The long-term effort to suppress the Mexican profit-seeking illicit networks (PSINs)[1], labeled the “Mexican Drug War” when Operation Michoacán was launched in 2006 by Mexican President Felipe Calderón, seems to have ended with the death of Heriberto “El Lazca” Lazcano Lazcano in a shootout with Mexican marines in October of this year. By late 2012, Calderón’s last year in office, the vast majority of famous top cartel leaders were either killed, presumed dead or extradited to the U.S. to serve jail sentences. There is only one last capo left standing: Joaquín “El Chapo” Guzmán Loera, leader of the Sinaloa cartel. Despite the visible results of the so-called “kingpin strategy” of cartel decapitation, applied extensively by the Mexican government, it is the Sinaloa cartel that can be plausibly considered the winner of the Drug War.
In this article, I will first explain why the Sinaloa cartel under Joaquίn “El Chapo” Guzmán Loera succeeded in the long and intensive fight against both the Mexican government and its rivals in the illicit drug trade. Second, using Nathan Patrick Jones’s typology regarding resiliency of criminal organizations, I will describe the effects the struggle with the Mexican state had on the Mexican PSINs, suggesting that despite damage suffered during the war, the Mexican PSINs are far from being defeated and Calderón’s administration thus achieved only partial success mainly due to its rigid strategy of “beheading.” Finally, I will provide an outline of possible future scenarios based on lessons learned from recent internal developments within the drug industry.
How El Chapo Won the Drug War: Success of the Sinaloa Cartel’s “Transactional Business Model”
In this section, I will focus on explaining various business models applied by the Mexican PSINs. I will explore how these strategies influence the state response against PSINs, and how these strategies provide strong resilience for the PSINs.
Now at the end of 2012, with President Calderón having left the stage and most of his major rivals in the drug business shattered, El Chapo Guzmán can plausibly be considered the winner of the drug war. There is one essential factor responsible for El Chapo Guzmán’s success: the “business model” of the Sinaloa cartel. This model, has invited a less intense response from the Mexican government against cartel activities. It also provided effective mechanisms to deal with results of the “kingpin strategy” applied by the Calderón Administration, thus significantly increasing resiliency of the PSIN, providing it with a comparative advantage against the business model adopted by its rivals in the illicit drug trade.
Nathan Patrick Jones offers a typology of illicit networks based on a distinction between “insurgent,” “transactional,” and “territorial” networks, whereby the latter two are labeled “profit-seekers.”[2] Since the conception of insurgent networks – defined here as political movements attempting to overthrow a state through unconventional uses of force – is irrelevant for the Mexican case in discussion, I will exclude the “insurgent” type of network from further consideration in this article.
“Profit-seeking illicit networks” can be divided into two categories according to their respective business strategies: “transactional” and “territorial.” Transactional PSINs focus primarily on the business of trafficking in illicit goods and laundering revenues, hiding their wealth behind legitimate front businesses. This seemingly licit appearance of the network makes it extremely hard to detect and identify, especially when the whole network purposefully seeks to maintain a low-profile. Transactional networks’ business strategies within democratically-governed societies focus on securing their operational environment by corrupting higher-level state and federal government officials, including military and federal law-enforcement forces. Such networks confine their use of violence mainly to fending off business rivals, not targeting civilians. Transactional networks share some characteristics with territorial networks due to the need for specific trafficking routes throughout the region, but do not make money through extortion of the local population.[3]
In contrast, territorial PSINs focus on the control of specific territory, generating revenue not only through drug trafficking within the area, but also through taxation and extortion of the local population, often relying upon kidnapping to enforce their authority. Bribery is usually focused on local, municipal, or law-enforcement officials. Unlike transactional PSINs, territorial PSINs are usually more hierarchically-organized because they must control and protect their territory from rival smugglers, who attempt to traffic without paying fees, or “taxes,” to the relevant controlling territorial PSIN. The use of violence serves mainly as an operational tool to demonstrate the territorial PSIN’s own power or the weakness of state control over territory, or to send a message to rival traffickers. This violence usually tends to be especially brutal and symbolic. Torture, mutilation of victims’ bodies, beheadings and other forms of brutal violence are very common.[4]
Despite these idealized conceptions of networks, most PSINs tend to be hybrids of transactional and territorial types, containing varying proportion of each. Within the Mexican context, the Sinaloa cartel might serve as an example of primarily transactional PSIN, whereas Los Zetas, the Gulf cartel, the Juárez cartel, or the Arellano Félix Organization (AFO) are mostly territorial networks.
