Packages of cocaine are stacked in rows on a naval base lot during a news conference in Panama City, Wednesday Sept. 21, 2011. According to authorities, police seized 2.2 tons of cocaine on Panama’s Atlantic coast and arrested four Colombian nationals during a Tuesday night operation. (AP Photo/Arnulfo Franco)

Cocaine seized by police in Panama City, 21 September 2011. (AP Photo/Arnulfo Franco)

This article is part of a News-Decoder series of “decoders” that explain crucial background to big issues. For more decoders, click here.

It’s the stuff of Hollywood movies: gun battles, daring prison escapes, speed boats and undercover agents sporting Ray Bans.

But drug lords like “El Chapo” of the Sinaloa cartel, who fled through a tunnel from a Mexican prison this year, thrive on corruption and crime that shape the economies and politics of Latin America — and fill U.S. prisons.

Supply and demand

The drug trade constitutes a market. Illicit, but a market nonetheless that aligns producers, distributors and consumers in a business worth billions of dollars a year.

Cartels control most of Latin America’s supply of cocaine, methamphetamine, marijuana and heroin. Demand comes massively from the United States, which in 2013 according to the U.S. National Institute on Drug Abuse had:

  • 19.8 million consumers of marijuana
  • 1.5 million consumers of cocaine
  • 595,000 consumers of meth

The more rapacious cartels engage in kidnapping and extortion. Mexican cartels have even stolen oil from Gulf Coast pipelines.

Huge markup

Cocaine is made from coca leaves that thrive in the Andes mountains, particularly in Bolivia and Colombia. Opium for heroin grows mostly in Mexico. Mexico and Colombia are major marijuana producers.

It costs about $2,000 to produce a kilogram (2.2 pounds) of cocaine, from coca leaf to laboratory, in Columbia or Peru, according to the U.S. Drug Enforcement Administration. That same kilo can be sold for $35,000 in the United States — or for as much as $100,000 if sold in smaller quantities on the street.

Mexican drug cartels earn between $19 billion and $29 billion every year from drug sales in the United States.

Dead and missing

In the 1970s, Colombian drug barons like Pablo Escobar grew rich from a global explosion in cocaine demand. Colombia was the world’s biggest cocaine producer until 2012 when authorities launched a crackdown. Peru is now the largest producer.

Two large Mexican cartels — Sinaloa and Los Zetas — have extended into Peru, Colombia and much of Central America.

Efforts to combat cartels in Mexico have had mixed results. A military-led campaign from 2006 to 2012 destabilized some groups, and in 2012 Mexico created a special federal police unit to fight cartels. Still, violence has continued.

Between 2006 and 2012, 60,000 people were killed in Mexico and 26,000 went missing due to drug-related violence, according to Human Rights Watch.

Lords, lieutenants, hitmen and falcons

A drug cartel is a hierarchical criminal organization. At its head, drug lords, or “kingpins,” give orders to lieutenants, who control different territories and manage hitmen, who carry out assassinations and kidnappings, and falcons, who keep a watch on police and rivals.

Some cartels coexist on the same turf, fueling violent rivalries.

To survive, drug cartels corrupt police and public officials. In Mexico, drug cartels spend up to 1.3 billion pesos (around $100 million) a month to corrupt police, according to authorities.

Cartels reach deep into communities. They commonly blackmail landowners who grow crops that are transformed into drugs. Cartels demand a monthly payment to protect the farmers, whose crops are destroyed if they don’t comply.

Cartels constantly adjust their distribution methods. Speeds boats, trunks of family cars, tequila bottles, even poor migrants are used to smuggle drugs into the United States.

The tentacles of Mexican drug cartels reach into 1,000 U.S. cities, according to the U.S. Justice Department. Cartels contract with local gangs to outsource street sales.

U.S. legalization moves

The U.S. “war on drugs” costs taxpayers more than $50 billion a year in spending on law enforcement and to run prisons, according to the White House. More than 1.5 million people were arrested in 2013 in the United States on nonviolent drug charges.

A growing number of experts say legalization of some drugs would weaken cartels.

Since 2012, four U.S. states — Alaska, Colorado, Oregon and Washington — plus the District of Columbia have at least partially legalized marijuana, giving a fillip to the legal market, which grew by 74% in 2014 to $2.7 billion and is predicted to top $4 billion by 2016, according to the ArcView cannabis research firm.

U.S. authorities have been seizing less cannabis at the Mexican border — 1.9 million pounds in 2014 compared to 2.5 million in 2011, according to the U.S. Border Control.

That has eaten into Mexican cartels’ revenue from marijuana, which in the past represented 30 percent of their earnings.

Still, seizures of other, harder drugs have increased. In 2014, heroin hauls rose five percent from the previous year, while the amount of methamphetamine that was seized increased nearly 10 percent, according to U.S. authorities.

(By Pauline Bock)

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