartels -- which would be another significant loss for the VCF.

Mexico Security Memo: Long Fight Between Military, Gunmen in Sinaloa
May 2, 2012 | 1242 GMT

Military Battles Gunmen in Sinaloa

Firefights between organized criminal elements and the Mexican military erupted early April 28 in several villages of the Choix and El Fuerte municipalities of northern Sinaloa state. The conflict continued through at least April 30, with some uncorroborated reports claiming that fighting is still ongoing. As the battle went on, gunmen reportedly fled into the rugged Sierra Madre Occidental mountain range of neighboring Chihuahua state.

The hostilities have unfolded in remote mountain villages, making details of the battle few and conflicting. The military has said at least 27 people have been killed, including one soldier and one municipal police officer. Unofficial accounts report far more casualties. Federal authorities said April 29 that the military has seized several high-powered rifles, grenades, tactical vests and three vehicles from the gunmen. The vehicles had been designed to resemble a Federal Police vehicle, a state police vehicle and a military vehicle.

Fights between organized criminal elements and the military do not typically last several days, indicating the gunmen are defending valuable turf. However, some unverified media reports have suggested that the attempted arrest of a high-ranking member of the former Beltran Leyva Organization sparked the fight and may have been the goal of the operation.

Choix is in the Sierra Madre Occidental, an area often referred to as Mexico's Golden Triangle, where marijuana and opium poppies are grown. Particularly in Sinaloa, the mountains have long served as a stronghold for high-ranking members of the Sinaloa Federation and the Beltran Leyva Organization, both of which originated farther south in the state. Choix is not of particular value in the transit of illicit drugs. This means the gunmen likely are defending fields used for growing illicit drugs or labs used in their production, or are defending a high-level leader of their organization.

Canadian Drug Trafficker Killed in Mexico

Two gunmen opened fire on Canadian drug trafficker Thomas Gisby on April 27 in a Starbucks in a mall in Nuevo Vallarta, Nayarit state. The gunmen reportedly waited for Gisby in the Starbucks. When he arrived, they stood up and fired sidearms at him, wounding him twice before fleeing.

According to Canadian officials, Gisby had ties to several drug trafficking organizations in Vancouver, British Colombia, including the United Nations gang and the Dhak group. He also worked with Mexican and Colombian drug traffickers for the last two decades. Gisby arrived in the Nayarit area three months ago, after surviving an assassination attempt in Whistler, British Colombia. In that incident, an explosive detonated in his RV on Jan. 16. While authorities have not yet revealed the motive or identity of the culprits in the Nuevo Vallarta attack, the evidence suggests Gisby was targeted in a hit.

Gisby is the sixth Canadian citizen linked to organized crime to be killed in Mexico during the last few years. The last such murder occurred Jan. 16 in Culiacan, Sinaloa state, with the death of United Nations gang member Salih Abdulaziz Sahbaz. Sahbaz died the same day Gisby's RV was bombed in Whistler. Canadian authorities at the time linked the RV bombing to a turf war between organized criminal groups in Vancouver. Both Sahbaz and Gisby in turn were linked to the murder of a Vancouver-based gangster in August 2011, a killing that escalated into a turf war in Vancouver between an alliance of the Dhak, Dupre and United Nations groups against an alliance of the Hells Angels, Independent Soldiers and Red Scorpions.

While Gisby's murder could be an act of retaliation from his Canadian rivals, both Gisby and Sahbaz dealt with several organized criminal groups in Mexico. This means their deaths could have been connected with their relations to Mexican organized crime.

Several Canadian organized criminal groups import illegal drugs from Mexican drug cartels. According to a U.S. indictment of Clayton Rouche, the former leader of the United Nations gang arrested in 2009, the United Nations gang would export marijuana into the United States. The revenue from the sale of marijuana would then be used to purchase cocaine coming from Mexico for distribution into Vancouver, Canada. Both Sahbaz and Gisby thus represent examples of the contacts used by Canadian gangs to conduct business with Mexico's transnational criminal organizations.

