Drug Cartels Take Over Mexican Black Market

When drug trade started to take a dip in 2008, the Mexican cartels continued to expand their operation to other lucrative markets. Now they have taken complete control of counterfeiting goods in Mexico, according to Immigration and Customs Enforcement.

“It was never something the cartels wanted to get involved (in),” said Oscar Hagelsieb, an assistant special agent in charge of Homeland Security Investigations in El Paso, Texas. “They saw the money they were making -- illicit funds.."

The Department of Homeland Security (DHS) has intelligence on all drug cartel organizations participating in the black market; however they have seen the most activity among the Los Zetas and Sinaloa Cartel, according to Hagelsieb.

He said when one buys counterfeit items linked to drug cartels; it is directly supporting them and their efforts in the war on drugs.

Consumers see an item that is cheaper than it initially would be and they think they are getting a great deal.

— Margo Monreal, communications director for the Better Business Bureau in El Paso

Any knockoff items sold in El Paso are going back to fuel the needs of the cartel across the border in Ciudad Juárez, Hagelsieb added.

Items such as purses and bags are typically manufactured overseas and shipped to Mexico, then distributed throughout the country or smuggled across the border into the U.S. Smaller items such as DVDs and CDs are made right in Mexico, Hagelsieb added.

In fact, the Los Zeta cartels mark the discs with the letter “Z” to show it is their product.

In April, ICE Homeland Security Investigation agents seized close to $900,000 in items from vendors in an El Paso flea market, including knock-off purses, hats, and sports jerseys.

The black market costs U.S. businesses over $250 billion a year in lost sales, according to Hagelsieb.

Margo Monreal, communications director for the Better Business Bureau in El Paso, said most buyers don’t realize the economic damage of buying items off of the black market.

“Consumers see an item that is cheaper than it initially would be and they think they are getting a great deal.”

Yet Monreal said it slows down innovation.

“It really discourages an owner and somebody who's trying to put out something that’s fresh.”

Monreal also mentioned the loss in tax revenue for the government, since counterfeited items are not taxed.

Last December, ICE Homeland Security Investigations uncovered $76 million in a six-week operation, which uncovered knock-off sports jerseys, handbags, sunglasses, and cell phones. Much of the goods in “Operation Holiday Hoax” were sold in Mexico, South Korea, and the United States. 33 arrests were made in the operation for people participating in the distribution and selling the goods.

In El Paso, knock-off sales discourage retail store owners, including running store owner Chris Rowley.

“Businesses are hurt from it because we’re the ones working with the manufacturers and we’re trying to sell their goods. We’re knowledgeable about their products and obviously we’re not getting the sale from that.”

He added that it is a major loss for retailers’ when a customer comes in to get sized and then leave to go buy the knockoff item some place else, including a vendor selling counterfeit items.

“We’ve taken the time to work with somebody. (We) show them what shoe they need or show them what apparel they need, and then they walk out here because they think they can go down the street for a better value.”

However Rowley said in the end, the buyers end up suffering like the business owners.

“The customer gets hurt too, because they actually get an inferior product, they’re not getting what they think they are buying.”