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Reconceptualizing the Illegal Narcotics Trade and Its Effect on the Colombian and the Mexican State

Revised January 17, 2003

Reconceptualizing the Illegal Narcotics Trade:

Its Effect on the Colombian and Mexican State

Patricia B. McRae, Ph.D.

Department of Political Science

Muhlenberg College

2400 Chew St.

Allentown, Pa. 1810

This paper was first presented at SECOLAS,

South East Conference on Latin American Studies,

Savannah, Ga. April 9-12, 1998.

Draft: Please do not cite without author's permission

Reconceptualizing the Illegal Narcotics Trade:

Its effect on the Colombian and Mexican State

Introduction

On a Frontline Special, Money, Murder & Mexico: The Rise and Fall of the Salinas Brothers, Dr. Peter Lupsha, Professor of Latin American Studies at the University of New Mexico echoed the thoughts of long time Mexico scholars and watchers when he said, "What's going on in Mexico is beyond fiction".(1) Mexico, long considered to have a "muddling through" style seemed to be teetering on the edge of chaos as the peso plunged in December of 1994.

Moreover revelations about corruption during the Salinas regime exceeded even the standard levels of corruption which usually accompany an ex-president. Daily newspaper reports linking members in top governmental administration posts raised questions of Mexico becoming a narco-democracy. How did this happen? Who and what was to blame? Would this ultimately pose a national security threat to the United States?

While this paper does not purport to have answers to all those questions, it does suggest that there are profound and permanent ways in which the illegal narcotics trade (INT) affects the economic and legal institutions of a country, in this particular instance Mexico. To this extent drug trafficking, its actors and stakeholders have an impact on state-civil society relationships. In this paper I argue that to more fully understand the impact of the INT on Mexican economic and legal institutions, the INT must be situated within Mexican culture and then treated as a transnational corporation (TNC). That is to say, the evolution of the INT as a TNC must be directly situated within a larger framework of state-civil society relationships. In an earlier work on the Colombian cocaine cartels and as part of a larger ongoing research project, I argue that the evolution of the INT, its explosive growth and effects upon producing and consuming countries (INT) could be best understood and explained through a model of firm or organizational evolution using network analysis.(2) I developed an organizational typology set within a historical chronology of the INT in Colombia and which traces three phases of INT evolution consistent with the literature on firm evolution from strategic management literature. It demonstrates that the INT, like other TNCs, develop competencies and adjusts is organizational structure to deal with multiple political environments within which it conducts business.

Obstructions to markets imposed by a variety of governmental regimes are less problematic as organizational structures adjust to deal with these market obstructions. As such the INT develops multiple points of access, creates alliances, and develops an articulate constituency which aids its development. How did the INT develop in Mexico? What role did general corruption play in its development? Having long been considered an "exception" by Latin American scholars because of its lack of civil and political violence, were there ways by which Mexico earned its reputation as "exceptional" that may have contributed to the growth of the INT? In what ways did external pressure from the U.S., Mexico's partner in many social and economic pressures, alter governmental policy? What was the ensuing dialectic relationship with, to use Gramscian parlance, differing power contenders who emerged as the INT became a transnational organization? The purpose of this paper is to develop an historical chronology using the methods and models developed in earlier work on Colombia. The hope is that there are some mid-level generalizations that can be drawn from this regarding state-civil society relationships and the role of illegal power brokers and challengers to the state.

Review of the Literature

Since the late 1980s there has been an explosion of literature on drug trafficking in the Americas. Few systematic studies, however, attempt to trace the evolution of the INT through its relationship to culture and the institutions of state or state-civil society relationships. At the beginning of this century the earliest studies focused on the criminal nature of the activity. By the 1960s the focus was on narcotics abuse as part of a larger public health issue. Presently much of the literature on narcotrafficking offers a strong policy focus on the enterprise as a criminal activity or as part of general corruption. In research tracing the evolution of narcotrafficking in Mexico, Peter Lupsha observes that it is not only difficult to pinpoint a specific date for the beginning of corruption in Mexico but also notes that pervasive and persistent corruption in Mexico has been so widespread that the "...government handbook on Mexico includes it under , The Rule of Political Competition.(3)

While useful in helping situate organized crime within a larger culture, it does not identify in specific ways, the evolution of the INT as a TNC nor its role as an agent of social change for the culture and institutions of State. Few studies in the early 1990s have attempted to deal with the INT as a multinational corporation (MNC) or, preferably, a TNC. Part of the reason for this is that early models of MNCs assumed a coherence and logic not readily apparent in enterprises such as the INT. Moreover there was not space within these models to deal with an illegal activity. Another important difficulty in conceptualizing the INT as an MNC is the very amorphousness of the INT concept which defies the precision required in analysis. To speak of the INT is to speak of a drug production chain which begins in the producer countries where narcotic plants are grown and ends in the consumer countries. There are many MNCs along the drug production chain and in earlier stages of my research, the most clearly defined TNC to emerge was the Colombian cocaine cartels. Though they are not cartels in an orthodox economic sense, they do exhibit certain characteristics consistent with cartel behavior in their attempts to set price and production levels. Peter Lupsha's definition of organized crime as a process that possesses certain identifiable characteristics was used to define the cocaine cartels.(4)

Growing evidence suggests that the emerging organizational structure among TNCs is that of the network organization, characterized as much by a set of relationships as by a formal structure. Indeed, many of the component parts are outside the legal TNC structure as suppliers and other firms with mutual interests. In his studies on American organized crime, Peter Lupsha identified network analysis as crucial to understanding the growing power of organized crime. Network analysis attempts to identify patterns of causation through an examination of a wide variety of social relationships and interactions such as group cohesion, social distance measures, clique patterns, proximity and proximity flows, network density and centrality, influence patterns, and affective and instrumental associational ties. He notes that trust is the most critical of variables in all interactions, whether that trust exists through blood-tie relations or patron-client relations and which may or may not contain a coercive element. This is not surprising when examining an illegal enterprise which is conspicuous for its lack of written contracts. Lupsha's study of corruption helps us incorporate in measurable ways the element of illegality that had been missing in more traditional models of TNCs.

