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Mexico's cartels are rational actors
- Gordon Housworth [ 11/17/2011 - 18:34 ] #
Though gaining notoriety for their brutality, Mexico's organized criminal groups are rational actors who respond to market dynamics. If not forced into a showdown or a loss of face, their behavior can be influenced.
The prevailing narrative in the Mexican press is one of irrationality, of monsters on the loose, but reality is the exact opposite. Yes, their methods are harsh and designed to compel compliance, but their intense violence and cruelty is driven by objectives that can, with expert guidance, be used to positively influence the threat they pose.
These groups are competing to prosper in a fragmenting and hypercompetitive market that has seen its primary market (drugs) face competitive pressure and so force entry into new markets (corporate and personal extortion, kidnapping, robbery and oil theft).
The leadership of these rational actors are actively trying to reduce both their own risk and their ‘costs of doing business' while maximizing profit. Properly guided, potential targets (companies and personnel) can take advantage of this ongoing feature of criminal planning and activity.
Mexican criminals mimic African warlords
Analysis of African "Blood Diamond" warlord behavior is directly applicable to the 'commercial responses' of Mexican criminal enterprises, i.e., similar operating drivers, methods, ferocity and absence of restraint. Both cartels and warlords are attempting to extract wealth from areas under their control while repelling competitors. In Africa it is minerals extraction. In Mexico it was transit rights to service the US drug market but has now diversified into wholesale extortion and other crimes. Writing in 2008:
Individuals are goal-oriented and adaptive, and will attempt to reach their goals by what they see as the easiest and least costly or most efficient means. (Rationality does not have to be a universally agreed-upon mindset.)...
"Blood diamonds" [is] a special case [of] resource-based means of civil war. To the degree that any primary extraction process can be sequestered by a powerful minority, the opportunity for conflict, extortion, and interruption rises. Coupling this concept with the fact that most wars today occur within nations rather than between them, the risk analysis of investing firms should be reevaluated...
Collier and Hoeffler found that conflicts occur when rebels respond rationally to market opportunities, much as entrepreneurs and investors do. Civil wars that are so often blamed on chaotic, irrational ethnic, religious and communal feuds now have a unifying thread:
"Rebels need to meet a payroll without actually producing anything, so they need to prey on an economic activity that won't collapse under the weight of the predation... Natural resources is a good one. The same characteristics that make a commodity readily taxable -- that it's rooted to a spot, it can't move -- makes it readily lootable, too."...
Negotiation short of warfare between opponents in both regions is extremely difficult as there is no defined 'court system' to adjudicate grievances and no external entity to enforce compliance to agreements. The result is that the conflict groups take the least risky path of immediately attempting to eliminate their opponents in a winner-take-all effort. Again from 2008:
While most interstate wars end in a negotiated settlement, the majority of intrastate conflicts end with the extermination, expulsion, or complete surrender of one side. Civil wars with a communitarian or ethnic dimension are especially difficult to negotiate and the most likely to result in protracted strife, and closely mapping to the African experience, often go on for years and sometimes decades. Szayna and Tellis note that the reason is straightforward:
"To end intrastate strife the warring sides must lay down arms and respect an agreement usually in the absence of a legitimate government and under conditions in which the agreement is generally unenforceable. In conditions of communitarian strife [it is] especially difficult for the two sides to go on coexisting in the same state. Put differently, there are only two main pathways for the regulation of ethnic conflict:
1. Eliminating the differences (genocide, forced transfer of population, partition/secession, and integration/assimilation);
2. Managing the differences (hegemonic control, arbitration by third party, federalization, and power-sharing)."
Because the trust that would allow for management of differences is absent once conflict starts, it is understandable that elimination of the differences becomes the preferred choice and that many ethnic and communitarian conflicts end up in prolonged and bloody strife, sometimes mixed in with attempts at genocide and complete elimination of the other side:
"Because of the unenforcibility of an internal agreement to end intrastate conflict, third-party intervention is usually required to guarantee the agreement and, even then, the intervening forces easily may become caught up in the continuing struggle between the belligerents. But without an intervention, the simmering intrastate strife may well spawn an international crisis, either in the form of a humanitarian disaster or because a neighboring state becomes drawn into the internal strife and, as a result, creates a regional conflict and the potential for an interstate war."
Criminal actions that appear irrational to the public have very sound operational and profit-driven motives.
Mexico’s three converging threat trends
Three trends are converging to broaden exposure of personnel and commercial assets to criminal predation:
1) Territorial incursions and
expulsions among cartels: Increasingly splintered criminal
groups violently attempting territorial incursions and expulsions of their
competitors. Such attempts are typically extremely violent.
2) Revenue expansion beyond drugs: Established expansion of cartel focus to personal and corporate extortion, and commercial penetrations and takeovers.
