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The Economic Impact of
Drug Trafficking in Mexico
Research Paper
Author: Peter Hartmeier
Supervisor: Stefan Philippi
Place, date: Brugg-Windisch, 09 June 2018
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Statement of Authenticity
I, the undersigned declare that all material presented in this paper is my own work
or fully and specifically acknowledged wherever adapted from other sources.
I understand that if at any time it is shown that I have significantly misrepresented
material presented here, any degree or credits awarded to me on the basis of that
material may be revoked.
I declare that all statements and information contained herein are true, correct and
accurate to the best of my knowledge and belief.
Name: Peter Hartmeier
Date: 9 June 2018
Signature:
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Peter Hartmeier 09 June 2018
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Abstract
Since decades Mexico is notoriously famous for drug production, trafficking and vio-
lence. Mexico’s geographic location favors those activities by bordering the largest
drug market in the world, the United States of America, making drug trade an ex-
tremely lucrative business opportunity for cartels. Its proximity to Central and South
America also gives Mexico access to cocaine which is produced mostly in the Co-
lombian, Bolivian and Peruvian highlands.
During my exchange semester at the Universidad Popular Autónoma del Estado de
Puebla in Puebla, Mexico I experienced the scale of the drug business at first hand.
Luxurious real estate and other assets allegedly owned by cartel leaders, corrupt
authorities, the popularity of drugs in general and dealers selling cocaine openly at
events were among the most dominant indicators I noticed.
Drug Trafficking in Mexico is a multibillion-dollar industry which shapes the country
in many ways. This paper will highlight the economic impact of drug trade in Mexico
by using pro/contra analysis and evaluating strengths/weaknesses of selected re-
search fields such as consequences for small businesses, investment and em-
ployment.
Research question:
How is Mexico’s economy affected by drug cartels?
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Table of Contents
1. INTRODUCTION 5
1.1 METHODICAL APPROACH AND STRUCTURE 6
1.2 PRO/CONTRA ANALYSIS 6
1.3 STRENGTHS/WEAKNESSES ANALYSIS 6
2. MEXICO 7
2.1 DRUG CARTELS 7
2.2 DRUG TRAFFICKING INDUSTRY 8
3. ECONOMIC IMPACT 9
3.1 BUSINESSES 10
3.2 EMPLOYMENT 12
3.3 INVESTMENTS 14
4. DISCUSSION 16
5. CONCLUSION 18
6. REFERENCE LIST 19
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1. Introduction
Nowadays we are more connected than ever, economies around the world can be
measured and compared according to a wide span of analytical data. But those sta-
tistics never show the full truth, black markets for illegal products and illicit activities
accumulate enormous revenues and shape the economies in different ways that
are not accounted for in official publications. The most lucrative black markets are
smuggling, counterfeit, trafficking and piracy. Together, the top ten countries that
possess the largest illegal markets are estimated to have an impact of 1.6$ trillion
on the world’s economy (Illicit Trade, 2017).
Mexico is notoriously famous for having one of the biggest illegal drug markets in
the world bringing enormous profits to the parties involved in it. Drug trade has af-
fected and shaped the country tremendously; cartels, corruption and violence have
become a normal part of the daily lives of many Mexicans. The cartels even ex-
panded their operations from solely trafficking drugs into other territories, for in-
stance, they started committing oil theft, kidnapping, homicides and are acquiring
assets around the world to secure their earnings. Concluded, they started operating
just like legitimate enterprises with the advantage of having the ability to use illegal
tactics to achieve their goals. Therefore, it could be stated that cartels have to be
considered as entities that actively contribute to the current situation of the Mexican
economy.
In this paper, I want to research the economic impact of drug cartels in Mexico. At
first glance, many negative aspects come to mind, for example violence, money
laundering and corruption. But on the other side, there also seem to be benefits like
providing banks with money, investments in real estate, opening businesses or job
creation in impoverished regions which rely on drug money. Therefore, I specified
the following research question:
How is Mexico’s economy affected by drug cartels?