Increasingly research findings suggest that structural forms adopted by various TNC are in response to the specific needs of their particular environments and entry barriers as well as a reflection of their history and specific competencies. Stopford and Wells [1972], for example, notes that the progressive change in structure of TNCs, although somewhat similar, was based on the specific growth and development of each organization. Just as there are limited number of ways in which a government may be structurally arranged, there are a finite number of ways in which firms may put together their component parts. Chandler [1962] first developed a framework to describe the progression from simple, single business structures to complex, multi-divisional structures in American businesses. This confirmed and expanded by others including Stopford [1968], Scott [1970], Channon [1971], Thanheiser [1972], Dyas [1971],Pavan [1972], and Rumelt [1973]. However, as Schollhammer [1971] points out, there are ultimately more similarities than difference among the population of TNCs.

How, where and when such structural changes occur is the concern of entrepreneurship scholars. [Dean, Meyer, and DeCastro, 1992] Dean, et al, argue that market dynamics create disequilibrium providing opportunities for entrepreneurs. Constraints on new firm development or incumbent firms taking advantage of new market opportunities is largely dependent upon the existence and height of entry barriers. Dean, Meyer, and DeCastro's model of demand determinants of business formation permits incorporating the expansion of drug demand [enlarging markets], modification of demand [preference shift in type of drugs by consumers], technological development [both product and process of INT was refined by changes in distribution networks] availability of new sources [alliance creation between Mexico and Colombia as well as local traffickers] and political dynamics [pressures of the War on Drugs]. The model also allows for the incorporation of culture and values located in earlier work by McRae and Ackerman.

Subsequent literature in the management discipline has further examined this issue and confirms the existence of a general progression of structural types often related to firm strategy. Concomitant with this structural progression is evidence that a congruency or coalignment of structure and strategy play a significant role in performance [e.g., Schollhammer, 1971; Thorelli 1977;Venkatraman 1989, 1990]. Bartlett and Ghoshal [1989] point out that the success or failure of structural arrangements frequently depends on administrative heritage, a collection of forces which include the history of the firm's development and the personalities of its leaders. These along with environmental forces shape a strategy which is suited for the needs of each specific firm. Such a form may emphasize centralized, decentralized or shared decision-making. In any event, the form adopted must ultimately be one which most closely matches the specific needs of the specific organization. Ultimately, however, they advocate that management mentality and strategic posture are of greater importance than structure to the TNC.

The search for the ideal structure, however, continues, with considerable interest currently given to the concept of the network organization. Raymond Vernon, whose work on multinational/transnational organizations spans over 30 years, now includes the concept of networks as a part of his definition of such organization [Vernon 1992:7].

Network Organizations

Recent studies suggest that the emerging organizational structure among TNCs is that of the network organization [Ghoshal and Bartlett 1990]. Bartlett and Ghoshal [1989] view three characteristics as critical to the understanding of the structural and strategic needs of the modern corporation operating in international/multinational environments. The first dimension, configuration of assets and capabilities measure the degree to which assets are centralized and related among the operating units. In the traditional conceptualization, these were seen as decentralized and nationally self-sufficient as a means of insuring responsiveness to local conditions and forces. As firms sought to globalize their operations and achieve global standardization and economies of scale, assets became centrally managed with a resultant loss of flexibility for local operations. The emerging pattern, however, appears to be toward dispersed assets which are interdependent and specialized.

A second dimension, that of the role of overseas operations has moved through a steady progression over time. Initially all that was required was adaptation to competencies of the parent corporation. However, the new role of operations located outside the home country has become one of contribution to integrated world-wide operations based upon the specialized knowledge of each operating unit. Thus, rather than simply carrying out the plans of the parent, the individual operation is expected to share its specialized competencies with all other components.

The third dimension is one of development and diffusion of knowledge. Historically, knowledge was developed at the parent corporation and transferred to the operating units located in various countries. As decentralized patterns emerged, knowledge was developed at each operating unit and retained there or in the case of firms seeking to seek global economies of scale, developed centrally and retained at the center. Such a pattern, however, lacks the ability to integrate the specific and often complementary competencies of each national unit. Thus, the emerging trend is toward jointly developed knowledge shared among the units. Taken as a whole, the pattern described by Bartlett and Ghoshal has come to be described as the heterarchy [e.g., Hedlund and Rolander 1990], a definition based in the control mechanisms employed or network organization [e.g., Ghoshal and Bartlett 1990; Sundaram and Black 1992], and located within the structural relationships of the components. While this is, in some respects, a departure from more traditional conceptualizations of organizational relationships with TNCs, it is also consistent with many including those based in resource allocation [Kogut 1983], administrative heritage [Bartlett 1986], and cognitive orientation [Perlmutter 1969]. Most importantly, such arrangements facilitate adaptation by operating units to the local environments in which they are embedded while retaining a common orientation with the other units of the TNC/network. Thus, rather than utilizing structure as an integrative mechanism, each operating unit proceeds with various strategies to adopt structures congruent with their specific environments, a significant factor in achieving superior returns [Ghoshal and Nohria 1993].

