Mexican Drug Cartels Face Economic Battle as U.S. Marijuana Growers Cut Into Their Profits


October 7, 2009 – ARCATA, Calif. — Stiff competition from thousands of mom-and-pop marijuana farmers in the United States threatens the bottom line for powerful Mexican drug organizations in a Picture 36way that decades of arrests and seizures have not, according to law enforcement officials and pot growers in the United States and Mexico.

Illicit pot production in the United States has been increasing steadily for decades. But recent changes in state laws that allow the use and cultivation of marijuana for medical purposes are giving U.S. growers a competitive advantage, challenging the traditional dominance of the Mexican traffickers, who once made brands such as Acapulco Gold the standard for quality.

Almost all of the marijuana consumed in the multibillion-dollar U.S. market once came from Mexico or Colombia. Now as much as half is produced domestically, often by small-scale operators who painstakingly tend greenhouses and indoor gardens to produce the more potent, and expensive, product that consumers now demand, according to authorities and marijuana dealers on both sides of the border.

The shifting economics of the marijuana trade have broad implications for Mexico’s war against the drug cartels, suggesting that market forces, as much as law enforcement, can extract a heavy price from criminal organizations that have used the spectacular profits generated by pot sales to fuel the violence and corruption that plague the Mexican state.

While the trafficking of cocaine, heroin and methamphetamine is the main focus of U.S. law enforcement, it is marijuana that has long provided most of the revenue for Mexican drug cartels. More than 60 percent of the cartels’ revenue — $8.6 billion out of $13.8 billion in 2006 — came from U.S. marijuana sales, according to the White House Office of National Drug Control Policy.

Now, to stay competitive, Mexican traffickers are changing their business model to improve their product and streamline delivery. Well-organized Mexican cartels have also moved to increasingly cultivate marijuana on public lands in the United States, according to the National Drug Intelligence Center and local authorities. This strategy gives the Mexicans direct access to U.S. markets, avoids the risk of seizure at the border and reduces transportation costs.

Unlike cocaine, which the traffickers must buy and transport from South America, driving up costs, marijuana has been especially lucrative for the cartels because they control the business all the way from clandestine fields in the Mexican mountains to the wholesale dealers in U.S. cities such as Washington.

“It’s pure profit,” said Jorge Chabat, an expert on the drug trade at the Center for Research and Teaching in Economics in Mexico City.

The exact dimensions of the U.S. marijuana market are unknown. The 2007 National Survey on Drug Use and Health estimated that 14.4 million Americans age 12 and over had used marijuana in the past month. More than 10 percent of the U.S. population reported smoking pot once in the past year.

Mexico produced 35 million pounds of marijuana last year, according to government estimates. On a hidden hilltop field in Mexico’s Sinaloa state, reachable by donkey, a pound of pot might earn a farmer $25. The wholesale price for the same pound in Phoenix is $550, and so the Mexican cartels could be selling $20 billion worth of marijuana in the U.S. market each year.

“Marijuana created the drug trafficking organizations you see today. The founding families of the cartels got their start with pot. And marijuana remains a highly profitable business they will fight to protect,” said Luis Astorga, a leading authority on the drug cartels at the National Autonomous University of Mexico, who grew up in Sinaloa in 1960s and recalls seeing major growers at social functions in the state capital, Culiacan.

Led by California, 13 U.S. states now permit some use of marijuana; Maryland is considering such a law. In many cities, marijuana is one of the lowest priorities for police. Source.


8 responses to “Mexican Drug Cartels Face Economic Battle as U.S. Marijuana Growers Cut Into Their Profits”

  1. This PROVES our Argument, Legalization could hurt their business if it were complete Legalization not just Medical.
    In California if you purchase Medical Quality MJ you get charged anywhere from $250.00 up to $500.00 an ounce or More(My Sister and Nephew live there)but Mexican still sells for $100.00 up to $200.00 an ounce on the streets, So it appears that if it were legal for “Medical Only” it has the potential to end up being so costly to those that need it most that it would drive them to the Black Market anyway so I am afraid it will not really hurt the drug cartels business very bad but it will hurt it some.
    If they are going to Tax it,Make the tax Reasonable along with the Price and Quality. Only then will we be successful.

  2. “..in a way that decades of arrests and seizures have not”.

    We have been telling our legislators this for years!

    The prohibition costs taxpayers $40 BILLION a year and is responsible for more than 6,000 brutal cartel murders every year. And it does NOTHING to end the production, trafficking or consumption of marijuana!!

    The ONLY way to end the cartel murders is by legalizing the production and sale of marijuana, thus allowing us to undercut the cartel prices and eliminate their marijuana incomes. According to the ONDCP two-thirds of the cartel’s incomes are derived solely from selling marijuana in the U.S.

    Legalize, Save Lives!

  3. Simple. You want to hamstring the Mexican cartels overnight, and provide AMERICAN farmers with a real cash crop?

    LEGALIZE CANNABIS!

    After a 40 year ‘War on Drugs’ NO ONE can say it has had ANY affect, can they? If they think it’s done ANYTHING, they either work for it, or are so prohibition-minded they can’t see the forest for the trees.

    NO, drugs aren’t good for you, but prohibition is WORSE.

    26 MILLION Americans used cannabis last year. With only 3 million prison beds, where does the DEA and ONDCP propose we put them all, if we managed to ‘win’ the ‘War on Drugs?’ WHERE?

    Bottom line is the WoD is UNWINNABLE. We CANNOT win the WoD.

    So instead of trying our darndest to flush 26 million Americans lives away, perhaps we ought to recognize the futility of this ‘War’ and think about reaping some tax money from an industry we CAN NOT make go away?

    Pragmatism works best, when your idealism fails.

    Stop oppressing nearly 10% of the American populace. STOP making the Mexican Cartels richer through the ignorance and futility of the DEA and ONDCP. They’ve failed, but they will NEVER admit it!

  4. Ditto!!!
    Like I keep saying, “It’s about the money, not the morality.”
    I would be surprised if the drug cartels did not donate to congressmen that are against legalization. Follow the Money!!!

  5. You’re right bobo. Safe, attractive, LEGAL establishments selling premium marijuana guaranteed free of glass, lead, hairspray etc – who wouldn’t ditch their dealer for that?

    No customers equals no dealers equals two-thirds of the cartels incomes ELIMINATED. That’s the ONLY thing that’ll end the cartel murders.

    Legalize – save lives.

  6. People, the government KNOWs that cannibis is harmless. Come on! This is the same government with experts who build nukes, F15 & F122 jet fighters via the MIC (Military Industrial Complex), sends the space shuttle on amazing missions into space, etc. It was NEVER about YOU, it’s about THEM controlling you and preferring you to choose ALCOHOL & NICOTINE…all crap.
    The government wants to CONTROL you. Got it? And um don’t forget all the vested interests in keeping cannabis illegal: crooked lawyers (er liars), PIC (Prison Industrial Complex), hypocritical religious organizations with pedophilic and/or sex craved leaders (Catholic church anyone?), the booze & tobacco industry, et al.
    Repeat after me: It’s NOT about YOU…it’s about THEM staying on top.
    The battle to CONTROL your minds is the last frontier in society. For the record, it’s amazing how many people flock to church here in East Africa despite all the corruption, tribalism, bad governance and mass ignorance — well, in Kenya for sure. Chalk one up for religion over HERE. I see more churches than hospitals, schools and libraries when I go out on a daily basis. Religion, just like the drug cartels, is BIG BUSINESS. 🙂

    Cheers!

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