Tag Archives: cartel

Cartel Entry Into Mexico’s Illicit Fuel Market Brings About New Security Challenges – Mexico Analysis

Executive Summary

Fuel thefts have emerged as a leading cause for increased rates of violent crime in states with major oil pipelines.

The increase in violence stems from the entry of cartels into the illicit fuel trade, due to its lucrative, low-risk nature.

Security threats stemming from such thefts and related attacks on both state-owned and private oil companies are likely to increase going into 2019.

Avoid nonessential travel to states with an extreme or high risk of cartel and gang-related violence, especially in central Mexico, which is the heart of the fuel distribution system.

Current Situation

On December 22, Mexican authorities announced that an additional 4,000 soldiers will be deployed to protect assets of the state-owned oil company, PEMEX, throughout the country in the coming weeks. Military officials took over 73 strategic pipelines, six refineries, and several fuel monitoring centers across the country, which are responsible for observing the levels of fuel in pipes and ensure the functioning of the distribution system, and closed pipelines. The announcement came after a December 4 report outlining fuel shortages in 57 gas stations in the States of Mexico and Guanajuato due to thefts and attacks on the Tula-Azcapotzalco and Salamanca-Azcapotzalco pipelines. On November 7, Jalisco State reported fuel shortages in 500 stations due to the closure of a pipeline over illegal taps.

On January 9, five employees of the state-owned oil company, PEMEX, were arrested for failing to report the drop in pressure in gasoline ducts, an indication of a sudden loss of fuel from the pipeline. The Secretary of Energy also said that ongoing fuel shortages would resolve over the coming days as several pipelines were scheduled to reopen following investigations.

Several states in Central Mexico, as well as Mexico City, continued to experience fuel shortages as of January 13. Long waiting times were witnessed at fuel stations across the region, with a number of stations reportedly running out of supply. Furthermore, businesses are facing shortages of goods due to trucks being unable to obtain the necessary fuel to facilitate transportation.

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Timeline of notable oil-related crimes prior to December 2018

July 28 – Five security personnel were reportedly killed in Puebla by local oil-theft gangs.

August 4 – Local oil syphoning gangs set two trucks on fire on the Mexico City-Puebla highway to block the road in response to security forces detaining the head of one of the gangs.

September 20 – The Cartel Jalisco Nueva Generacion (CJNG) claimed the killing a worker of the national oil company, PEMEX, in Salamanca, accusing him of informing the local Santa Rosa Lima cartel of the CJNG’s oil syphoning operations in the area. Authorities had stepped up security at a PEMEX-owned oil refinery in Salamanca in July, following allegations of cartels stealing oil with the help of several refinery workers.

October 6 – Five individuals were shot dead near Salamanca, Guanajuato in a suspected cartel dispute over control of the illicit oil trade in the state.

November 29 – A PEMEX pipeline located in the municipality of Cardenas, Tabasco, exploded during a fuel theft operation, causing the deaths of two and injuring several others.

 

Background

In the first ten months of 2018, the number of illegal taps on oil pipelines rose 45 percent from the same period in 2017 to over 12,500 nationwide. Fuel thefts have led to a 30 percent decrease in deliveries to centrally located fuel stations, and according to President Andres Manuel Lopez Obrador (AMLO), have cost the country over USD 3.5 billion annually.

In June 2018, 15 trucking firms contracted to the national oil company, PEMEX, ceased operations due to repeated threats to their drivers and vehicles. Trucking unions have accused PEMEX of indifference, as it receives insurance payouts, while drivers pay deductibles in the event of theft. PEMEX has said that it will shift from pipelines to other modes of gasoline delivery due to the rise in fuel thefts and subsequent decrease in the amount of fuel being delivered to gas stations, despite such modes being more expensive.

The center of the violence lies in the so-called ‘Red Triangle’ region in Puebla, encompassing the municipalities of Acajete, Acatzingo, Palmar de Bravo, Quecholac, Tecamachalco, and Tepeaca. It acts as a transit zone for 40 percent of the fuel distributed from Mexico City to the rest of the country. The most affected states are thus primarily located in the country’s central region, including Puebla, Hidalgo, and Guanajuato.

While fuel thieves, locally known as ‘huachicoleros’, have operated in the country for years, violence increased in 2017, following the government liberalizing fuel prices, which created a lucrative black market for cartels. Today, huachicoleros operate both as part of local standalone gangs and as extensions of powerful cartels, with the most notable being the CJNG. Further, the ongoing splintering of larger gangs since the government’s ‘War on Drugs’ strategy in 2011 has led to increased cartel disputes over the fuel trade, catalyzing more violence.

Assessments & Forecast

Military deployment, consolidation of illicit fuel gangs to lead to increased violence

Given the rampant corruption in local police forces, the proposed deployment of military personnel, who are perceived to be less entrenched in organized crime and huachicolero gangs, is likely to hinder these groups’ operational capabilities, as they are often reliant on cooperation and assistance from law enforcement. However, as seen with previous instances of an enhanced role of the military in domestic security issues, violence emanating from clashes between security forces and fuel thieves is likely to ensue. Thus, an improvement in the overall security situation seems unlikely in the medium term.

