Mexican Cartels as Vicious Firms

Mexican Cartels as Vicious Firms

Paul Rexton Kan

At the height of his power, Sinaloa cartel kingpin, Joaquin “El Chapo” Guzman, was on Forbes’ most powerful list just below Robin Li, the CEO of China’s number one search company, Baidu.  Unlike Apple and Baidu, which have to report their annual earnings, acknowledge the members of their companies, and open their finances to government scrutiny, Mexican drug cartels have no such requirements. 

Many in the academic and policy communities share the notion that organized crime groups operate similarly to legitimate businesses.  For example, the United Nations World Ministerial Conference on Transnational Organized Crime took the view that organized crime syndicates are similar to large-scale legal enterprises but whose use of violence is only secondary to the required organizational capacity to earn profit.  The Conference stated that “Like any business, the business of crime requires entrepreneurial skill, considerable specialization, and a capacity of coordination, and this is in addition to using violence and corruption to facilitate the conduct of activities.”[1]  Reflecting the business acumen needed to succeed in criminal enterprises, Mexican cartels derive illegal profit by using their capabilities to expand into new drug markets and to smuggle drugs and other illicit commodities through innovative and secret means. 

Because organized crime groups’ central reason for existing is to make money for its membership, an alternative way to understand Mexican cartels is to compare them to other profit making enterprises.  To emphasize the cartels’ use of violence leads to inapt comparisons with other clandestine groups and results in crippled policies to combat them.  Instead, analyzing how cartels earn and use money draws attention to what characteristics they share with legal companies and where they intersect with the legitimate economy.  By viewing cartels through the lens of a profit making enterprise, rather than focusing solely on their use of violence, policy makers and scholars can develop better approaches to reduce their power and influence.

From Violent Entrepreneurs to Vicious Firms

To highlight how organized crime groups are like legitimate businesses, Russian sociologist Vadim Volkov coined the term “violent entrepreneurs.” Volkov’s term refers to individuals who create “a set of organizational solutions and action strategies enabling organized force (or organized violence) to be converted into money or other valuable assets on a permanent basis….”[2] Volkov continues by stating that “Violent entrepreneurship is a means of increasing the private income of the wielders of force through ongoing relations of exchange with other groups that own other resources.”[3]  Critics of the term “violent entrepreneurs” argue that it places too much emphasis on the use of violence rather than on the increase of private income through illegal means.  Most of the time illegal trafficking markets are generally peaceful.[4]  In fact, organized crime groups involved at the higher end of the trafficking network often behave peacefully and cooperate with one another while also colluding with state agents.  Interactions among organized crime groups and the state, in many cases, are characterized by considerable cooperation.[5]  The use of violence by organized crime groups can be bad for business because it interferes with the group’s money making activities and can bring unneeded state intervention. Violence raises the possibility of incarceration or death causing cartels to shift their attention and money to increase security for their members and business activities.  In short, the use of violence can create significant disruption in earnings for the group. 

With an emphasis on the organizational logic of their profit-making, rather than on instances where their interactions result in violence, Mexican cartels should be viewed as “vicious firms”, which earn money as illicit logistics organizations engaged in providing vice (in this case, primarily drugs) across sovereign borders.  To highlight the critical element of logistics to Mexican cartels, Evelyn Krache Morris explains:

What the [cartels] are really selling is logistics, much like Wal-Mart and Amazon.com. Wal-Mart was one of the first retailers to run its own fleet of trucks, providing tailored shipping at a lower cost that in turn gave the company an edge over its competitors. Similarly, Amazon may have started as a bookseller, but its dominance, as Fast Company put it, is ‘now less about what it sells than how it sells,’ providing a distribution hub for all sorts of products. Drug-trafficking organizations are using the same philosophy to cut costs, better control distribution, and develop new sources of revenue.[6]

The term “vicious firm” better underscores the private nature of these groups and emphasizes their illegal profit making while avoiding the overemphasis on their violent tactics.  The term also facilitates the understanding of how Mexican cartels share an organizational logic akin to that of a legitimate business.

