Cocaine Incorporated
By PATRICK RADDEN KEEFE. Published: June 15, 2012
One afternoon last August, at a hospital on the outskirts of Los Angeles, a former beauty queen named Emma Coronel gave birth to a pair of heiresses. The twins, who were delivered at 3:50 and 3:51, respectively, stand to inherit some share of a fortune that Forbes estimates is worth a billion dollars. Coronel’s husband, who was not present for the birth, is a legendary tycoon who overcame a penurious rural childhood to establish a wildly successful multinational business. If Coronel elected to leave the entry for “Father” on the birth certificates blank, it was not because of any dispute over patrimony. More likely, she was just skittish about the fact that her husband, Joaquín Guzmán, is the C.E.O. of Mexico’s Sinaloa cartel, a man the Treasury Department recently described as the world’s most powerful drug trafficker. Guzmán’s organization is responsible for as much as half of the illegal narcotics imported into the United States from Mexico each year; he may well be the most-wanted criminal in this post-Bin Laden world. But his bride is a U.S. citizen with no charges against her. So authorities could only watch as she bundled up her daughters and slipped back across the border to introduce them to their dad.
Known as El Chapo for his short, stocky frame, Guzmán is 55, which in narco-years is about 150. He is a quasi-mythical figure in Mexico, the subject of countless ballads, who has outlived enemies and accomplices alike, defying the implicit bargain of a life in the drug trade: that careers are glittering but brief and always terminate in prison or the grave. When Pablo Escobar was Chapo’s age, he had been dead for more than a decade. In fact, according to the Drug Enforcement Administration, Chapo sells more drugs today than Escobar did at the height of his career. To some extent, this success is easily explained: as Hillary Clinton acknowledged several years ago, America’s “insatiable demand for illegal drugs” is what drives the clandestine industry. It’s no accident that the world’s biggest supplier of narcotics and the world’s biggest consumer of narcotics just happen to be neighbors. “Poor Mexico,” its former president Porfirio Díaz is said to have remarked. “So far from God and so close to the United States.”
The Sinaloa cartel can buy a kilo of cocaine in the highlands of Colombia or Peru for around $2,000, then watch it accrue value as it makes its way to market. In Mexico, that kilo fetches more than $10,000. Jump the border to the United States, and it could sell wholesale for $30,000. Break it down into grams to distribute retail, and that same kilo sells for upward of $100,000 — more than its weight in gold. And that’s just cocaine. Alone among the Mexican cartels, Sinaloa is both diversified and vertically integrated, producing and exporting marijuana, heroin and methamphetamine as well.
Estimating the precise scale of Chapo’s empire is tricky, however. Statistics on underground economies are inherently speculative: cartels don’t make annual disclosures, and no auditor examines their books. Instead, we’re left with back-of-the-envelope extrapolations based on conjectural data, much of it supplied by government agencies that may have bureaucratic incentives to overplay the problem.
So in a spirit of empirical humility, we shouldn’t accept as gospel the estimate, from the Justice Department, that Colombian and Mexican cartels reap $18 billion to $39 billion from drug sales in the United States each year. (That range alone should give you pause.) Still, even if you take the lowest available numbers, Sinaloa emerges as a titanic player in the global black market. In the sober reckoning of the RAND Corporation, for instance, the gross revenue that all Mexican cartels derive from exporting drugs to the United States amounts to only $6.6 billion. By most estimates, though, Sinaloa has achieved a market share of at least 40 percent and perhaps as much as 60 percent, which means that Chapo Guzmán’s organization would appear to enjoy annual revenues of some $3 billion — comparable in terms of earnings to Netflix or, for that matter, to Facebook.
The drug war in Mexico has claimed more than 50,000 lives since 2006. But what tends to get lost amid coverage of this epic bloodletting is just how effective the drug business has become. A close study of the Sinaloa cartel, based on thousands of pages of trial records and dozens of interviews with convicted drug traffickers and current and former officials in Mexico and the United States, reveals an operation that is global (it is active in more than a dozen countries) yet also very nimble and, above all, staggeringly complex. Sinaloa didn’t merely survive the recession — it has thrived in recent years. And after prevailing in some recent mass-casualty clashes, it now controls more territory along the border than ever.