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1.1 Methodical approach and structure
The focus of this paper will be the description and analysis of the economic impact
drug trafficking has on Mexico by highlighting the effects caused for businesses,
employment and investments. To create a general overview and understanding of
the topic the author will provide background information on Mexico’s drug trafficking
industry, drug cartels and their history.
I will use a pro/contra and strengths/weaknesses analysis to create a broad over-
view of the current state of affair. Relevant information will be collected from na-
tional agencies, reports, news outlets, magazine articles and relevant literature. Im-
portance is put on finding sources from an American and Mexican standpoint with
the goal of creating a neutral point of view.
1.2 Pro/Contra Analysis
The Pro/Contra Analysis is used to evaluate good and bad aspects of a certain sub-
ject. It will be used to assess the positive and negative effects brought to Mexico’s
economy by drug trafficking
1.3 Strengths/Weaknesses Analysis
A strengths/weaknesses analysis is part of the widely used SWOT Analysis which
assesses strengths, weaknesses, opportunities, and threats for a specified busi-
ness. Strengths intend to give a deeper look into what a company is doing well and
weaknesses show where the company has its weak points (Van den berg & Pie-
tersma, 2003, p. 58).
In this paper, the analysis will be used to assess the strengths/weaknesses of drug
cartels in context to the Mexican economy.
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2. Mexico
2.1 Drug Cartels
A drug cartel is an organization operating in the illicit market of drug production,
trafficking and sales. The goal of cartels is to reduce competition and acquire large
shares of a market acting in a monopolistic way (Samuels, 2016). Wainwright
(2017) implies that today’s drug trafficking organizations resemble big legal corpo-
rations because they compete in a market worth billions of dollars where they man-
ufacture, transport, market and sell their products to the end consumer, they basi-
cally take over control of the entire supply chain to maximize their profits.
The first major Mexican drug cartel formed itself around 1980 when Miguel Ángel
Félix Gallardo, a Mexican drug kingpin, started working with Pablo Escobar who
then was in charge of the notorious Colombian Medellin cartel. Gallardo imported
cocaine directly from Colombia and distributed it into the USA. Gallardo’s cartel be-
came enormously large and eventually got split up in different sectors around Mexi-
co and new cartels like Sinaloa and Tijuana started operating. The existence of
multiple cartels has led to territory wars, violence and shifts of power that generated
instability throughout the country. In 2006 former President of Mexico, Felipe Calde-
ron, started deploying military forces to eradicate the illegal drug industry. Those
actions are known as the war on drugs and have caused over 50’000 deaths up to
this date (Davis, 2016).
With every high-profile cartel leader captured, more violence occurred and authori-
ties ranging from policemen to high ranking government officials, have been cor-
rupted by accepting hefty bribes from criminal organizations. This suggests that the
war on drugs is far away from achieving its desired effect and rather evolved into a
national crisis (Agren, 2017).
In conclusion, it can be said that cartels are still operating very successfully and be-
came even more unpredictable due to power imbalances and increasingly violent
behavior.
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2.2 Drug Trafficking Industry
The Mexican gross domestic product added up to $2.4 trillion in 2017 with a per
capita GDP of $19’500. The economy heavily relies on exports, with goods export-
ed worth $373 billion Mexico is the world’s 13th largest export industry. This posi-
tion can be maintained due to numerous free trade agreements with partners
around the globe. The most important goods Mexico produces are manufactured
products, silver, vegetables, coffee, cotton and oil (Pariona, 2017).