However, Mexican cartels are more encumbered than legitimate businesses in a number of ways.  In fact, there is a high degree of complexity that a drug trafficking organization must navigate in order to not only survive but also to be successful.  Mexican drug trafficking organizations participate in a hypercompetitive illegal market that is distinct, in four ways, from legitimate commercial competition.  First, the commodity is illegal or it is legal but its manner of delivery is illegal.  Second, the market size for the commodities is large and the number of groups seeking to control its delivery is numerous.  Third, because the Mexican cartels cannot avail themselves of legal remedies, there is the lack of an arbiter to resolve disputes over agreements.  Fourth, the state actively engages in curtailing the market and therefore spin-off criminal markets—kidnapping and murder-for-hire—often emerge as a result. 

In order to be a successful firm in such an environment, Mexican cartels have adapted to new market drivers by diversifying their sales territory, types of products and delivery methods.   When it comes to the drug market, the Mexican cartels continue to be the main supplier for the US.  They have, however also expanded the cocaine trade outside of the hemisphere. Mexican cartels supply drugs to a growing Western European market via West and North Africa.  With a higher profit margin for cocaine and increased demand in European countries combined with lax law enforcement in the countries of West Africa, Mexican cartels have seized the opportunity for increased profits.   The Sinaloa cartel has been the most entrepreneurial and expansive; its operations have been discovered in the Philippines, Hong Kong, and Australia.[7]

Other than expanding into new drug markets, Mexican cartels have diversified their activities beyond drug trafficking.  They are now involved in poly-crime activities mostly centered on secretly moving pirated consumer goods, oil, and people.  Because of their ability to control key transportation hubs like ports, Mexican cartels can export a variety of illicit products. Most recently, a new product of choice to smuggle is iron ore from Mexico to China via the Pacific Coast port of Lazaro Cardenas.[8]

The cartels also continue to innovate their delivery methods.  Mexican cartels’ extensive use of underground tunnels to evade border security is well documented.  However, Mexican cartels have worked with Colombian traffickers to utilize “narco submarines” to smuggle mainly cocaine into the US.  The Mexican cartels are also using drones to smuggle drugs over the US border.  Since 2012, the DEA has counted approximately 150 drones crossing the border, with an average of thirteen kilos per load, totaling approximately two tons of narcotics.[9]

From Farm and Lab to Market and Street

As vicious firms in the illicit logistics business, Mexican cartels must have reasonably secure access to territory.  For drugs, like heroin and marijuana, crops must be grown, harvested, transported to labs for processing, moved to distribution points, sold to wholesale markets, and purchased at the retail or street level.  Drugs that are made and not grown, like methamphetamine, must be produced with the necessary precursor chemicals that are imported into Mexico via seaports and airports.  The chemicals must then be delivered to processing labs.  Once processed, they are then moved along the distribution chain in a similar manner as indigenously grown drug crops.  Colombian cocaine and heroin must be received from South America and moved to market.  Some of these drugs come via land through the states along the southern border shared with Guatemala, but the bulk of Andean cocaine and heroin is shipped by air or boat along two main routes:  the first route enters the Yucatan Peninsula via remote airstrips and the port of Cancun; the second route enters Mexico via port cities in Guerrero and Michoacan.[10]

The transportation infrastructure for moving drugs is also used to move counterfeit consumer goods and people; trafficking these illicit commodities requires autonomy of action that is only enabled by unfettered access to certain areas—staging points, transit routes and market destinations.  To maintain such access, cartels bribe and threaten local police and politicians to ensure that they do not interfere with cartel operations in their jurisdictions.

Mexican cartels are able to take full advantage of Mexico’s location to the US.  250 million people per year cross the nearly 2000-mile long border between the US and Mexico.  “It spans four US states, six Mexican states, twenty railroad crossings, and there are about 30 city pairings along it (US and Mexican cities directly across from each other).  About 12 million people live on both sides.”[11]  Border cities such as Nuevo Laredo, Juarez, and Tijuana have a strategic location where the re-aggregation of drug loads occurs.  Cocaine, in particular, has a far longer supply chain than marijuana and methamphetamine; because the supply chain is transnational, thus it is difficult to guard.  The result is that protection of shipments has made the Mexican cartels involved in the cocaine trade more aggressive and violent than smaller groups that traffic in marijuana or Mexican heroin.[12]

Demonstrating another aspect of their ability to innovate, Mexican cartels have also groomed a domestic market for marijuana, methamphetamine, and heroin.  Mexico is now a consumer market for drugs; one study conducted by the Mexican government found that drug consumption in the Mexican state of Sonora, a key border state for smuggling, had increased by thirty percent in six years.[13]

