Cocaine Incorporated
Illustrations by Steve McNiven; Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
Illustrations by Steve McNiven. Coloring by R. Kikuo Johnson.
One afternoon last August, at a hospital on the outskirts of Los
Angeles, a former beauty queen named Emma Coronel gave birth to a pair
of heiresses. The twins, who were delivered at 3:50 and 3:51,
respectively, stand to inherit some share of a fortune that Forbes
estimates is worth a billion dollars. Coronel’s husband, who was not
present for the birth, is a legendary tycoon who overcame a penurious
rural childhood to establish a wildly successful multinational business.
If Coronel elected to leave the entry for “Father” on the birth
certificates blank, it was not because of any dispute over patrimony.
More likely, she was just skittish about the fact that her husband,
Joaquín Guzmán, is the C.E.O. of Mexico’s Sinaloa cartel, a man the
Treasury Department recently described as the world’s most powerful drug
trafficker. Guzmán’s organization is responsible for as much as half of
the illegal narcotics imported into the United States from Mexico each
year; he may well be the most-wanted criminal in this post-Bin Laden
world. But his bride is a U.S. citizen with no charges against her. So
authorities could only watch as she bundled up her daughters and slipped
back across the border to introduce them to their dad.
Known as El Chapo for his short, stocky frame, Guzmán is 55, which in
narco-years is about 150. He is a quasi-mythical figure in Mexico, the
subject of countless ballads, who has outlived enemies and accomplices
alike, defying the implicit bargain of a life in the drug trade: that
careers are glittering but brief and always terminate in prison or the
grave. When Pablo Escobar was Chapo’s age, he had been dead for more
than a decade. In fact, according to the Drug Enforcement
Administration, Chapo sells more drugs today than Escobar did at the
height of his career. To some extent, this success is easily explained:
as Hillary Clinton acknowledged several years ago, America’s “insatiable
demand for illegal drugs” is what drives the clandestine industry. It’s
no accident that the world’s biggest supplier of narcotics and the
world’s biggest consumer of narcotics just happen to be neighbors. “Poor
Mexico,” its former president Porfirio Díaz is said to have remarked.
“So far from God and so close to the United States.”
The Sinaloa cartel can buy a kilo of cocaine in the highlands of
Colombia or Peru for around $2,000, then watch it accrue value as it
makes its way to market. In Mexico, that kilo fetches more than $10,000.
Jump the border to the United States, and it could sell wholesale for
$30,000. Break it down into grams to distribute retail, and that same
kilo sells for upward of $100,000 — more than its weight in gold. And
that’s just cocaine. Alone among the Mexican cartels, Sinaloa is both
diversified and vertically integrated, producing and exporting
marijuana, heroin and methamphetamine as well.
Estimating the precise scale of Chapo’s empire is tricky, however.
Statistics on underground economies are inherently speculative: cartels
don’t make annual disclosures, and no auditor examines their books.
Instead, we’re left with back-of-the-envelope extrapolations based on
conjectural data, much of it supplied by government agencies that may
have bureaucratic incentives to overplay the problem.
So in a spirit of empirical humility, we shouldn’t accept as gospel the
estimate, from the Justice Department, that Colombian and Mexican
cartels reap $18 billion to $39 billion from drug sales in the United
States each year. (That range alone should give you pause.) Still, even
if you take the lowest available numbers, Sinaloa emerges as a titanic
player in the global black market. In the sober reckoning of the RAND
Corporation, for instance, the gross revenue that all Mexican cartels
derive from exporting drugs to the United States amounts to only $6.6
billion. By most estimates, though, Sinaloa has achieved a market share
of at least 40 percent and perhaps as much as 60 percent, which means
that Chapo Guzmán’s organization would appear to enjoy annual revenues
of some $3 billion — comparable in terms of earnings to Netflix or, for
that matter, to Facebook.
The drug war in Mexico has claimed more than 50,000 lives since 2006.
But what tends to get lost amid coverage of this epic bloodletting is
just how effective the drug business has become. A close study of the
Sinaloa cartel, based on thousands of pages of trial records and dozens
of interviews with convicted drug traffickers and current and former
officials in Mexico and the United States, reveals an operation that is
global (it is active in more than a dozen countries) yet also very
nimble and, above all, staggeringly complex. Sinaloa didn’t merely
survive the recession — it has thrived in recent years. And after
prevailing in some recent mass-casualty clashes, it now controls more
territory along the border than ever.
“Chapo always talks about the drug business, wherever he is,” one
erstwhile confidant told a jury several years ago, describing a driven,
even obsessive entrepreneur with a proclivity for micromanagement. From
the remote mountain redoubt where he is believed to be hiding,
surrounded at all times by a battery of gunmen, Chapo oversees a
logistical network that is as sophisticated, in some ways, as that of
Amazon or U.P.S. — doubly sophisticated, when you think about it,
because traffickers must move both their product and their profits in
secret, and constantly maneuver to avoid death or arrest. As a mirror
image of a legal commodities business, the Sinaloa cartel brings to mind
that old line about Ginger Rogers doing all the same moves as Fred
Astaire, only backward and in heels. In its longevity, profitability and
scope, it might be the most successful criminal enterprise in history.
