Pubdate: Sun, 17 Jun 2012
Source: New York Times Magazine (NY)
Copyright: 2012 The New York Times Company
Note: The New York Times Magazine is a section of the Sunday edition 
of the New York Times
Author: Patrick Radden Keefe
Note: Patrick Radden Keefe is a staff writer for The New Yorker and a 
fellow at the Century Foundation. From 2010 to 2011, he was a policy 
adviser in the Office of the Secretary of Defense.


One afternoon last August, at a hospital on the outskirts of Los 
Angeles, a former beauty queen named Emma Coronel gave birth to a 
pair of heiresses.

The twins, who were delivered at 3:50 and 3:51, respectively, stand 
to inherit some share of a fortune that Forbes estimates is worth a 
billion dollars.

Coronel's husband, who was not present for the birth, is a legendary 
tycoon who overcame a penurious rural childhood to establish a wildly 
successful multinational business. If Coronel elected to leave the 
entry for "Father" on the birth certificates blank, it was not 
because of any dispute over patrimony. More likely, she was just 
skittish about the fact that her husband, Joaquin Guzman, is the 
C.E.O. of Mexico's Sinaloa cartel, a man the Treasury Department 
recently described as the world's most powerful drug trafficker. 
Guzman's organization is responsible for as much as half of the 
illegal narcotics imported into the United States from Mexico each 
year; he may well be the most-wanted criminal in this post-Bin Laden world.

But his bride is a U.S. citizen with no charges against her. So 
authorities could only watch as she bundled up her daughters and 
slipped back across the border to introduce them to their dad.

Known as El Chapo for his short, stocky frame, Guzman is 55, which in 
narco-years is about 150. He is a quasi-mythical figure in Mexico, 
the subject of countless ballads, who has outlived enemies and 
accomplices alike, defying the implicit bargain of a life in the drug 
trade: that careers are glittering but brief and always terminate in 
prison or the grave.

When Pablo Escobar was Chapo's age, he had been dead for more than a decade.

In fact, according to the Drug Enforcement Administration, Chapo 
sells more drugs today than Escobar did at the height of his career.

To some extent, this success is easily explained: as Hillary Clinton 
acknowledged several years ago, America's "insatiable demand for 
illegal drugs" is what drives the clandestine industry.

It's no accident that the world's biggest supplier of narcotics and 
the world's biggest consumer of narcotics just happen to be 
neighbors. "Poor Mexico," its former president Porfirio Diaz is said 
to have remarked. "So far from God and so close to the United States."

The Sinaloa cartel can buy a kilo of cocaine in the highlands of 
Colombia or Peru for around $2,000, then watch it accrue value as it 
makes its way to market.

In Mexico, that kilo fetches more than $10,000. Jump the border to 
the United States, and it could sell wholesale for $30,000. Break it 
down into grams to distribute retail, and that same kilo sells for 
upward of $100,000 - more than its weight in gold. And that's just cocaine.

Alone among the Mexican cartels, Sinaloa is both diversified and 
vertically integrated, producing and exporting marijuana, heroin and 
methamphetamine as well.

Estimating the precise scale of Chapo's empire is tricky, however. 
Statistics on underground economies are inherently speculative: 
cartels don't make annual disclosures, and no auditor examines their 
books. Instead, we're left with back-of-the-envelope extrapolations 
based on conjectural data, much of it supplied by government agencies 
that may have bureaucratic incentives to overplay the problem.

So in a spirit of empirical humility, we shouldn't accept as gospel 
the estimate, from the Justice Department, that Colombian and Mexican 
cartels reap $18 billion to $39 billion from drug sales in the United 
States each year. (That range alone should give you pause.) Still, 
even if you take the lowest available numbers, Sinaloa emerges as a 
titanic player in the global black market.

In the sober reckoning of the RAND Corporation, for instance, the 
gross revenue that all Mexican cartels derive from exporting drugs to 
the United States amounts to only $6.6 billion.

By most estimates, though, Sinaloa has achieved a market share of at 
least 40 percent and perhaps as much as 60 percent, which means that 
Chapo Guzman's organization would appear to enjoy annual revenues of 
some $3 billion - comparable in terms of earnings to Netflix or, for 
that matter, to Facebook.

The drug war in Mexico has claimed more than 50,000 lives since 2006. 
But what tends to get lost amid coverage of this epic bloodletting is 
just how effective the drug business has become.

A close study of the Sinaloa cartel, based on thousands of pages of 
trial records and dozens of interviews with convicted drug 
traffickers and current and former officials in Mexico and the United 
States, reveals an operation that is global (it is active in more 
than a dozen countries) yet also very nimble and, above all, 
staggeringly complex. Sinaloa didn't merely survive the recession - 
it has thrived in recent years.

And after prevailing in some recent mass-casualty clashes, it now 
controls more territory along the border than ever.

"Chapo always talks about the drug business, wherever he is," one 
erstwhile confidant told a jury several years ago, describing a 
driven, even obsessive entrepreneur with a proclivity for 
micromanagement. From the remote mountain redoubt where he is 
believed to be hiding, surrounded at all times by a battery of 
gunmen, Chapo oversees a logistical network that is as sophisticated, 
in some ways, as that of Amazon or U.P.S. - doubly sophisticated, 
when you think about it, because traffickers must move both their 
product and their profits in secret, and constantly maneuver to avoid 
death or arrest.