Often disregarded in economic statistics, drug trade is also a major economic force
in Mexico, estimating the true scale of monetary worth generated by cartels is diffi-
cult because drug trafficking organizations do not file annual reports, partake in au-
diting procedures, or provide official documentation like legally operating compa-
nies do (Keefe, 2012). According to the latest United Nations World Drug Report,
the value of the illicit drug market in the United States of America in 2010 was esti-
mated to total up to $109 billion annually, 0.74% percent of the total American
gross domestic product. Compared to other nations, those numbers indicate that
the USA is the largest drug consuming economy on a global scale. (United Nations
Office on Drugs and Crime, 2017, p. 23). This creates a permanent demand on
narcotics of which a great share is supplied by Mexican cartels operating mainly in
selling heroin, marijuana, and cocaine. While cultivating their own heroin and mari-
juana farms, they also import cocaine from South-American countries to later export
them into the USA (Redmond, 2013). In 2016, the US Drug Enforcement Admin-
istration reported that 93% to 94% of Colombian cocaine exported to the USA has
been transported through Mexico beforehand (Woody, 2017). The US Justice De-
partment argues that Mexican and Colombian cartels are accountable for 18 to 39
billion dollars of drug sales per year in the USA (Keefe, 2012). The enormous profit
margins found in drug trafficking are remarkable, a kilogram of cocaine can be
bought for $800 in Colombia and sold in the USA at around $122’000. Of course,
expenses like shipping cost or bribing of officials must be subtracted but the
markup remains highly profitable (Wainwright, 2016, p. 58).
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Cartels also expanded their operating range into other business sectors like steal-
ing gasoline from pipelines in different states grossing them over 1 billion US dol-
lars annually. The state-owned oil refiner Pemex generated revenues of 52$ billion
US dollars in 2016, approximately a fifth of the total government income making oil
theft very lucrative for criminal organizations (Stargardter, 2018).
Joaquin Guzman Loera “El Chapo” has operated as the leader of the notorious Si-
naloa Cartel until his arrest by Mexican Authorities in 2016. Forbes Magazine esti-
mated his net worth to be at around a billion US dollars which put him in the list of
the richest people in the world showing further proof of the incomes cartels can
generate (Estevez, 2013).
3. Economic Impact
The United Nations list distorted resource allocation, price distortion in the real es-
tate sector, distortion of exports, unfair competition, negative effects on foreign in-
vestments, corruption and further skewing of income and wealth distribution as the
main harmful factors that drug cartels bring to an economy. A good example would
be that the illicit earned funds of drug cartels mostly are reinvested into corrupt
businesses so the cartels can generate the high profits and launder money. This
creates a whole economy based on corruption in states with high cartel activity and
forces legally operated enterprises to either leave the market or cooperate with
drug trafficking organizations to find investors (United Nations Office on Drugs and
Crime, 2017, p. 29).
According to the Mexican Peace Index (2018) violence causes an economic loss of
249$ billion annually. The study further reveals that the government allegedly spent
24.7$ billion on military, internal security and its justice system in 2017. Drug traf-
ficking organizations undoubtedly have a significant impact on violence and the
Mexican economy. In the following sections I attempt to assess the economic im-
pacts for businesses, employment and investments.
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3.1 Businesses
There are about 4 million small and midsize businesses around Mexico employing
72% of the countries workforce and providing 52% of Mexico’s gross domestic
product. Therefore, they play a very important role in the country’s economic sys-
tem (Carriedo, 2017). Drug cartels represent a viable threat to small businesses
operating in their territories, cartel members have been known to kidnap and mur-
der employees, using company logistics to smuggle drugs as well as collecting pro-
tection money from store owners (Ceniceros, 2017). A study carried out by the
Bank of Mexico estimates that more than 60% of all firms in Mexico have been af-
fected by the criminal climate the cartels have established through cartel violence
and extortion practices (Krzeski, 2013).
Recently, an increasing number of tortilla shops, which can be found all over Mexi-
co, have been subject to cartel-related violence. Due to their strategic location in
poorer areas of towns with ongoing criminal activity, those shops are well suited to
be used as lookout and drug distribution posts. To seize control of those establish-
ments the cartels started kidnapping owners, threatening them with murder and
permanent shop closure if they are not willing to cooperate. Drug trafficking organi-
zations are also accused of having used those methods on companies in the taxi
and public transportation business too (Balderos, 2016). In a BBC article, journalist
Julian Miglierini reported that 10’000 companies in drug violence troubled regions
had to shut down production in 2010. Many of these enterprises have been suffer-
ing from cartels issuing threats against them. To highlight the nature of those
threats, the article cites a businesswoman saying that she was approached by
armed men telling her to pay $4000 monthly as a protection for her family and
company (Miglierini, 2011).