Rather than relying on hierarchical power, network organizations allocate power, in part, by the degree of point centrality [Ghoshal and Bartlett 1990]. That is to say, power within the network is partially dependent upon the number of linkages controlled by any one portion of the network. If the parent continues to control critical linkages, it will retain centrality. Such would be the case when coordination continues to be exercised primarily by the parent organization, or it is the decision-point for resource allocation (i.e., it controls investment decisions).

It is important to remember, however, that members of the network need not be "owned" by the parent, they need only be bound by contracts, mutual purpose or advantage to the network. This is in contrast to the more traditional mechanisms such as vertical integration. Early in our exploration of similarities of between the INT and TNCs, I attempted to conceptualize the Colombian cocaine cartels as vertically integrated corporations, but found that many of the necessary components of the production and transportation chain were not, in fact, owned by the cartels. By considering all parts of the system as parts of a network with a common purpose of maximizing the return on illegal narcotics, this factor becomes unimportant.

In the case of the INT networks, component parts are allied in a common mission, the production and distribution of illegal drugs. The network has expanded to encompass all phases of the operation, from cocoa leaf gathering or marijuana leaf processing or manufacturing of barbiturates and amphetamines to retail sales. Because of their involvement in critical phases of the operation, the Colombian cocaine cartels managed to maintain a high degree of centrality to the overall network and thus provided strategic direction. Specialized functions within the network, on the other hand, are performed by allied organizations which occupy comparatively weaker positions within the network and whose relationship with the coordinating center (the Colombian cocaine cartels) is often a function of their criticality to the overall operation. It is not yet clear that this is the case with Mexico.

In the following section I construct an historical typology for Phase One of the evolution of the INT in Mexico. It is bound in time between the years 1973-1982. I have chosen the early-mid 1970s as the starting point for Phase One in the evolution of the INT because until then illegal narcotics trafficking had been essentially a regional phenomenon, notwithstanding the constant cross-border flow of drugs [principally marijuana]. The early to mid-1970s also represent a point in time that a coyuntura or conjuncture of events came together changing the market dynamics of narcotic consumption and narcotic production heralding the transformation of the INT into a transnational phenomenon. The market for narcotics in general expanded, both regionally and internationally during this period. The paroquet scare that dried up marijuana for a time in Mexico enabled Colombian producers to expand their market share. The closing down of poppy fields in Turkey made Mexican heroin more attractive and enlarged its market share. Simultaneously there was a shift in preferences as narco-producers as cocaine increasingly became the consumers's drug of choice. Additionally the INT market changed in response to technological changes. The increased use of airplanes to distribute the drugs increased efficiency and improved security of delivery. For the Colombians at this time, organizational changes included bringing cocaine chemists/cooks into the organization depending less and less on small mom and pop type organizations for this skill. In Mexico we will see the development of irrigation technology as a major innovation in developing marijuana plantations and achieving economies of scale not possible at a smaller level. These activities represent both vertical and horizontal mergers in structural adaptation. The alliance formation between Mexican and Colombian traffickers as the political environment of the south Florida coast and Caribbean became increasingly risky under various drug enforcement campaigns represents new sources of market product and distribution. And lastly, despite pressures on the Mexican government by the US to stop drug trafficking, the political environment remained hospitable to the creation of newalliances and increased opportunities for profit.

Phase One of INT evolution is characterized by the end of turf wars between smaller traffickers. Loose coalitions are built accompanied by informal and occasional cooperation among various crime families on specific projects. Lupsha situates Phase One of narcotrafficking in Mexico at a much earlier stage, before 1960 to approximately 1965.(5) Lupsha is concerned, however, with examining patterns and history of drug trafficking related to corruption in Mexico. For the purposes of this paper I am concerned with the evolution of INT from a regional phenomenon to a transnational phenomenon. In this transformational process I attempt to identify which strategies the Mexican narcotraficantes and the Mexican government employ and their effect on state-civil society relationships. In what ways did the Mexican narcotraficantes adjust organizational structures to meet either the challenges of the Mexican government or to improve alliance formation with political elites. How did this either foster the leap to transnationalization and/or weaken Mexican political and economic institutions?

Before beginning our study, we must define the concept of the Mexican state. The Mexican political model cannot be full appreciated until one comes to grips with what Blum terms "..Mexico's extraordinarily dense institutional context".(6) Roderic Ai Camp identifies Mexico as a semiauthoritarian political system unique for its blend of liberalism and authoritarianism by which it permits greater access to the decision-making process and by which decision-makers change frequently than traditional authoritarian regimes.(7) A second feature of the Mexican political structure is corporatism, a mechanism by which groups relate to the state and by which the state relates to group interests and demands, the essence of which is reciprocity. Central to this feature for our purposes, however, is how the Mexican state has used this feature to strengthen various groups by absorbing them into the government-sponsored political party, the Institutional Revolutionary Party (Partido Revolucionario Institucional or the PRI). Comparative studies have shown that while this is an effective means of interest aggregation and articulation, it is also an effective means to coopt opposition movements. State dominance is a third structural feature of the Mexican political system. The prestige of state institutions over private institutions has served to attract some of the finest minds to careers in public service as well as concentrating resources in the Districto Federal or Federal District. The locus of power within the state vis a vis local and provincial governments has engendered dependency and resentment over allocation of resources. Moreover, the dominance of the PRI which has functioned, at least operatively, as the Mexican state does not mean the PRI has an institutional structure and/or presence in the more rural areas. In even the most dusty and isolated of small towns, one will find a military garrison. Here the Mexican military acts as an agent of the state, an important variable as we examine the impact of the INT on Mexican institutions. Presidentialism or prescidencialismo , or concentration of authority in the executive branch is a third feature of Mexico's political system. This locus of power usually comes at the cost of decreased power in the legislature and judicial branches but radiates outward at the horizontal level through the organization of the PRI. These structural features of the Mexican political model are complimented by the dual political heritage of modernity and traditionalism and two populations, rural and urban. The contradictory blend of political values such as supporting increased political participation while simultaneously supporting suppression of political dissent has produced contradictory policy goals.