As a mirror image of a legal commodities business, the Sinaloa cartel 
brings to mind that old line about Ginger Rogers doing all the same 
moves as Fred Astaire, only backward and in heels. In its longevity, 
profitability and scope, it might be the most successful criminal 
enterprise in history.

The state of Sinaloa, from which the cartel derives its name, lies 
wedged between the Sierra Madre Occidental and Mexico's west coast. 
Sun-blasted and remote, Sinaloa is the Sicily of Mexico, both cradle 
and refuge of violent men, and the ancestral land of many of the 
country's most notorious traffickers. Chapo was born in a village 
called La Tuna, in the foothills of the Sierra, in 1957. His formal 
education ended in third grade, and as an adult, he has reportedly 
struggled to read and write, prevailing upon a ghostwriter, at one 
point, to compose letters to his mistress.

Little is known about Chapo's early years, but by the 1980s, he 
joined the Guadalajara cartel, which was run by a former policeman 
known as El Padrino - the Godfather.

For decades, Mexican smugglers had exported homegrown marijuana and 
heroin to the United States. But as the Colombian cocaine boom 
gathered momentum in the 1980s and U.S. law enforcement began 
patrolling the Caribbean, the Colombians went in search of an 
alternate route to the United States and discovered one in Mexico. 
Initially, Mexican traffickers, like a pudgy 25-year-old airplane 
pilot named Miguel Angel Martinez, acted as independent contractors 
who were paid a fee by the Colombians to move their cargo.

In 1986, the Guadalajara cartel dispatched Martinez to the Colombian 
port of Barranquilla, in the hope that someone might commission him 
to fly drugs up to Mexico. But Martinez couldn't find any takers and 
ended up languishing in Colombia for months, worrying that he had 
blown his big opportunity with the cartel.

Eventually, he caught a commercial flight back to Mexico, and shortly 
thereafter, he was summoned to a meeting with Chapo, who was by then 
an underboss in the cartel. "You were very well behaved in Colombia," 
Chapo told him, according to subsequent testimony.

He seemed impressed by Martinez's patience in waiting for an assignment.

Having passed this test, Martinez started working for Chapo as a kind 
of air traffic controller, negotiating directly with the Cali and 
Medellin cartels, then guiding their cocaine flights from South 
America to secret runways in barren stretches of Mexico. Martinez 
knew U.S. agents were monitoring his radio communications, so rather 
than say a word, he would whistle - a signal to the pilots that they 
were cleared for takeoff.

With the decline of the Caribbean route, the Colombians started 
paying Mexican smugglers not in cash but in cocaine.

More than any other factor, it was this transition that realigned the 
power dynamics along the narcotics supply chain in the Americas, 
because it allowed the Mexicans to stop serving as logistical 
middlemen and invest in their own drugs instead.

In 1986, Martinez couldn't land a gig as a lowly courier in 
Barranquilla. Not five years later, he was marshaling hundreds of 
flights laden with cocaine for Chapo. "Sometimes we would get five 
planes a night," he remembered. "Sometimes 16." Now it was the 
Colombians who went hat in hand to Chapo, looking not to hire him to 
move their product but to sell it to him outright.

They would tip Martinez $25,000 just to get an audience with the man.

The young pilot became a gatekeeper to the ascendant kingpin, 
fielding his phone calls and accompanying him on foreign trips. 
There's a vaudevillian goofiness to nicknames in Mexico, and the 
stout Martinez was known in the cartel as El Gordo. He and Chapo - 
Fatty and Shorty - made quite a pair. "Japan, Hong Kong, India, all 
of Europe," Martinez recalled in testimony.

Chapo owned a fleet of Learjets, and together, they saw "the whole 
world." They both used cocaine as well, a habit that Chapo would 
eventually give up. When a lawyer inquired, years later, whether he 
had been Chapo's right-hand man, Martinez replied that he might have 
been, but that Guzman had five left hands and five right hands. "He's 
an octopus, Chapo Guzman," he said. For his efforts, Martinez was 
paid a million dollars a year, in a single annual installment: "In 
cash, in a suitcase, each December." When Martinez's son was born, 
Chapo asked to serve as godfather.

In 1989, Chapo's mentor, El Padrino, was captured by Mexican 
authorities, and the remaining members of the Guadalajara cartel 
assembled in Acapulco to determine which smuggling route each capo 
would inherit.

According to Ioan Grillo's book, "El Narco," the meeting was 
ostensibly a gathering of friends.

But the shards of El Padrino's organization would become the basis 
for the Tijuana, Juarez and Sinaloa cartels, and these onetime 
colleagues would soon become antagonists in a cycle of bloody turf 
wars that continues to this day.

"Drug cartel," it turns out, is a whopper of a misnomer; neither the 
Mexicans nor the Colombians ever colluded to fix prices or supply. "I 
wish they were cartels," Arturo Sarukhan, Mexico's ambassador in 
Washington, told me. "If they were, they wouldn't be fighting and 
driving up the violence."

At first, Chapo's organization controlled a single smuggling route, 
through western Mexico into Arizona. But by 1990, it was moving three 
tons of cocaine each month over the border, and from there, to Los 
Angeles. The Sinaloa has always distinguished itself by the eclectic 
means it uses to transport drugs.