“Chapo always talks about the drug business, wherever he is,” one erstwhile confidant told a jury several years ago, describing a driven, even obsessive entrepreneur with a proclivity for micromanagement. From the remote mountain redoubt where he is believed to be hiding, surrounded at all times by a battery of gunmen, Chapo oversees a logistical network that is as sophisticated, in some ways, as that of Amazon or U.P.S. — doubly sophisticated, when you think about it, because traffickers must move both their product and their profits in secret, and constantly maneuver to avoid death or arrest. As a mirror image of a legal commodities business, the Sinaloa cartel brings to mind that old line about Ginger Rogers doing all the same moves as Fred Astaire, only backward and in heels. In its longevity, profitability and scope, it might be the most successful criminal enterprise in history.
The state of Sinaloa, from which the cartel derives its name, lies wedged between the Sierra Madre Occidental and Mexico’s west coast. Sun-blasted and remote, Sinaloa is the Sicily of Mexico, both cradle and refuge of violent men, and the ancestral land of many of the country’s most notorious traffickers. Chapo was born in a village called La Tuna, in the foothills of the Sierra, in 1957. His formal education ended in third grade, and as an adult, he has reportedly struggled to read and write, prevailing upon a ghostwriter, at one point, to compose letters to his mistress. Little is known about Chapo’s early years, but by the 1980s, he joined the Guadalajara cartel, which was run by a former policeman known as El Padrino — the Godfather.
For decades, Mexican smugglers had exported homegrown marijuana and heroin to the United States. But as the Colombian cocaine boom gathered momentum in the 1980s and U.S. law enforcement began patrolling the Caribbean, the Colombians went in search of an alternate route to the United States and discovered one in Mexico. Initially, Mexican traffickers, like a pudgy 25-year-old airplane pilot named Miguel Angel Martínez, acted as independent contractors who were paid a fee by the Colombians to move their cargo. In 1986, the Guadalajara cartel dispatched Martínez to the Colombian port of Barranquilla, in the hope that someone might commission him to fly drugs up to Mexico. But Martínez couldn’t find any takers and ended up languishing in Colombia for months, worrying that he had blown his big opportunity with the cartel. Eventually, he caught a commercial flight back to Mexico, and shortly thereafter, he was summoned to a meeting with Chapo, who was by then an underboss in the cartel. “You were very well behaved in Colombia,” Chapo told him, according to subsequent testimony. He seemed impressed by Martínez’s patience in waiting for an assignment.
Having passed this test, Martínez started working for Chapo as a kind of air traffic controller, negotiating directly with the Cali and Medellín cartels, then guiding their cocaine flights from South America to secret runways in barren stretches of Mexico. Martínez knew U.S. agents were monitoring his radio communications, so rather than say a word, he would whistle — a signal to the pilots that they were cleared for takeoff.
With the decline of the Caribbean route, the Colombians started paying Mexican smugglers not in cash but in cocaine. More than any other factor, it was this transition that realigned the power dynamics along the narcotics supply chain in the Americas, because it allowed the Mexicans to stop serving as logistical middlemen and invest in their own drugs instead. In 1986, Martínez couldn’t land a gig as a lowly courier in Barranquilla. Not five years later, he was marshaling hundreds of flights laden with cocaine for Chapo. “Sometimes we would get five planes a night,” he remembered. “Sometimes 16.” Now it was the Colombians who went hat in hand to Chapo, looking not to hire him to move their product but to sell it to him outright. They would tip Martínez $25,000 just to get an audience with the man,
The young pilot became a gatekeeper to the ascendant kingpin, fielding his phone calls and accompanying him on foreign trips. There’s a vaudevillian goofiness to nicknames in Mexico, and the stout Martínez was known in the cartel as El Gordo. He and Chapo — Fatty and Shorty — made quite a pair. “Japan, Hong Kong, India, all of Europe,” Martínez recalled in testimony. Chapo owned a fleet of Learjets, and together, they saw “the whole world.” They both used cocaine as well, a habit that Chapo would eventually give up. When a lawyer inquired, years later, whether he had been Chapo’s right-hand man, Martínez replied that he might have been, but that Guzmán had five left hands and five right hands. “He’s an octopus, Chapo Guzmán,” he said. For his efforts, Martínez was paid a million dollars a year, in a single annual installment: “In cash, in a suitcase, each December.” When Martínez’s son was born, Chapo asked to serve as godfather.
In 1989, Chapo’s mentor, El Padrino, was captured by Mexican authorities, and the remaining members of the Guadalajara cartel assembled in Acapulco to determine which smuggling route each capo would inherit. According to Ioan Grillo’s book, “El Narco,” the meeting was ostensibly a gathering of friends. But the shards of El Padrino’s organization would become the basis for the Tijuana, Juárez and Sinaloa cartels, and these onetime colleagues would soon become antagonists in a cycle of bloody turf wars that continues to this day.
