Posts Tagged ‘Southwest Border Anti-Money Laundering Alliance’

This Week in Drugs (Sept. 10, 2010)

by David E. Robles

Gunmen killed 25 people in drug war-related attacks in Ciudad Juarez today, making it the single deadliest day in the Mexican city in the past two years. According to the Associated Press, 15 people were killed the day before in a series of attacks on four homes in three hours.

Ten days after his arrest, U.S. born kingpin Edgar “La Barbie” Valdez Villarreal has provided a wealth of information to Mexican authorities about the inner workings of the Sinaloa cartel led by Joaquin “El Chapo” Guzman. National Public Radio reported that the videotapes of his declarations have been pored over by the Mexican media for days. Valdez’s case is unique because most other kingpins have been killed or have been less willing to talk to police after their arrest. He is also the only U.S. citizen known to have risen so high in a Mexican cartel. Read The New York Times story about his rise from Texas high school football star to Mexican drug kingpin here.

As border violence and instability increases, factories along the border, known as maquiladoras, have seen a sharp decline in investors, bringing more economic woes to an already war-torn area of northern Mexico. Because of drug war violence, 20 percent of members in the Reynosa Association of Maquiladoras and Manufacturers had to put projects on indefinite hold or cancel them entirely. The group’s president, Dan McGrew, told My San Antonio, “We’re not being targeted, but we are collateral damage.”

Mexican journalists have also been caught up in the violence as Mexican criminal enterprises attempt to censor news of the drug war. Upwards of 30 journalists have been murdered or have gone missing since President Felipe Calderón took office.  Joel Simon, executive director of The Committee to Protect Journalists, says “Unless the Mexican government takes bold action, the narcos will continue to define what is news and what is not. That is no way to win the drug war.”

The debate over pot policy in Mexico has intensified as California weighs legalizing marijuana for recreational use. A Washington Post article looked at the differences in the way marijuana is viewed in the U.S. and Mexico as the legalization debate escalates. Although some prominent Mexican figures such as former Mexican President Vicente Fox have spoken in favor of legalizing marijuana in Mexico in order to undermine the drug profits for the criminal enterprises, there are many who say legalization will not effectively eliminate the crime seen today. (In case you missed it: in an open email to CrawfordOnDrugs earlier this week, Cameron H. Holmes of the Southwest Border Anti-Money Laundering Alliance argued that he does not believe the economics of legalization in the U.S. would work to undercut the price of illicit drugs in Mexico. Of course, many others, like the national Just Say Now campaign disagree, at least when it comes to marijuana.)

Nine former Drug Enforcement Agency administrators are urging President Obama to sue the state of California if voters there pass Proposition 19 to legalize marijuana for recreational use by people 21 years old and older. The former DEA officials wrote in a letter to Attorney General Eric Holder that the law would challenge federal authority and that it should be treated just as the controversial SB1070 immigration law in Arizona.

Is legalization the answer to the drug war? Should President Obama sue if Proposition 19 passes? What do you think?


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“There is no easy way”: Guest Opinion from head of Southwest Border Anti-Money Laundering Alliance

Editor’s Note: Last week, I blogged about my recent interview with Cameron H. Holmes, a senior litigation counsel in the Arizona Attorney General’s Office who will soon leave for his new job as staff director of the Southwest Border Anti-Money Laundering Alliance. In a comment on that post, a reader “TheRealBillC” disputed some of Holmes’ claims, contending that Mexican cartels would not resort to such violence if the government backed down. Holmes, who I suspect hears that sort of argument a lot, responded to me directly with a lengthy email.  In the email, Holmes addresses everything from the change in strategy by the drug cartels, which he says are more accurately referred to as “criminal enterprises,” to reasons why he believes drug legalization is not the answer to address violence in Mexico. I was granted permission to publish the email only if I agreed to run it verbatim, without editing or trimming. Please note that the views expressed here do not reflect my own opinions. However since Holmes is a pre-eminent expert on border issues, I felt like his thoughtful and informed ideas were worth sharing. Please comment and let me know what you think.


