HomeNewsAnalysisGameChangers 2020: How Black Markets Became the New Normal
GameChangers 2020: How Black Markets Became the New Normal

GameChangers 2020: How Black Markets Became the New Normal


In a region where 50 percent of the population already makes its living in the informal market, it was perhaps of little surprise that black markets exploded in 2020 amidst a worldwide contagion.

Among them was a so-called “water mafia” in Venezuela’s northern state of Falcón, where thieves repeatedly cracked open pipes to steal thousands of liters of water at a time. Government raids and arrests appeared to make little difference. While the theft and resale of water was not new in Venezuela, it escalated dramatically in 2020.

Other countries also faced rising criminal activities around water. A criminal network in Mexico’s northern state of Chihuahua allegedly seized control of 12.5 percent of water in a state where illegal mining and disputes over the use of the Rio Grande have taken a toll. And Chile, where the pandemic came amid a severe drought, has seen similar accusations.

With a Nature Sustainability report published in August stating that up to half of the world’s water may be obtained illegally, black markets are only likely to worsen. For the Brookings Institute, water theft is now a viable option for larger criminal groups, especially those “with experience in oil theft and illegal sale of gasoline.”

The new water wars were the proverbial canary in the coal mine. Throughout Latin America, there was an explosion in black market resellers to provide virtually any product. The biggest earners remained contraband staples: cigarettes, alcohol and medicine among them. But other, less traditional products, also spiked, including everything from personal protective equipment to bacon.

“Faced by the economic recession caused by the coronavirus, important sectors of the population are going to try to mitigate poverty by buying far more products on informal and street markets, which will drive up contraband of all types,” Juan Pablo Toro, director of the Chilean security think-tank AthenaLab, told InSight Crime.

This was not just organized criminal groups, of course. Some of this trafficking were just individuals or cases of petty corruption. But it highlighted how calamity had brought with it large and small opportunities.

Providing the Basics

In July, David Beasley, the executive director of the World Food Program, gave a bleak warning. “The COVID-19 pandemic has just been devastating in Latin America,” he said during a visit to Ecuador.

“Families are struggling to buy basics like food and medicine, as livelihoods are destroyed. ... We have seen a substantial increase in over 11 million people that are marching towards the brink of starvation," he added.

The scramble was evident on the Venezuela-Colombia border. While remote border trails there have long seen food contraband, cattle rustling into Colombia became so severe it was labeled “another pandemic” and tons of cheese were seized on the way to reportedly feeding the huge Venezuelan diaspora in Colombia.

But dire conditions also saw Venezuela’s border with Brazil become busier. When Brazil shut down its frontiers due to the pandemic, a law allowing trucks carrying food to keep crossing the border “for humanitarian reasons” proved ripe for abuse. In August, dozens of trucks crossed the border every day, carrying staples such as butter, coffee, sugar, cooking oil and canned goods. Far from meeting humanitarian criteria, these goods were being sold at inflated prices on black markets across Venezuela, with police and military checkpoints charging a cut to let the trucks pass. Worse still, most of the food never made it to the desperate and hungry.

“A lot of the items are transported strategically, for example, to mining areas of Bolívar state to ensure that illegal mining can continue,” Ricardo Delgado, former mayor of the Venezuelan municipality of Gran Sabana on the Brazilian border, told InSight Crime.

Another popular smuggling region, the Tri-Border Area (TBA) of Paraguay, Brazil and Argentina, also saw a brisk trade. COVID-19 shuttered Paraguay’s sugar industry, dropping legal sales from 7,000 tons a month to just 1,000. In response, tons of sugar, which Paraguay consumes in large amounts, have poured across the border illegally from Brazil.

But Latin America’s agricultural powerhouse has not just sent sugar to its smaller neighbor. One convoy of trucks was stopped carrying 100,000 eggs in August, while cooking oil, chicken, sausages, fruit and vegetables have also been intercepted.

Virtually every Latin American country saw meat and produce being smuggled, an unsurprising fact in a region with 47 million people still vulnerable to hunger and where an estimated 11.6 percent of all food is wasted.

Regulations on the sale of beer and alcohol were implemented, from Mexico to Argentina, to limit social gatherings in which the virus could spread. Some consumers, however, turned to bootlegged alcohol. Mexico in particular has struggled to stamp out the common consumption of moonshine in remote areas. Up to 42.5 percent of all alcohol sold in Mexico is illegal, as opposed to a regional average of 15 percent. It saw over 200 people die between May and July from drinking illegal alcohol that had been adulterated. Other countries have reported death tolls in the dozens, or even hundreds, such as the Dominican Republic, Peru and Costa Rica.