Moving and Cleaning Dirty Money

Profit taking is done at each stage of the enterprise, but the shipment and smuggling stages are where the highest profits are made; nearly a quarter of the price of a kilo of drugs is kept as profit.  Like profits from a legitimate business, illegal profits must be converted into useable financial instruments; this stage is where vicious firms intersect more directly and more visibly with the licit world.  Financial institutions, like banks, are particularly susceptible to the influx of cartel profits.  Wachovia, Bank of America, and HSBC, have all admitted to failing to properly monitor money transfers.  For example, Mexican cartels deposited illicit funds into accounts in Atlanta, Chicago, and Brownsville, Texas, from 2002 to 2009.  Wachovia admitted that it failed to monitor and report suspected money laundering activities to the tune of $110 million.[14]  Finally, in the case of HSBC, the company was fined $1.9 billion for failing to comply with required anti-money laundering practices, thereby permitting hundreds of millions of dollars in Mexican drug proceeds to be deposited in various accounts and transferred to others with impunity.[15]  All three examples show how cartels can use the world banking system to “clean” the money that comes to them through illegal activities.

In addition to using the US banking system to launder and distribute proceeds, Mexican cartels employ gangs to move hard currency back to Mexico. The cash is moved to Mexico in a way similar to how drugs are moved from Mexico to the US—US cities near the border or cities that contain lucrative retail markets act as collection points for cash.  “Stash houses” are used to breakdown the hard currency into loads that can be moved in vehicles or carried by individuals across to Mexico.  In September 2014, US authorities raided areas of the Garment District in Los Angeles and discovered $100 million in hard currency belonging to the Sinaloa cartel.[16]

Because moving such large amounts of hard currency increases the likelihood of detection, cartels have once again sought innovative ways to move money while evading law enforcement.  One innovative tactic is the investment of illegal proceeds into gift cards—smugglers can place thousands of dollars on a single card, reducing bulky shipments of cash and thereby decreasing law enforcement’s ability to detect the movement of money.[17]  Another innovation is the use of “virtual money” in online role-playing games.  Criminals in the US can invest in any number of different accounts in various online communities and the money can be transferred to other accounts to be withdrawn by an accomplice in Mexico or any other country.[18]  The smugglers also use the tactic of “cloning” vehicles to make them look like Border Patrol or local law enforcement vehicles, which can then be used to enter restricted areas near the border to transfer loads of currency to waiting partners on the Mexican side.[19]  Smugglers have also used fake uniforms to impersonate law enforcement as a way to complete the ruse.[20]

The money that moves into Mexico enters the economy in a number of ways. Trade-based money laundering, or the use of commerce to move illegally gained money across borders, has become a favorite of cartels.  Through fraudulent invoicing, a cartel can use a front company to overvalue commodities to be purchased and shipped across the US-Mexico border.  For example, “A front company for a Mexican cartel might sell $1m-worth of oranges to an American importer while creating paperwork for $3m-worth, giving it cover to send a dirty $2m back home.”[21]  According to the IMF, the value of Mexican exports to the US regularly exceeds what the US imports from Mexico; with the end of export subsidies, the discrepancy is due to Mexican cartels’ use of trade-based money laundering to bring US money into Mexico.[22]

Real estate is also another favorite way to hide criminal proceeds; property transactions are registered at the state level in Mexico and face weak scrutiny.  In fact, until 2011 the only money laundering investigative organization was the Financial Intelligence Unit (FIU) within the Secretariat of Finance and Public Credit and a new anti-money laundering law was passed that same year.[23]  Since then, cooperation with US financial agencies has improved and there has been in an increase in reporting suspicious banking transactions.  However, improved reporting has not led to greater enforcement.  According to Jan Smith of Edgar, of the global financial service company of Dunn and Company in Mexico City, anti-money laundering laws “suffer from a lack of effective implementation capacity”.[24]  Up to 2013, there have only been twenty-nine legal proceedings in Mexico to seize assets linked to Mexican cartels.[25]  Therefore, this avenue of cartels' money laundering capability remains virtually untouched largely because Mexico's weak civil-asset-seizure processes and laws.