Email from Cameron H. “Kip” Holmes to Amanda J. Crawford, editor at


I am afraid I must disagree with your commenter. My primary thesis is that the Mexican criminal enterprises (“CEs”)(it is misleading to call “drug cartels” because they are not primarily price-setting entities and they are not just about drugs—they are primarily opportunistic multi-crime criminal enterprises) pose a serious threat to U.S.-Mexican trade, which in turn poses a serious threat to the economic health of Mexico and therefore of our hemisphere. Defending these trade routes should therefore be our primary focus.  In the short term, this means focusing U.S. and Mexican investigation and prosecution on the CEs’ trade-based criminal activities and redoubling our efforts to treat and prevent drug use.  In the long term, it means focusing our efforts on helping Mexico strengthen and defend its core democratic institutions, such as its judicial system, its press, and its law enforcement agencies. Ultimately, success will come down to the U.S. public’s recognition that use of Mexican-supplied drugs is killing our hemisphere, and the Mexican people’s continuing belief in their government’s ability to maintain the rule of law.  If either of these fails, Mexico will descend into economic ruin and political instability, and large parts of the U.S. economy, particularly in the Southwest, will sink with it.

The writer, TheRealBill, does not deny that the CEs are engaging in organized criminal activity that bleeds trade-related activity, such as diverting petroleum products, hijacking cargo, or kidnapping business leaders.  Rather, the writer seems to believe that the CEs will somehow intentionally stop such activities just short of the point that would “shut that door.”  But it does not matter what they intend to do. What matters in the context of injury to the Mexican economy is the result of what they actually do, even if they have no idea how that will effect the overall economy.  A pack of wolves may decimate a deer population without a thought about what that may mean to the wolves years hence.  They act like wolves because that is their nature, and CEs act like CEs because that is their nature.

The idea that CEs’ will pull up short of shutting off the economy displays ignorance of how CEs’ leadership operates.  Organized crime leaders stay in charge by inspiring and fostering the loyalty of their immediate inner circle.  Without this loyal inner circle, they are subject to sudden and successful challenge by contenders for their dominant role.  Keeping a loyal inner circle involves several factors, the most important of which is making financial opportunities available to the most loyal. Turning away apparent economic opportunities is an invitation to that inner circle to look elsewhere for leadership.  There is always another contender waiting in the wings for a shot at the top spots.  Also, where one group does not exploit an opportunity, another similarly placed group will.  When traditional Mafia dons balked at trafficking in narcotics, they were replaced by leaders who would.  Once criminal opportunities are identified, leaders must exploit them or risk being replaced (which generally involves death).  There are no beneficent organized crime leaders because that is not the nature of such organizations, just as there are no shrinking violet alpha male wolves because that is not the nature of wolf packs.  So the diversification of the Mexican CEs’ criminal conduct will continue as long as the economic opportunities are there and will take whatever advantage of those opportunities that they can get away with.  These opportunities will continue to expand as long as the power of the representative government declines relative to that of the CEs. The causal relationship between the violence in Mexico and President Calderon’s law enforcement efforts is irrelevant to the magnitude of the present risk of economic crisis.  It does not matter who started the escalation of the violence except as that relates to useful strategies to avoid economic catastrophe now.  The writer’s thesis is that “When Calderon decided to call in the military and up the violence, the cartels responded move for move.”  His conclusion from this false assertion is the false deduction that, “When the government backs down, the cartels will go quiet again.” However, the rise of the newly aggressive and power-acquiring CEs was not caused by Calderon’s administration, and in any event, to the extent that increased law enforcement has some violent repercussions, the Mexican government cannot simply “back down.”

The rise of the present CE’s is the result of numerous parallel events and trends.  To name a few, the arrival of many Mexican criminals in the U.S. in the 1990s permitted Mexican drug organizations to rely on Mexicans to distribute their drugs, rather than on Columbians or other groups.  Vertical integration of the distribution chain brought more money to the Mexican organizations.  At the same time, U.S. and Columbian pressure on Columbian drug organizations weakened them vis-à-vis Mexican organizations.  The Zetas arrived on the scene in the late 1990s, bringing military tactics and a new ruthlessness and opportunism. As an example of the ruthlessness, over 100 people died in drug violence in Nuevo Laredo alone in January-August 2005, long before Calderon’s inauguration.  As an example of opportunism, it is the Zetas who began the petroleum diversion and who have played a large part in the expansion of drug smugglers’ role in human smuggling. The maquiladoras (factories in Mexico at which goods are assembled for export in to the U.S. with favorable duties/tariffs) brought many unemployed Mexican young men to northern Mexico, away from their families, churches, and villages and therefore ready for recruitment into criminal organizations and related street gangs, and eager to prove themselves.  The sharp decline of the economies of the U.S. and Mexico in 2008 magnified this available pool of soldiers.  With many strangers available as soldiers, leaders are not as constrained about violent confrontations with rival gangs as they had been when their conflicts meant their own relatives may die or be injured, and brutality became more acceptable.  The evolution of diversified criminal organizations in Mexico is not a one-cause process.