Adding Fuel to the Fire

With millions out of work, heavy restrictions on movement and many conventional criminal economies temporarily hobbled, stealing and reselling oil and its derivatives has also risen to the fore. It is, quite simply, both a convenient way for criminal groups to shore up their finances and for the public to keep moving.

SEE ALSO: Why Oil Theft Spread Across Latin America During Pandemic

Despite the capture of José Antonio Yépez Ortíz, alias “El Marro,” in August, arguably Mexico’s most prolific oil thief, Mexico continued to grapple with “huachicol,” the local term for oil theft. (The term is so commonly used it was declared the 2019 Word of the Year and got its own emoji.) Millions of liters of gasoline have been stolen during the pandemic, partially erasing hard-earned advances made by the government in 2019.

Guanajuato, the heart of the trade, remained the most violent state in the nation, with conflicts between the Jalisco Cartel New Generation (Cartel Jalisco Nueva Generación -- CJNG) and El Marro’s Santa Rosa de Lima Cartel ongoing.

And as legal sales of gasoline plummeted, the reselling of conventional fuel and liquid petroleum gas soared. Mexico’s demand for black market oil was so high that attacks on offshore platforms also increased. From January to June 2020, authorities registered 19 such attacks, compared to 20 in all of 2019 and 16 in 2018, according to the New York Times.

Meanwhile, gasoline theft spread rapidly across the region. Venezuela -- the country with the largest proven oil reserves in the world -- relying on stolen gasoline from Colombia and Brazil came as a shock. With criminal groups along the border such as the National Liberation Army (Ejército de Liberación Nacional -- ELN) and Rastrojos keen to cash in on this opportunity, petrol stations on the Colombian side were reportedly completely empty on several occasions.

The economic incentives for this crime are clear. In May, InSight Crime found that a liter of gasoline sold legally in Colombia for $0.53 could fetch $1.50 a liter on the black market in Táchira, Venezuela. Brazilian gasoline could bring in even higher margins, with reports stating that smuggled Brazilian fuel was selling as high as $4 to $6 a liter in Bolívar state and was primarily used to run machinery needed for illegal gold mining.

With several seizures of thousands of gallons of stolen gasoline being made, Ecuador also stood out. And while gasoline smuggled from Ecuador has been used to produce cocaine and move drugs in Colombia in the past, one clandestine refinery was found in September in the province of Sucumbíos, near a pipeline stretching across the border. The facility tapped oil directly from the pipeline, refined it on site and loaded it onto waiting boats.

Elsewhere, Colombia’s Ecopetrol warned of a rapid increase in oil taps along its infrastructure, and the country saw an increase in the use of “pategrillo,” a low-quality fuel used in cocaine production. In Argentina, local politicians colluded with oil thieves to steal up to $5 million worth of oil a year from the state-owned oil company, YPF. And in Paraguay, family clans reportedly assaulted barges transporting gasoline along the Paraná River and sold heavy fuel oil to local communities.

As one journalist with experience covering oil theft in Colombia told InSight Crime, with authorities focused on the lockdown and on more violent forms of organized crime during the pandemic, oil theft has been able to fly under the radar. This may not be the case for much longer.

Personal Protective Equipment Craze

One type of contraband was wholly new in 2020. With countries and governments desperately outbidding each other to secure needed personal protective equipment (PPE) and supplies to fight COVID-19, gangs moved in to secure their own supply.

Medical theft seemed to become more sophisticated through the year, as information about the coronavirus and how to combat it grew.

Early attempts in April seemed slapdash with criminal groups likely snatching items they thought would sell without a specific client in mind. An example of this came in mid-April, right as Brazil’s government saw bitter in-fighting about how to address the crisis, when a gang of thieves entered a warehouse at São Paulo’s Guarulhos international airport, snatching around 15,000 coronavirus testing kits and two million PPE items, including masks, hand sanitizer and gloves.

In Mexico, a truck carrying 200 kilograms of hand sanitizer was stolen but recovered through satellite tracking. Far more seriously, 20 ventilators were stolen from a hospital in the southern state of Oaxaca. And in Honduras, hundreds of N-95 masks intended for public hospitals went missing. Even Cuba saw critical medical supplies being pilfered and resold.

