Mexico's cartels are rational actors
- Gordon Housworth [ 11/17/2011 - 18:34 ] #
An abbreviated version appeared as Mexican
Gangs: Not Monsters, but Rational Actors at InSight Crime on 2 September, 2011.
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.
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
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...
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
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
the differences (genocide, forced transfer of population, partition/secession,
the differences (hegemonic control, arbitration by third party, federalization,
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.
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
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.
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
Commercial firms do not understand their three
options and if, how and when to employ them:
Deflect (move hostile intent to
Defer (delay hostile efforts)
Defend (interdict an incipient
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
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.
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