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Drug lords set to exploit free trade pact Mexican smugglers establish companies


WASHINGTON -- Cocaine smugglers working with Colombian drug cartels are starting to set up factories, warehouses and trucking companies in Mexico to exploit the flood of cross-border commerce expected under the North American Free Trade Agreement, U.S. intelligence and drug-enforcement officials say.

The Mexican smugglers are buying and setting up the companies "as fronts for drug trafficking," says a report written by an intelligence officer at the U.S. Embassy in Mexico City.

The phenomenon was confirmed by a senior U.S. drug-enforcement official, who spoke on condition that he not be identified.

The cocaine traffickers "intend to maximize their legitimate business enterprises within the auspices of the new U.S.-Mexico free trade agreement," the report says.

The report was released under the Freedom of Information Act to the National Security Archive, a private research group in Washington that seeks to declassify government documents.

The document says traffickers plan to invest in trucking and warehousing businesses in Mexico as conduits for drug shipments. They have also started to buy manufacturing and assembly plants known as "maquiladoras" as fronts for drug shipments, the senior U.S. official said.

Under a program established in 1965, the maquiladoras have special tariff exemptions and the goods they produce move in and out of the United States with minimal inspection.

"A lot of intelligence demonstrates the drug traffickers' ties to maquiladoras," the U.S. official said. "They are investing in these plants for shipments to the United States."

U.S. investigators said that they first noted the phenomenon 16 months ago and that the problem was growing. Mexican officials, who first heard of it six weeks ago from their U.S. counterparts, said they knew of only a few such cases.

The intelligence report, intended mainly as a warning, did not specify how widespread the problem was or which companies the smugglers were investing in. Law-enforcement officials on both sides of the border said they did not know the scope of the threat.

"The free-trade agreement makes the United States more accessible and convenient for traffickers," the U.S. enforcement official said. "It gives these people better opportunities to smuggle drugs."

The trade agreement, which was signed in December by President George Bush, President Carlos Salinas de Gortari and Prime Minister Brian Mulroney, awaits approval by Congress and by the legislatures of Mexico and Canada.

Over the next 15 years, it would gradually eliminate tariffs on goods traded among the three nations and eventually allow Mexican truckers to drive their rigs anywhere in the United States and Canada.

A trade expert and two former U.S. trade negotiators said that while U.S. and Mexican officials had foreseen the possibility that drug traffickers would take advantage of the trade pact, the problem was not raised during the negotiations. In fact, the pact does not address law-enforcement issues related to trade.

"This was in the 'too hot to handle' category," said Gary Hufbauer, a senior fellow at the Institute for International Economics and co-author of a favorable book about the trade pact. "It's a painfully obvious problem. The huge increases in traffic will provide a huge cover for drug traffickers."

The challenges facing customs inspectors are already daunting.

Mexican smugglers working with the Medellin and Cali drug cartels in Colombia already ship 50 percent to 70 percent of the cocaine consumed in the United States, hauling roughly 200 tons a year over the border and pocketing billions of dollars in profit.

The maquiladoras have grown over the past decade into Mexico's most important source of foreign exchange after oil.

More than 2,100 maquiladoras employ half a million workers to make components or finished products from materials that are allowed into Mexico duty-free. The products, from furniture and television sets to auto parts, are shipped back by truck or train, with duty payments only on the value added in Mexico.

A senior Mexican law-enforcement official, speaking on condition that he not be named, said the U.S. officials' warning could "definitely" be well-founded.

He said officials were investigating a report of a cocaine shipment hidden in electronics components, although he had not confirmed that any specific maquiladora was being used to smuggle drugs.

Since Mexico deregulated its trucking industry in 1989, each maquiladora has been allowed to operate its own truck fleet and set up its own trucking company. That alone might make them attractive to smugglers.

"The issue of the maquiladoras is a new one," the Mexican official said. "There is no hard evidence, but these guys are not stupid, and the path is very clear."

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