Thursday, October 08, 2009

Domestic pot production best strategy to reduce cartel profits?

It appears the economic downturn is achieving public policy goals the federal government could otherwise never dream of accomplishing: Reducing illegal immigration and attacking the economic foundations of Mexican drug cartels.

Steep employment declines have dramatically reduced the number of illegal immigrants entering the United States looking for work. And now that nearly one in five (17%) Americans are un- or underemployed, it turns out thousands of them have begun growing and selling pot to those who still have jobs, cutting deeply into market share and profits of foreign drug cartels. Reports the Washington Post ("Cartels face an economic battle," Oct. 7):
Stiff competition from thousands of mom-and-pop marijuana farmers in the United States threatens the bottom line for powerful Mexican drug organizations in a way that decades of arrests and seizures have not, according to law enforcement officials and pot growers in the United States and Mexico.

Illicit pot production in the United States has been increasing steadily for decades. But recent changes in state laws that allow the use and cultivation of marijuana for medical purposes are giving U.S. growers a competitive advantage, challenging the traditional dominance of the Mexican traffickers, who once made brands such as Acapulco Gold the standard for quality.

Almost all of the marijuana consumed in the multibillion-dollar U.S. market once came from Mexico or Colombia. Now as much as half is produced domestically, often by small-scale operators who painstakingly tend greenhouses and indoor gardens to produce the more potent, and expensive, product that consumers now demand, according to authorities and marijuana dealers on both sides of the border.

The shifting economics of the marijuana trade have broad implications for Mexico's war against the drug cartels, suggesting that market forces, as much as law enforcement, can extract a heavy price from criminal organizations that have used the spectacular profits generated by pot sales to fuel the violence and corruption that plague the Mexican state.

While the trafficking of cocaine, heroin and methamphetamine is the main focus of U.S. law enforcement, it is marijuana that has long provided most of the revenue for Mexican drug cartels. More than 60 percent of the cartels' revenue -- $8.6 billion out of $13.8 billion in 2006 -- came from U.S. marijuana sales, according to the White House Office of National Drug Control Policy.

Now, to stay competitive, Mexican traffickers are changing their business model to improve their product and streamline delivery. Well-organized Mexican cartels have also moved to increasingly cultivate marijuana on public lands in the United States, according to the National Drug Intelligence Center and local authorities. This strategy gives the Mexicans direct access to U.S. markets, avoids the risk of seizure at the border and reduces transportation costs.

Reacting to the Post story, Pete Guither sagely observes: "Give the cannabis consumer the choice between “Buy American” and “Mexican brick,” and there’s no doubt they’ll go American."

I had a conversation the other day with reporter Brandi Grissom (formerly of the El Paso Times and now with the soon-to-startup Texas Tribune) about the drug policy conference in El Paso she recently attended. She remarked that many experts at the event thought pot legalization would cripple the cartels and there was wide support for marijuana legalization among attendees (which is probably why the US drug czar and border czar backed out of coming at the last minute). But she also said there was near-universal acknowledgment that the US and certainly Texas politically isn't "ready" to take that leap, which is probably true. What would it take, she asked me, for Texas pols to reach the point where pot legalization might be a real political possibility instead of just the butt of nervous jokes?

I told her I didn't really know, pointing out that in the era of alcohol prohibition, it was public disgust with widespread violence (like the St. Valentine's Day Massacre) and police corruption. But if those factors were enough to change public opinion today, we'd already have legal pot.

This latest news, though, strikes me as potentially setting dynamics in place that provide an economic basis for marijuana legalization, with a California ballot initiative in either 2010 or 2012 as the likely spearpoint. If California legalizes marijuana, generates millions in new tax revenue, and the sky doesn't fall, I'd be surprised if other states don't follow suit (just as many states besides Nevada now allow casino gambling).

Alternatively, assuming marijuana remains illegal but Mexican producers must now manage large-scale marijuana grows within US borders to compete in the American market, it's only a matter of time before they begin to use violence to a) protect their grows and b) attack their economic competitors. At that point, when the cartel-generated body count in the US interior begins to expand, Pete's "Buy American" slogan may start to look pretty good.

Arguably the quickest most effective way to strangle Mexican drug cartel profits would be to legalize domestic US pot producers and allow them to serve a regulated adult market. In short order (just a few growing seasons) it would eliminate 60% of revenue for the biggest, most dangerous organized crime rings in the hemisphere, reduce US-side enforcement costs, generate a large new taxation stream, and contribute to political stability in Mexico.

Will we go that route? I'm not holding my breath. But the idea sure makes a lot of sense and the current economic downturn has created opportunities for changing policies that may have seemed immutable during times of plenty.


Anonymous said...

As a former customs agent who lived in the "Emerald Triangle", my mantra was always, "Buy American."

doran said...

[HT to Doran]?

You're welcome, Grits.

Gritsforbreakfast said...

Sorry Doran, should have given you props. I did see your email but didn't decide to write on it until a bit later, after seeing Pete Guither's item. No disrespect!

Anonymous said...