Another sector heavily influenced by cartel activities is Tourism, a good example for
the issues is the history of Mexican resort city Acapulco in the state of Guerrero.
Around 1950 Acapulco was one of the most exclusive places to visit for tourists vis-
iting from all over the world. Nowadays the atmosphere has changed drastically
and it has become the most violent city in Mexico. The bad reputation holds back
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visitors and threatens the local economy which acquires 80% percent of its income
from tourism (Flannery, 2016). Cartels see tourist resorts as a viable source of in-
come because there they can sell directly to vacationers without having to export
the drugs into the USA first. This is also the reason why cartels frequently engage
in fights over those valuable territories resulting in the closure of an estimated 2000
local businesses and deaths of 150 business owners from 2016 to 2017 (Webber,
2017).
Not only small businesses are affected by cartels, FEMSA, a large firm responsible
for bottling Coca-Cola in Mexico, has shut down a factory with 160 employees in
the Guerrero state. They stated a lack of safety for its employees, violent gang ac-
tivities in the area and insufficient intervention by state authorities as main factors
for the closure (Rodriguez, 2018). Even the state-owned oil company PEMEX, who
had a revenue of $52 billion in 2016, is affected by cartels who steal oil from pipe-
lines. It is estimated that oil theft brings an annual loss of 1.6$ billion to the firm
consisting of stolen resources and repair work for pipelines. To access information
on pipeline locations, cartels bribe or threat PEMEX employees to cooperate with
them (Woody, 2018).
Summarized, the information gathered suggests that cartel activity almost exclu-
sively has negative effects on businesses. A constant presence of violence and
threats puts business owners under constant pressure, scares away companies
and hinders market entrance. In many cities, cartel violence has caused the depar-
ture of people and firms alike. All that is left behind are empty office buildings, res-
taurants out of service, and run down shopping centers. Big enterprises such as
Caterpillar are withdrawing their workforce back to the USA due to safety concerns,
and other companies do not even consider investing in Mexico. Those circum-
stances take a large toll on welfare, public services and the general economy in
affected regions. (Kim, 2014).
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3.2 Employment
The Mexican unemployment rate is at 2.9% in March 2018, the average rate from
1994 to 2018 is at 3.2% which means that around 4.35 million people are currently
unemployed (Trading Economics, 2018). Inequality of wealth distribution is also a
significant economic problem, 54.4% of the population are accounted for as poor
and the government is often accused of only providing for the wealthiest individuals
in the country represented by around 150’000 people owning more than 1$ million
in assets. The minimum wage in Mexico is 80 pesos per day which conversed in
US dollars equals to $4 (BBC Mundo, 2017). Those circumstances lead to many
problems such as lack of education and job prospects which trap the lesser affluent
Mexicans in a constant state of poverty with limited chances to climb up the social
ladder. Therefore, drug cartels can provide lucrative work opportunities for people
that do not have other choices.
The logistics of drug trafficking require cartels to have a large workforce, the Sina-
loa cartel alone was suspected to have employed up to 150’000 people at its peak
but those numbers could be misleading because other research suggests that only
a few hundred directly work for cartels and the remaining work is conducted by third
parties indirectly linked to the core of operation (Keefe, 2012).
High ranking jobs such as money laundering and responsibility for drug smuggling
routes are mostly given to relatives and trustworthy friends of the respective cartel
boss. The functions referred to as ‘’dirty work’’ like assassinations of enemies are
generally subcontracted to third parties who could be unemployed, low paid or part
of state authorities. Military investigations in the city of Monterrey have revealed
that police officers receive up to $1’500 monthly for cooperating with drug traffickers
by acting as hitmen, informants and providing back up for them (Emmot, 2010).
