The Mechanism and the Wire

Through a brief walk in history, I outline how the lines between Latin America’s licit and illicit economic actors have blurred. This piece is the first of five for Three Challenges and Two Opportunities in Latin America.

In 2018, the COO of a gold mining company was tense and tight-lipped at a breakfast in Mexico City. The past several months had tested his resolve and desire to manage a gold production mine in Southern Mexico, where the combustible mix of communities, unions, and organized crime had brought his production schedule to a standstill, and for too long. It threatened to do so again. I didn’t know it at the time, but he was already planning his exit.

His replacement, a veteran mine operator with no prior experience in Mexico, asked us “not to pull any punches” when we set a meeting in late 2018 to describe the local chaos that surrounded the Mexican property. Fifteen minutes into the conversation, held inside a glass-walled meeting room on the 45th floor of a Toronto business tower, the new COO asked for a minute “take a moment and clear my head.”

Since 2004, I have worked closely with executives in the mining, oil and gas, and manufacturing sectors across Latin America, helping them understand their environment first, and, second, how to navigate the complex intersection of interests around workers, politicians, criminals, and their employees.?

As I have marked the passage of cycles of political leadership, I continue to watch a decades’ old trend that – as recently as the last round of Colombian presidential elections – surges forward like an undertow current that threatens to pull business leaders into deep water unless they are prepared.?

Since the early 1990s, deviant economic activity in Latin America has increased at pace with profitability derived from the sale of commodities – the region’s economic bread and butter. As the price of oil and metals, meat, legumes, fruit and other goods has either remained stable or risen, distortions aside, there has been a tendency for illicit actors to penetrate these markets, networks, and relationships.?

Yet the region’s political leaders have not sustainably pushed against this deviant economic activity.? And they cannot, I argue in this article, because the political, social, and monetary capital required to lift and maintain these efforts is greater than the sum total of resources – political and liquid capital – available. The net result often feels like sálvese quien pueda.?

Save yourself if you can.

“Ok, so tell me again about these self-defense communities,” the new COO said after taking some time to get clear.?

The following two hours of conversation brought us through the high points of geopolitical history in Latin America to provide broad context for the violence, social upheaval, and the motivations of apparently self-immolating political leadership. We settled on one bottom line truth: the line between smart, honest business interests and criminal intent was too blurry to be seen by the untrained eye. We agreed that this mining executive’s need to cleanly and clearly manage business operations in Mexico, and at sites across Latin America, must be managed in a chaotic and often unpredictable environment. We agreed that in the moment it all felt a little overwhelming, but resolve remained.

“Overwhelming now, but always profitable over time,” were the last words shared before leaving the tower and turning to focus on the next thing. The executive had a mine to run. My job was to keep it out of trouble.

A brief walk through time

For over 100 years, Washington has been both the lead investor and primary antagonist for the well being of Latin America and its people. History counts high and low points, but lately I’ve observed a gradual ebb of interest and Washington-led investment. I cannot remember a time in the past 30 years when the United States has been less interested in Latin America’s well being. The region has been largely left to its own devices. Though signs of strong leadership and level-headed economic decisions surface now and again, predominant trends of self-serving governance spin the region in the opposite direction.?

In the early 2000s, as the region found its post Cold War footing, the deviant side of Mexico’s economy remained focused on one thing: running drugs. But then the summer of 2005 happened. I remember that summer as the moment when Mexico went off the rails. Military-trained operators in the service of criminal masters banged it out with high powered rifles, explosives, high-tech communications equipment. YouTube-fueled psyops that often looked more like insurgent warfare than inter-cartel skirmishes. Decapitation was no longer the purview of Islamic extremism. We called it a “CNN effect.”

But Mexico was not the only country to burn in the early 2000s. Peru, Bolivia, Ecuador and Colombia also saw fire. So did Brazil. Eventually El Salvador, Guatemala, and Honduras backed into a place that looked more like the civil wars of the 1980s than the promise of peace offered by a return to Democracy in the 1990s. The 2000s saw pockets of the entire region fall into extended months, or years, of unprecedented levels of violence.?

To be clear here: violence is a symptom of deeper root causes linked to poverty, inequality, and weak democratic institutions. Yet violence receives the most attention because immediate cessation of bloodshed brings immediate relief. Unfortunately, root causes are rarely touched.?