Working with Colombian suppliers, cartel operatives moved cocaine 
into Mexico in small private aircraft and in baggage smuggled on 
commercial flights and eventually on their own 747s, which they could 
load with as much as 13 tons of cocaine. They used container ships 
and fishing vessels and go-fast boats and submarines - crude 
semi-submersibles at first, then fully submersible subs, conceived by 
engineers and constructed under the canopy of the Amazon, then 
floated downriver in pieces and assembled at the coastline. These 
vessels can cost more than a million dollars, but to the smugglers, 
they are effectively disposable. In the event of an interception by 
the Coast Guard, someone onboard pulls a lever that floods the 
interior so that the evidence sinks; only the crew is left bobbing in 
the water, waiting to be picked up by the authorities.

Moving cocaine is a capital-intensive business, but the cartel 
subsidizes these investments with a ready source of easy income: 
marijuana. Cannabis is often described as the "cash crop" of Mexican 
cartels because it grows abundantly in the Sierras and requires no 
processing. But it's bulkier than cocaine, and smellier, which makes 
it difficult to conceal.

So marijuana tends to cross the border far from official ports of entry.

The cartel makes sandbag bridges to ford the Colorado River and sends 
buggies loaded with weed bouncing over the Imperial Sand Dunes into 
California. Michael Braun, the former chief of operations for the 
D.E.A., told me a story about the construction of a high-tech fence 
along a stretch of border in Arizona. "They erect this fence," he 
said, "only to go out there a few days later and discover that these 
guys have a catapult, and they're flinging hundred-pound bales of 
marijuana over to the other side." He paused and looked at me for a 
second. "A catapult," he repeated. "We've got the best fence money 
can buy, and they counter us with a 2,500-year-old technology."

Improvisation is a trafficker's greatest asset, and in recent years, 
Sinaloa has devised an even more efficient solution to the perennial 
challenge of getting marijuana across the border.

Grow it here. Several years ago, a hunter was trekking through the 
remote North Woods of Wisconsin when he stumbled upon a vast 
irrigated grow site, tended by a dozen Mexican farmers armed with 
AK-47's. According to the D.E.A., it was a Sinaloa pot farm, 
established on U.S. National Forest land to supply the market in Chicago.

Heroin is easier to smuggle but difficult to produce, and as detailed 
in court documents, Chapo is particularly proud of his organization's 
work with the drug. He personally negotiates shipments to the United 
States and stands by its quality, which is normally 94 percent pure. 
"The value-to-weight ratio of heroin is better than any other drug," 
says Alejandro Hope, who until recently was a senior officer at 
Cisen, Mexico's equivalent to the C.I.A.

But the future of the business may be methamphetamine. During the 
1990s, when the market for meth exploded in the United States, new 
regulations made it more difficult to manufacture large quantities of 
the drug in this country.

This presented an opportunity that the Sinaloa quickly exploited.

According to Anabel Hernandez, author of "Los Senores del Narco," a 
book about the cartel, it was one of Chapo's deputies, a trafficker 
named Ignacio (Nacho) Coronel, who first spotted the massive 
potential of methamphetamine. "Nacho was like Steve Jobs," Hernandez 
told me. "He saw the future."

Here was a drug that was ragingly addictive and could be produced 
cheaply and smuggled with relative ease. When they first started 
manufacturing meth, the Sinaloa would provide free samples to their 
existing wholesale clients in the Midwest. "They'd send five hundred 
pounds of marijuana, and secreted in that would be two kilos of 
meth," Jack Riley, the D.E.A.'s special agent in charge of the 
Chicago office, told me. "They'd give it away for free. They wanted 
the market." As demand grew, the cartel constructed superlabs, 
capable of churning out industrial volumes of meth. Container ships 
from India and China unloaded precursor chemicals - largely ephedrine 
- - in the Pacific ports Lazaro Cardenas and Manzanillo. To grasp the 
scale of production, consider the volume of some recent precursor 
seizures at these ports: 22 tons in October 2009; 88 tons in May 
2010; 252 tons last December. When Mexico banned the importation of 
ephedrine, the cartel adapted, tweaking its recipe to use unregulated 
precursors. Recently they have started outsourcing production to new 
labs in Guatemala.

But Chapo's greatest contribution to the evolving tradecraft of drug 
trafficking was one of those innovations that seem so logical in 
hindsight it's a wonder nobody thought of it before: a tunnel.

In the late 1980s, Chapo hired an architect to design an underground 
passageway from Mexico to the United States. What appeared to be a 
water faucet outside the home of a cartel attorney in the border town 
of Agua Prieta was in fact a secret lever that, when twisted, 
activated a hydraulic system that opened a hidden trapdoor underneath 
a pool table inside the house.

The passage ran more than 200 feet, directly beneath the 
fortifications along the border, and emerged inside a warehouse the 
cartel owned in Douglas, Ariz. Chapo pronounced it "cool."

When this new route was complete, Chapo instructed Martinez to call 
the Colombians. "Tell them to send all the drugs they can," he said. 
As the deliveries multiplied, Sinaloa acquired a reputation for the 
miraculous speed with which it could push inventory across the 
border. "Before the planes were arriving back in Colombia on the 
return, the cocaine was already in Los Angeles," Martinez marveled.

Eventually the tunnel was discovered, so Chapo shifted tactics once 
again, this time by going into the chili-pepper business.

