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Cocaine Incorporated — The Mexican Drug Cartel

A fascinating longread on the inner-workings of the Mexican drug cartel and the economics of drug industry.

The Sinaloa cartel can buy a kilo of cocaine in the highlands of Colombia or Peru for around $2,000, then watch it accrue value as it makes its way to market. In Mexico, that kilo fetches more than $10,000. Jump the border to the United States, and it could sell wholesale for $30,000. Break it down into grams to distribute retail, and that same kilo sells for upward of $100,000 — more than its weight in gold. And that’s just cocaine. …

Moving cocaine is a capital-intensive business, but the cartel subsidizes these investments with a ready source of easy income: marijuana. Cannabis is often described as the “cash crop” of Mexican cartels because it grows abundantly in the Sierras and requires no processing. But it’s bulkier than cocaine, and smellier, which makes it difficult to conceal. So marijuana tends to cross the border far from official ports of entry. The cartel makes sandbag bridges to ford the Colorado River and sends buggies loaded with weed bouncing over the Imperial Sand Dunes into California. Michael Braun, the former chief of operations for the D.E.A., told me a story about the construction of a high-tech fence along a stretch of border in Arizona. “They erect this fence,” he said, “only to go out there a few days later and discover that these guys have a catapult, and they’re flinging hundred-pound bales of marijuana over to the other side.” He paused and looked at me for a second. “A catapult,” he repeated. “We’ve got the best fence money can buy, and they counter us with a 2,500-year-old technology.”

There’s a reason coke and heroin cost so much more on the street than at the farm gate: you’re not paying for the drugs; you’re compensating everyone along the distribution chain for the risks they assumed in getting them to you. Smugglers often negotiate, in actuarial detail, about who will be held liable in the event of lost inventory. After a bust, arrested traffickers have been known to demand a receipt from authorities, so that they can prove the loss was not because of their own negligence (which would mean they might have to pay for it) or their own thievery (which would mean they might have to die). Some Colombian cartels have actually offered insurance policies on narcotics, as a safeguard against loss or seizure.

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