The state of Sinaloa, from which the cartel derives its
name, lies wedged between the Sierra Madre Occidental and Mexico’s west
coast. Sun-blasted and remote, Sinaloa is the Sicily of Mexico, both
cradle and refuge of violent men, and the ancestral land of many of the
country’s most notorious traffickers. Chapo was born in a village called
La Tuna, in the foothills of the Sierra, in 1957. His formal education
ended in third grade, and as an adult, he has reportedly struggled to
read and write, prevailing upon a ghostwriter, at one point, to compose
letters to his mistress. Little is known about Chapo’s early years, but
by the 1980s, he joined the Guadalajara cartel, which was run by a
former policeman known as El Padrino — the Godfather.
For decades, Mexican smugglers had exported homegrown marijuana and
heroin to the United States. But as the Colombian cocaine boom gathered
momentum in the 1980s and U.S. law enforcement began patrolling the
Caribbean, the Colombians went in search of an alternate route to the
United States and discovered one in Mexico. Initially, Mexican
traffickers, like a pudgy 25-year-old airplane pilot named Miguel Angel
Martínez, acted as independent contractors who were paid a fee by the
Colombians to move their cargo. In 1986, the Guadalajara cartel
dispatched Martínez to the Colombian port of Barranquilla, in the hope
that someone might commission him to fly drugs up to Mexico. But
Martínez couldn’t find any takers and ended up languishing in Colombia
for months, worrying that he had blown his big opportunity with the
cartel. Eventually, he caught a commercial flight back to Mexico, and
shortly thereafter, he was summoned to a meeting with Chapo, who was by
then an underboss in the cartel. “You were very well behaved in
Colombia,” Chapo told him, according to subsequent testimony. He seemed
impressed by Martínez’s patience in waiting for an assignment.
Having passed this test, Martínez started working for Chapo as a kind of
air traffic controller, negotiating directly with the Cali and Medellín
cartels, then guiding their cocaine flights from South America to
secret runways in barren stretches of Mexico. Martínez knew U.S. agents
were monitoring his radio communications, so rather than say a word, he
would whistle — a signal to the pilots that they were cleared for
takeoff.
With the decline of the Caribbean route, the Colombians started paying
Mexican smugglers not in cash but in cocaine. More than any other
factor, it was this transition that realigned the power dynamics along
the narcotics supply chain in the Americas, because it allowed the
Mexicans to stop serving as logistical middlemen and invest in their own
drugs instead. In 1986, Martínez couldn’t land a gig as a lowly courier
in Barranquilla. Not five years later, he was marshaling hundreds of
flights laden with cocaine for Chapo. “Sometimes we would get five
planes a night,” he remembered. “Sometimes 16.” Now it was the
Colombians who went hat in hand to Chapo, looking not to hire him to
move their product but to sell it to him outright. They would tip
Martínez $25,000 just to get an audience with the man.
The young pilot became a gatekeeper to the ascendant kingpin, fielding
his phone calls and accompanying him on foreign trips. There’s a
vaudevillian goofiness to nicknames in Mexico, and the stout Martínez
was known in the cartel as El Gordo. He and Chapo — Fatty and Shorty —
made quite a pair. “Japan, Hong Kong, India, all of Europe,” Martínez
recalled in testimony. Chapo owned a fleet of Learjets, and together,
they saw “the whole world.” They both used cocaine as well, a habit that
Chapo would eventually give up. When a lawyer inquired, years later,
whether he had been Chapo’s right-hand man, Martínez replied that he
might have been, but that Guzmán had five left hands and five right
hands. “He’s an octopus, Chapo Guzmán,” he said. For his efforts,
Martínez was paid a million dollars a year, in a single annual
installment: “In cash, in a suitcase, each December.” When Martínez’s
son was born, Chapo asked to serve as godfather.
In 1989, Chapo’s mentor, El Padrino, was captured by
Mexican authorities, and the remaining members of the Guadalajara cartel
assembled in Acapulco to determine which smuggling route each capo
would inherit. According to Ioan Grillo’s book, “El Narco,” the meeting
was ostensibly a gathering of friends. But the shards of El Padrino’s
organization would become the basis for the Tijuana, Juárez and Sinaloa
cartels, and these onetime colleagues would soon become antagonists in a
cycle of bloody turf wars that continues to this day.
“Drug cartel,” it turns out, is a whopper of a misnomer; neither the
Mexicans nor the Colombians ever colluded to fix prices or supply. “I
wish they were cartels,” Arturo Sarukhán, Mexico’s ambassador in
Washington, told me. “If they were, they wouldn’t be fighting and
driving up the violence.”
At first, Chapo’s organization controlled a single smuggling route,
through western Mexico into Arizona. But by 1990, it was moving three
tons of cocaine each month over the border, and from there, to Los
Angeles. The Sinaloa has always distinguished itself by the eclectic
means it uses to transport drugs. Working with Colombian suppliers,
cartel operatives moved cocaine into Mexico in small private aircraft
and in baggage smuggled on commercial flights and eventually on their
own 747s, which they could load with as much as 13 tons of cocaine. They
used container ships and fishing vessels and go-fast boats and
submarines — crude semi-submersibles at first, then fully submersible
subs, conceived by engineers and constructed under the canopy of the
Amazon, then floated downriver in pieces and assembled at the coastline.