He opened a cannery in Guadalajara and began producing thousands of 
cans stamped "Comadre Jalapenos," stuffing them with cocaine, then 
vacuum-sealing them and shipping them to Mexican-owned grocery stores 
in California. He sent drugs in the refrigeration units of 
tractor-trailers, in custom-made cavities in the bodies of cars and 
in truckloads of fish (which inspectors at a sweltering checkpoint 
might not want to detain for long). He sent drugs across the border 
on freight trains, to cartel warehouses in Los Angeles and Chicago, 
where rail spurs let the cars roll directly inside to unload.

He sent drugs via FedEx.

But that tunnel into Douglas remains Chapo's masterpiece, an emblem 
of his creative ingenuity.

Twenty years on, the cartels are still burrowing under the border - 
more than a hundred tunnels have been discovered in the years since 
Chapo's first.

They are often ventilated and air-conditioned, and some feature 
trolley lines stretching up to a half-mile to accommodate the tonnage 
in transit.

You might suppose that a certain recklessness would be a prerequisite 
for anyone contemplating a career in the drug trade.

But in reality, blue-chip traffickers tend to fixate, with neurotic 
intensity, on the concept of risk. "The goal of these folks is not to 
sell drugs," Tony Placido, who was the top intelligence official at 
the D.E.A. until he retired last year, told me. "It's to earn a 
spendable profit and live to enjoy it." So the smart narcos are 
preoccupied with what Peter Reuter and Mark Kleiman once referred to, 
in a classic essay on the drug business, as "the marginal 
imprisonment risk." In 2010, Chapo's old friend Ismael (El Mayo) 
Zambada, the No. 2 man in the Sinaloa cartel, granted an interview to 
the Mexican magazine Proceso. Now in his 60s and a grandfather, El 
Mayo has been in the drug business for nearly half a century and has 
amassed a fortune.

But you can't buy peace of mind. "I'm terrified they'll incarcerate 
me," he acknowledged. "I'm full of fear. Always."

There's a reason coke and heroin cost so much more on the street than 
at the farm gate: you're not paying for the drugs; you're 
compensating everyone along the distribution chain for the risks they 
assumed in getting them to you. Smugglers often negotiate, in 
actuarial detail, about who will be held liable in the event of lost 
inventory. After a bust, arrested traffickers have been known to 
demand a receipt from authorities, so that they can prove the loss 
was not because of their own negligence (which would mean they might 
have to pay for it) or their own thievery (which would mean they 
might have to die). Some Colombian cartels have actually offered 
insurance policies on narcotics, as a safeguard against loss or seizure.

To prevent catastrophic losses, cartels tend to distribute their risk 
as much as possible.

Before sending a 100-kilo shipment across the border, traffickers 
might disaggregate it into five carloads of 20 kilos each. Chapo and 
his associates further reduce their personal exposure by going in 
together on shipments, so each of those smaller carloads might hold 
10 kilos belonging to Chapo and 10 belonging to Mayo Zambada. The 
Sinaloa is occasionally called the Federation because senior figures 
and their subsidiaries operate semiautonomously while still employing 
a common smuggling apparatus.

The organizational structure of the cartel also seems fashioned to 
protect the leadership. No one knows how many people work for 
Sinaloa, and the range of estimates is comically broad.

Malcolm Beith, the author of a recent book about Chapo, posits that 
at any given moment, the drug lord may have 150,000 people working 
for him. John Bailey, a Georgetown professor who has studied the 
cartel, says that the number of actual employees could be as low as 
150. The way to account for this disparity is to distinguish between 
salaried employees and subcontractors. A labor force of thousands may 
be required to plow all that contraband up the continent, but a lot 
of the work can be delegated to independent contractors, people the 
Mexican political scientist and security consultant Eduardo Guerrero 
describes as working "for the cartel but outside it."

Even those who do work directly for the cartel are limited to 
carefully compartmentalized roles.

At a recent trial, a regional cartel lieutenant, Jose Esparza, 
testified about his experience working for the Sinaloa along the border.

On one occasion, he attended a meeting outside Culiacan with many of 
the cartel's top leaders. But there was no sign of Chapo. Once the 
discussion concluded, an emissary left the group and approached a 
Hummer that was parked in the distance and surrounded by men with 
bulletproof vests and machine guns, to report on the proceedings. 
Chapo never stepped out of the vehicle.

It's not just the federales that the narcos fear; it's also one 
another. The brutal opportunism of the underworld economy means that 
most partnerships are temporary, and treachery abounds.

For decades, Chapo worked closely with his childhood friend Arturo 
Beltran Leyva, a fearsome trafficker who ran a profitable subsidiary 
of Sinaloa. But in 2008, the two men split, then went to war, and 
Beltran Leyva's assassins were later blamed for murdering one of 
Chapo's sons. To reduce the likelihood of clashes like these, the 
cartel has revived an unlikely custom: the ancient art of dynastic marriage.

Chapo's organization is occasionally referred to as an alianza de 
sangre ("alliance of blood"), because so many of its prominent 
members are cousins by marriage or brothers-in-law. Emma Coronel, who 
gave birth to Chapo's twins, is the niece of Nacho Coronel, the Steve 
Jobs of meth (who died in a shootout with the Mexican Army in 2010). 
All of this intermarriage, one U.S. official in Mexico suggested to 
me, functions as "a hedge against distrust." An associate may be less 
likely to cheat you, or to murder you, if there'll be hell to pay 
with his wife. It's a cynical strategy, certainly, but in a vocation 
where one of Chapo's rivals went by the nickname Mata Amigos, or 
"Friend Killer," it may also be quite sound.