Moreover, with the entry of larger cartels into the illicit fuel trade, who have significantly more resources and connections, smaller huachicolero gangs will likely be forced to cease operations or declare allegiance to one of the rival cartels in the region. This will translate into turf wars becoming more two-sided and thus more deadly in the medium term, with opposing sides reverting to increasingly violent tactics to gain control of the region’s fuel trade.

Fuel thefts have now expanded to include truck robberies and hold-ups targeting fuel transport vehicles, with such attacks carrying a higher chance of turning violent and leaving casualties. Attacks on PEMEX pipelines and buildings also involve high casualty rates, especially in the event that fuel theft gangs seek to exact revenge on corrupt workers who shift allegiances.

Illicit fuel trade to become more lucrative to cartels with entry of foreign companies, complexities of drug trade

With one of AMLO’s campaign promises revolving around the legalization of drugs, such as marijuana, and bolstered security on the US border narco-trafficking groups may increasingly seek to divest into other revenue-generating operations, due to the increasing volatility within the drug trade. As a number of the larger cartels have splintered in recent years, local gangs affiliated to these groups have attempted to seek more reliable sources of revenue which offer a comparatively lower risk to the perpetrators compared to trafficking drugs, for which they may be targeted by rival groups. Gasoline, in particular, has emerged as a viable option, due to the elimination of issues such as smuggling the product across country borders and the availability of a much broader market than illicit drugs and thus has begun to be capitalized on by cartels.

Further, Mexico opened its markets to foreign oil companies for the first time in 2014, and the 2017 removal of fuel subsidies to PEMEX has made for a competitive market into which investors are keen to enter. Given the government’s increasingly aggressive approach to combating internal corruption in PEMEX, huachicolero gangs and cartels may seek to infiltrate or attack foreign-owned assets. This assessment is bolstered by the increased number of kidnappings targeting foreign workers in 2018, as they are seen as more likely to elicit higher ransoms and thus prove more lucrative targets.

Recommendations

Avoid nonessential travel to states with an extreme or high risk of cartel and gang-related violence, especially in the vicinity of the Red Triangle region.

Those with continuing essential operations in such states are advised to maintain an adequate private security contingent in order to secure any facilities or transport plans. Minimize employee exposure to areas with a known cartel presence.

Avoid non-essential travel on state highways due to the heightened risk of armed robberies and kidnappings, especially during the late night and early morning hours. If confronted by muggers, it is advised to cooperate fully and not engage in any behavior that could raise tensions and lead to violence.

Update your office or company of your travel plans and whereabouts. Use travel-tracking or satellite monitoring applications to indicate your location. In the event of an abduction, use the panic button on such apps.

In the event that a facility or operation begins to be targeted by cartel members, it is advised to evacuate all personnel immediately from the site, while avoiding any interaction with the criminal groups where possible.

Remain cognizant of local media updates regarding areas with a significant cartel presence, given the dynamic nature of the violence.

 

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How increased cartel violence and extortion operations are threatening the security of global companies – Mexico Analysis

Executive Summary

A number of multi-national companies have ceased operations in various parts of Mexico due to threats or attacks from drug cartels and cartel-linked criminal organizations.

As the cartels continue to gain strength amid an ongoing security crisis in the country, they are targeting larger, foreign companies for extortion.

The presence of cartels in any given area brings with it an increased level of violent crime, which threatens private operations, regardless of whether the cartel is targeting a particular firm.

Avoid nonessential travel to states with an extreme or high risk of cartel and gang-related violence

MAX Security

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Current Situation

On May 27, 2018, a Canadian mining company reportedly made the decision to halt operations at one of its largest mines near Madera Municipality in the northern state of Chihuahua, following threats to a number of its workers. Members of drug cartels had set up checkpoints at entry points to the mine, harassing and assaulting workers entering the site, forcing some to be evacuated from the area. The discovery of a decapitated body near the open-pit mine was reportedly the final catalyst for the company to reconsider continuing operations. Reports indicate that the powerful Juarez and Sinaloa cartels have been fighting for control of the region around the mine since early 2018.

Similarly, one of Mexico’s largest bottling plants in Altamirano City, Guerrero State was completely closed down on May 25, after gunmen opened fire on workers attempting to reopen the plant, which had been temporarily shut since January due to threats of extortion. The company reportedly accused the local government of not doing enough to secure worker safety, an accusation echoed by the head of the national employers’ confederation, Confederacion Patronal de la Republica Mexicana (COPARMEX), on May 29, 2018. COPARMEX has frequently highlighted the increasing rate of extortion across Mexico, with the number of reported cases in the capital growing by roughly a third between April 2016 and April 2018. COMPARMEX officials have suggested that at least three percent of corporate spending goes on security alone in order to combat the threat of extortion stemming from the increasingly powerful drug cartels.

On May 3, a multi-national dairy company was reportedly forced to temporarily close one of its distribution centers in Mante City, in the border state of Tamaulipas, after a cargo truck was burnt down while carrying products in the direction of Veracruz. Reports indicate that in the first quarter of 2018 over 800 attacks and robberies targeting cargo-trains and trucks were carried out in Mexico, an almost 500 percent increase on the previous quarter. In 2017, there were over 200 train robberies respectively in both of the centrally located states of Puebla and Veracruz.