3) Lessened reticence to target foreign nationals and firms: Increasing effectiveness of formerly covert US-Mexican military cooperation is lessening cartel sensitivity to antagonizing the US.
Territorial struggles and splintering of violent groups:
President Calderon's effort to dismember the largest cartels by focusing upon their leadership ranks has backfired. Deprived of senior leadership, second tier members have broken away and formed their own criminal groups.
These increasingly splintered criminal groups are violently contesting both their former groups and other new groups, each attempting to penetrate competitors' territory and expel the former owners. In some cases this has resulted in many entities fighting over smaller territories with increasing violence. The recent arson attack against the Casino Royale in Monterrey is being cited as one such extortion effort, but in early stages it is difficult to distinguish extortion from expulsion.
Revenue expansion beyond drugs:
The post 11 September tightening of US borders increased cartel costs of moving narcotics to market. While significant quantities are continue to get through, as evidenced by no increase in US street prices, greater volumes have to be sent north to maintain that flow. Cartels soon discovered their own citizens as consumers and commenced a now vibrant narcotics addiction inside Mexico. A cheaper street price, yes, but lower costs with much less risk.
The next significant leap was institutionalized extortion of businesses large and small as well as individuals. Largely unpublicized until now, this 'tax' upon Mexican commerce has reached epidemic proportions up and down Mexican supply chains. Thousands upon thousands of businesses have closed while the better financed have relocated the businesses as well as their owners to the US. Cartel responses to this last step have been to scour social media sites to look for relatives still in Mexico that can be kidnapped for ransom against the fleeing owners.
Criminal enterprises have long penetrated the petroleum sector and have now moved into penetrating commercial firms and their suppliers to the point of taking over entire supply chains or taking revenue from large portions of the chain.
These more recent revenue streams have exhaustively targeted Mexican nationals but as the Mexican target set declines due to predation, closure and emigration, criminal groups will turn to foreign assets and those entities that have immobile fixed investments in country.
Lessened reticence to target US and foreign nationals and firms:
We have frequently commented on US drone overflights of Mexican soil, including the March 16 observation, "Drones in various formats have been over Mexico for some time. What is new is the open admission coupled with deep penetration, multi-sensor efforts. Vetted sharing is also up," it is clear that such missions are accelerating along a wide spectrum of communications, photographic, radar and signature intelligence collection.
This increasingly rich intelligence stream is being put to operational use by vetted, isolated silos of Mexican assets operating with US intelligence, even launching from US soil. A US military officer said, "The military is trying to take what it did in Afghanistan and do the same in Mexico."
The upshot of this cooperation will inevitably be increasing direct criminal activity against foreign firms, including US nationals and firms, which criminal groups have heretofore largely sought to avoid lest they draw US retaliation. Once formerly 'retaliatory' actions become common, these criminal groups will have less to lose in reacting to US efforts and confronting foreign commercial assets.
Preemptive recommendations for their commercial targets:
The security situation in Mexico, and notably Monterrey, is deteriorating at an accelerating pace as threats worsen country-wide. Risks long keenly felt by Mexican nationals are becoming evident to foreign nationals and firms.
Criminal behavior must be influenced early, during target selection. This cannot be accomplished without a systematic approach to protecting potential targets. Cost and risk rise dramatically once your personnel and assets have been selected as targets. The worst days of Colombia saw security costs reaching as high as fifty percent of operating revenue.
Commercial firms do not understand their three options and if, how and when to employ them:
· Deflect (move hostile intent to another target)
· Defer (delay hostile efforts)
· Defend (interdict an incipient hostile attack)
The successful approach to defend, defer, or deflect an attacker is almost all proactive process with a modest amount of strategically placed hardware that has a specific value to the process - one variant of which is to prevent, deter, prepare, detect, respond, recover, and mitigate.
Remember that these rational criminal actors are actively trying to reduce both their own risk and their ‘costs of doing business’ while maximizing profit. As Defend is rarely a response option against such heavily armed opponents, commercial firms gravitate to Deflect and Defer.
Properly guided, potential targets (enterprises and personnel) can take advantage of this ongoing feature of criminal planning and activity to make their protection more effective and the targets they present less attractive than other potential targets under surveillance by these criminal groups.
Surveillance for target identification and selection, for example, has become more costly to criminal groups as their competitors ambush one another’s surveillance team or track them back to their operating bases. Targets seen as predictable and less risky quickly rise up the targeting queue.
Systematic improvements in protective options need to be undertaken before it is too late to take advantage of effective and relatively inexpensive options.
To avoid this fate, firms need to move quickly and deploy a systematic program. A well designed plan could be decisive in helping the company steer clear of the considerable losses, pain and reputation damage that await its peers in Mexico.
InfoT Public Infrastructure Defense Public Risk Containment and Pricing Public Strategic Risk Public Terrorism Public
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