The surest way to stay out of trouble in the drug business is to dole 
out bribes, and promiscuously. Drug cartels don't pay corporate 
taxes, but a colossus like Sinaloa makes regular payments to the 
federal, state and municipal authorities that may well rival the 
effective tax rate in Mexico. When the D.E.A. conducted an internal 
survey of its top 50 operatives and informants several years ago and 
asked them to name the most important factor for running a drug 
business, they replied, overwhelmingly, corruption. At a trial in 
2010, a former police official from Juarez, Jesus Fierro Mendez, 
acknowledged that he had worked for Sinaloa. "Did the drug cartels 
have the police on the payroll?" an attorney asked.

"All of it," Fierro Mendez replied.

The cartel bribes mayors and prosecutors and governors, state police 
and federal police, the army, the navy and a host of senior officials 
at the national level.

After an arrest for drug trafficking in the 1990s, Chapo was 
sentenced to 20 years and shipped to Puente Grande, a fortified 
prison in Jalisco that was Mexico's answer to a supermax. But during 
the five years he spent there, Chapo enjoyed prerogatives that make 
the prison sequence in "Goodfellas" look positively austere. With 
most of the facility on his payroll, he is said to have ordered his 
meals from a menu, conducted business by cellphone and orchestrated 
periodic visits by prostitutes, who would arrive aboard a prison 
truck driven by a guard.

I spoke with one drug producer who negotiated a joint venture deal 
with Chapo while he was behind bars. Eventually, as the story goes, 
Chapo was smuggled out in a laundry cart. According to Martinez's 
testimony, he paid more than $3 million to secure his release.

Today, Chapo is a free man, Puente Grande's warden only recently 
completed a jail sentence for letting him go and Mexicans call the 
prison Puerta Grande - the Big Door.

The tacit but unwavering tolerance that Mexican authorities have 
shown for the drug trade over the years has muddled the boundaries 
between outlaws and officials.

When Miguel Angel Martinez was working for Chapo, he says, "everyone" 
in the organization had military and police identification. Daylight 
killings are sometimes carried out by men dressed in police uniforms, 
and it is not always clear, after the fact, whether the perpetrators 
were thugs masquerading as policemen or actual policemen providing 
paid assistance to the thugs.

On those occasions when the government scores a big arrest, 
meanwhile, police and military officials pose for photos at the 
valedictory news conference brandishing assault weapons, their faces 
shrouded in ski masks, to shield their identities. In the trippy 
semiotics of the drug war, the cops dress like bandits, and the 
bandits dress like cops.

When you tally it all up, bribery may be the single largest line item 
on a cartel's balance sheet.

In 2008, President Felipe Calderon's own drug czar, Noe Ramirez, was 
charged with accepting $450,000 each month. Presumably, such 
gargantuan bribes to senior officials cascade down, securing the 
allegiance of their subordinates. "You have to recruit the high 
commands, so they can issue the information to lower ranks and order 
whatever they want," the corrupt cop, Fierro Mendez, testified. But 
in key jurisdictions, the cartel most likely makes payments up and 
down the chain of command.

In a 2010 speech, Genaro Garcia Luna, Mexico's secretary of public 
security, speculated that together, the cartels spend more than a 
billion dollars each year just to bribe the municipal police.

It's not only officials who must be bribed, either.

There are also the "falcons," an army of civilian lookouts who might 
receive $100 a month just to keep their eyes open and make a phone 
call if they notice an uptick in border inspections or a convoy of 
police. "There are cities in Mexico where virtually every cabdriver 
is on the payroll," Michael Braun, formerly of the D.E.A., said. 
"They have eyes and ears everywhere."

And then there are the Americans. Guards at the U.S. border have been 
known to wave a car through their checkpoints for a few thousand 
dollars, and since 2004, there have been 138 convictions or 
indictments in corruption investigations involving members of the 
United States Customs and Border Protection. Paradoxically, one 
explanation for this state of affairs is the rapid expansion of 
border forces following the creation of the Department of Homeland 
Security. In their hurry to fortify the U.S.-Mexico boundary with 
uniformed personnel, it seems, officials may have made allowances on 
background checks and screenings. In some instances, job offers have 
been extended to the immediate relatives of known traffickers.

When corruption fails, there is always violence.

During the 12 years that he worked for the cartel, Martinez claims 
that he did not carry a gun. But Sinaloa has risen to pre-eminence as 
much through savagery as through savvy. "In illegal markets, the 
natural tendency is toward monopoly, so they fight each other," 
Antonio Mazzitelli, an official with the United Nations Office on 
Drugs and Crime in Mexico City, told me. "How do they fight: Go to court?

Offer better prices?

No. They use violence." The primal horror of Mexico's murder epidemic 
makes it difficult, perhaps even distasteful, to construe the 
cartel's butchery as a rational advancement of coherent business 
aims. But the reality is that in a multibillion-dollar industry in 
which there is no recourse to legally enforceable contracts, some 
degree of violence may be inevitable.

"It's like geopolitics," Tony Placido said. "You need to use violence 
frequently enough that the threat is believable. But overuse it, and 
it's bad for business."