Under Charles Tilly’s conception of the state, wherein institutions of the modern state (such as taxes) are created to allow war-making, the state is more likely to target territorial rather than transactional PSINs, because modern states and territorial illicit networks are alike. Both are territorial, hierarchical, prone to violence, and funded via taxation.[5] The predatory alternative governance structure these territorial PSINs establish through extortion and kidnapping directly challenges the state by illicitly taxing the local population and exercising violence within the state’s territory.[6] Therefore, for a “territorially sovereign state,” the primary target is the “territorial” PSIN.[7]
In other words, the Sinaloa cartel survived largely intact because of its inclination to keep a low-profile through a less publicly visible modus operandi: relying on extensive corruption rather than brutal symbolic violence, and because the federal state intuitively targeted primarily Los Zetas, AFO, and other territorial networks, regarding them as their main threat and rivals. Moreover, brutal and frequent violence used by territorial PSINs also increased public demand for the Mexican federal government to suppress them. The Sinaloa cartel therefore profited from its status as a “secondary” target and the consequently less intense fight with the Mexican government.
The impact of “transactional” and “territorial” business models on PSIN resiliency
Organizational resilience can be broadly defined as the ability to survive a disruptive event.[8] Probably the most significant weakness in the existing literature on organizational resilience is that outcomes resulting from disruptive event are often seen in absolute terms, the organization either survives or does not. On an individual level, there are various levels of survival and there is no reason to believe this does not apply to some extent to organizations, hierarchies, and networks as well. In case of Mexican PSINs the absolute categorization of the survival issue offers extremely weak explanatory power in terms of clarifying what impact the Mexican government’s effort had on PSINs; hence more sensitive and more sophisticated approach is required.[9]
Jones attempts to overcome this gap in the treatment of resilience by presenting a continuum based on a typology of “levels of resilience.”[10] For Jones, the highest of the four levels of resilience is to “survive intact,” which means that after a disruptive event an organization can survive intact without requiring major reorganization to survive.[11] This is best characterized by contingency theory designs, which argue that organizations purposefully aiming to build highly adaptive structures – creation of adaptive structures becomes an integral part of organization’s standard operating procedure – will be more successful in adaptation to changing environment, and therefore resilient. This seems to be confirmed by the survival of the Sinaloa cartel, since extremely adaptive structure is the main factor responsible for its resiliency and overall success. Despite a serious blow to the cartel caused by the arrest of Alfredo “El Mochomo” Beltrán-Leyva in 2008, and the subsequent separation of the Beltrán-Leyva faction, the Sinaloa cartel retained its operational capacity, winning the battle for Ciudad Juárez drug routes in 2010 and being labeled by some U.S. officials as the most powerful drug trafficking organization in the world.[12] There is reason to believe this status remains valid despite the death of one of El Chapo’s top lieutenants, Ignacio “Nacho” Coronel Villareal, in July 2010. I include the Sinaloa cartel within the top level of organizational resiliency because of its fast and successful adaptation to its changing environment.