These vessels can cost more than a million dollars, but to the
smugglers, they are effectively disposable. In the event of an
interception by the Coast Guard, someone onboard pulls a lever that
floods the interior so that the evidence sinks; only the crew is left
bobbing in the water, waiting to be picked up by the authorities.
Moving cocaine is a capital-intensive business, but the cartel
subsidizes these investments with a ready source of easy income:
marijuana. Cannabis is often described as the “cash crop” of Mexican
cartels because it grows abundantly in the Sierras and requires no
processing. But it’s bulkier than cocaine, and smellier, which makes it
difficult to conceal. So marijuana tends to cross the border far from
official ports of entry. The cartel makes sandbag bridges to ford the
Colorado River and sends buggies loaded with weed bouncing over the
Imperial Sand Dunes into California. Michael Braun, the former chief of
operations for the D.E.A., told me a story about the construction of a
high-tech fence along a stretch of border in Arizona. “They erect this
fence,” he said, “only to go out there a few days later and discover
that these guys have a catapult, and they’re flinging hundred-pound
bales of marijuana over to the other side.” He paused and looked at me
for a second. “A catapult,” he repeated. “We’ve got the best fence money
can buy, and they counter us with a 2,500-year-old technology.”
Improvisation is a trafficker’s greatest asset, and in recent years,
Sinaloa has devised an even more efficient solution to the perennial
challenge of getting marijuana across the border. Grow it here. Several
years ago, a hunter was trekking through the remote North Woods of
Wisconsin when he stumbled upon a vast irrigated grow site, tended by a
dozen Mexican farmers armed with AK-47’s. According to the D.E.A., it
was a Sinaloa pot farm, established on U.S. National Forest land to
supply the market in Chicago.
Heroin is easier to smuggle but difficult to produce, and as detailed in
court documents, Chapo is particularly proud of his organization’s work
with the drug. He personally negotiates shipments to the United States
and stands by its quality, which is normally 94 percent pure. “The
value-to-weight ratio of heroin is better than any other drug,” says
Alejandro Hope, who until recently was a senior officer at Cisen,
Mexico’s equivalent to the C.I.A.
But the future of the business may be methamphetamine. During the 1990s,
when the market for meth exploded in the United States, new regulations
made it more difficult to manufacture large quantities of the drug in
this country. This presented an opportunity that the Sinaloa quickly
exploited. According to Anabel Hernández, author of “Los Señores del
Narco,” a book about the cartel, it was one of Chapo’s deputies, a
trafficker named Ignacio (Nacho) Coronel, who first spotted the massive
potential of methamphetamine. “Nacho was like Steve Jobs,” Hernández
told me. “He saw the future.”
Here was a drug that was ragingly addictive and could be produced
cheaply and smuggled with relative ease. When they first started
manufacturing meth, the Sinaloa would provide free samples to their
existing wholesale clients in the Midwest. “They’d send five hundred
pounds of marijuana, and secreted in that would be two kilos of meth,”
Jack Riley, the D.E.A.’s special agent in charge of the Chicago office,
told me. “They’d give it away for free. They wanted the market.” As
demand grew, the cartel constructed superlabs, capable of churning out
industrial volumes of meth. Container ships from India and China
unloaded precursor chemicals — largely ephedrine — in the Pacific ports
Lázaro Cárdenas and Manzanillo. To grasp the scale of production,
consider the volume of some recent precursor seizures at these ports: 22
tons in October 2009; 88 tons in May 2010; 252 tons last December. When
Mexico banned the importation of ephedrine, the cartel adapted,
tweaking its recipe to use unregulated precursors. Recently they have
started outsourcing production to new labs in Guatemala.
But Chapo’s greatest contribution to the evolving tradecraft of drug
trafficking was one of those innovations that seem so logical in
hindsight it’s a wonder nobody thought of it before: a tunnel. In the
late 1980s, Chapo hired an architect to design an underground passageway
from Mexico to the United States. What appeared to be a water faucet
outside the home of a cartel attorney in the border town of Agua Prieta
was in fact a secret lever that, when twisted, activated a hydraulic
system that opened a hidden trapdoor underneath a pool table inside the
house. The passage ran more than 200 feet, directly beneath the
fortifications along the border, and emerged inside a warehouse the
cartel owned in Douglas, Ariz. Chapo pronounced it “cool.”
When this new route was complete, Chapo instructed Martínez to call the
Colombians. “Tell them to send all the drugs they can,” he said. As the
deliveries multiplied, Sinaloa acquired a reputation for the miraculous
speed with which it could push inventory across the border. “Before the
planes were arriving back in Colombia on the return, the cocaine was
already in Los Angeles,” Martínez marveled.