“Drug cartel,” it turns out, is a whopper of a misnomer; neither the Mexicans nor the Colombians ever colluded to fix prices or supply. “I wish they were cartels,” Arturo Sarukhán, Mexico’s ambassador in Washington, told me. “If they were, they wouldn’t be fighting and driving up the violence.”
At first, Chapo’s organization controlled a single smuggling route, through western Mexico into Arizona. But by 1990, it was moving three tons of cocaine each month over the border, and from there, to Los Angeles. The Sinaloa has always distinguished itself by the eclectic means it uses to transport drugs. Working with Colombian suppliers, cartel operatives moved cocaine into Mexico in small private aircraft and in baggage smuggled on commercial flights and eventually on their own 747s, which they could load with as much as 13 tons of cocaine. They used container ships and fishing vessels and go-fast boats and submarines — crude semi-submersibles at first, then fully submersible subs, conceived by engineers and constructed under the canopy of the Amazon, then floated downriver in pieces and assembled at the coastline. These vessels can cost more than a million dollars, but to the smugglers, they are effectively disposable. In the event of an interception by the Coast Guard, someone onboard pulls a lever that floods the interior so that the evidence sinks; only the crew is left bobbing in the water, waiting to be picked up by the authorities.
Moving cocaine is a capital-intensive business, but the cartel subsidizes these investments with a ready source of easy income: marijuana. Cannabis is often described as the “cash crop” of Mexican cartels because it grows abundantly in the Sierras and requires no processing. But it’s bulkier than cocaine, and smellier, which makes it difficult to conceal. So marijuana tends to cross the border far from official ports of entry. The cartel makes sandbag bridges to ford the Colorado River and sends buggies loaded with weed bouncing over the Imperial Sand Dunes into California. Michael Braun, the former chief of operations for the D.E.A., told me a story about the construction of a high-tech fence along a stretch of border in Arizona. “They erect this fence,” he said, “only to go out there a few days later and discover that these guys have a catapult, and they’re flinging hundred-pound bales of marijuana over to the other side.” He paused and looked at me for a second. “A catapult,” he repeated. “We’ve got the best fence money can buy, and they counter us with a 2,500-year-old technology.”
Improvisation is a trafficker’s greatest asset, and in recent years, Sinaloa has devised an even more efficient solution to the perennial challenge of getting marijuana across the border. Grow it here. Several years ago, a hunter was trekking through the remote North Woods of Wisconsin when he stumbled upon a vast irrigated grow site, tended by a dozen Mexican farmers armed with AK-47’s. According to the D.E.A., it was a Sinaloa pot farm, established on U.S. National Forest land to supply the market in Chicago.
Heroin is easier to smuggle but difficult to produce, and as detailed in court documents, Chapo is particularly proud of his organization’s work with the drug. He personally negotiates shipments to the United States and stands by its quality, which is normally 94 percent pure. “The value-to-weight ratio of heroin is better than any other drug,” says Alejandro Hope, who until recently was a senior officer at Cisen, Mexico’s equivalent to the C.I.A.
But the future of the business may be methamphetamine. During the 1990s, when the market for meth exploded in the United States, new regulations made it more difficult to manufacture large quantities of the drug in this country. This presented an opportunity that the Sinaloa quickly exploited. According to Anabel Hernández, author of “Los Señores del Narco,” a book about the cartel, it was one of Chapo’s deputies, a trafficker named Ignacio (Nacho) Coronel, who first spotted the massive potential of methamphetamine. “Nacho was like Steve Jobs,” Hernández told me. “He saw the future.”
Here was a drug that was ragingly addictive and could be produced cheaply and smuggled with relative ease. When they first started manufacturing meth, the Sinaloa would provide free samples to their existing wholesale clients in the Midwest. “They’d send five hundred pounds of marijuana, and secreted in that would be two kilos of meth,” Jack Riley, the D.E.A.’s special agent in charge of the Chicago office, told me. “They’d give it away for free. They wanted the market.” As demand grew, the cartel constructed superlabs, capable of churning out industrial volumes of meth. Container ships from India and China unloaded precursor chemicals — largely ephedrine — in the Pacific ports Lázaro Cárdenas and Manzanillo. To grasp the scale of production, consider the volume of some recent precursor seizures at these ports: 22 tons in October 2009; 88 tons in May 2010; 252 tons last December. When Mexico banned the importation of ephedrine, the cartel adapted, tweaking its recipe to use unregulated precursors. Recently they have started outsourcing production to new labs in Guatemala.
