Revised version of "Mexico: Laundering the Political System" published in OGD: The World Geopolitics of Drugs, 1998/1999, annual report, Paris, 2000.
Despite the “historical” seizures announced by the Mexican government and a few arrests of fairly high-level traffickers, almost a “normal” phenomenon given the electoral context, Mexico is still one of the world’s busiest narcobusiness centers. And it is probable that, in years to come, drug production and trafficking and money laundering will continue to be indispensable to the country’s economy and, thanks to impunity, to bankroll political activity, especially within the Institutional Revolutionary Party (PRI), which has been in power for 71 years. Indeed, no profound change has taken place during the last two years; not in drug smuggling to the United States, which remains at extremely high levels; not in the organic links between political power and drug trafficking, which have been confirmed; finally, not in the antidrug strategy jointly implemented by the American and Mexican governments, which in spite of some reforms is experiencing a severe credibility crisis.
The first reason for this crisis is that violence continues to rise in Mexico. It reached unprecedented heights in 1999, both in border cities such as Tijuana, Ciudad Juárez and Matamoros, the great hubs of drug smuggling to the U.S., and in cities of the interior like Guadalajara and Mexico City. Most, if not all, major human rights monitoring organizations in the world have published alarming reports about violations by Mexican police and military forces (cases of torture, “disappearance”, extra-judicial killing, etc.), sometimes with the excuse of fighting drugs. Police and military officers were also killed by corrupt colleagues or the traffickers. In addition, some military interventions against guerrilla movements, especially the Zapatist rebels in Chiapas (EZLN), were camouflaged as drug law enforcement.
The second related problem is that the rule of law, which in theory governs the antidrug fight, continues to be ignored in practice when legal action affects people and institutions that may upset the PRI system and its grip on state institutions. Even if it is no longer total, the impunity of senior PRI figures, guaranteed by the complicity of many sectors of the party and the support of Washington, remains one of the fundamental obstacles to an efficient fight against drug trafficking and money laundering, together with poverty. Meanwhile, officials of all parties have accused each other of involvement in drug trafficking or money laundering (or, indeed, both), a phenomenon that has accelerated as the presidential election gets nearer. Although they are not always unfounded, these accusations never result in formal complaints, much less police investigations and indictments. Let us note in passing that the candidates of the opposition parties, left and right, have promised that they would end the drug trade if elected, but did not explain how they would go about doing it. Neither of the two main opposition coalitions has proposed a coherent alternative to the government’s drug control strategy.
The last, but certainly not the least, credibility problem faced by the war on “drugs” waged in Mexico since 1994 is a sharp increase in illicit drug consumption, cocaine and crack especially, announced by OGD as early as 1995, and confirmed by a study of the Mexican health ministry. Present-day Mexico is officially a significant consumer market for illicit substances, even if it is still far from catching up with its northern neighbor or the European Union, Mexico’s new economic partner under a free trade treaty signed on March 23, 2000.
In view of these facts it is clear that drug-related interests, both Mexican and foreign, have expanded their grip on the country by adding to their traditional role as drug producers and smugglers for the U.S. market that of distributors on the domestic market. This tells a tale about the credit that should be given to the statements, clearly electoral in nature, that officials on both sides of the border make about the improvement of the drug fight in Mexico.When More Seizures mean...
On January 26, 2000, or about one month before the results of the American certification process were made public in Washington, Mexico’s Attorney General, Jorge Madrazo Cuéllar, gave a press conference in Mexico City to present the balance-sheet of the antidrug fight between December 1, 1994, when President Zedillo took office, and January 25, 2000. During this five-year period, the Mexican authorities seized a little more than 142 metric tons of cocaine; nearly 5,513 tons of marijuana; 1.066 tons of heroin; and 1.713 tons of opium. In addition, they officially eradicated 126,585 hectares of cannabis and 82,519 hectares of poppies. Seizures for 1999 (from December 1998 to November 1999) amounted to 26 tons of cocaine; 1,457 tons of marijuana; 222 kilograms of heroin; and 777 kg of opium. Moreover, 10,775 people were arrested on drug charges in Mexico in 1999 (52,516 during the five-year period). Madrazo did not mention seizures of methamphetamine, but the U.S. State Department has revealed that 358 kg of this drug was seized and 14 laboratories were destroyed in Mexico in 1999. There were more seizures in 1999 than in 1998, but since the Mexican results were particularly poor in 1998, last year’s seizures mostly represent a return to the average observed since Zedillo became president.