Eventually the tunnel was discovered, so Chapo shifted tactics once
again, this time by going into the chili-pepper business. He opened a
cannery in Guadalajara and began producing thousands of cans stamped
“Comadre Jalapeños,” stuffing them with cocaine, then vacuum-sealing
them and shipping them to Mexican-owned grocery stores in California. He
sent drugs in the refrigeration units of tractor-trailers, in
custom-made cavities in the bodies of cars and in truckloads of fish
(which inspectors at a sweltering checkpoint might not want to detain
for long). He sent drugs across the border on freight trains, to cartel
warehouses in Los Angeles and Chicago, where rail spurs let the cars
roll directly inside to unload. He sent drugs via FedEx.
But that tunnel into Douglas remains Chapo’s masterpiece, an emblem of
his creative ingenuity. Twenty years on, the cartels are still burrowing
under the border — more than a hundred tunnels have been discovered in
the years since Chapo’s first. They are often ventilated and
air-conditioned, and some feature trolley lines stretching up to a
half-mile to accommodate the tonnage in transit.
You might suppose that a certain recklessness would be a
prerequisite for anyone contemplating a career in the drug trade. But
in reality, blue-chip traffickers tend to fixate, with neurotic
intensity, on the concept of risk. “The goal of these folks is not to
sell drugs,” Tony Placido, who was the top intelligence official at the
D.E.A. until he retired last year, told me. “It’s to earn a spendable
profit and live to enjoy it.” So the smart narcos are preoccupied with
what Peter Reuter and Mark Kleiman once referred to, in a classic essay
on the drug business, as “the marginal imprisonment risk.” In 2010,
Chapo’s old friend Ismael (El Mayo) Zambada, the No. 2 man in the
Sinaloa cartel, granted an interview to the Mexican magazine Proceso.
Now in his 60s and a grandfather, El Mayo has been in the drug business
for nearly half a century and has amassed a fortune. But you can’t buy
peace of mind. “I’m terrified they’ll incarcerate me,” he acknowledged.
“I’m full of fear. Always.”
There’s a reason coke and heroin cost so much more on the street than at
the farm gate: you’re not paying for the drugs; you’re compensating
everyone along the distribution chain for the risks they assumed in
getting them to you. Smugglers often negotiate, in actuarial detail,
about who will be held liable in the event of lost inventory. After a
bust, arrested traffickers have been known to demand a receipt from
authorities, so that they can prove the loss was not because of their
own negligence (which would mean they might have to pay for it) or their
own thievery (which would mean they might have to die). Some Colombian
cartels have actually offered insurance policies on narcotics, as a
safeguard against loss or seizure.
To prevent catastrophic losses, cartels tend to distribute their risk as
much as possible. Before sending a 100-kilo shipment across the border,
traffickers might disaggregate it into five carloads of 20 kilos each.
Chapo and his associates further reduce their personal exposure by going
in together on shipments, so each of those smaller carloads might hold
10 kilos belonging to Chapo and 10 belonging to Mayo Zambada. The
Sinaloa is occasionally called the Federation because senior figures and
their subsidiaries operate semiautonomously while still employing a
common smuggling apparatus.
The organizational structure of the cartel also seems fashioned to
protect the leadership. No one knows how many people work for Sinaloa,
and the range of estimates is comically broad. Malcolm Beith, the author
of a recent book about Chapo, posits that at any given moment, the drug
lord may have 150,000 people working for him. John Bailey, a Georgetown
professor who has studied the cartel, says that the number of actual
employees could be as low as 150. The way to account for this disparity
is to distinguish between salaried employees and subcontractors. A labor
force of thousands may be required to plow all that contraband up the
continent, but a lot of the work can be delegated to independent
contractors, people the Mexican political scientist and security
consultant Eduardo Guerrero describes as working “for the cartel but outside it.”
Even those who do work directly for the cartel are limited to carefully
compartmentalized roles. At a recent trial, a regional cartel
lieutenant, José Esparza, testified about his experience working for the
Sinaloa along the border. On one occasion, he attended a meeting
outside Culiacán with many of the cartel’s top leaders. But there was no
sign of Chapo. Once the discussion concluded, an emissary left the
group and approached a Hummer that was parked in the distance and
surrounded by men with bulletproof vests and machine guns, to report on
the proceedings. Chapo never stepped out of the vehicle.
It’s not just the federales that the narcos fear; it’s also one
another. The brutal opportunism of the underworld economy means that
most partnerships are temporary, and treachery abounds. For decades,
Chapo worked closely with his childhood friend Arturo Beltrán Leyva, a
fearsome trafficker who ran a profitable subsidiary of Sinaloa. But in
2008, the two men split, then went to war, and Beltrán Leyva’s assassins
were later blamed for murdering one of Chapo’s sons. To reduce the
likelihood of clashes like these, the cartel has revived an unlikely
custom: the ancient art of dynastic marriage. Chapo’s organization is
occasionally referred to as an alianza de sangre (“alliance of
blood”), because so many of its prominent members are cousins by
marriage or brothers-in-law. Emma Coronel, who gave birth to Chapo’s
twins, is the niece of Nacho Coronel, the Steve Jobs of meth (who died
in a shootout with the Mexican Army in 2010). All of this intermarriage,
one U.S. official in Mexico suggested to me, functions as “a hedge
against distrust.” An associate may be less likely to cheat you, or to
murder you, if there’ll be hell to pay with his wife. It’s a cynical
strategy, certainly, but in a vocation where one of Chapo’s rivals went
by the nickname Mata Amigos, or “Friend Killer,” it may also be quite
sound.