April 24

  • Authorities discovered the body of an Ahome municipal police commander in Cerro Prieto, Sinaloa state. The victim had been kidnapped April 23.
  • An improvised explosive device stored in the bed of a parked truck exploded in front of a government office in Nuevo Laredo, Tamaulipas state. Gunmen ambushed the military officials who arrived at the scene to respond to the explosion.
  • Authorities discovered four male bodies on a road connecting Santiago Papasquiaro and Topia, Durango state. All of the bodies bore gunshot wounds.
  • Gunmen opened fire and threw hand grenades into a convenience store in Zihuatanejo, Guerrero state, leaving one person dead and four injured.
  • The Mexican military detained Romero "El Chaparro" Dominguez Velez, an 18-year-old Los Zetas plaza boss in Coatzacoalcos, Veracruz state. The plaza boss was detained with another member of Los Zetas.
  • Authorities discovered two male bodies along with a narcomanta that was signed by Cartel de Jalisco Nueva Generacion (CJNG) Grupo Mata Zetas, in Veracruz, Veracruz state.
  • Mexican authorities arrested three members of La Familia Michoacana in Ciudad Nezahualcoyotl, Mexico state.

April 25

  • A confrontation between gunmen and the Mexican military resulted in two dead gunmen and two wounded soldiers in Adolfo Ruiz Cortines, Sinaloa state.
  • Gunmen shot and killed two men inside a shop in Boca del Rio, Veracruz state.
  • Mexican authorities detained two nephews of Ismael "El Mayo" Zambada in Tijuana, Baja California state. One of the arrested, Omar Ismael Zambada, is the son of Jesus "El Rey" Reynaldo Zambada, a ranking leader in the Sinaloa Federation. The nephews were detained with two bodyguards and approximately 20 kilograms (44 pounds) of cocaine.

April 26

  • Mexican authorities arrested Octavio "El Chapito" Leal Hernandez, a lieutenant under Luis Fernando Sanchez Arellano of the Tijuana cartel. Hernandez had replaced Juan Francisco Sillas Rocha, a former lieutenant in the same organization who was arrested in November 2011.
  • Authorities discovered two male bodies and a narcomanta in Cuernavaca, Morelos state. According to authorities, the message attributed the murders to a group identified as "CSF."
  • Mexican authorities detained two Los Zetas operators in Tapachula, Chiapas state. The operators were detained over complaints of extortion.
  • Authorities discovered a decapitated body in a street in Chihuahua, Chihuahua state, along with a narcomanta. The narcomanta attributed the murder to La Linea and threatened a rival group.

April 27

  • A confrontation between gunmen and security forces in Tierra Blanca, Veracruz state, resulted in one dead gunman, several injured gunmen and the arrest of the gunmen's leader, Maria "La Comandante Tere" Teresa Gonzalez Sanchez. According to Gonzalez, she and her men were attempting to kidnap a police commander in Tierra Blanca. Gonzalez later told authorities that the police chief in Tres Valles, Veracruz state, had collaborated with her.
  • Authorities discovered the body of man in Veracruz city, Veracruz state, along with a narcomanta signed by CJNG. The message threatened members of Los Zetas and drug dealers in the area.
  • After a firefight between the Mexican army and gunmen north of Saltillo, Coahuila state, the Mexican army freed a kidnapped soldier from the gunmen. The army detained four gunmen after the gunfight.

April 28

  • The Mexican navy detained nine municipal police officers in Tres Valles, Veracruz state, for links to organized crime. The arrests came one day after arrested cell leader Gonzalez said that she had collaborated with the Tres Valles police chief.
  • Gunmen intercepted a police vehicle in Guadalajara, Jalisco state, and freed two arrested individuals.
  • Authorities found the body of journalist Regina Martinez, who had worked with Proceso magazine, inside her home in Xalapa, Veracruz state. Authorities said it appeared that Martinez was strangled to death.
  • Gunmen opened fire on nine individuals in front of a corner store in Ciudad Juarez, Chihuahua state, killing four and wounding five. After the attack, the gunmen fled in their vehicles.