Nor are the CEs’ tactics “move for move” responses to law enforcement. While it is obvious that CE conduct and law enforcement conduct drive each other to change, and no one doubts that escalation is a two-way process, it is misleadingly shallow analysis to attribute present CE tactics to Mexican law enforcement, whether before or after Calderon’s initiative. The CEs’ tactics are clearly intended to undermine representative government by instilling fear and lack of confidence in the Mexican people.  It is simply irrational to say that beheadings, murders of reporters, murders of mayors, postings of murders and threats on the Internet, ads for criminal gang recruitment in the newspapers, murders of and death threats to clergy, “taxation” (extortion) of city residents, or car bombings, are responses to law enforcement.  If they were responses to law enforcement, they would be done in the U.S. in response to law enforcement.  They are not done in the U.S. for the simple reasons that the CEs are not now contending for control of cities or areas of the U.S., as they are in Mexico, and they do not believe they could avoid prosecution for such crimes in the U.S., as they do in Mexico.  The writer is wrong about causation and wrong about the CEs’ tactics and goals, so he is wrong about his simplistic solution of “backing down.”

In the present circumstances, it is not really possible for the Mexican government to back down. While it has long been believed by some in the U.S. that Mexican government officials accepted bribes to allow Mexican drug and human smugglers to operate with relative amnesty, that was in the context of the crimes of drug and human smuggling.  The crimes have changed.  They now include diversion of petroleum (owned by the government and therefore by the people), hijacking cargo, kidnapping business people, extorting insurance companies, extorting whole cities, and atrocious murders, including of clergy, journalists, and political leaders.  No government can look the other way in connection with such conduct, no matter what the bribe amount offered. Nor would the CEs accept a return to the former order, even if could be offered.  As explained above, once the CE has enjoyed the criminal benefits of operating in a governmentally challenged area, a leader who proposed to his inner circle that the group should limit itself to drug and human smuggling and abandon the other criminal opportunities would not remain the leader for very long.  The alpha wolf who will not lead the pack on the trail of fresh blood will lose his leadership position to a contender.

It would be nice if legalization of drugs were a panacea by which the violence could be stopped and the strength of Mexico’s representative government restored.  This is simply not possible.  I am referring to economics, not politics.  Please consider the economics of, say, a hypothetical “National Cocaine Corp.” (“NCC”), a new business formed to sell hypothetically recently legalized cocaine in the U.S.  As the first order of business, NCC must get an FDA permit after showing the purity of the product and the conditions of its manufacture in a clean plant under closely monitored conditions, under the watchful eyes of various doctors, chemists, and quality control experts.  Next, NCC must pay for insurance against the inevitable lawsuits a la the massive suits against Big Tobacco.  Next, NCC must set its prices based on its payment of massive taxes, again like alcohol and tobacco, but undoubtedly much higher. But the Mexican CEs won’t have any of these expenses.  Bottom line: there is no legal product that can match the price of good old smuggled drugs. In addition, some young people, say, under 21, will inevitably be deemed too young to use the drugs legally, again like alcohol and tobacco.  This market would not be available to NCC, but the CEs would keep selling to this market.  So the Mexican CEs would stay in business and would continue smuggling the same products, but for a larger market because the products are “legal” (not their own smuggled products of course, but that’s of no concern to them because they have always been selling illegal products).

It is also tempting to some to suggest that the U.S. could hide behind Mexico’s sovereignty and continue our ineffective and under-funded efforts.  But this is not an option.  The U.S. /Mexican economy is in many ways a single vessel.  If one side of it sinks, the other side sinks with it.  Yes, sovereignty is an issue that the U.S. must deal with in true partnership against our common enemy, but abandonment of our partner is not a proper way to recognize and honor its sovereignty. Here is the sober truth: the U.S. faces a substantial and immediate risk that the Mexican criminal enterprises will drive the U.S.’s neighbor into economic ruin in the next few years, accompanied by its political disintegration.  There is no easy “back down” solution and no “legalize drugs now” solution.  We must act decisively now to avert this, in close partnership with and following the leadership of the Mexican government, or invite the catastrophic consequences of a destabilized Mexico. Although U.S. public officials have kept their heads buried in the sand as the Mexican CEs evolved into what they are today, making the solution far more difficult than it would have been several years ago, it is no longer possible to ignore this economic threat.  It is going to be a very difficult and costly road.  It will require careful assessment of the options, none of which are easy or attractive, in an atmosphere unclouded by simplistic rhetoric relating to such things as sealing the border, legalizing drugs, or expelling illegal immigrants. It is time to put these impossible, ineffective, or irrelevant agendas aside and consider what must be done for the survival of our hemisphere’s economic health.  There is no easy way around it.