The bad performance of 1998 had led various American legislators to try to reverse the certification President Clinton had granted Mexico on March 1, 1999. Anxious to avoid such unpleasantness in 2000, when presidential elections will be held in Mexico and the United States, Madrazo stressed that he was presenting “historical figures” confirming the “validity” of “President Zedillo’s strategy”, which is based on the American “drug control” model. The attorney general thus implicitly underlined that the present administration had done better than its predecessor, which was headed by Carlos Salinas. But Salinas (who, among many other problems, faces money-laundering charges in France) had considerably improved on his own predecessor, Miguel De la Madrid (whose entourage included presumed trafficker and money-launderer Carlos Cabal Peniche), who himself had done better than the previous government (when the drug trade was abetted by Arturo “El Negro” Durazo, the sinister chief of the Mexico City police and President López Portillo’s “trusted friend”), etc. And during all that time, drug production and trafficking have increased non-stop in Mexico. Therefore, experience shows that in Mexico as elsewhere seizures, “historical” or otherwise, have a very limited impact at best on the real level of drug production, trafficking and consumption (which is confirmed by the falling prices and increasing diversification of the drugs available on international consumer markets) and that they do not guarantee that the drug trade will not enjoy high-level protection.
Nor have these seizures preserved Mexico from registering a dramatic increase in drug use since 1994, a fact that Madrazo “forgot” to mention during his press conference. Far from sharing the optimism of the attorney general, a nation-wide study conducted by the ministry of health has concluded that drug use “has shown a preoccupying increase and worrisome trends”. Indeed, according to this study reviewed in the weekly magazine Proceso, the mean age of first drug use in Mexico is ten years. In 1993, 3.9% of Mexicans had used a drug at least once in their lifetime, but in 1997 they were 5.27%. Since Mexico has 95 million inhabitants, about half of whom are aged 15 and under, it follows that the domestic market is huge and lucrative. The range of drugs available is diversifying, polydrug use is spreading, and substances that were practically unheard of a few years ago, like synthetic drugs and especially ecstasy, are now imported from Europe and marketed in Mexico. However, cristal, the smokeable methamphetamine manufactured in Mexico, is also gaining adepts on the domestic market.
Another imported product – cocaine – is now the second most-used illicit drug in the country, after marijuana, which is grown locally. In fact, cocaine use has exploded: 10% of Mexican minors used it is 1997, as opposed to 0.1% in 1993. Because prices have dropped, cocaine consumption, which used to be restricted to the elite and the narcos, has become democratized and is spreading to new social groups and regions. Almost everyone can buy it, in urban as well as rural areas. For example, an OGD correspondent observed that some young dwellers of a small village in the mostly rural and Indian state of Oaxaca (one of Mexico’s poorest states, a large marijuana and opium producer and a significant transit territory for cocaine) used cocaine hydrochloride. The kids said they could buy a gram for 100 pesos (about US $9). In Mexico City, high-grade hydrochloride sells for 200 pesos a gram, but highly adulterated product is available at 80 pesos a gram. Crack cocaine costs 20 pesos a dose (“grapa”), and on the capital’s street markets, from scruffy Tepito (a hub for smuggling, piracy and drug trafficking) to trendy Coyoacán, crack pipes are sold openly. This cocaine boom is a direct consequence of the deal struck between Colombian traffickers and Mexican counterparts in the early 1990s: the Colombians would pay the Mexicans in kind for smuggling cocaine shipments to the “other side”, on the basis of a kilo in payment for a kilo delivered in the United States. As a result, the Mexican narcos have come to own large amounts of cocaine that they are disposing of cheaply on a domestic market which is much less glutted than that of the United States.
Heroin use is also spreading in Mexico, especially along the northern border. This increase is likely a consequence of the rise in domestic opium production, itself due in some degree to the introduction of new varieties of poppies, which are “foreign”, according to the authorities, and yield more opium per hectare than domestic plants. Insistent rumors mention the presence of “Turkish chemists” in the country, allegedly producing a distinct type of heroin than the usual “Mexican tar”. In addition, Mexico is a transit country for Asian heroin.