April 29

  • Gunmen kidnapped two men in Cuauhtemoc, Nuevo Leon state, and took them to a safe-house. They executed one man, while the other managed to escape with a victim kidnapped in another incident.
  • A shootout between a gunman in a vehicle and the municipal police in Saltillo, Coahuila state, left one individual dead and three children wounded. Los Zetas leader Alberto "El Paisa" Jose Gonzalez Xalate was arrested. Gonzalez, his wife and their three children were traveling in the vehicle when federal police began pursuing them, triggering a shootout. Gonzalez's wife was killed and his children were injured. Gonzalez was later brought to the hospital, where additional gunmen attempted to free him from police custody. The gunmen failed to rescue Gonzalez but did take the three children and managed to escape by vehicle.

April 30

  • Gunmen shot and killed the ministerial police commander in Guasave, Sinaloa state. Gunmen with AK-47s intercepted the commander while he was traveling to an apartment in the city.
  • Gunmen in El Salto, Jalisco state, killed a municipal police officer and his two young sons.
  • Authorities discovered a decapitated body in Cadereyta Jimenez, Nuevo Leon state, with a narcomanta signed by the Gulf cartel.
Columbia: Bacrim and FARC Increase Cooperation
April 24, 2012 | 1848 GMT

GUILLERMO LEGARIA/AFP/Getty Images

A Colombian police officer in Bogota on April 23 with part of an arsenal seized from the Los Rastrojos gang in the cities of Cali and Villavicencio

Colombian authorities announced April 23 the seizure of a weapons cache held by Los Rastrojos, one of the country's most prominent "bandas criminales" or bacrim. According to Colombian Defense Minister Juan Carlos Pinzon, Los Rastrojos intended to trade the weapons with the Sixth Front of the Revolutionary Armed Forces of Colombia (FARC) in return for drugs, most likely cocaine. The seizure was reportedly based on an anonymous tip given to Colombian authorities and information from the U.S. Drug Enforcement Agency. 

The weapons cache, including 160 rifles, four machine guns, four grenade launchers, six mortar bases, 25 handguns and 6,650 rounds of ammunition, has a roughly estimated value of $75,000. Based on standard cocaine pricing in Colombia, this amount would buy about 100 kilograms (220 pounds) of coca paste or 40 kilograms of pure cocaine in a direct trade. The use of weapons and drugs as currency is important because it allows for barter between criminal organizations without cash. The weapons were reportedly on the way to Cauca, a FARC stronghold where the guerrillas are currently in open conflict with government security forces.

Los Rastrojos' willingness to trade weapons in exchange for drugs shows how the relationship between the bacrim and guerrilla organizations has improved. Although ex-paramilitary soldiers did not form Los Rastrojos, the group has recruited them heavily since 2006 when the United Self-Defense Forces of Colombia were decommissioned. This trade is further evidence that these criminal organizations are willing to put past ideological conflicts aside in order to focus on what is most important: making money.

Previous reports have pointed to growing cooperation between the insurgent groups and bacrim, including a possible joint attack on a police station in Tumaco, Narino department, on the Pacific coast. Stratfor expects these groups to continue consolidating -- putting pressure on the Colombian state to respond with more force and therefore increasing violence in the disputed regions as government security forces engage both groups.