Smugglers also kept a careful eye on healthcare news. In late May, shortly after US President Donald Trump and Brazil President Jair Bolsonaro recommended the use of hydroxychloroquine as a treatment to fight COVID-19, smugglers were caught in Brazil with 3,000 doses of the drug that had been brought in illegally from Paraguay. (Hydroxychloroquine is not effective against coronavirus, according to the World Health Organization.)

A best-selling anti-parasitic drug, Ivermectin, was also briefly touted as a possible cure. Given its widespread use for both humans and animals, a black market for it immediately popped up in Colombia and Ecuador, as well as Peru, where three clandestine laboratories were found producing thousands of doses in May.

As the year progressed, some more proven options to treat COVID-19 emerged, such as Remdesivir. By September, Remdesivir could be bought illegally in Venezuela, with a Colombian doctor selling it for $800 a vial after reportedly stealing it from a local hospital.

In October, Ecuador reported a theft of Tocilizumab, also known as Actemra, an immunosuppressive drug that was found to lower mortality rates among severely affected coronavirus patients.

Even traditional Chinese medicine (TCM) options made an appearance, with Chile making several seizures of TCM drugs touted to help alleviate respiratory failure being smuggled in from China. (To date, there is no reliable evidence Chinese traditional remedies are effective against COVID-19.)

But another consequence of the coronavirus kept contraband networks active as well this year. With hospitals and healthcare systems overloaded, governments began putting off and cancelling more operations and treatments for other diseases, including cancer. Contraband gangs filled the breach.

The most daring example came in October in Mexico City, when around 38,000 anti-cancer drugs were stolen from a warehouse as gunmen assaulted staff and drove off in five vehicles. While these were soon found, the raid raised questions about how such complex drugs would even be administered.

When Latin American countries announced a scarcity of flu vaccines due to the pandemic, smugglers also saw an opportunity. In October, 10,000 doses of flu vaccine were stolen from a truck belonging to Mexico’s Institute of Social Security (Instituto Mexicano del Seguro Social -- IMSS).

According to Andrés Castañeda Prado, coordinator of health and wellbeing at the anti-corruption group Nosotrxs in Mexico, if a patient were to arrive at a hospital with one of these products, even if sourced from the black market, his or her doctor might administer it without question.

“There is a market for these medicines, because if somebody with economic resources has a sick child, they will do whatever it takes to find the medicine,” he told InSight Crime.

Trying to Make Ends Meet?

Contraband is the second-most lucrative criminal business in the world, according to the World Economic Forum, and, according to the WHO, as much as 10 percent of all medicine sold in Latin America could be fake or stolen. This year, it has proven particularly damaging.

The Mexico Chamber of Commerce estimated that contraband would cost the economy $5 billion in 2020. In Peru, seizures of contraband goods rose from 4.2 million items from January to August 2019 to 18 million items for the same period in 2020. In Honduras, an association of private business owners stated contraband was getting so bad it was hindering the country’s economic development.

Authorities have clamped down with stricter sentences for smugglers, stating that they contributed to other crimes, such as extortion and money laundering.

SEE ALSO: For Cuban Government, Desperate Resellers are Dangerous Criminals

But the demand for black markets raises a final challenge. The vast majority is unquestionably dominated by established and well-organized groups, often aided by corrupt officials, especially at hotspots like the Venezuela-Colombia border or Paraguay's frontiers. But this year, authorities have had to differentiate between gangs cashing in on the contraband craze and individuals trying to survive challenging times.

Some have not tried. Cuba, for example, has a long tradition of resellers selling off goods that are imported from abroad or unavailable in state-owned shops. But where Havana has often allowed a certain level of contraband to take place in order to help the economy keep ticking, this year the government did not discriminate. A black market for foodstuffs grew rapidly during the pandemic, which came in amid a raft of new sanctions from the United States. With stores regularly running out of staples such as chicken and soup, private individuals were forced to turn to the black market or even become resellers themselves. The government’s response was uncompromising. It fined thousands of resellers and reportedly threw some in jail.

Laura Rodríguez, a journalist from CubaNet who has investigated contraband on the island, told InSight Crime that resellers “don’t have any other economic choice. They ... can dedicate their time to hunt products in various shops ... they are not sitting on products waiting for the price to go up, they need money to invest again.”

In Chile, sales of illegal cigarettes, both on the street and online, became a convenient way to make ends meet. In Brazil, devastating job losses led to a surge in informal jobs and reselling black market items. Some even turned to smuggling wild animals for a generous fee.

This same story is being told in many different ways as the COVID-19 pandemic drags on, and the upheaval becomes the new normal.

Top Photo: AP

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