Bankrupting a Vicious Firm

By focusing on the cartels as vicious firms with more similarities to legitimate corporations, policy makers can better frame their efforts.  Tackling criminal cartels is about hitting their bank accounts and bottom lines.  Successful government efforts to bring down criminal networks have always had a robust financial component.  For the Mexican and US governments, gaining an advantage against the cartels will require more accountants with spreadsheets combing over trails of money.  “Targeting illicit funds is one of the most effective ways of dealing with drug trafficking.”[26] The Mexican attorney general’s office created a Special Unit for Financial Analysis Against Organized Crime in 2011 that is designed to reinforce the FIU and streamline investigations and prosecutions. However, this effort should also include the placement of US Treasury agents alongside their Mexican counterparts to assist in implementing the anti-money legislation that has been passed.

Other important areas for concentration are the interdiction of southbound bulk cash smuggling and money laundering through US financial institutions.  US law enforcement and intelligence assets should be directed at those groups that specialize in the smuggling of hard currency to Mexico.  Additionally, Congress should not only pass legislation that includes tougher criminal penalties for bankers who participate in money laundering, but federal prosecutors must be willing to prosecute these cases.  Breaking the nexus between illegitimate profit and legitimate financial institutions would do much to lessen the power of vicious firms.

A larger policy debate over how to bankrupt Mexican drug cartels has centered on the legalization of drugs, particularly marijuana.  By one estimate, Mexican drug cartels earn approximately 60 percent of their income from marijuana sales to the US.[27]  Legalization advocates argue that the legal distribution and sale marijuana in the US would significantly reduce the economic strength of Mexican cartels by cutting into their main profit making enterprise.  However, a RAND analysis concluded that marijuana sales account for only 15-26 percent of Mexican cartel income.[28]  Moreover, even the legalization of all drugs is not likely to lead to the reduction of the Mexican cartels’ economic power.  As the repeal of alcohol prohibition in the US demonstrated, American organized crime at the time was able to innovate by moving into other criminal enterprises like gambling, prostitution and illegal waste disposal. 

Mexican drug cartels will continue to mimic legitimate firms by innovating their business models.  Those seeking to reduce their power and influence must continue to rethink their understanding of criminal groups.  With differing approaches and more creativity, policy-makers and scholars can be more innovative than the Mexican cartels they seek to understand and rein in.

The ideas expressed are the author's and don't represent the views of the Department of Defense or the Department of the Army.

End Notes

[1] United Nations Economic and Social Council, “Problems and Dangers Posed by Organized Transnational Crime in Various Regions of the World”, Background Document for the World Ministerial Conference on Organized Transnational Crime, E/CONF.88/2, 18 August 1994.

[2] Vadim Volkov, Violent Entrepreneurs, (Ithaca:  Cornell University Press, 2002), 27-28.

[3] Vadim Volkov, Violent Entrepreneurs, (Ithaca:  Cornell University Press, 2002), 27-28.

[4] Peter Reuter, “Systemic Violence in Drug Markets”, Crime, Law and Social Change, (September 2009), 275.

[5] Phil Williams, “The International Drug Trade”, in Graham Turbiville, ed., Global Dimensions of High Intensity Crime and Low Intensity Conflict (Chicago:  University of Illinois, 1995), 162.

[6] Evelyn Krache Morris, “Think Again:  Mexican Drug Cartels”, Foreignpolicy.com, 3 December 2013.  URL:  http://www.foreignpolicy.com/articles/2013/12/03/think_again_mexican_drug_cartels

[7] Peter Shadbolt, “Philippines Raid Reveals Mexican Drug Cartel Presence in Asia” cnn.com, 245February 2014 URL:  http://www.cnn.com/2014/02/24/world/asia/philippines-mexico-sinaloa-cartel/ ; Bryan Harris, “Mexican Cartel Smuggling Cocaine into Hong Kong Amid Booming Demand for Drugs”, scmp.com, 2 February 2014 URL:  http://www.scmp.com/news/hong-kong/article/1418852/mexican-cartel-smuggling-cocaine-hong-kong-amid-booming-demand-drugs ;  James Bargent, “Is Sinaloa Cartel Making a Play for Asia’s Lucrative Drug Market?” insightcrime.org, 24 January 2014 URL:  http://www.insightcrime.org/news-briefs/assassination-warnings-shows-sinaloa-cartels-presence-in-philippines

[8] “Why Mexican Drug Traffickers Started Smuggling Iron Ore to China”, The Economist, 9 May 2014  URL:  http://www.economist.com/blogs/economist-explains/2014/03/economist-explains-4

[9] Camilo Mejia Giraldo, “Mexico’s Cartels Building Custom-Made Narco Drones”, insightcrime.org, 11 July 2014.  URL:  http://www.insightcrime.org/news-briefs/mexico-s-cartels-building-custom-made-narco-drones-dea

[10] Stratfor.com, “Organized Crime in Mexico” 11 March 2008.