Phase One: Who's on First? 1973-1982

Marijuana had been the drug of choice for the counter-culture movement dominating the middle-1960s to early 1970s in the United States.(8) During 1970 heroin use and addiction in the United States was considered to have reached epidemic proportions. Poppies, from which heroin is refined, were grown in Mexico but the quality of heroin produced in Southeast Asia was preferred to the "tar-like" Mexican Brown heroin. By 1972-1973 preferences in taste among drug users changed simultaneously as the Turkey Opium ban went into effect and the French Connection was broken. Gomeros [gum makers as poppy growers were called] had made a modest living for border addicts in the 1950s and 1960s dissolved into well established opium families in Mexico.(9) At this point aerial spraying was not available to the central Mexican government, so most eradication had to be done by hand using the military and the state police.

Prior to the early/mid 1970s illegal narcotics trafficking in Mexico was dominated by local chieftains or as Lupsha notes "the rhythm of the La Plaza"(10) or the time when a village was controlled by whomever dominated the trade. Unlike Colombia during this period when drugs were just another inventory item in a large underground smuggling enterprise that cris-crossed regions in Colombia and posed no threat to the Colombian state, the owners of the Mexican plaza, or those in charge of the day to day operations of the village, obtained their franchise from the local jefes meaning the police commandante, mayor military or local oligarch.(11) Those operating la plaza in Mexico do not appear to have been as thoroughly networked among their kinship groups as Colombia was during Phase One. Institutional settings for corruption may limit itself to a pervasive but poorly organized bribery.(12) Nadelman notes that the change from one type of corruption such as pervasive poorly organized to pervasive organized corruption can be understood in the shifting organizational structures.

Influencing the ability of the narcotraficante to maintain his franchise was the structure of the PRI, Mexico's single political party. The downward vertical reach of the PRI extended from the Districto Federale (DF) through state governors to local municipal governments. This suggests narcotrafficking was not the relatively ad hoc isolated regional event it was during a similar period in Colombia. The rapid expansion and demise of less well organized and connected traffickers during this time occurred in both states accompanied by increased intervention of the State in response to external international pressure. The shift from a plaza type organization to one dominated by fewer actors resulted in vertical and horizontal mergers, a movement from market competition to market protection, co-optation of some by raising the entry barriers for the smaller narco-entrepreneur rather than eliminating them.(13) In the following section I identify and examine three different organizational types which survived phase one of the INT evolution in Mexico.

Blood, Kin and Familial Entrepreneurs: The Herrera Nevares Family

Foremost among the opium families which emerged during this period was the Herrera Nevares family.(14) Located in the Sierra Madre Mountains the Herrera family had developed several laboratories and an extensive transportation system that stood them in good stead to become heroin suppliers to East Coast addicts when the French Connection ended. Thus they had an existing production infrastructure in place when the market expanded. The Herreras had a comparative organizational advantage over other traffickers: numbers and political power. Through intermarriage the Herrera clan grew to approximately 2,000 blood relations with an additional 3000 associative relations. Family members occupied positions up and down the entire drug production chain in a "farm to arm" organization stretching from their home base of Durango to Chicago. By 1978 conservative DEA estimates were that the Herreras were grossing $60 million per year.(15)

The Herreras were very involved community members, binding their community to them not only through marriage but by reinvesting their profits into legitimate businesses in the community. Hospitals and municipalities benefitted from the clan's philanthropy as differing members of the clan were rewarded with positions or at least badges of the Durango State Judicial Police. DEA reports that among all the Herreras almost every position in law enforcement have been occupied by a Herrera at one time or another.(16) Compared to shootouts elsewhere the Herreras were an ocean of calm.

The Herrera clan represents a fully integrated organizational system with a competitive advantage over other trafficking organizations. Bound by familial ties with a shared purpose strengthened by familial loyalty, the trust quotient among member of the family corporation was very high requiring less of a paper trail for authorities. It also required lower levels of sanctions and coercions with high levels of concentration of power in a single leader. The organization's primary goal was to take control of the market disequilibrium that occurred in the mid-1970s meeting the demand, change in preferences, technological innovation, and adaptation to a changing political and regulatory environment.

Plaza Overstretch: Pedro Aviles Pérez and Pablo Acosta

Pedro Aviles Pérez emerged from Sinaloa in the late 1960s as a major transporter of more "recreational drugs" like marijuana which he moved in ten-ton loads. Second generation Sinaloan traffickers such as Rafael Caro Quintero and Ernesto Fonseca-Carillo would claim they learned all they knew about narcotrafficking while serving in the Aviles organization. Killed in a shootout with the MFJP, it is believed Aviles was set up by Fonseca, the gang's treasurer. After Aviles Peréz' death the gang splintered. Rafael Caro Quintero, Aviles' foreman in Chihuahua began acquiring marijuana and poppy plantations. An introduction to powerful politicians and law enforcement officers in the state of Jalisco and its capital, Guadalajara was brokered by Miguel Angel Félix Gallardo, an emerging capo who had spent time in Sinaloa wearing the badge of a Sinaloan State Police trooper and serving as body guard to Leopold Sanchez Celis, governor of Sinaloa.