The second-highest level of resilience in Jones’s typology is the survival of a disruptive event resulting in the need to “restructure.”[13] In the context of Mexican PSINs, a prime example of a disruptive event is the arrest or killing of top leadership. Since the “kingpin strategy” has been largely deployed by the Mexican government every cartel suffered significant losses among its top leaders. Such events can spur a rapid restructuring or even a violent fragmentation of PSINs.[14] Los Zetas provide an example here. With the death of Arturo “Z-1” Guzmán Decena in 2002 and the capture of Rogelio “Z-2” González Pizaña in 2004, the group restructured under Heriberto “El Lazca” Lazcano Lazcano, who rose in command as “Z-3” to take charge of the organization. An example of a split within a PSIN might be one again involving Los Zetas. After Osiel “El Mata Amigos” Cárdenas Guillén, former leader of the Gulf cartel, was arrested in 2003 and extradited to the U.S. in 2007, Los Zetas gradually achieved more influence within the cartel and finally separated from it, forming their own independent organization in 2010. AFO suffered severe internal struggle and fragmentation after the arrest of Eduardo “El Doctor” Arellano Félix in 2008, but seemingly recovered and reunited in 2010 around Fernando “El Ingeniero” Sánchez Arellano after his main rival in the successor fight, Eduardo Teodoro “El Teo” García Simental, was arrested.
The third level of resilience is “fragmentation,” – defined as when a disruptive event leads to a splitting of the illicit network into smaller parts.[15] Such a situation often occurs along lines of functional specialization, when, for example, smugglers and enforcers split from each other. Such is the case of the Gulf cartel, which suffered internal split in 2010 when Antonio “Tony Tormenta” Cárdenas Guillén, brother of Osiel Cárdenas Guillén, was killed and Los Zetas separated from the organization. Remaining enforcer groups within the cartel, Los Rojos and Los Metros, entered into a fight with each other after Samuel “El Metro 3” Flores Borrego was killed by the former group in 2011.[16] Also, fragmentation within Los Zetas seems to be occurring now due to internal problems within the leadership circle. With Iván “El Talibán” Velázquez Caballero’s arrest in September and Heriberto “El Lazca” Lazcano Lazcano’s death in October of this year, Miguel Ángel “Z-40” Treviňo Morales is the senior member most likely to assume leadership within the organization.[17] Nevertheless, Treviňo’s suspected participation in the arrest of Velázquez Caballero and other important members of the organization undermines his authority. Los Legionarios, a recent splinter group from Los Zetas, has already declared war on Treviňo.[18] Moreover, some of the local cells of Los Zetas seem to have become less responsive to the central authority in the organization, further weakening the cohesion of the cartel structure.
The final level, reflecting the lowest level of resilience, is “dissolution,” – whereby central PSIN nodes or entire PSINs can be dissolved by state action or systematically dismantled beyond recognition.[19] Within the world of illicit drug smuggling, the Colombian Medellίn and Cali cartels provide such examples. Intensive military and law-enforcement efforts dismantled these organizations beyond recognition in the first half of 1990’s. More recent examples from the Mexican PSINs include the Beltrán-Leyva cartel that dissolved after the death of Arturo “El Barbas” Belrán-Leyva in early December 2009 and arrest of Carlos Beltrán Leyva later that month.
These examples of recent changes within Mexican PSINs invite the assumption that territorial networks, besides being the state’s “natural” primary target, have demonstrated lower levels of resilience. The business model of territorial PSINs invites stronger state responses and decreases organizational resiliency because this model cannot cope effectively with significant loss among leading representatives within the PSIN. That is why Los Zetas, the Gulf cartel, the Juárez cartel, and AFO suffered so much, particularly during the last six years. The transactional business model invites less intense state responses and also provides capacity to more effectively deal with the loss of leaders, because the network structure is less dependent on individuals, thus increasing the PSIN’s resiliency. El Chapo and the Sinaloa cartel won the Drug War: by application of a more effective and flexible business model.
The future of drug trafficking in Mexico
It is still too early to predict the long-term impact of the strategy deployed by Calderón’s administration against PSINs. Nevertheless, it seems correct to assume that the outcomes do not justify increased optimism. The “kingpin strategy” remained the primary instrument of the Mexican government to fight the PSINs. As demonstrated above, this approach proved effective only against territorial PSINs, weakening but not completely destroying them. The most powerful Mexican criminal network is still fully operational, acquiring even more relative power due to the weakening of its rivals, and possibly even increasing its absolute power because of its long-term systematic effort to infiltrate the highest levels of the Mexican federal government. The only somewhat positive fact might be that El Chapo is already in his late fifties, and generational change might occur within the Sinaloa cartel. Managing the large empire of the Sinaloa cartel requires extraordinary personal qualities and it is possible that El Chapo’s successors will not be up to the task.
