convergence

Deville
banking and banknote sales to U.S. institutions. 29 Cartel accountants supervise this process.
One common tactic used by illicit networks is to launder drug proceeds through a system
called the Black Market Peso Exchange (BMPE). In the BMPE, drug revenues are smuggled
back into Mexico to be exchanged for pesos at a discounted rate. The peso brokers then use
the dollars to buy products in the United States and ship them back to purchasers in Mexico.
For example, in November 2011, U.S. Federal agents arrested Vikram Datta of Laredo, Texas,
for laundering millions of dollars for the Sinaloa Cartel through his perfume business as part
of a BMPE. Datta sold millions of dollars worth of perfume to corrupt buyers in Mexico since
2009. 30 According to prosecutors, he told an undercover agent that his responsibility was “just
washing the whole money.” 31 Over a 2-year investigation, Datta and other coconspirators
deposited more than $25 million in American currency in dozens of bank accounts. 32
These supply chain steps and roles are fairly standardized; however, the methods used to
conduct the required activities change frequently. One example of their adaptability is their
increasing use of emerging communication technologies (for example, Voice Over Internet
Protocol, satellite technology, cell phones, and two-way radios) in the intelligence step of the
chain. 33 By utilizing new modes of communication, cell members can anticipate law enforcement
efforts and adjust their activities. In a 2010 interview, a U.S. official admitted that the
cartels “have very good intelligence on our operations. We are always one step behind.” 34 This
advantage is largely rooted in the networks’ reliance on the supply chain model to effectively
organize and preempt threats to their chains.
In the case of Mexican illicit networks, the collection and movement of bulk cash drug
proceeds function as a supply chain that operates in opposition to both the Mexican and
the U.S. governments. By adopting and adapting the structure of commercial supply chains
for their own illicit activities, illicit networks have been able to position their operations in
opposition to the state.
Damage to the State
Mexican illicit networks have largely replaced their Colombian counterparts as the primary
drug-trafficking organizations in Latin America. As a result, Mexican cartels have enjoyed a
significant increase in their profit share. To continue increasing profits, these networks have
devoted greater and greater resources to protecting their market share and supply chain. For the
supply chain to function effectively, each process step or role must be protected by the network.
In the case of Mexico, enforcement typically takes the form of violence and/or corruption—
both of which severely undermine governance and the stability of the state.
Over the past 5 years, there has been a significant escalation in drug-related violence
in Mexico. In 2010 alone, there were 11,583 drug-related murders (compared to 6,587 in
2009). 35 In the past 4 years, officials estimate that almost 40,000 have been killed in connection
to drug-trafficking operations. 36 This escalation may be strongly linked to the government’s
efforts to curb illicit network activities. 37 As market-driven enterprises, Mexican illicit networks
have a strong incentive to protect their profits. Violence is an effective means to that
end. The majority of drug-related murders stem from conflicts over control of smuggling
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