Mexico’s narco-economy

A narco-economy is a term used to describe an economy of a country that in all areas has been fully infiltrated by the wealth and the power of the drug trade. This term perfectly describes Mexico for the last 3 decades, which can be mostly blamed on the Neoliberalist policies implemented by the Mexican Government in the 1990s under the direct and indirect influence of the major illegal drug cartels and the USA’s International Economic Policy.

Is Neoliberalism to blame?

Under the administration of Carlos Salinas, neoliberal reforms transformed Mexico into a free market economy. State control of key sectors was privatised (e.g. Carlos Slim, net worth around USD 68 billion, who bought state-owned telecommunications company Telmex which dominated that market in Mexico). This process was fast-tracked by NAFTA (North American Free Trade Agreement, 1994) which implemented capitalist values, designed predominantly to stimulate trade between the two nations, thereby leading to Mexico’s inevitable economic dependence on its larger neighbour. By 2006, around 85% of Mexico’s exports were to the United States. Mexico went from being a self-sufficient micro-farming economy to importing around 40% of its food, mostly from the US. It can be argued that Mexico’s heavy dependence on the US created the ideal breeding ground for the drugs trade later on.

Hundreds of thousands of small scale farmers lost their livelihoods to giant corporations who came to dominate the food distribution and farming businesses; for Mexican workers and farmers, NAFTA dealt some crushing blows and led to one million layoffs in the first year of the agreement. By the end of 1996, there were eight million unemployed and around five million working in the informal economy. Those who were lucky enough to find work were paid very little, with the majority working for an average of USD 6 per hour in foreign-owned export assembly lines called maquiladoras. As a result, NAFTA left millions working in poverty. To make matters worse, this pseudo food monopoly led to hyper- inflation and unaffordability for the masses, and the price of basic foodstuffs almost tripled against a backdrop of falling wages amongst the working class. This induced poverty was spread throughout the country and left large swathes of the population desperate for income.

Mexico is strategically geographically located between the core demand for drugs (the USA which is the largest consumer market for illegal drugs in the world) and the largest supply of the cocoa plant (Columbia), cannabis (Paraguay), and other illegal drug farming and production; this makes it the unavoidable throughway for drugs into the USA by land, air, sea, and underground. However, NAFTA allowed for new ‘businessmen’ such as Joaquin ‘El Chapo’ Guzman Loera to break through the ranks. He was the CEO of the Sinaloa cartel, perhaps one of the most notorious cartels to have ever infiltrated Mexico which was as equally focused on the distribution as production. He set up super labs close to the US border earning him the nickname ‘El Rey de Cristal’, as he was known for producing mostly methamphetamines and other drugs which would be sold both domestically and abroad. Drug cartels started to buy bankrupt farms cheaply and began cultivating poppies and cannabis. The unemployed found dangerous but relatively lucrative jobs in the drug trafficking supply chain, such as farmers, couriers, drivers, chemists, street sellers, informants and armed security guards.

Drug kingpins like El Chapo seized this opportunity and gave hope to the Mexican people. The cartels’ aims were only facilitated by the government who funded huge projects of transportation infrastructure which ultimately aided the drug couriers as now more vehicles could get through, so more product could be delivered, and so more profit for the cartels. This came in the form of new highways, bridges and rail lines. Therefore, the local drug cartels had the financial capability, the opportunity and the means (infrastructure and workforce) to distribute their product all around the country and into North America. This process continued and ended up finding its way in all areas of the economy. Large sums of money were reinvested by the cartels into the country, making other sectors directly or indirectly reliant on the drug trade. The drug kingpins were famous for their generous donations back to their people; drug money can be found in almost every area of life in the smaller communities. Thus, the reach of the impact of the drug trade only grew.

The growth of the drug trade can be attributed to the neoliberal policies put in place during the Salinas administration. NAFTA helped to consolidate the central role of the drug trade in the Mexican economy and provided the cartels with a poor, desperate and disposable workforce with effectively no civil rights. Mexican economic policy created huge unemployment, a desperate working-class workforce and well-invested infrastructure which presented this opportunity to the beady-eyed, opportunistic, ruthless and ambitious cartel leaders such as El Chapo, and so the drug kingpins quickly filled the power vacuum, leaving Mexico with a narco- economy which remains as strong today as ever.