Mexican cartels are diversifying business beyond drugs. Here's where they are profiting

MEXICO CITY — In a small town in Mexico’s western state of Michoacán, members of a criminal group forced residents to pay for high-cost internet service — or face death.

After these threats, residents made monthly extortion payments while simultaneously reporting the situation to authorities.

After months of investigations, officials raided three properties, finding evidence such as antennas, internet repeater equipment and connections, which were handed over to the prosecutor's office.

While it may sound surprising for Mexico's drug cartels to be involved in internet service, those who follow the criminal groups' activities aren't at all surprised.

"Drug cartels have diversified their operations since their inception," security analyst David Saucedo said. "Many of them started as criminal organizations whose main activity wasn’t drug trafficking."

Some gangs were involved in, for example, fuel theft, others were involved in vehicle theft and others specialized in robbing public transportation, Saucedo said.

“Criminal groups that joined drug trafficking already had these other activities beforehand.”

Besides the billions of dollars cartels make from the drug trafficking industry, the U.S. Drug Enforcement Administration says the most powerful drug cartels, Sinaloa and Jalisco New Generation (CJNG), are involved in many illegal ventures that result in profits.

“The Sinaloa Cartel is most closely identified with drug trafficking but is also engaged in extortion, the theft of petroleum and ores, weapons trafficking, migrant smuggling, and prostitution,” the 2024 National Drug Threat Assessment states.

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CJNG directs the theft of fuel from pipelines, extorts agave and avocado farmers, migrants and prison officials, and taxes migrant smugglers, the report said.

"The portfolio is extensive. However, while drug trafficking is the most profitable activity, it has a longer recovery time for the investment compared to other ... criminal activities, which yield almost immediate profit," Saucedo said.

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Posted by Secretaría de Seguridad Pública de Michoacán on Friday, December 29, 2023

From cartels calling older Americans to offer timeshares in Mexico, leading to the loss of nearly $40 million, to cartel-backed smugglers reaping growing profits in the trafficking of migrants across the U.S-Mexico border, their criminal range is extensive.

Here are some ways where the cartels have extended their reach:

Fuel theft

Fuel theft, known as huachicoleo in Mexico, is a highly profitable activity for organized crime groups. In the first nine months of 2022, Mexico's state-owned oil company, Pemex, lost $730 million from illegal pipeline taps.

Cartels in Mexico have developed a sophisticated approach to fuel theft, which involves corruption, precision and violence.

This includes tactics such as bribing Pemex employees and local officials for information, drilling precise illegal taps into pipelines, and using modified tanker trucks to transport stolen fuel for distribution in black market networks.

Several cartels are involved in this criminal activity. For instance, the Santa Rosa de Lima Cartel, led by Jose Antonio Yepez, also known as El Marro, established its dominance through fuel theft before entering into drug trafficking.

Additionally, CJNG and the Gulf Cartel are also linked to fuel theft, which supports their criminal activities.

Avocados

Mexico's multibillion-dollar avocado industry, which continues to break records for exports every year, has also been one of the main targets for drug cartels.

Avocados are known as “green gold” in Mexico, and the country has become the world’s largest producer of the popular fruit.

But as growers’ fortunes have risen, they have faced increasing threats from drug cartels seeking a share of the profits.

In Michoacán, the only state authorized to export the fruit to the U.S., CJNG and local gangs demand payments from farmers, often referred to as "protection fees."

These fees can range from $135 to $500 per hectare monthly, depending on the size of the farm and the level of perceived threat.

The extortion process begins with cartels identifying and targeting profitable farms. Armed cartel members then approach the farmers, issuing threats of violence or property damage if the farmers refuse to comply.

In February 2022, the U.S. suspended avocado imports from Mexico after a U.S. official received a death threat while working in Uruapan.

The imports resumed a week later following new safety measures applied by Mexico’s government in the region.

Two years later, locals say the situation hasn’t changed much, and avocado growers continue to deal with criminal organizations in the area.

Tortillas

The average Mexican consumes about 70 kilograms of tortillas annually, according to the Mexican Agriculture Ministry. It is a staple in Mexican cuisine, which is why cartels have decided to profit from it.

Extortion from cartels affects nearly 20,000 tortillerías, directly impacting the prices paid by Mexicans.

According to the National Tortilla Council, in an interview with The Washington Post, out of more than 130,000 tortillerías in the country, between 14 to 15% percent suffer from extortion.

Homero López García, the organization's president, told El Sol de México that establishments must pay between $135 and $190 weekly to multiple criminal groups to continue operating.

"Well, look, nothing surprises me anymore," Saucedo, the security analyst, said about cartels extorting tortillerías. "Perhaps it's a somewhat insensitive and cynical posture from me, but the truth is that I remain open to all possibilities in this regard."

Chicken

In a video posted on social media two days before Christmas 2023, an armed group was seen arriving at a poultry shop in Toluca, Mexico, kidnapping four workers and putting them into a white van.

The Mexico state prosecutor's office said the victims were retailers who were forced to buy chicken in some establishments. Likewise, they had to pay a fee of $2.50 per kilo in exchange for not getting killed by the Familia Michoacana cartel.

Authorities said as a result of their efforts to combat extortion, the criminal groups La Familia Michoacana and CJNG lost over $43 million from threatening poultry and egg vendors in municipalities of the Toluca Valley and the southern part of the state.

The state prosecutor's office said in 2023 alone, they received 4,010 complaints for this crime, of which they determined that only one in four was made in person, with the rest being indirect through phone calls, social media, and emails.

Three months later, the four workers kidnapped in December were found alive, and four perpetrators were detained, but those behind the abductions remain on the loose and the extortion of poultry vendors continues, officials said.

'Piso' fee

"They were asking me for $600 monthly for cobro de piso; we reported it, and we had to close for a month," Guillermo, a businessman in downtown Mexico City, told local media, recalling the extortion from the cartel.

The cobro de piso, which is the fee cartels charge business owners in exchange for "protection," has been the main problem for merchants in Mexico City.

"The first group of affected businesses are restaurants, followed by convenience stores in second place, and then jewelry stores in third place," said Jose de Jesus Rodriguez, president of Mexico City’s Chamber of Commerce.

In the past few years, extortions have been on the rise. Depending on the areas, some establishments would receive calls, emails, or in-person visits from armed men asking for the cartel's fee.

"They have tried several times, it's through calls," restaurant owner Israel Zavala told Mexican media. "The trust in the authorities isn't very high; complaints have been filed, but they don't proceed."

Analyst Saucedo said the problem with the metrics is that we have never had access to their accounting books.

“We will never have the total amount of the taxable fee because many do not report it to the authorities.”

In Mexico City, there are many criminal organizations involved in activities such as drug dealing, but also charging extortion fees to small business owners like tortilla shops, street vendors, and taxi drivers.

"Since Mexico City is a densely populated area, and we have a very large informal economy, many people are unfortunately susceptible to paying protection money. Consequently, it is a profitable activity for the local mafias," Saucedo said.

"Besides paying an official tax to come to work, you have to pay another one to them," Angel Campos, a vendor at a street market in Mexico City, said.

This article originally appeared on Louisville Courier Journal: Mexican cartels diversify business with fuel, tortillas and piso