By the summer of 2005, when Mexico went off the rails, the multi-national criminal enterprises that moved cocaine, heroin, and other illicit products around the Western Hemisphere had vertically integrated from leaf to nostril: from the farmgate supply in the Andes to street corners all over the world. The pressure applied by Plan Colombia, a Washington-driven drug war strategy to reduce the supply of cocaine in Andean countries,? had netted unintended results. Rather than stop the flow of cocaine north, Plan Colombia contributed to a fragmentation of Mexico’s hierarchical criminal family

The result of this atomizing effect was a new constellation of five powerful entities and their corresponding second- and third-tier loyalists hell bent on destroying one another. These entities were: the Sinaloa Federation, the Arellano-Felix Organization, the Beltran-Leyva Organization, the Gulf Cartel, and the Juarez Cartel. It was the perfect storm. The combined economic resources, political capital, and social soft power accumulated by the Warlord Entrepreneurs who ran these conglomerates rivaled that of the men and women who had been voted into office to stop them.

The Wire

Meanwhile, an acute desire to prevent the social malaise that for years had plagued the city of Baltimore, Maryland as chronicled in HBO’s acclaimed police drama, The Wire, motivated Washington’s politicians to push as hard as they could against their counterparts to the South.?

Among other soft power tactics, Washington doubled-down on Plan Colombia with a Guayabera-decorated handshake in October 2007 that sealed the Mérida Initiative, also known as Plan Mexico. Within months, an unprecedented level of cooperation between Mexican and American law enforcement and military scored a series of significant arrests and extraditions, further breaking up Mexico’s powerful drug-trafficking corporations. Black market economics, however, reinforced an ancient human truth: power abhors a vacuum. So new, smaller organizations quickly fell into place and continued the fight – and the business – with fresh legs and deeper determination for domination.?

A monopoly on the lethal use of force was no longer the sole purview of law enforcement and military in Mexico. And it hasn’t been since. The turbulence generated by distorting and disrupting the region’s drug trade has, so far, netted far more negative externalities than it has won trophies for its architects.?

Later this year, I will explore two of these elements: self-sufficient cycles of violence, and greater social space for the rise of Latin America’s leftist-populist leaders. So let’s press on.

Largely ignoring the violence among them and their people, populist leaders have – since the early 2000s – pushed against, hollowed out, or simply destroyed the democratic institutions that Washington had established in the preceding several decades to win hearts and minds away from Soviet-styled Socialism during the Cold War.

Through the 2010s, violence across Latin America’s cities grew deep roots into marginalized communities that often bordered the region’s capitals and economic centers. It was as if elected officials simply cared too little for the most needy communities, or as was the case of one elected Mexican official, simply left and never came back.

“Take a good look at this face,” the young Mexican federal representative for a tiny section of northern Veracruz said to a small crowd at the end of his victory speech in late 2000. “Take a good look at this face because you’re never going to see it again.” (Quoted from, “The Executioner’s Men,” a book I co-authored on Mexico’s Los Zetas criminal organization with the late George Grayson).

I think the most dramatic, and beautiful, pockets of humanity that lived within this aloof political sentiment found community in the favelas, or slums, of Rio de Janeiro. The externalities of the War on Drugs impacted networks North of Colombia, through Central America and into Mexico. It also impacted networks South of Colombia, into Brazil, where Rio-based street gangs cut arms-for-cocaine deals with Colombia’s FARC among other global aspirations. Sometimes even politicians got involved. Most of the time, the most aggressive and abusive group was not a street gang but the military police commandos trained to kill them.

The 2002 film, Cidade de Deus, and the 2007 film Elite da Tropa, dramatized the history of misery and beautiful community in Brazil’s favelas. These films also revealed how the urban insurgent battles between the cops and the robbers through these neighborhoods and sprawling suburbios pitted a diffused and heart-felt sentiment that stealing bread is not a crime when you’re hungry against the steely-eyed law enforcement disposition that replied, “a good thief is a dead one.”

