In recent decades Mexico has become the center of the drug trade in the world. With a high drug demand in the United States drug smuggling and trafficking became a very lucrative business. The drug trade has created a system in which powerful drugs operate and profit from selling drugs to the U.S. In 2006 president Calderon decided to limit the influence of the cartels and launched the Drug War. This paper focuses on the economic impact of the drug trade and the Drug War, description of the Sinaloa drug cartel and the role of the U.S. in the Drug War.
Economic Aspects of the Drug Trade and the Drug War in Mexico
Mexico is a major supplier of the variety of drugs into the United States. It serves as a transit place for the drugs from the whole Latin America. The most important drugs for the traffickers are heroin, methamphetamine, marijuana and cocaine. Mexico is a major supplier of heroin to the U.S. market and the largest supplier of methamphetamine and marijuana. It is estimated that 40 to 67 % of the marijuana originates in Mexico and 95 % of cocaine travels through it.
This huge system of drug trafficking and smuggling became an important part of Mexico´s economy. Mexico's drug system provides direct or indirect employment for much of its population. Drug trade is also a part of Mexico´s GDP. It is estimated it can represent around 4 percent of it. This percentage is equivalent to $30 billion. Drug trade employs at least half a million people. Involvement of people in the drug cultivation is connected with the large number of people living in poverty. For many of them drug cultivation is their only solution how to make a living.
Over the last decades the drug trade created a system of powerful drug cartels that generate high profits by smuggling drugs to the US. Their power grew because of the US anti-narcotics operations in the Caribbean and Florida, which meant redirect even more drugs through Mexico. The sales of the drug cartels range between $19 and $29 billion annually. However, to be able to make such fast growing business cartels need to corrupt politics and the police. According to the estimates drug cartels combined have to spend at least $1 billion each year on bribes for the police. This system is described as “a system-wide network of corruption that ensured distribution rights, market access, and even official government protection for drug traffickers in exchange for lucrative bribes.”
In general powerful cartels undermine the rule of law which causes high instability. This instability has an adverse effect on investors or business-owners. Drug cartels often intervene in economy directly and thus discourage investment. Another aspect of the power of the cartels is supplying the economy with illegal goods which are not taxed by the government. Because of this government tax revenues fall.
After elections of 2006, the new president Calderon reversed the government´s passive approach to drug trade and launched the Drug...