The surest way to stay out of trouble in the drug
business is to dole out bribes, and promiscuously. Drug cartels don’t
pay corporate taxes, but a colossus like Sinaloa makes regular payments
to the federal, state and municipal authorities that may well rival the
effective tax rate in Mexico. When the D.E.A. conducted an internal
survey of its top 50 operatives and informants several years ago and
asked them to name the most important factor for running a drug
business, they replied, overwhelmingly, corruption. At a trial in 2010, a
former police official from Juárez, Jesús Fierro Méndez, acknowledged
that he had worked for Sinaloa. “Did the drug cartels have the police on
the payroll?” an attorney asked.
“All of it,” Fierro Méndez replied.
The cartel bribes mayors and prosecutors and governors, state police and
federal police, the army, the navy and a host of senior officials at
the national level. After an arrest for drug trafficking in the 1990s,
Chapo was sentenced to 20 years and shipped to Puente Grande, a
fortified prison in Jalisco that was Mexico’s answer to a supermax. But
during the five years he spent there, Chapo enjoyed prerogatives that
make the prison sequence in “Goodfellas” look positively austere. With
most of the facility on his payroll, he is said to have ordered his
meals from a menu, conducted business by cellphone and orchestrated
periodic visits by prostitutes, who would arrive aboard a prison truck
driven by a guard. I spoke with one drug producer who negotiated a joint
venture deal with Chapo while he was behind bars. Eventually, as the
story goes, Chapo was smuggled out in a laundry cart. According to
Martínez’s testimony, he paid more than $3 million to secure his
release. Today, Chapo is a free man, Puente Grande’s warden only
recently completed a jail sentence for letting him go and Mexicans call
the prison Puerta Grande — the Big Door.
The tacit but unwavering tolerance that Mexican authorities have shown
for the drug trade over the years has muddled the boundaries between
outlaws and officials. When Miguel Angel Martínez was working for Chapo,
he says, “everyone” in the organization had military and police
identification. Daylight killings are sometimes carried out by men
dressed in police uniforms, and it is not always clear, after the fact,
whether the perpetrators were thugs masquerading as policemen or actual
policemen providing paid assistance to the thugs. On those occasions
when the government scores a big arrest, meanwhile, police and military
officials pose for photos at the valedictory news conference brandishing
assault weapons, their faces shrouded in ski masks, to shield their
identities. In the trippy semiotics of the drug war, the cops dress like
bandits, and the bandits dress like cops.
When you tally it all up, bribery may be the single largest line item on
a cartel’s balance sheet. In 2008, President Felipe Calderón’s own drug
czar, Noe Ramirez, was charged with accepting $450,000 each month.
Presumably, such gargantuan bribes to senior officials cascade down,
securing the allegiance of their subordinates. “You have to recruit the
high commands, so they can issue the information to lower ranks and
order whatever they want,” the corrupt cop, Fierro Méndez, testified.
But in key jurisdictions, the cartel most likely makes payments up and
down the chain of command. In a 2010 speech, Genaro García Luna,
Mexico’s secretary of public security, speculated that together, the
cartels spend more than a billion dollars each year just to bribe the
municipal police.
It’s not only officials who must be bribed, either. There are also the
“falcons,” an army of civilian lookouts who might receive $100 a month
just to keep their eyes open and make a phone call if they notice an
uptick in border inspections or a convoy of police. “There are cities in
Mexico where virtually every cabdriver is on the payroll,” Michael
Braun, formerly of the D.E.A., said. “They have eyes and ears
everywhere.”
And then there are the Americans. Guards at the U.S. border have been
known to wave a car through their checkpoints for a few thousand
dollars, and since 2004, there have been 138 convictions or indictments
in corruption investigations involving members of the United States
Customs and Border Protection. Paradoxically, one explanation for this
state of affairs is the rapid expansion of border forces following the
creation of the Department of Homeland Security. In their hurry to
fortify the U.S.-Mexico boundary with uniformed personnel, it seems,
officials may have made allowances on background checks and screenings.
In some instances, job offers have been extended to the immediate
relatives of known traffickers.
When corruption fails, there is always violence. During the 12 years
that he worked for the cartel, Martínez claims that he did not carry a
gun. But Sinaloa has risen to pre-eminence as much through savagery as
through savvy. “In illegal markets, the natural tendency is toward
monopoly, so they fight each other,” Antonio Mazzitelli, an official
with the United Nations Office on Drugs and Crime in Mexico City, told
me. “How do they fight: Go to court? Offer better prices? No. They use
violence.” The primal horror of Mexico’s murder epidemic makes it
difficult, perhaps even distasteful, to construe the cartel’s butchery
as a rational advancement of coherent business aims. But the reality is
that in a multibillion-dollar industry in which there is no recourse to
legally enforceable contracts, some degree of violence may be
inevitable.
“It’s like geopolitics,” Tony Placido said. “You need to use violence
frequently enough that the threat is believable. But overuse it, and
it’s bad for business.”