[11]Alberto Melis, “Foreword:  A View from the Borderlands”, Small Wars and Insurgencies (March 2010), 3.

[12] “Mexico:  The Struggle for Balance”, stratfor, 8 April 2010, URL:  http://www.stratfor.com/weekly/20100407_mexico_struggle_balance

[13] “Prevalence and Correlates of Drug Use Disorders in Mexico”, Revista Panamericana de Salud Publica, URL:  http://www.scielosp.org/scielo.php?pid=S1020-49892006000400007&script=sci_arttext

[14] Michael Smith, “Banks Financing Mexican Gangs Admitted in Wells Fargo Deal”, Bloomberg News, 29 June 2010, URL:  http://www.bloomberg.com/news/2010-06-29/banks-financing-mexico-s-drug-cartels-admitted-in-wells-fargo-s-u-s-deal.html

[15] Chrystie Smyth, “HSBC Judge Approves $1.98 Billion Drug-Money Laudering Accord”, Bloomberg News, 3 July 2013 http://www.bloomberg.com/news/2013-07-02/hsbc-judge-approves-1-9b-drug-m...

[16] Federal Bureau of Investigation News Release, “Money Laundering Takedown”, 12 September 2014, URL:  http://www.fbi.gov/news/stories/2014/september/money-laundering-takedown/money-laundering-takedown

[17] Casey Newton, “Goddard:  Mexican Cartels Move Cash with Gift Cards”, The Arizona Republic, 17 May 2009.

[18] Jean-Loup Richet, “Laundering Money Online:  A Review of Cybercriminals’ Methods”, Tools and Resources for Anti-Corruption Knowledge—United Nations Office on Drugs and Crime, 1 June 2013. 

[19] Janice Kephart, “Enhancing DHS’ Efforts to Disrupt Alien Smuggling Across the Border”, Testimony before House Committee on Homeland Security, Subcommittee on Border, Maritime and Global Counterterrorism, 22 July 2010, URL:  http://www.cis.org/node/2109

[20] William Booth, “Drug Smugglers Along Border use Innocent Disguises”, Seattle Times, 18 September 2010, URL:  http://seattletimes.nwsource.com/html/nationworld/2012929858_borderdrugs19.html

[21] “Uncontained:  Trade is the Weakest Link in the Fight Against Dirty Money”, The Economist, 3 May 2014, URL:  http://www.economist.com/news/international/21601537-trade-weakest-link-fight-against-dirty-money-uncontained

[22] Ibid.

[23] “Under the Volcano”, Economist, 16 October 2010, 31.

[24] Jan Smith, “How Well is Mexico’s New Anti-Money Laundering Law Working?”, Inter-American Dialogues Newsletter, November 14-17, 2013, 3.

[25] Charles Parkinson, “In Three Years, Mexico Sees Just 29 Trials to Seize Narco Assets”, insightcrime.org, 18 June 2013, URL:  http://www.insightcrime.org/news-briefs/in-3-years-mexico-sees-just-29-trials-to-seize-narco-assets

[26] Shannon O’Neill, “The Real War in Mexico”, Foreign Affairs (July/August 2009), 66.

[27] Steve Fainaru, and William Booth, “Cartels Face an Economic Battle,” Washington Post, October 7, 2009, URL:  http://www.washingtonpost.com/wp-dyn/content/article/2009/10/06/AR2009100603847.html

[28] Beau Kilmer, Jonathan Caulkins, Brittany Bond and Peter Reuter, “Reducing Drug Trafficking Revenues and Violence in Mexico” RAND Occasional Paper, 2010, 3.

