Solution
Shivagya answered on
May 01 2020
Economics of gobal organized crime
Discuss the tendency of global organized crime groups to diversify into other illegitimate and legitimate markets. Summarize some of the
oader economic, social and political consequences of the diversification of Mexican drug cartels in recent years. How does the movement of Mexican drug cartels into the oil business, as described in the video, Cocaine and Crude, illustrate some of these tendencies and consequences?
The global crime market which is the illicit market has been shifting from the traditional cartel and hierarchal models and towards a more autonomous and cellular approach. There still exists a hierarchy but nothing of the sorts that resembles the cartel model, that too with massive decentralisation to reduce running the risks of an illicit business. Another tactic being used in the recent decades is the diversification into different businesses, be it illicit or licit in nature. With enough conclusive evidence, it is easy to say that all of organized crime has at the very least one front business. These business may be operational independently or solely for the purpose of fulfilling its other half’s illegal activities. The staff may or may not be aware of the illicit operations being conducted by a few individuals in the firm and which may very well be involved in tax evasion and money laundering activities. Another solid reason for the organized crime to diversify is to invest the huge profits made by the business, which are to the tune of 25 to 40 billion US dollars according to intelligence and security sources. The net revenue from the drug exports by the Mexican cartels to the United States exceeds $ 6.6 billion if a 2012 report in the New York Times is to be believed. Jullivan, J. P., & Elkus, A. (2010)
According to recent news reports and published material the Mexican cartels have diversified into the petroleum industry. Their endeavours to this end include stealing fuel from oil refineries and pipelines, which in itself is turning out to be a major fiscal, security and economic problem for the Mexican government. Acting as a major dete
ent to any form of foreign investors, it is also the cause for an estimated 1 billion dollars in losses to the Mexican government. The increased importance of “huachicoleros” or fuel thieves in Mexican, they are reaping the benefits of the increased face-off between the fuel and narcotics industries, two of the major ones in Mexico. By the means of force, extortion, violence and blackmail the cartel gains information on the sources and storages for fuel. This business model generates very high profits for the cartel as they do not have to synthesize any substances or concoctions or invest in the procurement of any capital intensive equipment or raw material. Thus this gives the cartel very high margins on the petroleum that they steal. This has also led to the increase in cartel related violence, causing a 71 % surge in the crime rates in Guanajuato where nearly a third of all new illegal fuel taps were discovered. It is claimed that the local politicians, state, federal and the municipal police, along with the prosecutors, state or federal, is on the cartels payroll, looking the other way whenever instructed to. Bunker, R. J., & Sullivan, J. P. (2010)
Other lucrative business ventures that the cartels have had their finger in are alcohol (adulterated and unadulterated), pirated DVDs & the Mexican avocado industry. Smuggling is a routine job for them to get the supply and distribution of narcotics in the United States running. They even smuggle people across the border if the price is right, being the cause for major political controversy in the United States and drawing heat from the Republicans such as building a wall along the border and tightening of the border security & patrols. Other business that generate significant revenue for the cartels operating in the Mexican landscape are kidnapping, extortion, organ trade, human trafficking and counterfeiting.
The shifting of the Mexican cartels’ interests towards the petroleum industry indicates that the demand for petroleum is significantly high in the black market and the venture is highly profitable for the cartel as discussed previously. Pemex, the state oil company, reported a revenue of 52 billion US dollars, despite being heavily targeted by the cartels and reportedly costing the...