The average salary for police officials in Mexico adds up to around $500 a month
meaning that a corrupt officer can increase his salary drastically by accepting
bribes and partake in cartel activities (Arteaga, 2017). Estimates speculate that car-
tels have expenses of around 1$ billion annually just to bribe Mexico’s police force
(Blackstone, 2012).
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It must be remarked that the high wages in drug trafficking come with a price. If an
employee or subcontractor fails to achieve his task or changes his mind, the pun-
ishment is usually fatal.
In several cases cartels even directly recruit from government authorities. For in-
stance, the las Zetas cartel was formed out of an elite troop which deserted the
Mexican army and geared its efforts towards more lucrative, illegal endeavors
(Schumpeter, 2012).
Another good example for cartel labor are peasants in poorer, undeveloped regions
with bad infrastructure. Farmers are currently cultivating 26’100 hectares of opium
poppies making Mexico the third largest producer of heroin in the world (Villa,
2017). The number of farmers linked to drug production has increased steadily over
decades, in the 1970’s there were an estimated 50’000 workers involved, only a
decade later in 1980 the number rose to 200’000 and the latest estimation around
1998 stated that 300’000 peasants provided their services to cartels (Rios, 2008).
Inhabitants of rural towns in the state of Guerrero say that they only have two
choices of creating income: growing avocados and other vegetables or cultivate
drugs on their fields. Out of necessity, the majority chooses drug production be-
cause the profits are higher and the lack of roads in good condition leads to long
transport times with a high risk of vegetables rotting before arriving in store shelves.
This forms a relationship between cartels and farmers which highly depend on each
other; the cartels need farmers to grow opium for them and the farmers need the
cartels as clients to survive and provide for their children (Chandler, 2015).
Due to aforementioned reasons farmers keep on growing opium and expanding
their fields accepting the risk that their fields might get eradicated by the Mexican
army (Frederick, 2018). Farmers are also subject to free-market economics, as ma-
rijuana is getting decriminalized in US States the demand for marijuana has fallen
substantially, growers in Mexico can only charge a third of the price before legaliza-
tion for a kilogram of the drug (Bonello, 2015). Therefore, marijuana production and
revenue is on the decline and substituted with opium which is still illegal and highly
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sought after in the USA. As a result, opioid overdoses have increased by a third
over the last months (Glenza, 2018).
All things considered, cartels provide solid employment opportunities to a great
number people who otherwise would be unable to support themselves and their
relatives because the lack of infrastructure, education and well-paid job opportuni-
ties leave them no other choice. The positive aspects get mixed up with the illegal
and immoral nature of the drug business, individuals are forced to partake in illicit
markets where death, torture, arrestment and destruction of property are risks they
daily face. But as long as the government is not available to improve infrastructure,
unemployment and salaries, people have a high incentive in working for cartels
earning wages that cannot be rivaled by companies operating legal fields of em-
ployment.
3.3 Investments
It is clear that drug cartels generate billions of dollars from various income sources.
The question that arises is how they invest those revenues and if it has a beneficial
or negative impact on Mexico’s economy.
In 2008 Mexican authorities seized $200 million in cash by raiding the Mexico City
home belonging to Zhenli Ye Gon, a businessman with ties to the Sinaloa cartel
(Cruz, 2016). Confiscations of cash such as in this case reveal that cartels store
most of their revenues in cash reserves all over the country. To legitimize those
earnings the money has to be placed physically in the financial system by deposit-
ing it in a bank, it then gets transferred into various offshore bank account around
the world to erase the trails. In a final step, the money flows back to its original
market where it is invested in various ways (Cruz, 2013). The United Nations
(2017) cite real estate, casinos, restaurants, and offshore accounts as the most
commonly used investment vehicles to wash clean these illicit cash flows. Reuters
(2018) states that the Mexican government is not undertaking enough measures to
prevent money laundering, corruption and the case solving approach by authorities
have been listed as the main obstacles hindering major breakthroughs. In 2016
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Mexico only reported seizures of illicit funds amounting to 36.5$ million, a small
number compared to the billions criminal organizations earn annually. Numerous
large global corporations have been involved in drug money laundering schemes, in
2012 regulators found out that the multinational bank HSBC reportedly accepted
transactions of Mexican and Colombian cartel profits in the height of $881 million
over a timespan of 5 years. The bank got fined 1.9$ billion for its compliance failure
and assisting criminal organizations in laundering enormous sums of cash (White,
2017). HSBC is far from being the only firm that has had cooperated with drug car-
tels, Rabobank, Wachovia, and Citigroup among others, have faced similar charges
(VOA News, 2018). Observations like these confirm that proceeds made from ille-
gal narcotics are invested globally, cartels are believed to be in possession of as-
sets all over Latin America, Africa and Europe (Beith, 2011, p. 21). According to
Rios (2008), a great share of the profits goes directly to the cartel executives who
use money to buy luxurious real estate, cattle and other legally operating business-
es. The other share of the proceeds is used to cover the costs that the cartel opera-
tions accumulate e.g., bribery of authorities, wages for cartel employees and third
parties, construction of new facilities to produce drugs, building smuggling routes,
and so on.