The dusty town of Ojinaga in northwestern Mexico had been a coordinating center for smuggling all kinds of contraband with heroin trafficking providing a fresh infusion of cash in the post-World War II period. Control of la plaza was punctuated by disagreements over girlfriends, what inventories to carry and customer loyalty. Like most border towns, Ojinaga housed an army garrison. La Plaza, in civil terms referred to police authority and jurisdiction. In criminal terms, it referred to whomever had the concession to run narcotics.(17) Pablo Acosta's return from the United States to his birthplace in 1976 occurred when la plaza was in a state of uncertainty due to feuding factions among the local narcotraficantes. Manuel Carrasco, owner of la plaza had abandoned it leaving local traffickers without guidance or knowledge of whom was to be paid tribute. The situation became increasingly tense as, despite a growing market demand, most traffickers moved only enough narcotics to keep some customers and pay their bills. Interestingly while most of the traffickers knew some "arrangement with the authorities" was necessary, no one was clear which authority and what that arrangement should be. During the succession of failed jefes in la plaza, Pablo Acosta carefully built his own drug organization, cultivating people he gradually identified as being important to him including the local authorities.

Acosta's chain of payments is instructive both for the involvement of Mexican officials but also for the changes occurring within Acosta's organization. Initially payments to the federal police were made through intermediaries who made sure the monies got to Mexico City. Later the DF created a federal police headquarters in Ojinaga and the commandante collected the tribute personally and passed the money up the chain. Payments to the Mexican military were through a former Ojinaga chief of police who served as the military's liaison between the military and the narcotraficante, Acosta. In return Acosta was able to purchase credentials from an array of government agencies as well as being provided advance notice of impending raids. Although recent revelations suggest an increasing involvement of the Mexican military, evidence available for this time period suggests a limited institutional corruption at the regional level.

By the end of Phase One Pablo Acosta's drug organization was growing at an incredible rate even as the continuing shoot-outs between warring factions continued drawing more attention from the local authorities and driving the cost of protection higher. Chief among the traffickers brokering deals with the Colombians was the Pablo Acosta operation in Ojinaga whose treasurer was Ernesto Fonseca-Carillo, uncle to the up and coming young trafficker, Amado Carillo-Fuentes, later to become a major narco-mafioso with the appellation, Lord of the Skies, for introducing the use of jumbo jets to distribute narcotics. Fonseca-Carillo is generally believed to have been the broker between the Colombians and Acosta, as well as the Felix-Gallardo organization on occasion. Fonseca, treasurer to the Acosta organization, also provided enforcement services to other lesser drug trafficking gangs. Fonseca sent his nephew, Amado, to the Ojinaga plaza to work with Acosta. It was here Carillo-Fuentes experienced in great detail the organizational problems of a group that grows too fast and takes too many risks. His arrest in 1985 proved pivotal to his decision to "invest with politicians" not merely bribe them.(18)

By 1983 Acosta and his organization was considered a major player in the INT.

Rise of an Outsider: Alberto Sicilia Falcon

Alberto Sicilia Falcon was the third major trafficker to emerge during this period and is notable for being the object of a central tactical unit formed by DEA agents especially to find and imprison him Falcon. Although Falcon was arrested and imprisoned in 1975, his reign is notable for both his willingness to form associations with established Mexican traffickers like the Herrera family as well as the Aviles organization. He was also among the first of the Mexican traffickers to make contacts in South America for shipping cocaine in large quantities. This organizational shift in his organization was carried on by members of his organization such as Cochi Loco who became the drug lord of Mazatlán and made a name for himself in the Guadalajara cartel. An up and coming chemist by the name of Juan Matta Ballesteros who had helped establish sources in South America became a leader, until his capture, in the international cocaine trade. After Sicilia Falcon was arrested, Ballesteros became partners with Miguel Angel Felix Gallardo, a Culiacán heroin trafficker who aspired to become a cocaine dealer. The Felix Gallardo family became major players in INT during the 1980s and 1990s as the heads of the cartels restructured and shared skilled employees, devised mechanisms to settle differences and, on occasion, sharing risks. The shake-out among traffickers during this period left those most fit and whose political connections ran deep, to continue and consolidate. Traffickers hardened during the boom years of the 1970s such as Ernesto Fonseca, Felix Gallardo, Caro Quintero and the second generation of the Herrera family had organized themselves and penetrated the institutions of their local area. Survival for those traffickers in the old time bandido holder of the plaza mode, such as Pedro Aviles and Pablo Acosta, survival became more difficult as the dialectic changes between the INT and the Mexican state continued.

Convergence

By 1982 Guadalajara had become the international home for the Mexican traffickers as they shuttled between their regional strongholds and the convenience of international communications and international banking offered by the capital city of the state of Jalisco. Turf battles became fewer and limited to newer entrants to the business as the traffickers realized it was to their greater interest to stop fighting each other, share resources, and develop a mutual means of conflict resolution within the group. Later described as the Mexican Federation, these initial attempts represent what Pier Luigi Sacco in his discussion of the organized crime families of Italy the initial phases of the establishment of an ethical code as a management tool.(19) Sacco notes that as one attempts to address an illegal activity as a business, a central problem becomes one of contract compliance and enforcement, or contractual incompleteness. Contractual incompleteness occurs for several reasons. First is the absence of legal redress to enforce compliance as members of an illegal enterprise move beyond familial ties. Second unifying through organizational restructuring is a chief strategy for narrowing individual opportunism within ranks of the illegal organizations. Devising organizational structures to settle bargaining problems lessens the level of and potential for continued conflict secondary to the contractual incompleteness and incomplete information.