 

1
Your rating: None Average: 1 (1 vote)

Comments

Dear Sir,
Though the issue is not my current area of interest, I find certain assumptions and reasoning quite intriguing. First, the notion of ‘violent entrepreneurs’ reminds me of Pual Collier’s Greed and Grievance Theory (later modified as feasibility theory) on civil war. Collier postulates that 'where rebellion is feasible it will occur: motivation is indeterminate, being supplied by whatever agenda happens to be adopted by the first social entrepreneur to occupy the viable niche’ (Collier et al, 2006, p.20). While there is a clear difference between a rebel group and drug cartel in terms of degree of violence they subscribe to, their underlying economic rationale is very much grounded on ‘feasibility’. Both uses ‘organized violence’ to be converted into money/economic gains. However, in the case of drug cartels, it is only when such feasibility or risk (of losing market, of collecting proceed of drug money etc), is at stake, we may find such ‘vicious (drug) firms’ resorting to a degree of violence. Thus the compulsion for the drug cartels to resort to violence is passive as opposed to rebel groups in a civil war scenario where they thrive and live on violence. But in both cases, I guess 'greed/feasibilty' holds more explanatory power.
Second, the issue of innovative techniques used by the drug cartels in a globalized economy reveals the limit and pernicious impacts it can bring. This is particularly important in Fragile States – my current areas of interest. Indeed, the drug/illicit money flow from the Fragile States to the developed world is quite revelling. According to the Global Financial Integrity estimates, in 2012 alone, US$991.2 billion left developing countries (many of which are fragile) in illicit financial outflows. Such a drainage of capital results in the continued sufferings of the resource starved and Fragile States. Thus, in my view, the issue of drug cartels and their ill gotten proceeds holds wider implications to address developmental issues.
Sincerely,
Your ACSC student in 2001-02
Group Captain Zahidul Islam Khan
PhD Candidate, University of Reading
Chevening Scholar 2012-13

Sir,

I get the notion of a “violence bank” from the immediate cultural environment of an insurgency (or gang). Which “symbolic vehicles” circulate images and acts of violence that, in turn, normalize that violence as part of the broader “economy of symbols?” Narratives, symbols, myths, and rituals are those vehicles. They’re the “Brinks Trucks” of violence capital.

Stories both “store” and circulate legendary acts of violence. Rituals are the symbolic vaults of those acts in which their “magical” energies get released and absorbed by acolytes. But ritual is more than a mere symbolic vault in which “violence capital” is stored. Ritual forms groups into COHESIVE groups.

Stories of violent acts, initially multiplied through media coverage, often become the basis of a new kind of myth, which morph into new kinds of ritual celebrations of violence. IF insurgents, terrorists, or gangsters want to use ritual as a basis for creating group coherence and loyalty and IF they wish to build up violence credits with the surrounding population, then they must build their new myth/ritual system out of material that is recognizable to the target population. “New” myths (like ISIS’s appropriation of Islam) are concocted out of older myths that have been partially discarded or are currently breaking apart. (See Levi Strauss’s famous work THE SAVAGE MIND for a still-very-reliable description of this process.)

The Taliban have been very effective at creating “violence banks.” So have ISIS. And so have Mexican drug cartels.

An in situ example, the Mexican drug cartels to which you call our attention have rediscovered the Santa Muerta (death) cult. Gang members not only incorporate Santa Muerta symbols onto their bodies as tattoos, they also build shrines and perform blood rituals to invoke and propitiate Saint Death. These gangsters “cultists” performed their own anthropological history by researching past manifestations of this cult and by deliberately resurrecting it. Many build Santa Muerta shrines and churches in their own narco-palaces.

Today, the rituals of Santa Muerta have spilled out of the gangster’s ritual circle and now infect the locals who inhabit the territory of the drug lords. The spill-over effect, which is key to the “violence bank,” occurs because the new myth resonates with previous mythic forms and practices and narratives. Again, ISIS’s use of Islam turns Islam into a kind of junk religion, which is sort of like a “junk bond.” However, the “Islam” that ISIS promotes is still recognisable as “Islamic” to young Muslims chomping at the bit to wage Jihad.