Mexico Security Memo: Three Trends Continue
April 24, 2012 | 1848 GMT

GUILLERMO LEGARIA/AFP/Getty Images

A Colombian police officer in Bogota on April 23 with part of an arsenal seized from the Los Rastrojos gang in the cities of Cali and Villavicencio

Colombian authorities announced April 23 the seizure of a weapons cache held by Los Rastrojos, one of the country's most prominent "bandas criminales" or bacrim. According to Colombian Defense Minister Juan Carlos Pinzon, Los Rastrojos intended to trade the weapons with the Sixth Front of the Revolutionary Armed Forces of Colombia (FARC) in return for drugs, most likely cocaine. The seizure was reportedly based on an anonymous tip given to Colombian authorities and information from the U.S. Drug Enforcement Agency. 

The weapons cache, including 160 rifles, four machine guns, four grenade launchers, six mortar bases, 25 handguns and 6,650 rounds of ammunition, has a roughly estimated value of $75,000. Based on standard cocaine pricing in Colombia, this amount would buy about 100 kilograms (220 pounds) of coca paste or 40 kilograms of pure cocaine in a direct trade. The use of weapons and drugs as currency is important because it allows for barter between criminal organizations without cash. The weapons were reportedly on the way to Cauca, a FARC stronghold where the guerrillas are currently in open conflict with government security forces.

Los Rastrojos' willingness to trade weapons in exchange for drugs shows how the relationship between the bacrim and guerrilla organizations has improved. Although ex-paramilitary soldiers did not form Los Rastrojos, the group has recruited them heavily since 2006 when the United Self-Defense Forces of Colombia were decommissioned. This trade is further evidence that these criminal organizations are willing to put past ideological conflicts aside in order to focus on what is most important: making money.

Previous reports have pointed to growing cooperation between the insurgent groups and bacrim, including a possible joint attack on a police station in Tumaco, Narino department, on the Pacific coast. Stratfor expects these groups to continue consolidating -- putting pressure on the Colombian state to respond with more force and therefore increasing violence in the disputed regions as government security forces engage both groups.

Meth in Mexico: A Turning Point in the Drug War?
December 22, 2011 | 1158 GMT
By Ben West | February 16, 2012
Security Weekly

Mexican authorities announced Feb. 8 the largest seizure of methamphetamine in Mexican history -- and possibly the largest ever anywhere -- on a ranch outside of Guadalajara. The total haul was 15 tons of pure methamphetamine along with a laboratory capable of producing all the methamphetamine seized. While authorities are not linking the methamphetamine to any specific criminal group, Guadalajara is a known stronghold of the Sinaloa Federation, and previous seizures there have been connected to the group.

Methamphetamine, a synthetic drug manufactured in personal labs for decades, is nothing new in Mexico or the United States. The U.S. Drug Enforcement Administration (DEA) has led numerous crusades against the drug, increasing regulations on its ingredients to try to keep it from gaining a foothold in the United States. While the DEA's efforts have succeeded in limiting production of the drug in the United States, consumption has risen steadily over the past two decades. The increasing DEA pressure on U.S. suppliers and the growing demand for methamphetamine have driven large-scale production of the drug outside the borders of the United States. Given Mexico's proximity and the pervasiveness of organized criminal elements seeking new markets, it makes sense that methamphetamine would be produced on an industrial scale there. Indeed, Mexico has provided an environment for a scale of production far greater than anything ever seen in the United States.

But last week's methamphetamine seizure sheds light on a deeper shift in organized criminal activity in Mexico -- one that could mark a breakthrough in the violent stalemate that has existed between the Sinaloa Federation, Los Zetas and the government for the past five years and has led to an estimated 50,000 deaths. It also reveals a pattern in North American organized crime activity that can be seen throughout the 20th century as well as a business opportunity that could transform criminal groups in Mexico from the drug trafficking intermediaries they are today to controllers of an independent and profitable illicit market.

While the trafficking groups in Mexico are commonly called "cartels" (even Stratfor uses the term), they are not really cartels. A cartel is a combination of groups cooperating to control the supply of a commodity. The primary purpose of a cartel is to set the price of a commodity so that buyers cannot negotiate lower prices. The current conflict in Mexico over cocaine and marijuana smuggling routes shows that there are deep rifts between rival groups like the Sinaloa Federation and Los Zetas. There is no sign that they are cooperating with each other to set the price of cocaine or marijuana. Also, since most of the Mexican criminal groups are involved in a diverse array of criminal activities, their interests go beyond drug trafficking. They are perhaps most accurately described as "transnational criminal organizations" (TCOs), the label currently favored by the DEA.