The most gratuitous practitioners of violence right now would be the
Zetas, a rampaging league of sociopaths with a notable devotion to
physical cruelty. The Zetas are a new kind of cartel, in that they came
somewhat late to the actual business of smuggling drugs. They started
out as bodyguards for the Gulf Cartel before going into business for
themselves, and they specialize in messaging through bloodshed. It’s the
Zetas who are charged with dumping 49 mutilated bodies by the side of a
highway near Monterrey last month. Sinaloa is responsible for a great
deal of carnage as well, but its approach to killing has traditionally
been more discreet. Whereas a Sinaloa subsidiary allied with a Tijuana
farmer known as the Stewmaker, who dissolved hundreds of bodies in
barrels of lye, the Zetas have pioneered a multimedia approach to
violence, touting their killings on YouTube. One strategic choice facing
any cartel is deciding when to intimidate the civilian population and
when to cultivate it. Sinaloa can be exceedingly brutal, but the cartel
is more pragmatic than the Zetas in its deployment of violence. It may
simply be, as one Obama administration official suggested, that the
Sinaloa leadership is “more conscious of their brand.”
It’s a curious rivalry between these two organizations, because their
business models are really very different. The Zetas have diversified
beyond drugs to extortion, kidnapping and human trafficking, blossoming
into what officials call a “polycriminal organization.” Sinaloa, by
contrast, has mostly tended to stick to its core competence of
trafficking. According to one captured cartel member, Chapo specifically
instructed his subordinates not to dabble in protection rackets and
insisted that Sinaloa territory remain “calm” and “controlled.”
“Sinaloa does not do extortion directly,” Eduardo Guerrero said. “It’s
so risky, and the profits are so small. They want the big business — and
the big business is in the United States.”
Just how active the cartel is north of the border is a
divisive question. According to the Department of Justice, by 2009,
Mexican-based criminal organizations were operating in “more than a
thousand U.S. cities.” When you consider the huge jump in the price of
narcotics between bulk importation and retail sales, it might seem that
Chapo would want to expand into street-level distribution. In 2005, the
D.E.A. began intercepting large shipments of cocaine in which each kilo
brick was heat-sealed in a distinctive Mylar foil. They spotted the foil
in Los Angeles first, then in Oklahoma, Chicago, Atlanta and New
Jersey. “This was Sinaloa coke,” Michael Wardrop, who led two of the
agency’s most ambitious operations against the domestic networks of the
cartel, told me. As the telltale wrapping popped up across the country,
Wardrop and his colleagues marveled at the sheer expanse of Sinaloa’s
market. “It was like watching a virus in a Petri dish,” he said. “It was
constantly growing.”
Wardrop’s investigations netted more than a thousand arrests. But some
observers question the extent to which the perpetrators in these cases
were actually working for the cartel. “If you’re telling me there’s a
straight chain of command back to El Chapo in Sinaloa — come on, that’s
absurd,” the Mexican ambassador, Arturo Sarukhán, protested. Often, the
gatekeepers and logistics men that the D.E.A. arrested were indeed
connected to handlers in Mexico. But this was more true of high-level
importers dealing in kilos than run-of-the-mill retailers pushing grams.
When The Associated Press tracked down Otis Rich, a Baltimore dealer
who was ensnared in one of the operations, he answered the obvious
question with a telling reply: “Sina-who?”
“The fully integrated model would indeed maximize profits,” John Bailey
observes in a coming book about the cartels, but “it also maximizes risk
of exposure.” A big reason for the markup at the retail level is that
the sales force is so exposed — out on the corner, a magnet for
undercover cops, obliged to negotiate with a needy, unpredictable
clientele. When you adjust for all that added risk, the windfall starts
to seem less alluring. Like a liquor wholesaler who opts not to open a
bar, Chapo appears to have decided that the profits associated with
retail sales just aren’t worth the hassle.
What Sinaloa does do inside this country is ferry drugs along
highways to regional distribution hubs, where they are turned over to
trusted wholesalers, like the Flores twins of Chicago. Pedro and
Margarito Flores grew up in a Mexican-American enclave of the city
during the 1990s. Their father and an older brother had moved drugs for
Sinaloa, and by the time the twins were in their 20s, they had gone into
business as distributors, purchasing cocaine and heroin directly from
Mexican cartels, then selling to dealers throughout the United States.
Chicago, home of the Mercantile Exchange, has always been a hub from
which legitimate goods fan out across the country, and it’s no different
for black-market commodities. Chapo has used the city as a
clearinghouse since the early 1990s; he once described it as his “home
port.”
In 2005, the Flores twins were flown to a mountaintop compound in
Sinaloa to meet with Chapo Guzmán. The kingpin is an intimidating
interlocutor; one criminal who has negotiated with him face to face told
me that Chapo tends to dominate a conversation, asking a lot of
questions and compensating for his short stature by bouncing on the
balls of his feet. But the meeting went well, and before long, the
brothers were distributing around two tons of Sinaloa product each
month. As preferred customers, they often took Chapo’s drugs without
putting any money down, then paid the cartel only after they sold the
product. This might seem unlikely, given the pervasive distrust in the
underworld, but the narcotics trade is based on a robust and
surprisingly reliable system of credit. In a sense, a cartel like
Sinaloa has no choice but to offer a financing option, because few
wholesale buyers have the liquidity to pay cash upfront for a ton of
cocaine. “They have to offer lines of credit,” Wardrop told me, “no
different from Walmart or Sears.”