The most gratuitous practitioners of violence right now would be the 
Zetas, a rampaging league of sociopaths with a notable devotion to 
physical cruelty.

The Zetas are a new kind of cartel, in that they came somewhat late 
to the actual business of smuggling drugs.

They started out as bodyguards for the Gulf Cartel before going into 
business for themselves, and they specialize in messaging through 
bloodshed. It's the Zetas who are charged with dumping 49 mutilated 
bodies by the side of a highway near Monterrey last month.

Sinaloa is responsible for a great deal of carnage as well, but its 
approach to killing has traditionally been more discreet.

Whereas a Sinaloa subsidiary allied with a Tijuana farmer known as 
the Stewmaker, who dissolved hundreds of bodies in barrels of lye, 
the Zetas have pioneered a multimedia approach to violence, touting 
their killings on YouTube. One strategic choice facing any cartel is 
deciding when to intimidate the civilian population and when to 
cultivate it. Sinaloa can be exceedingly brutal, but the cartel is 
more pragmatic than the Zetas in its deployment of violence.

It may simply be, as one Obama administration official suggested, 
that the Sinaloa leadership is "more conscious of their brand."

It's a curious rivalry between these two organizations, because their 
business models are really very different.

The Zetas have diversified beyond drugs to extortion, kidnapping and 
human trafficking, blossoming into what officials call a 
"polycriminal organization." Sinaloa, by contrast, has mostly tended 
to stick to its core competence of trafficking. According to one 
captured cartel member, Chapo specifically instructed his 
subordinates not to dabble in protection rackets and insisted that 
Sinaloa territory remain "calm" and "controlled."

"Sinaloa does not do extortion directly," Eduardo Guerrero said. 
"It's so risky, and the profits are so small.

They want the big business - and the big business is in the United States."

Just how active the cartel is north of the border is a divisive 
question. According to the Department of Justice, by 2009, 
Mexican-based criminal organizations were operating in "more than a 
thousand U.S. cities." When you consider the huge jump in the price 
of narcotics between bulk importation and retail sales, it might seem 
that Chapo would want to expand into street-level distribution. In 
2005, the D.E.A. began intercepting large shipments of cocaine in 
which each kilo brick was heat-sealed in a distinctive Mylar foil. 
They spotted the foil in Los Angeles first, then in Oklahoma, 
Chicago, Atlanta and New Jersey. "This was Sinaloa coke," Michael 
Wardrop, who led two of the agency's most ambitious operations 
against the domestic networks of the cartel, told me. As the telltale 
wrapping popped up across the country, Wardrop and his colleagues 
marveled at the sheer expanse of Sinaloa's market. "It was like 
watching a virus in a Petri dish," he said. "It was constantly growing."

Wardrop's investigations netted more than a thousand arrests.

But some observers question the extent to which the perpetrators in 
these cases were actually working for the cartel. "If you're telling 
me there's a straight chain of command back to El Chapo in Sinaloa - 
come on, that's absurd," the Mexican ambassador, Arturo Sarukhan, 
protested. Often, the gatekeepers and logistics men that the D.E.A. 
arrested were indeed connected to handlers in Mexico. But this was 
more true of high-level importers dealing in kilos than 
run-of-the-mill retailers pushing grams.

When The Associated Press tracked down Otis Rich, a Baltimore dealer 
who was ensnared in one of the operations, he answered the obvious 
question with a telling reply: "Sina-who?"

"The fully integrated model would indeed maximize profits," John 
Bailey observes in a coming book about the cartels, but "it also 
maximizes risk of exposure." A big reason for the markup at the 
retail level is that the sales force is so exposed - out on the 
corner, a magnet for undercover cops, obliged to negotiate with a 
needy, unpredictable clientele.

When you adjust for all that added risk, the windfall starts to seem 
less alluring.

Like a liquor wholesaler who opts not to open a bar, Chapo appears to 
have decided that the profits associated with retail sales just 
aren't worth the hassle.

What Sinaloa does do inside this country is ferry drugs along 
highways to regional distribution hubs, where they are turned over to 
trusted wholesalers, like the Flores twins of Chicago. Pedro and 
Margarito Flores grew up in a Mexican-American enclave of the city 
during the 1990s. Their father and an older brother had moved drugs 
for Sinaloa, and by the time the twins were in their 20s, they had 
gone into business as distributors, purchasing cocaine and heroin 
directly from Mexican cartels, then selling to dealers throughout the 
United States. Chicago, home of the Mercantile Exchange, has always 
been a hub from which legitimate goods fan out across the country, 
and it's no different for black-market commodities. Chapo has used 
the city as a clearinghouse since the early 1990s; he once described 
it as his "home port."

In 2005, the Flores twins were flown to a mountaintop compound in 
Sinaloa to meet with Chapo Guzman. The kingpin is an intimidating 
interlocutor; one criminal who has negotiated with him face to face 
told me that Chapo tends to dominate a conversation, asking a lot of 
questions and compensating for his short stature by bouncing on the 
balls of his feet. But the meeting went well, and before long, the 
brothers were distributing around two tons of Sinaloa product each 
month. As preferred customers, they often took Chapo's drugs without 
putting any money down, then paid the cartel only after they sold the 
product. This might seem unlikely, given the pervasive distrust in 
the underworld, but the narcotics trade is based on a robust and 
surprisingly reliable system of credit.