To ensure loyalty and increase public supportiveness cartels are also known to give
back a share of their income to society. The most famous example of this behavior
is Colombian drug kingpin Pablo Escobar who constructed hundreds of homes for
the poorest people in the city of Medellin. His popularity among those inhabitants
increased drastically and he was seen as a savior that provided for them when the
government wouldn’t (Green, 2015). Although not as visible and on the same scale,
Mexican cartels also use similar strategies to secure their position. In economically
less fortunate communities they build homes for peasants, construct churches, pro-
vide food for the elderly and gift kids toys for Christmas (Thomet, 2015).
To sum it up, the way cartels invest their income has positive and negative effects
on Mexico’s economy. Illicit profits can be beneficial if it they stay in Mexico and are
invested in sectors such as real estate which employ a great number of workers, or
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into poor communities where cartels step in the place of the government to provide
for local people by giving them shelter, infrastructure and job opportunities. On the
other hand, cash flows deposited in offshore accounts harm the economy because
they left the country untaxed and are unlikely to be reinvested in their original mar-
ket. Furthermore, corruption and unethical practices are reinforced not only in Mex-
ico but also in renowned organizations across the world.
4. Discussion
Positive effects are found in the categories of employment and investments; drug
trafficking organizations have established entire industries revolving around their
core businesses of producing and selling drugs in locations where the majority of
inhabitants lives in poverty and struggles to find employment in legal fields due to
lack of infrastructure and the government’s failure to improve those though circum-
stances. If drug cartels suddenly vanished, many of the estimated 300’000 farmers
employed by them would be facing bankruptcy immediately, leaving them unable to
provide for their families anymore resulting in an economic collapse for numerous
impoverished communities in Mexico. The billions of dollars generated by cartels
also have beneficial impacts on the economy if they are reinvested in legal assets
on Mexican territory because then the money can contribute to job creation and in-
creasing welfare, especially in economically less fortunate areas. While those as-
pects appear to be mainly positive, some downsides have to be taken into account;
as already mentioned, the high number of cartel employees also includes low and
high ranking authorities who use their power to support criminal activities fostering
a climate of corruption where guilty public officials rarely face consequences for
their wrongdoings (Gan Integrity, n.d). According to Mellers (2015), corruption
caused an economic harm of $53 billion to Mexico in 2015. Investments can also
be named as an unfavorable factor if they are made in other countries e.g. deposit-
ed in offshore accounts or used to buy foreign property. Practices such as those
help cartel executives to secure their funds if the government takes up action
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against them but leave great uncertainty if the money is ever flowing back to its
country of origin.
In regions subject to high cartel activity, for example, border states to America, drug
cartels have had a negative impact on the local economy. Their presence has
sparked waves of violence and insecurity that forced countless legitimate business-
es to shut down and made life difficult and dangerous for those who have chosen to
stay. This situation threatens the economic prosperity of many states, due to
aforementioned reasons, lesser people are willing to invest anymore and innovation
stagnates.