Although recent drug use statistics are distressing and they could be manipulated for electoral purposes (see below), their publication may have at least one positive effect. They imply an official recognition that Mexico is now a significant drug consumer market, and should put an end to, and at least strongly mitigate, the traditional stance of the Mexican government, for which drug use is basically a “gringo” problem and does not affect Mexico. Although it is not devoid of demagoguery, this position enjoys widespread support among the Mexican population. One of the consequences of this official and social denial is that public policy has been “often guided by moral or political positions instead of scientific knowledge”, according to the health ministry, and as a result has not been efficient. According to OGD sources, American funds will be invested in developing a network of Mexican NGOs working in the field of drug prevention and rehabilitation, with branches throughout Mexico and led by good professionals. It may be hoped that these funds will avoid the fate of the US $17 million granted by UNDCP to government programs crop substitution programmes in Michoacán state in the early 1990s, and that vanished into thin air.
While presidential campaigns are in full swing in Mexico and the United States, the mainstream American media, like most of its Mexican and European counterparts, continues to base its reporting on the fiction that drug traffickers have penetrated and corrupted the Mexican political sphere. Readers should therefore recall that several elements, and most notably scholarly research, have shown that historically the narcos have been subjected to the power of PRI politicians – perhaps even the PRI as a whole – who control them through police and military institutions. The U.S. federal government is aware of this situation, which its diplomatic, police and military agencies have kept track of since the 1920s. In addition, American federal agencies, especially the CIA, used Mexican drug traffickers at least once — during the dirty war in Central America in the 1980s.
Finally, it must be noted that no legal action has been taken in the United States against New York-based Citibank, although the General Accounting Office has established that the bank, for a fee, had “effectively disguised [ƒ] the source and destination” of the $90 million to $100 million that Ra“l Salinas, the former president’s elder brother, transferred to Switzerland between 1992 and 1994. The GAO quotes an internal Citibank document dated May 28, 1992 according to which Ra“l was referred to Citibank “by a very valuable client of long standing”. According to the Mexican press, this client is none other than Carlos Hank González (see below). A Swiss judge found that Ra“l’s funds were the proceeds of drug trafficking and seized them as such in 1998. In Mexico, Ra“l Salinas is serving a 27-year sentence for the murder of former PRI secretary general José Francisco Ruiz Massieu, but not for money laundering or drug trafficking. Mario Ruiz Massieu, the former assistant attorney general for drug control, who had been in charge of investigating his brother’s death, “committed suicide” on September 15, 1999, according to the official version, while he was under house arrest in New Jersey. According to rumors in Washington, the present lack of legal action against Citibank, described as “a scandal” by a specialized American official interviewed by OGD, could be related to the bank’s donation to Bill Clinton’s 1995-1996 presidential campaign. It is important to keep these facts in mind while electoral campaigns are underway in both countries because politicians use the drug issue and drug-law enforcement for electoral purposes.
After the first primary in the party’s history, which Mexican commentators variously described as “farce”, “comedy”, “show” and “theater”, PRI members chose Francisco Labastida Ochoa as their candidate for the July 2000 presidential election. The PRI thus broke away from its tradition, which required the outgoing president to choose his successor, and introduced democracy into the party with a lot of publicity. However, observers have noted that the members of the “New PRI” have elected the man favored by Ernesto Zedillo, and that the president intervened in the party’s primary. Francisco Labastida was born in Sinaloa and he governed that state between 1987 and 1992 — a period during which he “struck an agreement” with the local narcos, according to the CIA. A former minister of agriculture and interior minister in the Zedillo cabinet, Labastida has made fighting corruption one of his campaign themes, thus taking up the “moral renovation” crusade that President De la Madrid (1982-1988), to whom Labastida is close, had led into failure. Labastida’s own moralization crusade has not started under the best of auspices. The press has revealed that a former civil servant has lodged a complaint involving a firm linked to the candidate’s brother, Juan Labastida Ochoa. According to the complaint, the firm received a loan of $8 million from Banrural, the bank of the agriculture ministry, while Francisco Labastida was agriculture minister in 1995. The bank allegedly authorized the loan without securing it, which is against the law. Jorge Navarrete Peralta, the Banrural official who lodged the complaint, was fired. In addition, he says that he has been attacked and threatened. Juan Labastida and Banrural have denied the accusations.
Before officially entering the primary race in the PRI, from the heights of his job as interior minister, Labastida had prepared the ground by posing as the mastermind of the new Mexican drug control strategy during a visit to Washington in February 1999. The strategy is based mostly on the purchase of radars, scanners and other imported “high tech” equipment for a total cost of $500 million. This equipment is supposed to help Mexico make even more “historical” seizures in coming years (see above).