When analysing the circulation of “violence capital” in the Human Terrain, we are NOT performing a limp-wristed “literary” reading of “stories.” We are investigating narrative, myth, and ritual that have become neurologically compulsive to adherents and, therefore, set up, define, and promote (or hinder) specific behavioural expectations and patterns. We have gained a good, but by no means complete, understanding of the neurology of ritual practices. We have a good, field-ready model for how ritual, even legitimate ritual, activates primary neurological responses (evolutionary pre-programmed learning and pre-adaptations) in ritual participants that bind them to each other as a group and at the same time bind them as a group to the myth/narrative upon which the ritual is based. That narrative or myth sets up behavioural vectors down which members are rocketed. (We’ve been calling the discipline that studies this process neuro-anthropology.) Why is it important to understand the “neurology” of ritual? So that we know our biological constraints when we are trying to understand just how infectious rituals of violence can become to the surrounding cultural inhabitants of the insurgency or criminal activity. Anyone who analyses the Human Terrain of an insurgency (or of organized criminal gangs) needs to take very seriously the social-bonding function of ritual and narrative and myth. Rituals that celebrate violence (like ISIS beheadings) essentially fuse group members together into a single neurological unit. The power of this bond is remarkable. Once coherence is achieved at the neurological level of members, it is nearly impossible to “undo” it. It’s as if the ritual and the myth/narrative to which it belongs (and all of its symbols) are tattooed into the brains of adherents. Ritual is a bottom-up social technology that we’ve been using to create group coherence/loyalty since our days as hunters and gatherers on the Savannah. Only now are we beginning to fully understand the relations between group size (Robin Dunbar’s 150), ritual/narrative, and our neurological hardwiring—the neuro-biological substrates of culture.

These new “neuro” insights will make us much smarter in our IO efforts to combat insurgency at the level of SOCIAL BONDING.

Consider these observations:

“…some observers speculate that modern Mexican sicarios who make a public display of their worship for Santa Muerte are also influenced by the internet and the videos posted by Muslim radicals beheading their enemies. It may be that the current criminal craze for beheading victims in Mexico was spawned in part by new age terrorists from the Middle East. In this scenario, Mexican sicarios saw beheading videos on the internet and thought it was a marvelous idea, especially in light of increasingly deadly competition and rivalries among themselves. The same anxieties that fostered the contemporary rise of Santa Muerte, likely also fostered public displays of ferocity as a means of survival.

Whatever their inspiration may be for the unprecedented barbarity with which Mexican criminals today torture, murder and mutilate their victims, including flaying their faces, it is evident that many of them turn to Santa Muerte for a sense of supernatural protection. She does not call for barbaric behavior, but she does not condemn it or discourage it either. She is amoral as were most of the Aztec gods. For example, the rain god Tlaloc did not consider whether or not his worshippers adhered to good moral standards. He rewarded those who pleased him by making proper sacrifices, irrespective of their behavior on earth. Incidentally, he liked to have children burned alive in large braziers before his idol because their tears were like rain drops. This is the product of a pre-modern mind, to which Santa Muerte beckons a return.”

The “myth” of Santa Muerta was waiting to be revivified by Mexican Drug Lords. They needed a sort of “virtual vault” in which to store their violent acts. They needed a culturally recognizable means by which to transmit and project their violence credibility. Myth/ritual is the vault in which violence capital is stored.

I apologize for the rudimentary nature of my explanation and would be happy to clarify this model in detail.

Much Respect,

Goat Rope

Hi, folks,

It's the author here. First, let me thank you each for taking the time to read my piece and to add your comments. I'm always humbled that people not only read what I write, but feel engaged enough to put down their own thoughts. To be honest, I'm amazed that I get to be part of the intellectual debate (I'm sure many of my high school teachers and English professors feel the same way). Nonetheless, here I am.

Sully, if Small Wars Journal is for "practioners" only, then I'm exceptionally grateful for the SWJ editors' indulgence in publishing my scholarly pieces over the years. For an interesting criticism of my perspective, here's a good article (from practioners): http://www.au.af.mil/au/ssq/digital/pdf/spring_2014/Farwell.pdf I can't say that I agree with all of their characterizations, but the more perspectives and voices on the issue of drug fueled violence in Mexico, then so much the better.

Goatrope, I'm intrigued about your ideas on "violence credit" and risk. I think there is something there worth exploring. I agree that the "rational actor" model has its limits, perhaps significant limits in studying groups who seem to be guided more by the Seven Deadly Sins than the Seven Habits of Highly Effective People. Feel free to send me an email at paul.kan@us.army.mil to continue the conversation.