This credit system, known as “fronting,” rests on an ironclad assumption
that in the American marketplace, even an idiot salesman should have no
trouble selling drugs. One convicted Sinaloa trafficker told me that it
often took him more time to count the money he collected from his
customers than it did to actually move the product. It may also help
that the penalty for defaulting could involve dismemberment.
As wholesale buyers, the Flores brothers occupied a crucial bottleneck
between the cartel and its consumers. They grew so indispensable, in
fact, that after taking delivery of a shipment of drugs, they could
retroactively bargain down the price. One day in 2008, Pedro Flores
telephoned Guzmán in Mexico to ask for a discount on heroin.
“What did we agree on?” Chapo asked him, according to a government transcript of the call.
They had negotiated a price of $55,000 per kilo, Flores explained. But
if Chapo would consider lowering that to $50,000, the twins could pay
immediately.
“That price is fine,” Chapo agreed, without argument. Then he added
something significant: “Do you have a way to bring that money over
here?”
For the Sinaloa cartel, pushing product north into the United States is
only half the logistical equation. The drug trade is a cash business —
you can’t buy kilos with your credit card. So while politicians tend to
focus on cartels primarily as importers of drugs, the narcos also devote
an enormous amount of energy to the export of money. Cash is collected
in small denominations from individual buyers and then bundled in great
stacks of broken-in bills that are used to pay wholesalers, like the
Flores brothers. These bills are counted, hidden in the same vehicle
compartments that were used to smuggle drugs in the opposite direction
and then sent to stash houses in Los Angeles, San Diego and Phoenix.
From there, they move across the border into Mexico.
What happens to the money when it gets there? The cartel employs
professional money launderers who specialize in drug proceeds, and
according to Robert Mazur, a former D.E.A. agent who infiltrated the
Colombian cartels, the fee for fully scrubbing and banking illicit
proceeds may run Sinaloa more than 15 cents on the dollar. But a great
deal of the cartel’s money remains in cash. In the early 1990s, a
Sinaloa accountant sent planeloads of U.S. currency to Mexico City in
suitcases holding $1 million each. When Miguel Angel Martínez worked for
Chapo, the kingpin would test his loyalty, adding an extra $200,000 to
one of the suitcases to see if Martínez would pocket it. “Eight
suitcases, compadre, so that is $8 million,” he would say.
(Martínez never fell for the trick.) A sizable share of the cash is
devoted to paying bribes, and some is sent to Colombia to purchase more
product, because drugs offer a strong return on investment. “Where would
you put your money?” the former Cisen officer Alejandro Hope
asked me with a chuckle. “T-bills? Real estate? I would put a large
portion of my portfolio in cocaine.”
Even so, the business generates such volumes of currency that there is
only so much you can launder or reinvest, which means that money can
start to pile up around the house. The most that Martínez ever saw at
one time was $30 million, which just sat there, having accumulated in
his living room. In 2007, Mexican authorities raided the home of Zhenli
Ye Gon, a Chinese-Mexican businessman who is believed to have supplied
meth-precursor chemicals to the cartel, and discovered $206 million, the
largest cash seizure in history. And that was the money Zhenli held
onto — he was an inveterate gambler, who once blew so much cash in Las
Vegas that one of the casinos presented him, in consolation, with a
Rolls-Royce. “How much money do you have to lose in the casino for them
to give you a Rolls-Royce?” Tony Placido, the D.E.A.
intelligence official, asked. (The astonishing answer, in Zhenli’s case,
is $72 million at a single casino in a single year.) Placido also
pointed out that, as a precursor guy, Zhenli was on the low end of the
value chain for meth. It makes you wonder about the net worth of the guy
who runs the whole show.
In 2008, the Flores twins were indicted in Chicago and
began secretly cooperating with law enforcement. The following year, one
of their Sinaloa contacts — a debonair young trafficker named Jesús
Vicente Zambada Niebla, or Vicentillo — was arrested in Mexico and later
extradited to Chicago. He will be the highest-ranking member of the
cartel ever to face trial in the United States, and his favorite
wholesale customers will be the star witnesses against him. In a
surprise twist, Vicentillo (who is the son of Chapo’s partner, Mayo
Zambada) has argued that he can’t be prosecuted — because even as he
worked for Sinaloa, he was also a secret informant for the D.E.A.
There has been speculation in Mexico that the Calderón regime favors
Sinaloa over the unhinged Zetas and has made a devil’s pact to lay off
the cartel. It might be impossible to eradicate all the cartels in
Mexico, this theory goes, so the government has picked a favorite in the
conflict in the hope that when the smoke clears, a Sinaloa monopoly
might usher in a sort of pax narcotica. A 2010 National Public
Radio investigation of Mexican arrest statistics found that Sinaloa had
suffered conspicuously fewer arrests than had its peers, though this
could simply be evidence of triage on the government’s part rather than
proof of a conspiracy. Calderón vehemently denies any charges of
favoritism, and his administration has arrested or killed several of
Chapo’s key deputies in the last few years. (My repeated requests for
interviews with relevant officials in Mexico were denied.)