Another impetus for the traffickers' structural adjustment toward federation on the part of the traffickers was the establishment of the South Florida Task Force to disrupt the cocaine supply link from Colombia to Florida. Although imprisoned at this time, Sicilia Falcon's initial collaboration with the Colombian cocaine cartels laid the organizational framework for a greater level of collaboration between the Mexican and Colombian traffickers. This proved fortuitous as the organizational efficiencies developed in both country's trafficking organizations and enabled the Colombians to tranship cocaine using the well established smuggling routes of the Mexicans.

Another advantage to forming a federative organization was to raise the entry barriers to others wanting to compete in the market place. As the naroctraficantes' business grew not only did it become difficult for them to meet the demands of a changing market, but their convergence raised the entry barriers to aspiring narcoentrepreneurs. The increase in volume and activity made the traffickers more vulnerable to security concerns and increased the amounts of payoffs necessary to conduct their business. The federative structure enabled them to not only share risks but to share the introduction of new technology such as the airplane for distribution and streamlining labs for production, and innovative irrigation methods to transform the Mexican desert into a thriving agribusiness for growing marijuana.(20) The exponential growth of trafficking and production required another layer of expertise, particularly in the financial area. Money launderers increased in number as did accountants to manage the narco-profits. While the addition of yet another layer of players could increase the traffickers' exposure, shared enforcement through coercion and incentives also reduced the organization's exposure. It was much easier to identify a leak if there were limited places from which the leak could have occurred.

The Mexican State

Although the Federal Security Directorate (Direccíon Federal De Seguridad-DFS) was formed in the late 1940s, Mexico's version of an internal CIA functioned primarily as an anti-guerrilla force during the 1960s. With the exception of one person all of the eight directors graduated from the prestigious Colegio Militar, forming bonds that would become more evident as the DFS became more intimately connected with the drug elite. The strengthening of regional strongholds by narcotraficantes presented a challenge to the state's authority and capacity to enforce the law. Additionally as Mexico became the chief supplier of marijuana and heroin, external pressure from the United States intensified. Mexico sought and received bilateral support from the United States in the form of helicopters, aerial photography to plot fields, specialized aircraft for herbicide spraying and training for Mexican pilots. The three pronged approach of the Government of Mexico (GOM) included the following: 1) eradication, 2) interdiction of transiting drugs, 3) disruption of traffickers networks and organizations.(21) The results were impressive. Between 1975-1978, the Mexican military is credited with destroying some 6,000 hectares of marijuana and an annual average of 11,000 hectares of opium. The Mexican government regained jurisdiction over its territory until 1983 when it was revealed Mexico was again experiencing high levels of drug production and trafficking. How could this have happened from such a promising eradication policy? Most of the literature on the Mexican military note the exceptional degree to which it has, unlike almost every other Latin American nation, remained subordinate to civilian control. Contributing factors to explain Mexican military subordination to civilian dominance include the following: 1) Mexico's authoritarian government, 2) lack of interference by Mexican civilian leaders in strictly military matters, 3) the military's role in civic action programs, 4) monitoring elections and 5) preserving internal order.(22) Three of these factors shed light on the military's role in drug trafficking. The first concerns the authoritarian Mexican state built around the dominance of the Institutional Revolutionary Party (PRI). Inasmuch as the PRI is operatively the Mexican state, Mexican military officers have not had to choose which political party to support. While Fryer and others argue that this has enabled the military to remain detached from politics, I will argue in the conclusion of this paper that such a statement ignores the political, economic and social linkages acquired by attachment to a single dominant political party in a patronage state. The second factor important for our analysis is the military's role in civic action programs. Perhaps more than any other state agency the Mexican military's role in civic action programs, especially in areas where the PRI is not functional, allows it to act as an agent of the PRI. Civic action programs such as rural electrical housing projects, flood prevention, veterinary programs, medical and health programs while strengthening support for the government and ensuring political stability also enables it to penetrate Mexican society in a way the government and the PRI have not yet accomplished. Preserving internal order, the third factor, includes administering and working with the Mexican police forces in anti-narcotics programs. Fryer notes that the Mexican police force resembles a pyramidal organization with those at the bottom receiving low wages supplemented by la mordida to those at the top of the pyramid who live luxurious lives.(23) It is difficult to envisage two agencies engaged in anti-narcotics programs together and one, the military, not being affected by the corrupt behavior of the police. The work of Shannon, Lupsha, Poppa and others suggest this was not the case at all during this period. The Mexican military guarded the marijuana plantations in Chihuahua while the MFJP guarded the marijuana plantations in Hermosillo, Sonora for Rafael Caro Quintero and others.(24) An informant for the DEA who had worked for traffickers confirms Lupsha's thesis that there were high levels of official corruption during this period as violence permeated Sinaloa. DFS commandantes went to Fonseca, Miguel Angel Felix Gallardo, the Caros and the Quinteros and advised them to limit the violence and shift their base of operations to the U.S. and move their operations to Guadalajara where DFS agents built a sort of narco-industrial complex.