Cinnamon, thanks for the vote of confidence. I am grateful for your work in helping to beat the bad guys. We need you.

Again, thank you for your comments. I look forward to more engaging exchanges in the future.

Paul Kan
Carlisle Barracks, PA

I have to disagree with sullygoarmy. Dr Kan's work consistently pulls us out of our tactical focus, to emphasize the strategic view. That's exactly the kind of perspective we need to devise productive strategies. I get it—out there in the real world people are dying at the hands of the cartels. But we don't win that fight (if winning is even possible) by failing to truly understand the phenomena we are fighting. That point is underpinning this entire article.

I've been directly involved in this war for 20+ years, and Paul Kan is one of the few academics that actually gets it. I hope we'll continue to see work of this quality on "practitioner's" websites.

...seems to clinical of an argument. They will mimic legitimate firms while they kill you and your entire Family. Not to take away from the author's argument, but it seems very institutional and lacks any sense of reality. Would rather see this published in an academic journal, rather than on a practitioner's site.

Mr. Kann,

I’ve profited a great deal from your scholarship on the commingling of the extra-legal, illegal, and the legal in the modern state. You know that the devil lives in the details. And I admire your work especially for its detailed analysis of the modus operandi of Mexican drug cartels. You’re practicing what the field anthropologist Carolyn Nordstrom preaches in her watershed work, GLOBAL OUTLAWS, but you practice it with a much finer-grained, more thickly detailed descriptive model.

Flattery aside, I wonder if you are giving cartel leadership too much credit for being “rational actors”? Aren’t cartel leaders able to operate their “businesses” so efficiently right now precisely because, over the past three decades, they’ve built up massive brutality credit in a kind of violence bank? They are trading today on their “reps,” the tacit and credible threat of violence. The recent beheadings of Mexican schoolchildren adds to this violence credit or credibility.

It would be a grave mistake to eliminate or downplay the role that violence plays in illegal business, especially among Mexican cartels. We risk getting trapped in our own cognitive delusion, the delusion of legitimacy, when we downplay the violence and “violence credit” upon which modern criminal business is based. The bottom line may be the goal. But we get into an Ends/means trap when we try to frame the risk choices of cartel leaders as "rational" and view them as another species of homo economics. Aside from the fact that many cartel midlevel managers are addicted to violence as a way of life and a mode of communication, even upper leadership do not set aside their "reps" when making risky choices that affect "Business." As cartel leaders, they embody their reps, which are based on the willingness to perpetrate brutality. Their "reps" are their "credit." And they know this.

Daniel Kahneman won a Nobel prize for analysing the psychology of risk behaviour and applying it to understand precisely the kinds of decision-making processes you analyse in Mexican drug-cartel leadership. He has spent a lifetime investigating this question: “How do humans actually make risky choices?”

We need to know the answer to that question before we assume that the “profit motive” is primarily what guides the risk choices and business behaviour of violence-prone criminal leaders. Kahneman has demonstrated time and again that human beings are NOT rational actors most of the time when making risk choices. We are intuitive actors. We make choices based on intuition, even when we are trying to follow a statistics-informed business model. How does a habit of violence infect intuitive risk choices?

Do extra-legal actors act any less or more intuitively than other business leaders? I follow your analysis of how cartel leaders seek to mimic and replicate legitimate business models. Of course we need to follow the money. But cartel leaders not only trade in standard currency. They trade upon violence credit, their credibility as doers of violent acts.

I question the premise that these leaders have transcended or abandoned or shy away from violence as a tool of trade. What I would like to know is the degree to which violence has become an integral part of a cartel leader’s intuitive decision-making process.

Even the tacit threat of violence radically influences any choice made under risk. Putin has mastered the art of coerced diplomacy by using the tacit threat of open war to cow NATO and the EU into acquiescence. His swift and successful invasion of the Crimea established his “violence credit.”

When faced with tough risk choices, cartel leaders revert to violence as a tool of trade. Even as you describe the abysmal situation along America’s Southern border, “violence” remains the quickest means to the greatest profit with the least effort—or at least the threat of violence.

We need to eliminate not only the actual material bank accounts but also the “violence accounts” (devalue the violence credits) of modern cartel leaders if we want to put them out of business.