The suggestion that the D.E.A. might have made a deal with a
high-ranking Sinaloa figure is new, however. In the past, Chapo has
occasionally authorized employees to provide information to American law
enforcement. Fierro Méndez, the Juárez cop, described a system in which
junior traffickers would walk into U.S. Immigration and Customs
Enforcement and announce their willingness to become informers — then
feed the Americans intelligence about rival cartels, thereby using law
enforcement to eliminate their competitors. U.S. officials allow that
there were discussions between the D.E.A. and Vicentillo, but they deny
that any quid pro quo was in place.
The trial, which is scheduled for October, should shed significant light
on Sinaloa’s logistical apparatus — provided the witnesses can stay
alive until then. Recently, a career criminal named Saul Rodriguez
testified that Vicentillo solicited his help at the Metropolitan
Correctional Center in downtown Chicago, where they were both being
held, in an effort to have the Flores twins assassinated. Authorities
have expressed concern that the cartel might undertake a daring
jailbreak to get Vicentillo out. They have also voiced the opposite
worry — that Vicentillo will himself be killed. A request by the
trafficker’s attorneys that he be permitted to exercise outdoors raised
concerns from prison officials, because the only open space at the
prison is a fenced-in recreation area on top of the building, where
Vicentillo could be picked off by a sniper. (He has since been moved to a
more secure facility.)
It might seem far-fetched that the cartel would try to assassinate one
of its own, the son of Mayo Zambada, no less. But Sinaloa guards its
secrets ruthlessly. After Chapo’s friend Miguel Angel Martínez was
arrested in 1998, four men came to kill him in prison, stabbing him
repeatedly. In that assault, and another that followed, he sustained
more than a dozen stab wounds, which punctured his lungs, pancreas and
intestines. After the second attack, he was moved to another facility
and kept in a segregated unit. This time, an assassin managed to get as
far as the gate outside Martínez’s cell and chucked two grenades at the
bars. Locked in with nowhere to run, Martínez could only cower by the
toilet to shield himself from the blast. The roof caved in, and he
barely survived. Asked later who it was that tried to have him killed,
Martínez said that it was his compadre, Chapo Guzmán. “Because of what I knew,” he explained. (Today he is living in witness protection in the United States.)
Between the coming trial and the increased political drumbeat on both
sides of the border for his capture, Chapo may be more embattled today
than at any time in his career. In February, he escaped a raid by
Mexican authorities in the resort area of Los Cabos. President
Calderón’s party is trailing in the polls, and some have theorized that
the only way it might manage to retain power after next month’s
presidential election would be if Chapo is killed or captured. U.S.
authorities, meanwhile, are uncertain about who might succeed Calderón —
Vice President Joe Biden met with all of the leading candidates on a
visit to Mexico in March — and whether that successor will have any
appetite to continue battling the cartels. With so many dead and so
little progress, the Mexican populace has grown war-weary. Several U.S.
officials told me that the critical window for capturing Chapo is
between now and when Calderón leaves office.
In addition to the threat of capture, there is the threat of
competition. By some estimates, the Zetas now control more Mexican
territory than Chapo does, even if they don’t move nearly as many drugs.
Zeta gunmen have made bloody incursions on Chapo’s turf, going so far
as to penetrate the previously inviolable stronghold of his own home
state, Sinaloa. In 2008, Chapo’s lover, Zulema Hernández, was discovered
dead in the trunk of a car, her body carved with the letter “Z.” “It’s
like the evolution of the dinosaurs, and the coming of the T. Rex,”
Antonio Mazzitelli told me. “The T. Rex is the Zetas.”
Chapo and his colleagues were never peaceful types; in the last few
years, they have waged vicious wars of acquisition to seize the
lucrative smuggling routes through Juárez and Tijuana. But to fend off
the Zetas, Sinaloa is resorting to new levels of barbarism. In March,
the cartel dumped a collection of dismembered bodies in Zeta territory
and posted a series of open letters on the walls around them, deriding
the Zetas as “a bunch of drunks and car-washers.” Each message was
signed, “Sincerely, El Chapo.”
One thing Chapo has always done is innovate. Even as he engages in
violent brinkmanship along the border, the cartel is expanding to new
markets in Europe, where a kilo of cocaine can sell for three times what
it does in the U.S., and in Australia, where authorities believe that
Chapo is now a major cocaine supplier. There are also indications that
the cartel is exploring opportunities in Southeast Asia, China and Japan
— places Chapo and Martínez first visited as younger men. And Chapo’s
great comparative advantage still lies along that fraught boundary
between Mexico and the United States. Even if the kingpin is killed or
captured, one of his associates will quite likely take his place, and
the smuggling infrastructure that Chapo created will endure, channeling
the product, reaping the profits and feeding, with barely a blip in
service, the enduring demand on this side of the border — what the
historian Héctor Aguilar Camín once referred to as “the insatiable North
American nose.”
Patrick Radden Keefe
is a staff writer for The New Yorker and a fellow at the Century
Foundation. From 2010 to 2011, he was a policy adviser in the Office of
the Secretary of Defense.
