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Biggest blow to Mexico drug cartels? It could be on your state ballot.

A Mexican study says legalizing marijuana for recreational use in the US - an issue on the ballot in three US states - could cut the proceeds of Mexican drug gangs by 30 percent.

By Staff Writer / November 5, 2012

In this October 2010 file photo, marijuana plants flourish under grow lights at a warehouse in Denver.

Ed Andrieski/AP/File

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Over the past year, the world has eyed Latin America as it has forged forward, in both policy and politics, with a rethink of the “war on drugs.” (See our recent cover story on “Latin America reinventing the war on drugs” here.)

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Sara Miller Llana moved to Paris in April 2013 to become the Monitor's Europe Bureau Chief. Previously she was the paper's Latin America Bureau Chief, based in Mexico City, from 2006 to 2013.

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But tomorrow, the world will be watching the United States, the birthplace of the “war on drugs,” as three states vote on legalizing the recreational use of marijuana.

A “yes” for any state would have huge implications for the US, but the referendums would also have ramifications south of the border. A new study released by the think tank Mexican Competitiveness Institute (IMCO) shows that if the referendums do pass, proceeds for Mexican drug trafficking organizations could be cut by up to 30 percent, depending on which state goes forward with the referendum. (Read the report here in Spanish.)

“The possible legalization of marijuana at the state level in the US could provoke a considerable loss in proceeds of drug trafficking for Mexican criminal organizations,” the report concludes. In fact, it says, ballot initiatives Tuesday could represent the biggest blow to Mexican criminal syndicates in decades.

IMCO assumes that better quality and cheaper marijuana – factoring in such things as transport savings – produced in the states of Washington, Oregon, or Colorado, where voters will have a chance to accept or reject new marijuana initiatives, would undercut demand for Mexican pot.

The ballot initiatives, which polls show have a chance of passing in Washington and Colorado but are less likely to pass in Oregon, go well beyond medicinal marijuana usage. (So far, 17 states allow that, with another three voting on it during this election cycle.) But Washington, Colorado, and Oregon are voting on state-regulated markets that would allow residents to smoke pot recreationally, not just to relieve pain.

If that wish is granted, the impact depends on the US response.

“There is a significant caveat,” says the report’s author Alejandro Hope, “which is that all of the displacement effects that we describe are contingent on the federal government not clamping down on whichever states decide to legalize.”

In other words, if no “illegal” drug market emerges in Colorado – say, to supply Ohio, where pot would still be illegal –  then Mexicans will still have the upper hand as they'll have illegal markets to supply in other states.

This was a similar caveat presented before a 2010 initiative in California, which voters ultimately rejected. RAND looked at what Proposition 19's impact would be on drug-trafficking organizations, or DTOs, in Mexico. “If legalization only affects revenues from supplying marijuana to California, DTO drug export revenue losses would be very small, perhaps 2 to 4 percent,” the report concludes.

“The only way legalizing marijuana in California would significantly influence DTO revenues and the related violence is if California-produced marijuana is smuggled to other states at prices that outcompete current Mexican supplies. The extent of such smuggling will depend on a number of factors, including the response of the US federal government,” the report notes.

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