(Cameron H. Holmes)

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The real threat: Cartels could disrupt economy of entire Western Hemisphere

What’s the worst thing that could happen if drug cartel violence in Mexico is left unchecked? The collapse of the Mexican government? Increased violence in U.S. border towns?

Cameron H. Holmes, staff director of the Southwest Border Anti-Money Laundering Alliance, says cartels have the potential to disrupt the economy of the entire Western Hemisphere. And he thinks our political leaders just don’t get it.

Holmes will retire soon from his post as senior litigation counsel in the Arizona Attorney General’s Office to lead the Alliance, a quasi-governmental agency formed earlier this year to provide assistance to law enforcement along the border in combatting cartel activities and stopping the flow of guns and money into Mexico. The Alliance is funded with the settlement proceeds from a lawsuit against Western Union led by Holmes’ boss Arizona Attorney General (and Democratic gubernatorial candidate) Terry Goddard, which accused the company of facilitating money transfers from the U.S. to Mexican drug cartels. (Read more about the Alliance here and the Western Union settlement here.)

Last month, I interviewed Holmes for a story on gun trafficking that will appear in the October issue of Phoenix Magazine. The conversation was among the most thoughtful I have had about the drug war, how we got to this bloody moment in time and what we should be worried about in the future. Here are highlights from that conversation* – think of it as Mexican Drug War 101, from Holmes’ perspective:

The major change in the drug war in Mexico in the last three years is the result of a change in strategy and methods by the drug cartels, Holmes says. Previously there had been an “uneasy truce”: the cartels paid off Mexican law enforcement to look the other way. But now, the cartels want absolute power. This has manifested itself in attacks on police stations and politicians, car bombs, beheadings and attacks on the general public.

The cartels have diversified their business to gain all manner of control: diverting petroleum, hijacking cargo from trains and trucks, extorting insurance companies. Essentially, they have taken on the characteristics of a classic mafia organization or warlord, not of a traditional drug trafficking organization. Many young men are attracted to the border area to work in the maquiladoras (the factories that have sprung up on the Mexican side of the border in recent years) and immigrate into the U.S. This gives the drug cartels an unlimited supply of young men to recruit as soldiers. In the past, the drug trafficking organizations were familial. Now, they see their men as expendable.

The all-out war we see in Mexico is enabled by this unlimited supply of mercenaries combined with a steady stream of weapons from the U.S. “The only way this war for regional control can continue to function is with a continuous supply of high-powered weapons,” he says. Yet U.S. politicians have done little to really clamp down on gun trafficking to Mexico by passing common sense laws such as restrictions on military grade weapon sales and sales at gun shows, instituting common sense reporting requirements (like of multiple purchases of assault rifles) or lifting gun lobby-pushed restrictions on the ATF that limit the agency’s investigative abilities.

Holmes notes that the Democrats control Congress and the White House, but they haven’t been willing to take on the gun lobby. “They haven’t got the guts, and I don’t think they understand how important it is to the future of our hemisphere,” he says. He calls the inaction on gun trafficking by Congress “disgraceful.” “Here is an opportunity to do something about the weapons fueling the Mexican criminal enterprise and they have done zero. They allowed previous restrictions on assault weapons to expire.”

Holmes says he does not think U.S. residents or political leaders fully grasp the significant threat posed by the increasing power of the Mexican cartels. “They are in a position to blockade trade between the U.S. and Mexico,” which would disrupt the economy of the entire hemisphere, he says. “I don’t think the general public of the U.S. has any idea how threatening the situation is or that Congress adequately appreciates it. I think that time is very short … that we and our contemporaries have to reverse this trend.”

Instead of focusing on gun trafficking, Holmes notes that politicians nationally and in Arizona have instead focused on immigrants and illegal immigration. “It doesn’t make the least bit of difference how many immigrants are in the United States at any given time to make the threat of Mexican criminal enterprises a clear and present danger to the United States’ hemispheric interests,” Holmes says. The cartels “don’t need to cross the border. They could stay in Mexico, throttle U.S.-Mexico trade and our hemispheric economy is dramatically disrupted . . . . What’s going to happen next is the representative government in Mexico is under question about whether it can survive.”

“We are spending our energy worrying about individuals crossing the border. We should be worried if there is going to be a Mexican economy five years from now,” he says. “It is tragic. We’re not doing nearly enough, and we are not succeeding.”

[*Author's Note: Ideally, I would have posted a verbatim transcript of my conversation with Holmes. However, my digital recorder died (and not just the batteries) right before the interview. As I always told my journalism students at Arizona State: this is why you take good notes.]


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