These findings lead to the assumption that drug cartels create economic benefits
but almost exclusively for themselves and their third-party contractors who often
work for them out of pure necessity or to increase their low state-provided salary by
a multiple. While they certainly help poorer communities to make a living, other re-
gions are left devastated by the reign of brutality incited by cartel conflicts. In mone-
tary terms, the negative outweigh the positive effects by far, the cost that drug car-
tel violence and corruption generate is difficult to estimate. If we add up the annual
economic cost of violence which is 249$ billion (Institute for Economics and Peace,
2018, p. 31) to the $53 billion cost of corruption (Mellers, 2015) and assume that
50% percent of total cartel revenues get transferred to offshore accounts which
contributes to another loss of 9-20$ billion, we end up at a sum exceeding $300
billion. It has to be remarked that those numbers refer to the entire population of
Mexico, not only drug trafficking organizations, but cartels undoubtedly contribute
heavily to the violence statistics. The Mexican government (2017, p. 7) reported
25’339 drug-crime related homicides in 2017 which illustrates the country’s highest
murder rate since 1997. A national survey on drug use in Mexico conducted by the
national health institute (2017) showed that 9.9% of the population have tried drugs
at least once in their life, 0.6% of them are counted as drug addicts. Drug use and
addiction cause a further negative economic impact because it increases costs for
health care substantially. Even if hypothetically speaking, Mexican Cartels served
the entire American illegal drug market worth $109 billion (United Nations Office on
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Drugs and Crime, 2017, p. 23) and invested all of their earnings back into the Mexi-
can economy, the negative economic effects would still overshadow the benefits.
Solving the drug problem proves to be an almost impossible challenge for Mexico,
the government’s war on drugs has only achieved little and contributed to the seg-
regation of cartels into smaller organizations that compete against each other.
To counter these issues Mexico has to systematically weed out corruption, provide
measures against poverty and build the necessary infrastructure allowing people to
partake in the legal employment market. Decriminalization of drugs could also be
an effective method to combat the cartels, this would allow that some of the Mexi-
can workforce employed for cartels, farmers for example, can continue with growing
opium but sell to legal companies instead of cartels.
5. Conclusion
In conclusion, it can be said that drug cartels affect the Mexican economy in a neg-
ative way when looking at it from a monetary point of view, the constant climate of
violence and corruption put its toll on many regions by driving away business, in-
habitants, tourism and foreign investment. This behavior shows a major weakness
the cartels possess, instead of conducting their operations away from legal firms
and the daily lives of many Mexicans, they take over entire cities with their mali-
cious practices and cause uncertainty by partaking in territory fights with rivaling
competitors. The cartel’s strengths are visible when it comes to poverty struck re-
gions, there they provide infrastructure and employment for an estimated 500’000
people that rely on the drug industry to afford their lifestyle. In those places, the in-
habitants often feel neglected by the government and see no other possibility of
labor other than working for drug trafficking organizations. These findings show
that, no matter how high the negative economic impact of drug trafficking might be,
cartels provide an important contribution to the preservation of a vast number of
rural communities.
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6. Reference List
Agren, D. (2017, December 26). Mexico maelstrom: how the drug violence got so
bad. Retrieved from
https://www.theguardian.com/world/2017/dec/26/mexico-maelstrom-how-
the-drug-violence-got-so-bad
Agren, D. (2018, February 20). Mexican cartels pushing more heroin after U.S.
states relax marijuana laws. Retrieved from
https://www.usatoday.com/story/news/world/2018/02/20/mexican-cartels-
switch-gears-after-u-s-states-relax-u-s-states-legalize-marijuana-mexicos-
cartels-sw/343389002/
Arteaga, A. (2017, April 07). MAPA: Los policías mexicanos con menor y mayor
salario [Mexican Police with the lowest and highest Salaries]. Retrieved
from https://www.huffingtonpost.com.mx/2017/04/07/mapa-los-policias-
mexicanos-con-menor-y-mayor-salario_a_22029361/
Balderas, O. (2016, March 14). Drug Cartels are taking over the Tortilla Business in
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