August 31, 2016

During an August 17th webinar, WorldAware detailed the impact of drug trafficking in Mexico on business operations, including supply chains, human capital, and physical assets. We briefly covered the history of drug trafficking in Mexico and spoke about the fragmentation of large organizations into splinter groups, which is fueling turf wars in multiple states. As a follow on, we'll explore the rivalry between two of Mexico's most powerful drug trafficking organizations (DTOs) and provide a forward-looking analysis of how the drug trafficking landscape might change over the next year.

On August 15, members of the Cartel de Jalisco Nueva Generacin (CJNG) entered a restaurant in Puerto Vallarta, Jalisco and kidnapped Jess Alfredo Guzman, the son of Joaqun "El Chapo" Guzman, the former leader of the Sinaloa Cartel. Although he was eventually released unharmed, the act was a clear sign of the CJNG's growing power along the Pacific Coast, as the organization would not likely have made such a bold move a few years ago before El Chapo's arrest.

Since authorities captured El Chapo in 2014 (he briefly escaped again in 2015), after he spent nearly 13 years on the lam following his escape from federal prison, the Sinaloa Cartel has steadily fragmented from infighting. Sensing blood in the water, the CJNG and other cartels have made incursions into territories once dominated by the Sinaloa Cartel, including the Port of Manzanillo in Colima and parts of Jalisco, Sinaloa, Baja California, and Baja California Sur. Despite their advances, the Sinaloa Cartel's robust drug trafficking network in the Americas remains mostly intact and continues to supply large quantities of illicit substances to the US, European, and Asian markets.

The CJNG, which was formerly the "armed wing" of the Sinaloa Cartel, formed in 2010 and gained notoriety in Mexico for its gruesome confrontations against the Los Zetas DTO in Veracruz. Despite its reputation for extreme violence against its rivals, CJNG states that it does not participate in extortion, kidnapping, or any other crime that could impact civilians, although those claims are disputable.

Following the recapture of El Chapo, Mexican and international media have turned their attention towards Nemesio "El Mencho" Oseguera Cervantes, leader of the CJNG. Prior to his involvement with the CJNG, El Mencho spent significant time in the US, first working in agriculture and later moving into drug trafficking. He was eventually arrested and spent three years in prison where he developed contacts with members of other DTOs and gangs. Upon his release, El Mencho formed what is today known as the CJNG and began working for the Sinaloa Cartel. After the death of Ignacio Coronel, former leader of the Sinaloa Cartel, the CJNG split off and took control of Jalisco. Currently, the organization controls territories in 11 states and possibly parts of Mexico City.

In Colima, the homicide rate has increased dramatically over the past year, largely due to an ongoing turf war at the Port of Manzanillo between the CJNG and Sinaloa Cartel. Both groups are vying for control over the port which is heavily used to traffic drugs between Mexico and other Latin American countries. The CJNG will likely emerge victorious or at least gain significant control of the port, as it is clearly taking over territories on other fronts while the Sinaloa Cartel appears somewhat rudderless without El Chapo. Further north in Baja California and Baja California Sur, the CJNG has clashed with factions of the Sinaloa Cartel, resulting in increasing rates of homicide in La Paz, Ensenada, and Tijuana. Since the Baja California Peninsula is an important route for drugs entering the US, Tijuana could continue to experience escalating violence over the coming months, as the CJNG makes additional attempts to gain territory.

Similar to southwestern Mexico, which includes Guerrero, Michoacn, Morelos, and Colima, the Pacific northwestern states could experience severe insecurity, especially if the Sinaloa Cartel continues to weaken. The spoils of a Sinaloa Cartel break up would potentially be huge, as the organization has well-established supply chains into international consumer markets for illicit substances and has strong connections with US-based gangs who handle distribution. The CJNG, while it does not have a significant presence in the US, would be well positioned to absorb much of the Sinaloa Cartel's territory in Mexico, although it would be heavily contested by Sinaloa Cartel splinter groups and other DTOs such as the Beltran Leyva Organization (BLO).

The Sinaloa Cartel is not expected to rapidly disband. However, it will likely continue to suffer territorial losses due to the formation of splinter groups within its ranks, incursions from other DTOs, and infighting between high ranking members. Although the CJNG appears to be strengthening, the organization could easily experience an upheaval if El Mencho is captured or killed or if other cartels form an alliance to challenge its territory. DTO-related crime will likely continue to worsen in Mexico through 2017, and areas in the northwestern states could begin to experience an escalation of DTO-related violence, including mass killings and high rates of kidnapping and assault.

For more background on the most recent drug trafficking trends and the impact on global organizations like yours doing business in Mexico, be sure to watch the recorded version of our webinar: {5761}