HomeNewsAnalysisWhat a Zeta’s Confessions Say About Mexico’s Internal Drug Market
ANALYSIS

What a Zeta's Confessions Say About Mexico's Internal Drug Market

MEXICO / 23 MAY 2012 BY ALEJANDRO HOPE* EN

The confessions of a captured Zetas boss give a valuable insight into the inner workings of the drug gang, and how much Mexico's internal drug market is worth to them -- analyst Alejandro Hope explores the implications.

Two days ago, I commented on the testimony given by Raul Lucio Hernandez, alias “El Lucky,” who was the regional Zetas boss in the center of the country until his detention in December. The document tells us a lot about the modus operandi and the vulnerabilities of the Zetas, but also about the size and nature of the criminal economy and, above all, the drug market within Mexico. Here a few of the conclusions I arrived at, some of them almost speculative, based on Lucky's numbers.

- El Lucky said that he used to sell 100 kg of cocaine a month in the state of Veracruz. That is the equivalent of 1.2 tons a year (predictably, the Zetas were monopolists, or almost, in that state). However, in all likelihood, this wasn’t pure cocaine. The Zetas boss does not say anything about the purity of his drugs, and there are no good external accounts. However, a recent study put the average purity of cocaine sold in bulk at the US-Mexican border at between 70 and 80 percent. It is likely therefore that the cocaine sold by the Zetas had a purity of around 80 percent (to be cut later, before being sold on the street). So, 1.2 tons of cocaine at 80 percent purity is equivalent to 960 kg of pure cocaine. According to the National Addiction Survey 2008 (ENA 2008), cocaine consumers in Veracruz (the previous year) represented 6.7 percent of the national total. As a consequence, if El Lucky is telling the truth about the volume, it is likely that the national consumption of cocaine is 14.3 tons (two days ago I said 17 tons, but I hadn’t made the adjustment for purity). That figure is equivalent to between 7 and 10 percent of the total consumption in the US.

- With the estimate of volume, it is possible to calculate the number of users. Assuming an average consumption of 34 grams a user per year (a measure used in rigorous estimates of demand), you get a total of 421,926 cocaine consumers in Mexico (of that total, something under 30,000 would be in Veracruz). The figure is slightly above the range estimated in ENA 2008 (from 267,445 to 393,656, with a best estimate of 350,550), so it’s worth congratulating the authors -- they almost hit the nail on the head. Now, not all consumers are equal: following the methodology of the RAND Corporation, it is possible that heavy consumers represent 17 percent of the total. That is equivalent to 71,727 users, who would be responsible for some 75 percent of total consumption, that is to say, 10.8 tons.

- El Lucky also sheds light on the value of the national cocaine market. According to his statements, the Zetas sell an average of 100 kg of cocaine a month in Veracruz, and each one earns them 350,000 pesos [$25,000]. That is equivalent to 350 pesos a gram [$25], but we don’t know if it refers to wholesale or retail prices. However, from his description of the tax the Zetas levied on truck robbers, it is likely that that number already covers a good part of the retail price: according to the statement of one robber, the Zetas took 80 percent of the loot. It is not improbable that the same applies to the local drug dealers. This being the case, the retail price would be 437 pesos per gram, approximately $32 (note: this is probably not the nominal price, as there are various cuts in quality during the process. But at the end of day, it is what the street drug dealers would probably get for a gram.) Of course, there are important regional variations in price, but given the location of Veracruz, it’s possible that this number is close to the average. Going back to the adjustment for purity at the estimated national volume, you get a total value of 7.811 billion pesos ($566 million). That would be roughly equivalent to 1.6 percent of the value of the retail cocaine market in the United States.

- If this is the worth of the national cocaine market, what do the total sales of illegal drugs come to in Mexico? El Lucky doesn’t tell us much about this issue, but we can use other sources. According to a study by consulting firm ABT Associates (using data from the year 2000), cocaine represents 55 percent of the total value of the US retail drug market. In a more recent study, and using different methodology, researchers from the RAND Corporation put cocaine’s share of the total drug market at 49 percent. Given the relatively very low prevalence of consumption of heroin and methamphetamine in Mexico and the low price (on average) of marijuana, it is not unlikely that cocaine makes up a slightly higher share of the market on this side of the border. I would think it’s about 60 percent. This being the case, the value of Mexico’s drug market would be 13.018 billion pesos (approximately $943 million). In value, the Mexican market would then be 65 times smaller than the US market (more or less).