In a sense, a cartel like Sinaloa has no choice but to offer a 
financing option, because few wholesale buyers have the liquidity to 
pay cash upfront for a ton of cocaine. "They have to offer lines of 
credit," Wardrop told me, "no different from Walmart or Sears."

This credit system, known as "fronting," rests on an ironclad 
assumption that in the American marketplace, even an idiot salesman 
should have no trouble selling drugs.

One convicted Sinaloa trafficker told me that it often took him more 
time to count the money he collected from his customers than it did 
to actually move the product.

It may also help that the penalty for defaulting could involve dismemberment.

As wholesale buyers, the Flores brothers occupied a crucial 
bottleneck between the cartel and its consumers.

They grew so indispensable, in fact, that after taking delivery of a 
shipment of drugs, they could retroactively bargain down the price.

One day in 2008, Pedro Flores telephoned Guzman in Mexico to ask for 
a discount on heroin.

"What did we agree on?" Chapo asked him, according to a government 
transcript of the call.

They had negotiated a price of $55,000 per kilo, Flores explained. 
But if Chapo would consider lowering that to $50,000, the twins could 
pay immediately.

"That price is fine," Chapo agreed, without argument.

Then he added something significant: "Do you have a way to bring that 
money over here?"

For the Sinaloa cartel, pushing product north into the United States 
is only half the logistical equation.

The drug trade is a cash business - you can't buy kilos with your 
credit card. So while politicians tend to focus on cartels primarily 
as importers of drugs, the narcos also devote an enormous amount of 
energy to the export of money. Cash is collected in small 
denominations from individual buyers and then bundled in great stacks 
of broken-in bills that are used to pay wholesalers, like the Flores brothers.

These bills are counted, hidden in the same vehicle compartments that 
were used to smuggle drugs in the opposite direction and then sent to 
stash houses in Los Angeles, San Diego and Phoenix. From there, they 
move across the border into Mexico.

What happens to the money when it gets there?

The cartel employs professional money launderers who specialize in 
drug proceeds, and according to Robert Mazur, a former D.E.A. agent 
who infiltrated the Colombian cartels, the fee for fully scrubbing 
and banking illicit proceeds may run Sinaloa more than 15 cents on the dollar.

But a great deal of the cartel's money remains in cash. In the early 
1990s, a Sinaloa accountant sent planeloads of U.S. currency to 
Mexico City in suitcases holding $1 million each. When Miguel Angel 
Martinez worked for Chapo, the kingpin would test his loyalty, adding 
an extra $200,000 to one of the suitcases to see if Martinez would 
pocket it. "Eight suitcases, compadre, so that is $8 million," he 
would say. (Martinez never fell for the trick.) A sizable share of 
the cash is devoted to paying bribes, and some is sent to Colombia to 
purchase more product, because drugs offer a strong return on 
investment. "Where would you put your money?" the former Cisen 
officer Alejandro Hope asked me with a chuckle. "T-bills? Real estate?

I would put a large portion of my portfolio in cocaine."

Even so, the business generates such volumes of currency that there 
is only so much you can launder or reinvest, which means that money 
can start to pile up around the house.

The most that Martinez ever saw at one time was $30 million, which 
just sat there, having accumulated in his living room. In 2007, 
Mexican authorities raided the home of Zhenli Ye Gon, a 
Chinese-Mexican businessman who is believed to have supplied 
meth-precursor chemicals to the cartel, and discovered $206 million, 
the largest cash seizure in history.

And that was the money Zhenli held onto - he was an inveterate 
gambler, who once blew so much cash in Las Vegas that one of the 
casinos presented him, in consolation, with a Rolls-Royce. "How much 
money do you have to lose in the casino for them to give you a 
Rolls-Royce?" Tony Placido, the D.E.A. intelligence official, asked. 
(The astonishing answer, in Zhenli's case, is $72 million at a single 
casino in a single year.) Placido also pointed out that, as a 
precursor guy, Zhenli was on the low end of the value chain for meth. 
It makes you wonder about the net worth of the guy who runs the whole show.

In 2008, the Flores twins were indicted in Chicago and began secretly 
cooperating with law enforcement. The following year, one of their 
Sinaloa contacts - a debonair young trafficker named Jesus Vicente 
Zambada Niebla, or Vicentillo - was arrested in Mexico and later 
extradited to Chicago. He will be the highest-ranking member of the 
cartel ever to face trial in the United States, and his favorite 
wholesale customers will be the star witnesses against him. In a 
surprise twist, Vicentillo (who is the son of Chapo's partner, Mayo 
Zambada) has argued that he can't be prosecuted - because even as he 
worked for Sinaloa, he was also a secret informant for the D.E.A.

There has been speculation in Mexico that the Calderon regime favors 
Sinaloa over the unhinged Zetas and has made a devil's pact to lay 
off the cartel.

It might be impossible to eradicate all the cartels in Mexico, this 
theory goes, so the government has picked a favorite in the conflict 
in the hope that when the smoke clears, a Sinaloa monopoly might 
usher in a sort of pax narcotica.

