Categorized | Drugs, Latin America, World

The Economics of Crime and Violence During Coronavirus

Image courtesy of THE Holy Hand Grenade!

Stores, restaurants and other businesses are suffering as a result of the Coronavirus pandemic. Drug Gangs in Latin America are no exception. With many sources of revenue cut off, narco traffickers are forced to adapt in order to survive. Drug markets from Mexico to Honduras are changing and, along with them, so is the structure of the gangs that operate across Latin America. These changes will define the future of crime in the Americas.

The Cost of Coronavirus

The Coronavirus pandemic poses three problems to drug traffickers. First, increased border security has made smuggling drugs across borders more difficult. Drug cartels in Mexico are struggling to move products across the border into the US as demand for some drugs has fallen substantially. Second, it is more difficult to access the precursors necessary to produce consumable drugs. Drugs like cocaine and meth require extra chemicals to refine their raw ingredients. It is especially difficult to access these chemicals given that many cartels import chemical precursors from China, which has faced import restrictions.

Finally, criminal gangs that rely on extortion have found it harder to collect revenue. Most criminal organizations in Latin America have multiple streams of revenue, and extortion forms a major portion of this income. In Honduras, Barrio 18 gangs are suffering an economic crisis because of their inability to extort small and medium sized businesses. With small businesses closed, it is impossible for gangs to extract their normal quota regardless of the level of threat. The loss of income is a significant problem because gangs in the Americas often operate with small cash reserves.

Necessary Adaptation

With less money, narcotrafficking organizations are changing the way they do business. While trafficking drugs has become more difficult, a lucrative new market has emerged for health products. In Honduras, criminal organizations are stealing N95 masks and other protective gear. In one incident in Sao Paulo, 15,000 coronavirus testing kits were stolen from Guarulhos Airport.

Some gangs are continuing to extort businesses despite the lockdown, but will have to change their targets to those businesses not significantly compromised by the lockdowns. Gangs in Honduras have been forced into the open to collect extortion money and have begun to increase their demands on business owners. As it has become more difficult to raise money through extortion, some gangs in El Salvador, Honduras, and Guatemala are pivoting to drug trafficking because – even with border restrictions – it is more lucrative than intimidating business owners with no customers.

The most interesting – and perhaps transformative – adaptation is taking place in Mexico. According to a Global Initiative on Organized Crime investigation, Mexican cartels are allegedly coordinating to limit production and fix prices at abnormally high levels for narcotics entering the US. The Sinaloa Cartel ordered its dealers to sell methamphetamine for five times its usual street price. With increasing border security and reduced demand, the cartels appear to be trying to avoid a “race to the bottom” on price. This could have serious long-term consequences in a country where cartels have historically been highly competitive. Even so, this alleged price agreement has not stopped the gangs in Mexico from engaging in increased violence as they compete for a larger share of the shrinking drug market.

Conflict and Division

Conflict is the most visible consequence of the economic problems that gangs are facing. Cash strapped criminal organizations are now desperate to control more of what is now a dwindling market, causing gang-on-gang violence in Mexico, Honduras, and El Salvador. Of these countries, El Salvador experienced one of the worst massacres with 50 gang members dying in a two day period, which some analysts view not only a sign of gang conflict but an attempt to extort financial support out of the government.

Below the surface, criminal organizations are facing an unusual internal class division. The loss of extortion revenue and drug sales is a big problem for low-ranking gang members who make their money directly from these activities and who do not have access to the cash reserves of their gangs. In Guatemala, low-level Barrio 18 members have begun to split from the main organization to try and raise revenue outside of the control and branding of Barrio 18. This is troubling in Guatemala, where Barrio 18 has historically been much more centralised than in neighboring El Salvador.

What do these changes mean for the future of drug trafficking in the Americas? In areas where the price cooperation seen in Mexico does not appear, the criminal landscape will become more fragmented by conflict both between and within gangs. Violence will be the consequence. Criminal organisations are also likely to operate with more diversified portfolios. Gangs that previously primarily relied on a single, highly lucrative industry like trafficking or extortion will look to benefit from the new opportunities that the Coronavirus outbreak offers. These opportunities will likely include a new illicit market for medicine, as well as the robbery of businesses and buildings left vulnerable during lockdown measures.

Image Courtesy of THE Holy Hand Grenade! CC BY-ND 4.0

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About Mark Wilson

Mark is a research intern at the William J. Perry Center for Hemispheric Defense Studies. He is also an upcoming MSc Conflict Studies candidate at the London School of Economics. He writes on the Colombian Civil War and the transnational crime networks in South and Central America.

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As Ardern storms it in NZ... and a battered UK starts discussing a failed “herd immunity” strategy again, it’s worth remembering: 1) Economies that have kept the virus down have kept the economic damage down. 2) This: pic.twitter.com/ABZ6sXbI96

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