- To put things in perspective, the cartels’ gross income from drug exports is estimated to be $6.6 billion, six times higher than the value of the national market. However, it is possible that in terms of the earnings of organized crime, national sales are worth more. In terms of collecting tax [piso], they could be getting 60 to 70 percent of the final consumer price (less in Mexico City, more in Veracruz or Nuevo Leon). In contrast, in exports, earnings probably tend to be more like 50 percent of gross income (that’s the percentage the United Nations Office on Drugs and Crime (UNODC) calculates for cocaine). This being the case, the difference between exports and the national market would be more like four to one.

- And how much do other businesses bring in? Here, who knows: El Lucky does not give us much detail to make a semi-reasonable estimate. But it would not surprise me if they are at least equivalent to the income generated by the national drug market. On another occasion, I made an estimate and it was around those ranges (about a billion dollars), but I didn’t feel very comfortable with the calculation. You can see it here if you're interested (p.274, box 6.2).

hope_summary_boxIn sum, El Lucky reveals a lot by giving a little bit of information. He confirms, among other things, that drugs in Mexico are still a fairly small and minority issue: most cocaine consumption is probably concentrated in less than 0.1 percent of the population aged between 12 and 64. But he also tells us that the size of the national market is not trivial, which can explain a good part of the violence that we have seen in these last few years. Perhaps I have bored you with so many calculations, but for me it is a crucial issue: to put numbers on things allows us to regain a sense of proportion that is sometimes lacking in discussions of organized crime. And with this sense of proportion comes hope: the enemy is very big and very dangerous, but it is not the size of a titan, and it does not have intergalactic levels of sophistication. To know that is, despite everything, good news.

Translated and reprinted with permission from Alejandro Hope*, of Plata o Plomo, a blog on the politics and economics of drugs and crime published by Animal Politico. Read Spanish original here.

share icon icon icon

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

What are your thoughts? Click here to send InSight Crime your comments.

We encourage readers to copy and distribute our work for non-commercial purposes, with attribution to InSight Crime in the byline and links to the original at both the top and bottom of the article. Check the Creative Commons website for more details of how to share our work, and please send us an email if you use an article.

Tags

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

Related Content

MEXICO / 10 MAY 2011

General Douglas Fraser, head of the U.S. armed forces' Southern Command, has warned that Latin American criminal groups are the…

COSTA RICA / 29 AUG 2017

Nearly every country in Latin America is struggling to combat high rates of impunity, according to a new report…

EL CHAYO / 11 MAR 2014

The death of Knights Templar leader "El Chayo" in Mexico has had little outward effect on the group's leadership structure,…

About InSight Crime

THE ORGANIZATION

Emergency First Aid in Hostile Environments

24 SEP 2021

At InSight Crime's annual treat, we ramped up hostile environment and emergency first aid training for our 40-member staff, many of whom conduct on-the-ground investigations in dangerous corners of the region.

THE ORGANIZATION

Series on Environmental Crime in the Amazon Generates Headlines

17 SEP 2021

InSight Crime and the Igarapé Institute have been delighted at the response to our joint investigation into environmental crimes in the Colombian Amazon. Coverage of our chapters dedicated to illegal mining…

THE ORGANIZATION

Exploring Climate Change and Organized Crime

10 SEP 2021

In July, InSight Crime Co-director Steven Dudley moderated a panel for the Climate Reality Project's regional series of workshops for young climate activists in the Americas. The week-long event…

THE ORGANIZATION

Gearing Up a New Class of Interns

3 SEP 2021

InSight Crime is readying its newest class of interns – from universities in Europe and the Americas – to begin investigative work on a number of high-impact projects. For the…

THE ORGANIZATION

Tracking Environmental Crime in the Amazon

27 AUG 2021

Next week, InSight Crime launches an investigation – conducted with Brazilian think-tank the Igarapé Institute – on the sophisticated organized crime structures and armed groups that…