Mexican drug cartels struggle during coronavirus, hike prices as lab supplies from China dry up

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The onslaught of the coronavirus has not only sent the global economy tumbling — it has also hit the black market where it hurts, and Mexican cartels are no exception.

The outbreak of COVID-19 has sent the price of heroin, methamphetamines and fentanyl soaring, as the likes of the Sinaloa cartel – and its main rival, the Jalisco “New Generation” – struggle to obtain the necessary chemicals to make the synthetic drugs, which typically come from China and are now in minimal supply.

“The cartels have suffered from COVID-19 due to the inability to get the regular shipments of synthetic opioids and precursor chemicals for the massive production of meth from China,” Derek Maltz, a former special agent in charge of the Drug Enforcement Administration (DEA) Special Operations Division in New York, told Fox News.

“The cartels have continued their production at a slower rate, but the demand seems to be increasing during these times of uncertainty in America. The shutdown of cities in China and travel in and out of China have also negatively impacted the flow of chemicals and drugs to Mexico.”

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China, where the virus originated late last year, has, for the most part, halted production on the chemicals required for the making of the drugs as it battles the virus within its own borders and battles to make medical supplies for other crumbling countries.

(Orlando Sentinel via AP)

“Drug cartels and criminal support organizations in the industry global drug trafficking have been deeply affected by the pandemic of the COVID-19,” Johan Obdola, president of the Canada-based Global Organization for Intelligence (IOSI), concurred. “Especially when it comes to the operations of the Sinaloa Cartel, which control 90 percent of the entrance of synthetic drugs to the United States.”

Obdola underscored fentanyl, which originates from China, has become the most coveted cartel commodity in recent weeks.

“In China, according to the Drug Enforcement Agency (DEA), around 5,000 illegal drug laboratories have been processing synthetic drugs and chemicals to process them. Most of these drugs have Europe and North America as the main markets,” he continued. “Cartels bring synthetic drugs through food exports, fruits, automotive equipment, toys and other products that are allocated in an extensive distribution network across the United States. COVID-19 has generated a huge loss in regarding any illegal drugs, and specifically synthetic drugs, not only to Mexican cartels but to most drug cartels operating worldwide.”

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In his assessment, the losses over the last two months stand at around 80 percent of their standard revenue. And the pandemic has seemingly hindered the cartels not only when it comes to getting their fix from China.

“The supply shock precisely comes from the supply chain disruption. At this moment, for the cartels, it must be hard to import cocaine from Colombia,” noted Fernando Posadas, a Latin America analyst for Medley Global Advisors. “The demand shock comes from a contraction in the U.S. economy."

He continued: "Drug consumption will likely be one of the sectors hit the hardest, given that people are now prioritizing in more essential expenses such as rent and food. I would expect a contraction in drug demand of at least 10 to 15 percent this year. That could translate in an annual loss of at least $3 to 5 billion for the cartels.”

But other experts beg to differ.

The coronavirus crisis has also ignited steep concern that the lockdown and social distancing measures, coupled with a shuttering of support groups, social services, and medical resources, could lead to another spike in drug overdoses.

Over the past decade, overdoses have claimed the lives of almost half a million Americans, and data from the Center for Disease Control and Prevention (CDC) shows that some 69,000 died in 2019 alone.

In this March 12, 2014, Mexican federal police fly over the Balsas River near the Pacific port of Lazaro Cardenas, Mexico.

In this March 12, 2014, Mexican federal police fly over the Balsas River near the Pacific port of Lazaro Cardenas, Mexico. (The Associated Press)

According to Maltz, the cartels have raised the prices of their products – as much as 400 percent – and “will get through the tough times,” especially since their business is so profitable.

And Daniel Romero, an Argentina-based analyst and expert in narco-trafficking, observed that while he is yet to see any sweeping changes to the cartel business model, small dealers in the region are now relying more heavily on using drones with posts to transport cocaine.

“These drones with GPS go from one point to another in the way of posts, where they change batteries,” Romero explained. “And payments are performed on e-commerce platforms.”

However, the lockdown constraints have also crippled the cartel business model beyond just the drug trade. The usually frequent shipments from China, stuffed with counterfeit luxury goods, clothes, and household items sold in Mexico City by the Union de Tepito cartel, have all but disappeared, along with the cartel’s own ability to travel to the country to facilitate collections as a result of travel restrictions.

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According to Gabriel Ruiz, a California border-based deportation officer with the U.S. Immigration and Customs Enforcement (ICE), it is still too early to tell what the effect the coronavirus has on the cartel’s ability to move product into the United States.

“The ports of entries have stopped non-essential traffic and [illegals] attempting entry are pushed back south without formal processing. Migration, in general, has slowed,” he said. “Since DHS his aware DTOs [drug-trafficking organizations] may exploit the pandemic for their gain, CBP [Customs and Border Patrol] is able to focus more on detecting and stopping illicit activity.”

This photo provided by the U.S. Drug Enforcement Administration's Phoenix Division shows some of the 30,000 fentanyl pills the agency seized in one of its bigger busts, in Tempe, Ariz., in August, 2017.

This photo provided by the U.S. Drug Enforcement Administration's Phoenix Division shows some of the 30,000 fentanyl pills the agency seized in one of its bigger busts, in Tempe, Ariz., in August, 2017. (DEA via AP)

However, Ruiz also stressed that it is likely DTOs will “shift away from land crossings to ocean crossings.”

David Johnson, a former assistant secretary of state for International Narcotics and Law Enforcement Affairs, indicated that one should also expect an uptick in the use of mail and small package services for substance delivery.

"With the decline in legitimate border crossings and the near cessation of civil aviation, traditional means of exporting, the [cartels] need to find alternatives," he observed. "And with the stay-at-home orders, combined with fear of leaving, the volume of goods moving by mail, FedEx, and UPS has exploded. So it's the simple needle-in-a-stack rule, it will become much easier to hide product."

But with the rapidly rising coronavirus caseload across the United States and much of Central and Latin America, the cartel’s central dilemma and disruption to its model is unlikely to bounce back anytime soon. For some Mexican locals, that sentiment instills a different kind of fear.

“When their normal M.O. isn’t making them a lot of money, they switch to extortion and kidnapping, which is exactly what happened to a neighbor,” one young professional based in Guadalajara, who requested anonymity due to safety concerns, told Fox News this past weekend. “He was assaulted while they went to his house and bank.”

The source noted in recent days, those in the ex-pat or more “well-off” swaths of the city have been either getting out of the area or picking up bulletproof SUVs and other modes of self-protection.

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And many are bracing for the violence to worsen as the coronavirus continues to wreak havoc on the region.

“Under normal conditions, the cartels could shift to Indian suppliers to augment supply, but Indian ports are experiencing slowdowns and backlogs of containers as government directives limit port activity. This situation only looks like it will worsen in the coming month as India begins a three-week lockdown announced on March 25,” added Andrew Lewis, a former Defense Department staffer and the president of a private intelligence firm, the Ulysses Group. “But the cartels will adapt to the changes and develop new routes and methods to move product and people into the U.S. to compensate for the losses if this continues for an extended period.”