A 2010 National Public Radio investigation of Mexican arrest 
statistics found that Sinaloa had suffered conspicuously fewer 
arrests than had its peers, though this could simply be evidence of 
triage on the government's part rather than proof of a conspiracy. 
Calderon vehemently denies any charges of favoritism, and his 
administration has arrested or killed several of Chapo's key deputies 
in the last few years. (My repeated requests for interviews with 
relevant officials in Mexico were denied.)

The suggestion that the D.E.A. might have made a deal with a 
high-ranking Sinaloa figure is new, however.

In the past, Chapo has occasionally authorized employees to provide 
information to American law enforcement. Fierro Mendez, the Juarez 
cop, described a system in which junior traffickers would walk into 
U.S. Immigration and Customs Enforcement and announce their 
willingness to become informers - then feed the Americans 
intelligence about rival cartels, thereby using law enforcement to 
eliminate their competitors. U.S. officials allow that there were 
discussions between the D.E.A. and Vicentillo, but they deny that any 
quid pro quo was in place.

The trial, which is scheduled for October, should shed significant 
light on Sinaloa's logistical apparatus - provided the witnesses can 
stay alive until then. Recently, a career criminal named Saul 
Rodriguez testified that Vicentillo solicited his help at the 
Metropolitan Correctional Center in downtown Chicago, where they were 
both being held, in an effort to have the Flores twins assassinated. 
Authorities have expressed concern that the cartel might undertake a 
daring jailbreak to get Vicentillo out. They have also voiced the 
opposite worry - that Vicentillo will himself be killed.

A request by the trafficker's attorneys that he be permitted to 
exercise outdoors raised concerns from prison officials, because the 
only open space at the prison is a fenced-in recreation area on top 
of the building, where Vicentillo could be picked off by a sniper. 
(He has since been moved to a more secure facility.)

It might seem far-fetched that the cartel would try to assassinate 
one of its own, the son of Mayo Zambada, no less. But Sinaloa guards 
its secrets ruthlessly. After Chapo's friend Miguel Angel Martinez 
was arrested in 1998, four men came to kill him in prison, stabbing 
him repeatedly. In that assault, and another that followed, he 
sustained more than a dozen stab wounds, which punctured his lungs, 
pancreas and intestines. After the second attack, he was moved to 
another facility and kept in a segregated unit. This time, an 
assassin managed to get as far as the gate outside Martinez's cell 
and chucked two grenades at the bars. Locked in with nowhere to run, 
Martinez could only cower by the toilet to shield himself from the 
blast. The roof caved in, and he barely survived.

Asked later who it was that tried to have him killed, Martinez said 
that it was his compadre, Chapo Guzman. "Because of what I knew," he 
explained. (Today he is living in witness protection in the United States.)

Between the coming trial and the increased political drumbeat on both 
sides of the border for his capture, Chapo may be more embattled 
today than at any time in his career.

In February, he escaped a raid by Mexican authorities in the resort 
area of Los Cabos. President Calderon's party is trailing in the 
polls, and some have theorized that the only way it might manage to 
retain power after next month's presidential election would be if 
Chapo is killed or captured.

U.S. authorities, meanwhile, are uncertain about who might succeed 
Calderon - Vice President Joe Biden met with all of the leading 
candidates on a visit to Mexico in March - and whether that successor 
will have any appetite to continue battling the cartels.

With so many dead and so little progress, the Mexican populace has 
grown war-weary. Several U.S. officials told me that the critical 
window for capturing Chapo is between now and when Calderon leaves office.

In addition to the threat of capture, there is the threat of 
competition. By some estimates, the Zetas now control more Mexican 
territory than Chapo does, even if they don't move nearly as many 
drugs. Zeta gunmen have made bloody incursions on Chapo's turf, going 
so far as to penetrate the previously inviolable stronghold of his 
own home state, Sinaloa. In 2008, Chapo's lover, Zulema Hernandez, 
was discovered dead in the trunk of a car, her body carved with the 
letter "Z." "It's like the evolution of the dinosaurs, and the coming 
of the T. Rex," Antonio Mazzitelli told me. "The T. Rex is the Zetas."

Chapo and his colleagues were never peaceful types; in the last few 
years, they have waged vicious wars of acquisition to seize the 
lucrative smuggling routes through Juarez and Tijuana. But to fend 
off the Zetas, Sinaloa is resorting to new levels of barbarism.

In March, the cartel dumped a collection of dismembered bodies in 
Zeta territory and posted a series of open letters on the walls 
around them, deriding the Zetas as "a bunch of drunks and 
car-washers." Each message was signed, "Sincerely, El Chapo."

One thing Chapo has always done is innovate.

Even as he engages in violent brinkmanship along the border, the 
cartel is expanding to new markets in Europe, where a kilo of cocaine 
can sell for three times what it does in the U.S., and in Australia, 
where authorities believe that Chapo is now a major cocaine supplier.

There are also indications that the cartel is exploring opportunities 
in Southeast Asia, China and Japan - places Chapo and Martinez first 
visited as younger men. And Chapo's great comparative advantage still 
lies along that fraught boundary between Mexico and the United 
States. Even if the kingpin is killed or captured, one of his 
associates will quite likely take his place, and the smuggling 
infrastructure that Chapo created will endure, channeling the 
product, reaping the profits and feeding, with barely a blip in 
service, the enduring demand on this side of the border - what the 
historian Hector Aguilar Camin once referred to as "the insatiable 
North American nose."

Editor: Greg Veis
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MAP posted-by: Jay Bergstrom