Criminal entrepreneurs represented that first step in a life of crime – to steal bread – that many young men and women across the region took. Most didn’t survive past the age of 20, but if they did, a world of opportunity opened up to them. Colombia’s Pablo Escobar, Brazil’s Fernandinho Beira-Mar, and Mexico’s Joaquin “El Chapo” Guzman are all examples of the boys who made it, until they didn’t. Like soccer stars, these men became legends and the heroes of boys of a younger generation. Politicians never did.

But basic needs like hunger and shelter were not always gateways to a life of crime. Crime is social-class agnostic. Corruption and democratic institutions are not like oil and water. Corruption dissolves easily and quickly into the halls and board rooms where governance and regulation meet big business. And the longer it is allowed to remain, the more corruption defines the institution, not just change its flavor.?

The Mechanism

As an unprecedented level of violence continued to rock Mexico in the 2010s, one Federal Police agent in Brazil assiduously pushed against a nationwide network of racketeering and corrupt influence. It looked something like an ant trying to lift the foot of an elephant. But when he convinced a Federal judge to get involved, the elephant toppled, and in the Spring of 2014, the world woke up to read about Opera??o Lava Jato. Years later, Netflix would dramatize this federal agent’s experience with a mini-series entitled, O Mecanismo.

Thousands of arrest warrants and millions of dollars of investigative time and effort later, this one operation would uncover the largest network of corruption in Brazilian history. But it didn’t stop at Brazil’s borders. Operation Car Wash, as it was known in English, touched just about every government meeting room where the leadership of Brazil’s engineering juggernaut Odebrecht had engaged in public sector infrastructure projects all over Latin America.?

The Car Wash investigation toppled previously untouchable political and business leaders. It brought Brazil’s political class to its knees. The Lava Jato fall out forced the removal of one of South America’s most powerful and deeply entrenched political parties at that time, the Partido dos Trabalhadores (PT), ending a 13-year reign in 2019 when the Brazilian Senate removed President Dilma Rouseff from office. Her dismissal, and the resulting political upheaval that followed, would be credited with creating the political space that enabled Brazil’s first conservative populist to rise to relevance, and eventually the presidency.

Opera??o Lava Jato reminded us that the region’s deviant actors didn’t always wear snakeskin boots and carry gold and ivory trimmed .40 caliber pistols.?

The rural, shotgun-toting self defense farmers, or semi-automatic pistol slinging street kids, or even the tactically fitted, heavily armed cartel gunmen are all in their minority when stacked side-by-side with the men and women who lie, cheat, and bend the rules to justify stealing from the people to gather up power and control. The former are the loudest and most bloody. The latter are the most dangerous because they hide in plain sight. Corporate executives trying to manage licit enterprises sometimes do not see them coming until it's too late.

The net result of history, The Wire, and The Mechanism must be all viewed as just pieces of a broader recipe that has resulted in the current state of play in Latin America. Many left-leaning, populist administrations currently in power across the region have taken, or will take, a full step back from the direct confrontation approach to dealing with organized crime. Arrangements are more expedient and cheaper politically than conflict.

So where do we go from here??

I’ll conclude with a quick antidote. Earlier this year I was on a call with a Bogotá-based lawyer who for decades has kept one foot in the world of international litigation and justice and the other in Colombia’s shadowy world of organized crime. We had connected over a mutual interest in helping his client find a path to the United States where he could exchange information and time in a prison for freedom from his life of violence in Colombia. After some back and forth about what was required to make the deal happen, I listened to the lawyer state that everything came down to the upcoming election. “My client has an arrangement with Petro,” the lawyer said, “so if Petro wins we are not going to worry about anything.”?

“There will be no deal,” he said, flatly.?

His client is one of Colombia’s most powerful criminal warlords, who was so concerned about Petro’s competitor, Rodolfo Hernandez, that he was considering extradition, and a deal with the US government – information for a more lenient sentence. Days later, Colombians turned a page in history by electing the country’s first leftist president. There will be little to no deals with the US government to extradite Colombia’s most successful criminal minds. They all bet on the horse that won.

These blurred lines are not going away. They exist because this is how Latin America operates. Indeed, it is how most of the rest of the world operates. Success in Latin America comes with understanding the system, working through it – not against it – and managing all the while the right orchestra of relationships. Operational continuity requires an open-eyed understanding and – likely – relationship with both licit and illicit economic actors. If history has anything to tell us about the future, it’s clear to see that this reality is not going to change anytime soon.