Meanwhile, the future of Mexico’s social programs is doomed because $70 billion to $80 billion in private debts vanished in the collapse of the banking sector and will be refunded by all Mexican taxpayers (Fobaproa/IPAB scandal). One of the reasons for the Mexican bank crash was the pillage of firms and banks by people, some of whom are linked to drugs, who generously contributed to the PRI, including the presidential campaign of Ernesto Zedillo. The PRI and the government gave themselves amnesty in this case by blocking all the attempts at auditing Banco Unión, Carlos Cabal Peniche’s former bank, made by the opposition-dominated lower house. Cabal is in prison in Australia because Mexico has requested his extradition for a $700-million fraudulent bankruptcy. However, the extradition procedure is slow, perhaps because Cabal has declared that in 1994 he had contributed $20 million to the campaigns of Zedillo and Luis Donaldo Colosio, the PRI candidate murdered in Tijuana on March 23, 1994; and $5 million to the campaign of Roberto Madrazo Pintado, the governor of Tabasco state (see below).
Furthermore, it was Labastida who presided to the creation of the new Federal Preventive Police (PFP), a quasi-military corps, supposedly incorruptible and trained, precisely, to handle “technology”, the new watchword of Mexican drug control. Like the Mexican counter-intelligence service (CISEN, which has wiretapped the opposition), the PFP is controlled directly from the interior ministry, and in some ways it is similar to the now defunct Dirección Federal de Seguridad (DFS), also of the interior ministry, which was deeply involved in drug trafficking and political repression until it was closed by the government in the mid-1980s. With these assets in hand, and after a faithful ally, Diódoro Carrasco, the former governor of Oaxaca, replaced him at the interior ministry, Labastida confronted his main contender within the PRI, Roberto Madrazo Pintado. Madrazo is the governor of oil-rich Tabasco, which is a large transit-territory for South American cocaine, he is close to the “Three Carlos”, Salinas, Hank González and Cabal Peniche, and a distinct smell of mafia surrounds him. Publicly, both men fought by hurling insults such as “Salinas crony” and “corrupt” at each other’s face through very costly television commercials. It has been estimated that Madrazo alone spent an incredible $80 million in his campaign for the PRI primary, but the source of the money remains officially “unknown”. Indeed, it seems that no-one within the PRI is interested in investigating such subjects, not even Labastida, who is in an ideal position to do so. Conveniently, the rules of the PRI primary election did not force the candidates to disclose the source of their funds. By way of comparison, George W. Bush reportedly spent “only” $63 million during his primary campaign – an amount that American commentators have described as “unheard of” in the history of their country – and he won the Republican Party’s nomination.
Privately, Labastida and his allies worked to weaken Carlos “El Profesor” Hank González and his clan, who supported Madrazo. They were helped by the publication, first in the Mexican daily El Financiero, on May 31, 1999, and then in The Washington Post of June 2, of extracts of a report from the National Drug Intelligence Center (NDIC), a U.S. federal agency, describing the Hank clan as “a significant criminal threat to the United States” because of its involvement in drug trafficking and money laundering. In addition, the Post repeated that the Hanks are under investigation in the United States.
The legitimate firms which, according to American customs, are owned by the Hanks, experienced some annoyances in Mexico. In 1998, Transportación Marítima Mexicana (TMM), Mexico’s largest shipping company and one of the largest in the world (with major interests abroad, including Colombia and Canada) was banned from transporting goods on the Pacific route Colombia-Mexico-USA, after several major cocaine seizures were carried out on some of its ships in 1997. The ban was lifted in early 1999 after TMM took security measures to “stop being the main source of drug supplies into Mexico”, according to Mariano Herrán, the Mexican antidrug special attorney. U.S. customs agents wrote that they intercepted telephone conversations during which members of the Hank clan were coordinating drug shipments in TMM ships. However, the alleged involvement of the Hanks in the drug shipments through TMM is not investigated in Mexico, at least not officially, while the American authorities have not indicted any one of them officially. Then came the turn of the betting houses belonging to Libros Foráneos, a firm owned by Jorge Hank Rhon, the Professor’s youngest son, which were inspected by captious interior ministry officials. The airline TAESA, also a Hank asset, was first the victim of a strike then, following a crash in Uruapán, Michoacán State, in November 1999, it was grounded by the Mexican government for security reasons, and eventually declared bankrupt in February 2000, leaving over $100 million in unpaid debt. Finally, in January 2000, the Mexican press filled with articles on the investigation that the U.S. Federal Reserve Board is conducting on the Laredo National Bank, a Texas bank owned by Carlos Hank Rhon, El Profesor’s eldest son.