Large territorial PSINs, once-formidable criminal organizations such as the Arellano Félix family, the Juárez cartel, the Gulf cartel, and Los Zetas, are currently undergoing a significant qualitative and quantitative transformation caused by the long fight with the Mexican government and with each other. Questions remain regarding whether this process will result in further fragmentation and dissolution of these PSINs or whether this transitory period will be concluded by successful adaptation to a new environment and their full reestablishment into the drug trafficking industry. Considering experiences from the last two decades, the latter scenario is very likely. With the “territorial business model” obviously failing, and the “transactional business model”undoubtedly flourishing, there is reason to expect the Mexican PSINs to become more transactional, with more flattened structures and “lower-profiles”.
It is also very likely that the “portfolio of services” offered by the Mexican PSINs will expand beyond the realm of drug and arms trafficking and money laundering. Human trafficking has proven extremely lucrative, lately becoming almost as profitable as drug trafficking itself.[20] Considering the high level of economically motivated migration in the region, it seems plausible that illegal transport of persons will remain attractive for the Mexican PSINs. Recently, Mexican PSINs have expanded their services to include illegal activities such as production of DVDs, with Los Zetas taking over the piracy business in the Mexican states of Chiapas, Tabasco, Veracruz, and Puebla.[21] Before its dissolution in 2011, La Familia Michoacana engaged in illegal extraction and export of iron ore to China.[22] Available evidence also suggests significant involvement of Mexican PSINs in producing and trafficking counterfeit prescription drugs such as Viagra.[23] The attraction here is obvious since the demand for pharmaceutical drugs runs into hundreds of billions of dollars globally, and the returns on low-cost production can be immense.[24]Increasing popularity of high-potency synthetic drugs such as methamphetamine can decrease the logistical burden of transporting large quantities of more traditional narcotics based on natural components, like cocaine and marijuana, across Latin America.
Conclusion
The so-called Mexican Drug War is over, but the fight against narcotics is not. The future development of this struggle seems to be largely dependent on the creative capacity of PSINs, their capability to adapt to a changing environment and always diversifying international demand for illicit goods and services. PSINs that remain loyal to territorial business models and traditional strategies, such as extortion, kidnappings, and violence against civilians, will retain their “high-profile,” inviting strong responses from the state, which will likely result in dissolution of these PSINs. Those PSINs that are instead adopting transactional characteristics with low-profile statuses and diversified portfolios of illegal services, often provided on an ad hoc basis, will most likely succeed; penetrating deeper into legitimate business activities, and strengthening symbiotic rather than predatory relationships between legitimate and criminal activities. Thus further enhancing the threat transnational organized crime poses to the Mexican government and to the security of the Americas.[25]
Lessons learned from the history of drug trafficking units in Mexico, especially those from the last six years, suggest that shall the currently observed trends of evolution within the transnational organized crime continue there is not much time left before the transactional PSINs as a phenomenon, or the Sinaloa cartel in particular, virtually usurp the state, depriving it of its institutional capacity to launch major coordinated, successful efforts against PSINs operating within its territory.
Mr. Kristlik is an M.A. candidate in Georgetown University’s Security Studies Program.
[1] The term “profit-seeking illicit network (PSIN)” was introduced by Nathan Patrick Jones in his doctoral dissertation as an alternative to the less accurate term of “drug cartel” in analysis of illicit drug traders. In this article, I use the term “PSIN” to refer to the characteristics of the illicit drug trade entity, and the term “cartel” only in reference to the established name of these entities. For details about introduction of the term “PSIN,” see: Nathan Patrick Jones, The State Reaction: A Theory of Illicit Network Resiliency, ProQuest Dissertations and Theses, 2012. http://search.proquest.com/pqdtft/docview/916751920/previewPDF/139FF3498741D49856E/1?accountid=11091.