Examples from the Past

While the level of violence in Mexico right now is unprecedented, it is important to remember that the Mexican TCOs are businesses. They do use violence in conducting business, but their top priority is to make profits, not kill people. The history of organized crime shows many examples of groups engaging in violence to control an illegal product. During the early 20th century in North America, to take advantage of Prohibition in the United States, organized criminal empires were built around the bootlegging industry. After the repeal of Prohibition, gambling and casinos became the hot market. Control over Las Vegas and other major gambling hubs was a business both dangerous and profitable. Control over the U.S. heroin market was consolidated and then dismantled during the 1960s and 1970s. Then came cocaine and the rise in power, wealth and violence of Colombian groups like the Medellin and Cali cartels.

But as U.S. and Colombian law enforcement cracked down on the Colombian cartels -- interdicting them in Colombia and closing down their Caribbean smuggling corridors -- Colombian producers had to turn to the Mexicans to traffic cocaine through Mexico to the United States. To this day, however, Colombian criminal groups descended from the Medellin and Cali cartels control the cultivation and production of cocaine in South America, while Mexican groups increasingly oversee the trafficking of the drug to the United States, Europe and Africa.

The Mexican Weakness

While violence has been used in the past to eliminate or coerce competitors and physically take control of an illegal market, it has not proved to be a solution in recent years for Mexican TCOs. The Medellin cartel became infamous for attacking Colombian state officials and competitors who tried to weaken its grasp over the cocaine market. Going back further, Benjamin "Bugsy" Siegel is thought to have been murdered over disagreements about his handling of the Flamingo Hotel in Las Vegas. Before that, Prohibition saw numerous murders over control of liquor shipments and territory. In Mexico, we are seeing an escalating level of such violence, but few of the business resolutions that would be expected to come about as a result.

Geography helps explain this. In Mexico, the Sierra Madre mountain range splits the east coast and the west from the center. The Gulf of Mexico and the Pacific Ocean coastal plains tend to develop their own power bases separate from each other.

Mexican drug traffickers are also split by market forces. With Colombian criminal groups still largely controlling the production of cocaine in jungle laboratories, Mexican traffickers are essentially middlemen. They must run the gauntlet of U.S.-led international interdiction efforts by using a combination of Central American traffickers, corruption and street-gang enforcers. They also have to move the cocaine across the U.S. border, where it gets distributed by hundreds of street gangs.

Profit is the primary motivation at every step, and each hurdle the Mexican traffickers have to clear cuts into their profit margins. The cocaine producers in Colombia, Peru and Bolivia can play the Sinaloa Federation and Los Zetas (as well as others) off of each other to strengthen their own bargaining position. And even though keeping the traffickers split appears to create massive amounts of violence in Mexico, it benefits the politicians and officials there, who can leverage at least the presence of a competitor for better bribes and payoffs.

For Mexican drug traffickers, competition is bad for the bottom line, since it allows other actors to exploit each side to get a larger share of the market. Essentially, everyone else in the cocaine market benefits by keeping the traffickers split. The more actors involved in cocaine trafficking, the harder it is to control it.

The Solution

Historically, organized criminal groups have relied on control of a market for their source of wealth and power. But the current situation in Mexico, and the cocaine trade in general, prevents the Mexican groups (or anyone) from controlling the market outright. As long as geography and market forces keep the traffickers split, all sides in Mexico will try to use violence to get more control over territory and market access. We assume that Mexico's geography will not change dramatically any time soon, but market forces are much more temporal.