This suggests that the DFS in conjunction with the military operated as agents of the state to reduce chaos in the INT marketplace and forestall instability in rural areas. The Mexican military's presence in these small rural areas was to pacify the countryside in a nation where the state had penetrated in a limited way and in which there was no institutional presence of the single political party, the PRI. Drawing upon strategic management literature, we can say that states will not tolerate chaos in the marketplace operating with dysfunctional and wasteful behavior as the smugglers exhibited as they warred and competed with each other. The work of Dyas and Thanheiser examining the interventions of the French and German governments provide an interesting analog, despite the illegality of the INT.(26) Dyas notes that when the French state considered the market to be out of balance it would step in forcing less able firms to merge or drop out of the market decreasing chaos and restoring balance in the marketplace. In Germany Thanheiser found this regulatory role was played by the large banks in Germany, operating in a form of corporate capitalism through the use of cross-cutting cleavages inasmuch as at least one seat on the company's board of directors was reserved for a member of the bank. I suggest that for the Mexican military, and to a lesser extent the DFS, functioned as a regulator of the smuggling business in Mexico during Phase One and sent the message to the feuding pistoleros that regulating their behavior was preferable to arresting them. At this stage it is clear in the Mexican and Colombian cases that neither thought the smuggling enterprise which had drugs as just one more inventory item would come to dominate smuggling generating profits none dreamed of.

Operation Condor/Trizo was hailed as a great success and eradication figures seemed to support its success. Behind this joint effort between the US and Mexico, however, were numerous atrocities and human rights abuses at the hands of Carlos Aguilar Garza of the Mexican Attorney General's office and Comandante Jaime Alcalá of the Mexican Federal Judicial Police.(27) The silence of DEA agents about these and other brutalities derived from the Mansfield Amendment of 1975 which made it illegal for US agents to be in a foreign country at the scene of an arrest and DEA agents had been given the "freedom of the skies" from Mexico in exchange for tangible support during Operation Condor. Lupsha suggests that the success of Operation Condor obscures the "embeddedness" of associational connections between the narcotraficantes and political institutions.

Miguel Nazar Haro was, in 1977, the director of the DFS and resigned under pressure in 1982 after being indicted for running an international stolen car ring in Los Angeles. The DFS/narcotraficante connections continued under his successor, Antonio Zorrilla who signed DFS and Gobernacíon Agent Identification cards for members of the Guadalajara cartel. Other forms of associational embeddedness is reflected in the appointment of Arturo Duarzo Moreno as the police chief of the Mexico City police force despite having been accused by a Florida grand jury of conspiring to ship heroin into the US. Moreover the Mexican Federal Judicial Police (MFJP) was revealed to be as corrupt as other Mexican Law Enforcement agencies. In 1976 presidential front-runner Mario Moya Palencia's name was pulled from consideration after it was discovered Moya had frequented Sicilia Falcon's Lear Jet several times as well was presented Falcon with the official Gobernacíon Special Agent identification he carried.(28) Despite urges from his supporters to run independently, Moya Palencia exercised a discretion and loyalty to the PRI and was rewarded with an appointment to Mexico's Tourist Development Fund and later Mexico's ambassador to the United Nations. Manuel Ibarra Herrera was now made head of the Mexican Federal Judicial Police. Subsequent campaigns against traffickers rarely netted "big fish" and in the case of the trial of trafficker Gilberto Ontiveros, his associate Carlos de Herrera identified Ibarra Herrera as the recipient of payoffs from the Chihuahua marijuana plantations. Jose Lopez Portillo announced in 1977 that the presence of the American government would be sharply reduced in Mexico. Lopez Portillo's decision was publicly assumed to be in response to a resurgent nationalism secondary to disputes with the US over natural-gas prices. DEA agents suspicions that the decision had more to do with corruption than gas prices may well be founded. More interesting is how the INT changed and presented more pressures for the incoming president, Lopez Portillo.

The success of the eradication campaign had an economic effect as well in a country suffering behind the boom and bust years of the 1970s. Mexico's oil production had plummeted from 191.5 million barrels in 1973 to 177.3 million barrels, equivalent to the output of 1921.(29) As oil production fell, domestic demand dramatically increased with Mexico's cost for oil imports rising from $124 million in 1972 to $382 in 1974. Borrowing to pay for imports caused the foreign debt to go from $9.5 billion in 1974 to $20 billion in 1976. Right before outgoingPresident Luis Echeverria left office, he devalued the peso. Although needed it was met with anger and hostility(30) as it increased Mexico's already high debt service of 30% of export earnings.(31) As Mexico's economy continued its downward spiral between 1981-82, President Lopez Portillo nationalized Mexico's banks in an attempt to stem the flow of capital flight. Four point four billion dollars in capital had left Mexico in 1979 and by 1982 capital flight was averaging $13.2 billion.(32) "Subsequent investigations estimated the loss to the end of 1984 between $33 billion and $60 billion or roughly 50% of Mexico's total funds from export receipts and foreign loans during that period."(33) Lopez Portillo castigated the local bankers, who protested they functioned as mere clerks converting pesos to dollars at the request of their clients, without whom such an outflow would not have been possible. Once more the peso was devalued, this time at 30% with still little or not stemming of capital flight in anticipations of further devaluations. Mexican finance minister, Jesus Silva Herzog, went to Washington to see what could be salvaged. Meanwhile the permanent anti-narcotics campaign suffered from "neglect, lack of guidance, a dearth of leadership."(34)

Conclusion

In this paper I have sketched out the first phase of a historical chronology of the INT in Mexico using network analysis to identify major conjunctural shifts in time and organization of the INT. The INT is treated as a transnational corporation, so I am particularly interested in tracking its organizational evolution. My findings suggests that during Phase one of the INT in Mexico, it emerged as part of an already existent organizational structure which really promoted differing levels of entrepreneurship combined with a shifting level of corruption consonant with the shifting organizational changes of the INT. As shown, in the beginning corruption of a passive, pervasive, and unorganized type suggests that corruption may be rampant but one cannot assume that everyone is corrupt. Simultaneously there appears to have even developing a systematic type of corruption characterized by a hierarchical payoff system with multiple of "payoff cones" that, in the case of the Acosta organization overlapped with payoffs being paid for a time to the local head of the military and local head of police.(35) Nadelman argues the case for corruption in Mexico being unique and I disagree and suggest that correlating the behavior of agents of the state [whether the agent be local PRI bosses or the Mexican military, the DFS, or the MFJP] with its actions as a regulator of the marketplace stimulating strategies among the players resulted in organizational changes that almost required an adjustment in the corruptive process. The INT grew from local druglords to a more complex and sophisticated corporations in response to market changes. It is also clear that as the business grew those druglords who could not keep pace with either the enormous influx of monies or the technological innovation had been winnowed from the scene by 1982 leaving only those who had survived this turbulent period in control and in the process of reorganizing.

