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How the Cartels Work

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"Mexicans don't flip," says an undercover DEA agent who participated in Operation Pocono Powder, a major case against the cartels in New York. "Part of the way the cartels retain control is through fear. Mexicans will cooperate to a certain level, but they won't talk about Sinaloa. They know their family back home will be killed."

The DEA insists that its high-profile busts are having an effect. "In Project Reckoning, we had 64 cities involved," says Carl Pike of the DEA's Special Operations Division, citing a bust against the Gulf cartels that resulted in 507 arrests by last year. "We were after their distribution capability. It was like taking out 64 Walmarts all at once. The Mexicans have to regroup from ground zero, and it's time-consuming and expensive to do that."

But the Walmart analogy offers a larger insight into how the Mexican cartels have transformed the drug business in America — and why the DEA has been unable to stop them. In the 1980s, the Colombians tried to directly control the distribution of their product through a network of low-level dealers — a group prone to stealing, fucking up, getting caught or trying to take over themselves. Like any good manager, however, the Mexicans learned from the mistakes of their predecessors. Instead of maintaining their own labor force of dealers — a risky and costly proposition at best — the drug lords came up with the same solution as Walmart and countless other multinational corporations: outsourcing.

To sell their product in America, the Mexicans contract with existing criminal operations, relying mainly on Hispanic gangs like MS-13 and the Mexican Mafia. But they also sell to Crips, Bloods, Hells Angels, Puerto Ricans or Dominicans — whoever can move weight reliably. This keeps their overhead low and reduces potentially risky connections to top management. It also makes all of the headaches of running the business — wages, benefits, overseeing an untrained and unruly workforce — someone else's problem. "American gangs are not integrated into the Mexican drug-trafficking organizations," says Tom Diaz, a senior policy analyst at the Violence Policy Center and the author of No Boundaries: Transnational Latino Gangs and American Law Enforcement. "The gangs are wild cards; their behavior is unpredictable. There's no advantage to the Mexican cartels to bring them into their structure. The Mexicans are happy to sell them drugs, but they keep them at arm's length. They use them sometimes as muscle or disciplinarians, but only on a contract basis."

Street-level dealers, mostly drawn from the pool of millions of Mexican immigrants stuck in menial jobs in the U.S., effectively become what Amway calls "IBOs," or Independent Business Owners. They sell all the crank and crack they can, hoping to boost their sales status from an Amway-like Silver to Gold to Platinum, providing them with ever-larger supplies of product to move. "The low-level guys are working menial jobs as they establish themselves as a drug dealer," says Greg Borland, the DEA assistant special agent in charge of Alabama. "They are the ones who are like Tony Montana in Scarface. They start small and try to make something of themselves."

Higher-level dealers are required to keep a low profile and live modestly, as if they were regional managers for a chain of fast-food restaurants. If one gets busted, there's rarely a link that can be traced back to the cartels — and even if there is, the dealer knows that his family back in Mexico is certain to be executed if he talks to the feds. "The structure is designed to minimize the risk by minimizing the number of sales or 'touches' that have to be made," says Borland. "The guys at the highest corporate level — the cartel guys — only make one sale. It's very low-risk."

Stripped to its essence, what the Mexican cartels sell is not drugs so much as access to the world's biggest and most lucrative market for drugs. And thanks to U.S. policy, the Mexicans enjoy a virtual monopoly on the American market. In the 1980s, Ronald Reagan largely closed off the Caribbean as a passage for narcotics, forcing the Colombians to turn to the Mexicans for an overland route. In the mid-1990s, after NAFTA made it easier to ship goods of all kinds across the border, Mexicans became the go-to distributors for Afghans, South Asians, Middle Easterners and anyone else looking to sell illegal substances to Americans.

The result has been the creation of one of the most successful criminal enterprises in human history. In Sinaloa, money brought back from U.S. drug deals was long known as "dirt," because of the smell it got from being hidden in suitcases underground. But today, the cartels launder Yankee dollars through a network of global banks, using the same secure electronic transfers as any self-respecting international business. According to the government's own estimates, the Mexican cartels generate as much as $38 billion in gross proceeds at the wholesale level every year — a sum that surpasses Dupont and Coca-Cola.

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