The year 2020 has been terrible for people across the world, but it has been particularly bad for Latin America. The ongoing Covid-19 crisis caused further suffering in a region already plagued by political uncertainty, corruption, and violence. The pandemic, coupled with sudden slumps in oil prices, significant regional currencies, and imports from China and the United States, created a perfect storm which devastated both the general population and the private sector.
However, it is not just the legal businesses that are feeling the heat. The pandemic has hit the illegal drug trade, too. But rather than allowing their industry to collapse, the drug cartels will likely do what they do best: adapt.
In Mexico, the biggest drug hub in the Americas, we know that some of the most influential drug cartels are already experiencing problems in their supply chains. The Cartel Jalisco Nueva Generacion, for example, is struggling to maintain its routes in the Pacific Ocean. The Union Tepito, meanwhile, is having similar problems in the Gulf of Mexico. This is due to the reduction of air and naval traffic, which makes it easier for the authorities to track illegal cargo. On top of this, the Covid-19 lockdown measures implemented in the US are hindering the cartels’ ability to move drugs over the US-Mexico border.
The crisis is harming not only international drug smuggling but also other sectors of the narco economy. As state-imposed lockdowns force people to stay at home, the cartels will soon find themselves unable to stage kidnappings for ransom. Meanwhile, the fact that most businesses are shut will mean they will not be able to make much money from extortion. Furthermore, the declining oil and gas prices and the tanking economy will make petrol smuggling, another important income source for the cartels, significantly less profitable.
The question at this point is how drug cartels will react to this situation, and how will this affect the already sky-high levels of criminal violence in the region.
Big Mexican cartels, such as Jalisco Nueva Generacion, have the financial capacity to withstand this crisis, so they are unlikely to increase violence, at least in the short term. At the moment, they are even distributing humanitarian aid packages to struggling civilians in an effort to increase their political capital.
The situation, however, is different for smaller criminal groups, with fewer resources, who depend mostly on extortion for their survival. These gangs, which do not have the necessary capital to peacefully ride out the crisis, might shift to other activities, such as cattle theft or looting of small companies, and could become more violent as they try to make up for their lost income.
If the crisis endures over a long period, causing food shortages and healthcare crises, criminal gangs can also exploit the population’s collective frustration and fan the flames of unrest for their own benefit. As they occasionally did in the past, they can orchestrate mob assaults on large private companies in order to force these companies to seek their protection and pay for it.
There are also concerns that the cartels will shift their focus to the medical market, and start producing and smuggling medicines that are used in the treatment of Covid-19 in an effort to turn crisis into opportunity. However, once again, the cartels’ ability to tap into the medical market depends a lot on their individual power and size. Stronger cartels, with better laboratories and technical skills, will be able to infiltrate the medical market, but smaller ones will not be able to produce complex drugs and will instead try to survive by adopting more primitive and violent strategies.
Although it is impossible to foresee if the combination of a health crisis and an economic downturn will lead to an immediate increase in generalised violence, it is clear that if this situation continues, it will substantially shift the existing balance between the cartels, creating brand-new criminal geographies and business models.
Today, a significant portion of Mexican cartels’ revenue comes from the US methamphetamine market, which is estimated to have an annual retail value of approximately $5bn. In the last five years, Mexican cartels have increasingly upped the production of synthetic drugs and smuggling to the US to keep up with the increased demand across the border.
Mexican cartels import ephedrine and benzyl methyl ketone (BMK) – precursors of crystal meth – from China, transform it into methamphetamine on Mexican soil, and then ship the drug to the US. The coronavirus lockdown in China, however, has caused Chinese companies to operate at 50 percent capacity, severely affecting the cartels’ ability to import the chemicals they need to produce meth. This has led to an unprecedented increase in meth prices. As prices skyrocket, Mexican and US meth users will likely look for substitutes.
Crystal meth can be substituted with crack cocaine, which comes from Colombia. Due to this shift, the logistics of the drug supply chain in South America will play a fundamental role in sustaining Mexican cartels during the current crisis.
In South America, the global lockdown is unlikely to affect the consolidated drug routes between Peru, Bolivia, and Colombia. The borders of these countries are largely covered by jungle and are extremely porous. Drug couriers and laboratories should be able to continue with business as usual. In the short term, the cartels will easily preserve their routes and providers in South America, as these organisations are well-armed and well-equipped. However, in the long run, cash shortages might compromise the capacity of these cartels to maintain control over their territories and foot soldiers.
Drug smuggling in Venezuela is also unlikely to stop anytime soon. The country is a huge drug hub, annually shipping an estimated 250 metric tonnes of cocaine to North America, allegedly with the support of the Venezuelan government. The already struggling Venezuelan regime is currently crumbling due to increased pressure from the US, as well as the drop in oil prices caused by the coronavirus pandemic.
While these problems may lead to the fall of the Chavista government, they are unlikely to end drug smuggling through the country. In order to stop it, Venezuela needs to go through a deep state-building process, and re-establish mechanisms of control and accountability, something that is unlikely to happen in the short term.
As the drug supply chain in South America is unlikely to be disrupted by the Covid-19 lockdowns, in the face of the ongoing crisis, the future of the drug market in the Americas will depend on the capacity of the Mexican cartels to deliver the product across the northern border, and the demand of drugs in the US.
The next few months will be crucial for the entire illegal drug industry in Latin America. While small criminal groups are likely to increase their violent activities to survive, there is also a chance that established cartels will use the crisis as an opportunity to attack and annihilate smaller competitors, causing a further increase in violence.
Meanwhile, the increasing difficulty in obtaining chemicals from China may encourage Latin American cartels to create new synthetic drugs using replacement materials, which could result in new social and health risks for populations and the emergence of new smuggling routes and providers. Additionally, the likely decrease in the consumption of various illicit substances due to the coronavirus pandemic might push the cartels to infiltrate new sectors. Should this occur, governments and security forces would have a hard time preventing the cartels from taking over the medical market.
The drug cartels will not miss a chance to profit from this crisis. However, there is still time for regional governments to take action. The extensive use of intelligence services is necessary now to predict and prevent the emergence of new criminal enterprises in the future.