This study is part of a larger project comparing the effects of the INT on economic and legal institutions of the Colombian and Mexican states. Two other phases have been identified and I am in the process of identifying a possible fourth phase. Phase two focuses on what I call the Golden Years of the INT as the differing members of the emerging cartels or federations enter the global economy. It is during this phase that the INT begins behaving in the way of TNCs engaging in what Stopford and Strange consider to be behaving like nations engaging in diplomacy, brokered agreements, bargaining and brokering. While it is clear from the Colombian example that this is the case, the Mexican case awaits further analysis.

1. PBS Frontline: Murder, Money & Mexico: The Rise and Fall of the Salinas Brothers.

Http://www.pbs.org.wbh/pages/frontline/shows/mexico

2. Patricia B. McRae and David J. Ackerman, "The Illegal Narcotics Trade (INT) as TNC: Implications for the TNC/Government Interface" Paper presented at the American Political Science Association, Washington, DC 1993.

3. Peter A. Lupsha, "Drug lords and Narco-corruption: The Players Change but the Game Continues." Crime, Law and Social Change Vol. 16, Kluwer Academic Publishers: Netherlands, 1991, 41-58.

4. Peter Lupsha, "Organized Crime in the United States", Organized Crime: Cross-Cultural Studies, ed. Robert Kelly, New Jersey: Rowman and Littlefield, 1986. Although Lupsha's primary focus is on the US, its application to the study was found appropriate.

5. Lupsha, "Drug Lords..."np.

6. Roberto E. Blum, "The Weight of the Past" Journal of Democracy 8.4 (1997) 28-42.

7. Roderic Ai Camp, Politics in Mexico, New York: Oxford Press, 1996. 10-18.

8. William O. Walker III, Drug Control in the Americas, Revised Edition, Albuquerque: University of New Mexico Press, 1989, 189.

9. Elaine Shannon, Desperados: Latin Drug Lords, US Lawmen and the War America Can't Win, New York: Viking Press, 1988. See Chapter 3 for a thorough treatment of this time period.

10. Ibid

11. For an excellent treatment of this phenomenon, see Terrence E. Poppa, Drug Lord: The Life and Death of a Mexican Kingpin, New York: Books, 1990.

12. Ethan A. Nadelmann, Cops Across Borders: The Internationalization of US Criminal Law Enforcement, Pennsylvania: The Pennsylvania University Press, 1993.

13. For a broader discussion of competitive strategies and entry barriers, see M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors, New York: The Free Press, 1980. M.E. Porter, "The Contributions of Industrial Organization to Strategic Management" Academy of Management Review, 1981 Vol. 6, No. 4, 609-620. M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, New York: The Free Press, 1985.

14. For an in-depth examination of the Herrera organization see Peter A. Lupsha and Kip Schlegle, "The Political Economy of Drug Trafficking: The Herrera Organization" (Mexico and the US)". Working Paper #2, The Latin American Institute, University of New Mexico, 1980.

15. Shannon, 58-59.

16. Ibid.

17. Poppa, 41-50.

18. "Mexico On The Edge: The Drug Cartel Threat" Albuquerque Journal News 1997.

Http://www.abqjournal.com/news/drugs/

19. Pier Luigi Sacco's discussion of Michele Polo "Internal Cohesion and Competition" in The Economics of Organised Crime, eds. Gianluca Fiorentini and Sam Peltzman, England: Cambridge University Press, 1997, 109-115.

20. Shannon, 14. One of DEA agent Camarena's informants showed him the beginning of marijuana plantation structures with 220 acres of marijuana 200 miles south of Guadalajara as early as May 1982.

21. Lamond Tullis, Unintended Consequences: Illegal Drug Policies in Nine Countries, Boulder: Lynne Reinner Publishers, 1995.

22. Wesley A. Fryer, "Mexican Security" WEB article 1993

http://www.wtvi.com/wesley/mexicansecurity.html

23. Ibid.

24. Shannon, 121.

25. Ibid., 196-197.

26. Gareth P. Dyas, The Strategy and Structure of French Industrial Enterprise, Ph.D. Dissertation, Harvard University Graduate School of Business Administration, 1972. Heinz T. Thanheiser, The Strategy and Structure of German Industrial Enterprise, Ph.D. dissertation, Harvard University Graduate School of Business Administration, 1972.

27. Shannon, 64-70.

28. Lupsha, Ibid.

29. Donald J. Mabry and Robert J. Shafer, Neighbors, Mexico and the United States: Wetbacks and Oil, Mississippi State, Ms: Historical Text Archive, 1997.

30. Ibid.

31. Jonathan Aronson, Money and Power: Banks and the World Monetary System, Beverly Hills: Sage, 1979, 174.

32. R.T. Naylor, Hot Money and the Politics of Debt, Montreal: Black Rose Books, 1994, 31.

33. Ibid., 62.

34. Richard B. Craig, "The Illicit Drug Traffic and US-Latin American Relations" Washington Quarterly, 1985, 122.

35. Nadelman, 169-178.

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