[2] Jones, The State Reaction, Chapter 3. Jones’s typology is partially based on the distinction between “territorial” and “transactional” operational methods among illicit networks as introduced in an Economist article quoting a Mexican government official, for details see: “Organized crime in Mexico: Outsmarted by Sinloa,” The Economist, 7 Jan. 2010, http://www.economist.com/node/15213785, (accessed 28 Nov. 2012).
[3] Jones, The State Reaction, 78-9.
[4] Ibid., 80-2.
[5] Charles Tilly, Coercion, Capital and European states, AD 990-1990, (Cambridge: B. Blackwell, 1990); Charles Tilly, War Making and State Making as Organized Crime, in Peter Evans, Bringing the State Back; Dietrich Rueschemeyer and Theda Skocpol, eds. (Cambridge: Cambridge University Press, 1985),http://static.ow.ly/docs/0%20Tilly%2085_5Xr.pdf.
[6] Jones, The State Reaction, 1.
[7] Hendrik Spruyt, The Sovereign State and Its Competitors: An Analysis of Systems Change (Princeton: Princeton University Press, 1994).
[8] Paul Chabot, An Historical Case Study of Organizational Resiliency within the Arellano-Felix Drug Trafficking Organization, 2008, http://www.paulchabot.com/PDF/PaulChabotDissertationMar272008.pdf.
[9] For more in-depth analysis of organizational resilience, see Paul Chabot, An Historical Case Study of Organizational Resiliency, Chapter 2.
[10] Jones, The State Reaction, 85.
[11] Ibid., 86.
[12] Alicia Caldwell and Mark Stevenson, “U.S. Intelligence Says Sinaloa Cartel Has Won Battle for Ciudad Juarez Drug Routes,” Associated Press, 9 April 2010, http://cnsnews.com/node/63984 (accessed 22 Nov. 2012).
[13] Jones, The State Reaction, 86.
[14] John Arquilla and David Ronfeldt, Networks and Netwars: the Future of Terror, Crime, and Militancy (Santa Monica, CA: RAND, 2001).
[15] Jones, The State Reaction, 87.
[16] “Captura de El Coss no acaba con el Cártel del Golfo,” in Vanguardia, 13 Sept. 2012,http://www.vanguardia.com.mx/captura_de_el_coss_no_acaba_con_el_cartel_del_golfo-1372937.html (accessed 22 Nov. 2012).
[17] Claire McCleskey, “Navy says Z-40 will Assume Control of Zetas but Group is Fragmented”, InSightCrime, 11 Oct. 2012, http://insightcrime.org/news-briefs/z-40-assume-control-zetas (accessed 21 Nov. 2012).
[18] Hannah Stone, “Zetas Splinter Group Announces Mission to Kill Z-40,” InSightCrime, 23 Oct. 2012,http://www.insightcrime.org/news-briefs/zetas-splinter-mission-kill-z40 (accessed 21 Nov. 2012).
[19] Jones, The State Reaction, 87.
[20] Jeremy Haken, “Transnational Crime in the Developing World,” Global Financial Integrity paper,http://www.gfintegrity.org/storage/gfip/documents/reports/transcrime/gfi_transnational_crime_web.pdf.
[21] “Mexican Drug Cartels Diversify,” in Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=372998&CategoryId=14091 (accessed 21 Nov. 2012).
[22] Ibid.
[23] Shirley Redpath, “Trade in illegal medicine hits pharmaceutical sector,” World Finance, 20 April 2012,
http://www.worldfinance.com/home/special-reports-home/trade-in-illegal-medicine-hits-pharmaceutical-sector, (accessed 21 Nov. 2012).
[24] Ibid.
[25] For the idea of the symbiotic relationship between legitimate and criminal actors replacing the predatory attitude of criminals towards legitimate businesses, see Carlo Morselli and Cynthia Giguere, “Legitimate strengths in criminal networks,” Crime, Law & Social Change, Vol. 45, no. 3 (April 2006), 185-20,http://www.springerlink.com/content/j31xl25830845n53/.