Mexican criminal organizations can overcome their weakness in the cocaine market by investing the money they have earned (billions of dollars, according to the most conservative estimates) into the control of other markets. Ultimately, cocaine is impossible for the Mexicans to control because the coca plant can only grow in sufficient quantity in the foothills of the Andes. It would be prohibitively expensive for the Mexicans to take over control of coca cultivation and cocaine production there. Mexican criminal organizations are increasing their presence in the heroin market, but while they can grow poppies in Mexico and produce black-tar heroin, Afghanistan still controls a dominant share of the white heroin market -- around 90 percent.

What Mexicans can control is the methamphetamine market. What we are seeing in Mexico right now -- unprecedented amounts of the seized drug -- is reminiscent of what we saw over the past century in the infancy of the illegal liquor, gambling, heroin and cocaine markets: an organized criminal group industrializing production in or control of a loosely organized industry and using that control to set prices and increase its power. Again, while illegal methamphetamine has been produced in the United States for decades, regulatory pressure and law enforcement efforts have kept it at a small scale; seizures are typically measured in pounds or kilograms and producers are on the run.

Mexican producers have also been in the market for a long time, but over the past year we have seen seizures go from being measured in kilograms to being measured in metric tons. In other words, we are seeing evidence that methamphetamine production has increased several orders of magnitude and is fast becoming an industrialized process.

In addition to the 15 tons seized last week, we saw a record seizure of 675 tons of methylamine, a key ingredient of methamphetamine, in Mexico in December. From 2010 to 2011, seizures of precursor chemicals like methylamine in Mexico increased 400 percent, from 400 tons to 1,600 tons. These most recent reports are similar to reports in the 1920s of U.S. liquor seizures going from barrels to shiploads, which indicated bootlegging was being conducted on an industrial scale. They are also eerily similar to the record cocaine seizure in 1984 in Tranquilandia, Colombia, when Colombian National Police uncovered a network of jungle cocaine labs along with 13.8 metric tons of cocaine. It was the watershed moment, when authorities moved from measuring cocaine busts in kilograms to measuring them in tons, and it marked the Medellin cartel's rise to power over the cocaine market.

A True Mexican Criminal Industry?

Anyone can make methamphetamine, but it is a huge organizational, financial and legal challenge to make it on the industrial level that appears to be happening in Mexico. The main difference between the U.S. labs and the Mexican labs is the kind of input chemicals they use. The U.S. labs use pseudoephedrine, a pharmaceutical product heavily regulated by the DEA, as a starting material, while Mexican labs use methylamine, a chemical with many industrial applications that is more difficult to regulate. And while pseudoephedrine comes in small individual packages of cold pills, methylamine is bought in 208-liter (55-gallon) barrels. The Mexican process requires experienced chemists who have mastered synthesizing methamphetamine on a large scale, which gives them an advantage over the small-time amateurs working in U.S. methamphetamine labs.

Thus, while methamphetamine consumption has been steadily growing in the United States for the past two decades -- and at roughly $100 per gram, unpure methamphetamine is just as profitable on the street as cocaine -- it is even more profitable for Mexican traffickers. Methamphetamine does not come with the overhead costs of purchasing cocaine from Colombians and trafficking valuable merchandise through some of the most dangerous countries in the Western Hemisphere. Precursor materials such as methylamine used in methamphetamine production are cheap, and East Asian producers appear to be perfectly willing to sell the chemicals to Mexico. And because methamphetamine is a synthetic drug, its production does not depend on agriculture like cocaine and marijuana production does. There is no need to control large swaths of cropland and there is less risk of losing product to adverse weather or eradication efforts.

For the Mexican TCOs, industrializing and controlling the methamphetamine market offers a level of real control over a market that is not possible with cocaine. We expect fighting over the methamphetamine market to maintain violence at its current levels, but once a group comes out on top it will have far more resources to expel or absorb rival TCOs. This process may not sound ideal, but methamphetamine could pick the winner in the Mexican drug war.