In the hope of laundering their reputation, the Hanks bankrolled their own inquiry into the allegations against them. This inquiry, which was implemented by former American law enforcement officers now working in the private sector, including former FBI and DEA special agents, concluded that “no-one could provide information or evidence allowing to verify” the truthfulness of the “suppositions” linking the Hanks to the drug trade. This is hardly a surprise—supposing that a U.S. prosecutor, for instance, did intend to indict one of the Hanks, s/he would not be likely to show her/his hand to the opponent before the start of the legal battle.
Not one of the investigations outlined above has resulted in sanctions for they were not part of an Italian-style “clean-hands” operation, which would probably mean the end of the PRI. Labastida, for one, would not support it, if only because one of the key operators of his campaign is Emilio Gamboa Patrón, who had had contacts with the woman in charge of the Gulf cartel’s public relations when he was minister of transports in the Salinas cabinet. Therefore, everyone was content with performing a type of rhetoric exorcism of the PRI’s “demons”, the highlight of which came in late November 1999 when Labastida, who had been nominated as the PRI’s candidate a fortnight earlier, publicly refused the help that Jorge Hank Rhon offered to his campaign. This repudiation allowed candidate Labastida to show off his “firmness”, though at little expense. No-one gets hurt. Indeed, a little after his defeat in the primary, a smiling Roberto Madrazo, who a few weeks earlier was swearing that he would leave the PRI if he was not nominated, went to the presidential palace in Mexico City to congratulate Labastida and assure him of his support, under the benevolent gaze of President Zedillo. The press and television, which crowded in to cover the event, recorded the scene supposed to symbolize the birth of the “New PRI” reconciled with itself. Then Madrazo returned to Tabasco to finish his term as governor.
 See, for instance, Astorga, L.: El Siglo de las Drogas, Espasa Hoy, Mexico City, 1996; “Mexico”, in WGD 1995-1996; Resa, C.: “Sistema político y delincuencia organizada en México: El caso de los traficantes de drogas”, papeles de trabajo, 02/99, Instituto Universitario Gutiérrez Mellado, Universidad Nacional de Educación a Distancia, Madrid, 1999; and Rivelois, J.: Drogue et pouvoirs : du Mexique aux paradis, L’Harmattan, Paris, 2000.
 Marshall, J. “CIA assets and the rise of the Guadalajara connection”, in Block, A. (ed.): The Politics of Cocaine, Special Issue, Crime, Law and Social Change, Vol. 16, No. 1, July 1991, pp. 85-96.
 GAO: Private Banking. Ra“l Salinas, Citibank and Alleged Money Laundering, GAO/OSI-99-1, Washington, October 1998.
 This accusation is vague and needs to be weighed against the following elements. Firstly, it must be extremely difficult to govern a state like Sinaloa without considering the drug factor. Indeed, the drug trade has a huge economic, and therefore political, weight in Sinaloa. Secondly, when his term as governor ended, and after his chief bodyguard was murdered by federal police officers, Labastida was appointed ambassador to Portugal, a measure aiming at protecting him from a possible attack by drug traffickers. However, in 1989 Governor Labastida praised General Jes“s Gutiérrez Rebollo, then the commander of the 9th Military Region in charge of drug control. Gutiérrez Rebollo was sentenced to 40 years in prison in Mexico on February 22, 2000 for complicity with the Juárez cartel. But then Barry McCaffrey, the U.S. “Drug Czar”, also praised Gutiérrez just weeks before his arrest in early 1997.
 Miguel De la Madrid Hurtado was president during the infamous “debt crisis” of the 1980s, which was accompanied by massive illegal capital flight, especially thanks to American and European banks.
 By way of comparison, the exceptional emergency loan organized by President Clinton during the 1995 Mexican crisis amounted to $50 billion.
 The Washington Post first published that the Hanks were under investigation on May 10, 1997. The file of the U.S. Customs investigation was published in Mexico in an excellent recent book on Carlos Hank González written by a Mexican journalist. The book also reproduced the article that OGD had written about Hank in WGD 1997/1998; see Martínez, J.: Las enseÀanzas del Profesor: Indagación de Carlos Hank González, Oceano, Mexico City, 1999.