HomeNewsAnalysisStudy: US Marijuana Legalization Could Cut Cartel Profits By 30%
ANALYSIS

Study: US Marijuana Legalization Could Cut Cartel Profits By 30%

DRUG POLICY / 5 NOV 2012 BY GEOFFREY RAMSEY EN

A new study suggests that Mexico's drug cartels could take big hits to their pocketbooks if ballot initiatives to legalize marijuana in parts of the United States are approved by voters, but the overall effect on the country's security situation would likely be limited. 

The study (.pdf), released on October 31 by the Mexican Institute of Competitiveness (IMCO), found that Mexican drug cartels could see their revenue from drug sales in three states drop by 22 to 30 percent if current ballot initiatives on marijuana legalization are passed. 

On November 6, residents of Colorado, Oregon and Washington state will vote on measures that will allow adults to grow, sell and possess small amounts of marijuana for recreational use. While opinion polls in Oregon show that the referendum is unlikely to be approved there, both Colorado and Washington stand a chance of passing theirs.

Using a statistical model, IMCO researchers estimated the legalized price of marijuana produced in Oregon, Washington and Colorado based on local demand. They then assumed that some of the drug will be smuggled into other states, and that marijuana purchasers in the country would be more likely to choose domestic marijuana over Mexican marijuana because of its lower price.

As a result of this, the IMCO report estimates that Mexico’s cartels would lose $1.425 billion if the initiative passes in Colorado, $1.372 billion if Washington votes to legalize, and $1.839 billion if Oregon approves its ballot measure.

The report did not look at how marijuana legalization would affect individual cartels, but according to Mexican crime analyst Alejandro Hope -- one of the report’s authors -- the powerful Sinaloa Cartel has the most to lose if the initiatives go through. In a press conference marking the report’s release, Hope told reporters that the cartel could see its profits fall by 50 percent if the measures are passed.

InSight Crime Analysis

IMCO is not alone in suggesting that relaxing marijuana laws could be beneficial in the long term to the “war on drugs.” The report comes at a time when interest in alternative drug policies is at an all-time high in the hemisphere, with the heads of state of Guatemala, Colombia, Mexico and Uruguay all expressing interest in decriminalizing marijuana as a way to refocus law enforcement efforts on more harmful drugs and the violent crime associated with them.  

But while many analysts have pointed to the hypothetical benefits of such measures, the number of real-world variables involved suggests that legalizing marijuana would not necessarily reduce the power of Mexico’s crime syndicates. For one thing, even the percentage of cartel profits that come from marijuana as opposed to other drugs is unclear. While US officials have said that 60 percent of Mexican cartels’ profits come from marijuana, this has been disputed by analysts with the RAND Corporation, who put the figure closer to 15 to 26 percent, and say that profits from cocaine shipments to the US are near twice that.

Still, even if marijuana legalization in parts of the US were to cut into cartels’ finances, it may not have much of a long term effect on violence or criminal activity in Mexico. Groups like the Sinaloa Cartel and the Zetas have shown an impressive ability to adapt to changes in the regional drug market in order to make up for lost revenue. Indeed, there is evidence to suggest that cartels have responded to a heightened crackdown on drug trafficking in the country by deepening their involvement in alternative criminal activities like human trafficking, migrant smuggling and illegal mining.

They have also ventured into new drug markets. Taking advantage of US law enforcement’s successes against methamphetamine production, Mexican cartels have become the main source of meth to the US, taking advantage of lax controls in neighboring Guatemala to produce the drug in industrial quantities there. Considering Mexican cartels’ demonstrated ability to make up for losses by broadening their criminal portfolios, the ongoing (albeit lowered) demand for cocaine, as well as the overall cutthroat competitiveness of the drug trade, Mexico’s security situation would not likely see much of a change if marijuana were legalized in parts of the US. 

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