I'm not surprised the Drug and Border Czars backed out of the conference. Like Prohibition, the War on Drugs is big business here in the States. Given that my grandparents generation were able to finance sending their children to Law and Medical school with the proceeds of what they earned during Prohibition running and selling booze, it was a very profitable enterprise. The US has created a major industry around illegal drugs not to mention the years they used laws to confiscate numerous properties seized from even small dealers and selling them off. It would seem that the government has just as much a vested interest in keeping marijuana illegal as the cartels based on the cash factor alone.

We've already had a good number of cartel murders on American soil over the last few decades. I would suspect because for the most part it's involved those working with the cartels or informants with criminal backgrounds, the deaths have been downplayed. It will probably take an event like a cartel shootout in front of a grammar school with a high death count of students to have the same effect that the St Valentines Massacre once had before the public gives enough outcry to make a change. Even then, I wouldn't count on the idea that legalization to break the cartels would be the route politicians would take. We'd probably see them screaming for more laws and can we impose higher penalties for possession? 25 to life for a single joint?

But I do agree, buy American. The costs of a college education for the little ones is just so much more today and who knows, the child you send to law school today on your earnings as an independent entrepreneur of alternative smoking materials might be the lawyer who defends you in court tomorrow.

Anonymous said...

Pot legalization gains momentum in California

PirateFriedman said...

I think Arnold is definitely the most important politician to consider legalization of pot. It's a milestone, but I'm cautiously pessimistic about this ballot proposal. The pro-legalization side may have the majority now, but the police will use scare tactics before the vote.

Herbert said...

Methamphetamine made a comeback in the 1990s with much of it produced domestically. Over time production shifted to the foriegn cartels and that shift was accelerated when the OTC pills were moved behind the counter.

I wonder if you look at US cocaine consumption over the last 30 years if you see any *ahem* bumps on the graph that correspond to the increase in meth consumption and then later the production shift to Mexico. I'm not sure how you'd get accurate consumption numbers.

Herbert said...

An underlying assumption was that many of the new meth users would have otherwise been using cocaine.

Anonymous said...

I am in total disagreement with your opinion; it’s not even legal yet and your already regulating it; I say put it on the shelf at the convenience store next to the potato chips, the frozen pizza too.

Anonymous said...

It's defacto legal in Cali already. All you need is $100-$200 for an "anxiety ailment" and you've got the legal power to buy some potent weed.

Judges in several Cali cases have ordered cases dismissed the police TO RETURN the pot to those who had prescriptions and were arrested.

Folks in many upscale parts of LA smoke openly walking down the street or at night on the patios of restaurants and cafes. Of course, clubs are more prohibitive of allowing it's consumption in their smoking patios because of their liquor licenses.

A year ago, I was walking down a west LA street in front of a popular local tea/coffee house in mid-afternoon and saw a street cop pleasantly talking with a m-f couple who were openly smoking pot, seated on the patio of the tea house. He bid them a good day after chatting pleasantly with them for a few moments.

I'm not talking about the ghetto here. I'm talking about on Melrose.

Playboy ran an article (really) 30 years ago that held that if legalized, the national debt could be eliminated in just two years from the tax proceeds.

Anonymous said...

Plus, Arnie isn't running for re-election and has nothing to lose.

Doesn't mean the feds won't get uppity though, but it would be interesting if they let California experiment with legalization. The rest of the country already thinks California is a little wacky, so if it can be experimented with anywhere, it's there. If profitable, the feds could roll in to take their share of the money.

Anonymous said...

In case any of you don't know it, Texas already has a pot taxing program in place. You can buy the tax stamps from the State Comptroller's office. At least you used to be able to. I am a stamp collector, so I bought some when the first came out. Very strange looking revenue stamps, they are.

Anonymous said...

In the past, I worked as a cancer nurse, where patients with extreme nausea/vomiting (due to the chemotherapy)reduced their appetites and ability to keep food in their stomachs. They lost so much weight, they were emaciated and just skin and bones. Some had such panic and persistent anxiety from the entire experience with cancer/chemo side effects. The oncologist (cancer doctor) would appropriately recommend marijuana (in pill form)for these instances, and it demonstrated effectiveness in alleviating suffering in these people. I am supportive in legalizing marijuana(if properly regulated), and really feel it is no more dangerous than alcohol. In fact, I would say there is much less of an abuse potential for marijuana than alcohol. Why not legalize and tax the plant? It could be for adult use(those over 21 years), and be a source of revenue for each state. And, I am not a smoker-but feel the benefits outweigh the risks.

doran said...

We probably will not see pot legalized in Texas until a significant number of prosecutors and LE get with the decriminalization program.

I cannot ascribe good intentions at this time to the prosecutorial and LE community who object to the decriminalization of pot. There are simply no rational reasons to continue to spend huge amounts of public money apprehending, prosecuting and "managing" those who are caught in possession of pot. The only reasons to keep on doing this is that to do so provides a level job security for prosecutors and LE.

Anonymous said...

A doobie to you grits.

RAS said...

If they legalize pot will they get off the backs of the tobacco companies?