Another sector significantly affected by the increasing cartel violence is construction, with a thirty percent increase in the theft and robbery of machinery and equipment from sites nationwide in 2017. The Jalisco State head of the Camara Mexicana de la Industria de la Construccion (CMIC), Mexico’s public body for the construction industry, said that while such thefts traditionally targeted rural and peripheral sites, increasingly robberies targeted urban centers, including the capital, Mexico City.

Background

The various cartels have been involved in an intense and expanding conflict between one another over the past two years, a symptom of the recapture of Joaquin ‘El Chapo’ Guzman, head of the powerful Sinaloa Cartel, in 2016, which left a power vacuum and an opening for a number of different groups to increase their regional standing. Cartel-related violence has especially increased along states on key drug-transit routes including in Chihuahua, Jalisco, Michoacan, Sinaloa, Tamaulipas, and Veracruz. Some of these states border the USA, the primary destination for much of the drug trade in Mexico. States such as Jalisco, Quintana Roo, and Veracruz are not only important land-transport routes for drugs destined for the USA, but ports in these states also act as hubs for maritime transportation of drugs to North America and Western Europe.

Over 25,000 murders were reported in Mexico during 2017, a 23 percent increase on 2016, with 2018 set to exceed 30,000. In Mexico City, the homicide rate for the first quarter of 2018 was 14 percent higher than in the previous quarter.

Cartel Risk by State, Mexico

Assessments

Threats to private companies increase due to regional power of cartels when compared to police, local security forces

As demonstrated by the abovementioned examples, the cartels have expanded beyond traditional primary sources of income, drug trafficking, in order to diversify revenue sources. It is this diversification that has led to the increased threat to foreign companies operating in Mexico. Extortion and robbery present an opportunity for the well-organized, well-funded cartels to earn money that is less likely to aggravate tensions with other cartels. In this sense, the obstacles to success are only federal security forces and private security, which have faced numerous accusations of corruption and ineffectiveness. Moreover, local law enforcement or local private security contractors are typically less well armed than rival cartels and have a reputation for being highly susceptible to bribery.

While cartels have targeted local businesses for extortion for many years, the recent trend in targeting large and multinational enterprises demonstrates their augmented strength and confidence within the new and chaotic security climate in Mexico. The largest cartels have built significant armed capabilities, as well as considerable wealth, making them less concerned about repercussions from security forces or the government. In many rural areas of Mexico, particularly in the aforementioned states which lie on drug-transport routes, the question of the most powerful armed organizations in the region has become obfuscated, with some cartels boasting far stronger capabilities than local law enforcement. Additionally, at times, the power of the cartels within the local government gives them increasing freedom to act entirely of their own volition, using bribery and threats to entrench themselves in the legal and political institutions.

Given this increased power, as well as a growing willingness to seek financial recourse from sources other than drug trafficking, the number of cases of large-scale corporate extortion in Mexico is likely to continue to grow, especially given the government’s seeming inability to fully secure even major cities against cartel violence. Foreign companies and foreign workers are just as likely to be targeted as locals, and many times may be particularly singled out due to a perception of the companies as more willing to pay out in an attempt to protect their assets and employees.

Regional cartel presence exacerbates general crime threat to private companies, even if specific firms are not being singled out

In addition to the threats from organized cartels in the region, there is also the security risk which arises when a cartel becomes involved in a particular area; specifically, that the general level of law and order decreases. Cartels often rely on young local residents to carry out a number of tasks in their operations, who can quickly become institutionalized and look to start their own smaller criminal enterprises. With this is in mind, the threat does not only arise from targeting by the cartel itself but also targeting by smaller groups who have arrived in the region due to the presence and opportunities offered by the cartels. While these groups pose less of a threat and often easier to secure against, in the event that they seek help from higher, more well-connected members of their cartel, the possibility for extreme violence increases. These smaller groups are more likely to carry out less-sophisticated and petty criminal operations, including armed robbery, automobile theft, and assault, as supposed to larger cartels who can run major extortion rackets. Nonetheless, they remain extremely dangerous and a major threat to corporate security for any company continuing to operate in the region. The threat is particularly acute with regards to individual employees rather than company sites or assets, given the ease with which individuals can be attacked.

Furthermore, the often heavy-handed nature of the federal security forces’ response to cartel violence can alienate much of the rural population and local security forces, discouraging them from aiding efforts to protect foreign entities and leaving them more susceptible to corruption. This disenfranchisement, particularly among young males, in addition to general poverty in many rural areas, means that criminal groups can easily align significant portions of local populations to their goals. Formally safe and reliable areas of operation can quickly become hotbeds of cartel-linked activity if they become part of a drug-route or the location of a conflict.

Recommendations

Avoid nonessential travel to states with an extreme or high risk of cartel and gang-related violence.

Those with continuing essential operations in such states are advised to maintain an adequate private executive security contingent in order to secure any facilities or transport plans. Minimize employee exposure to areas with a known cartel presence.

In the event that a facility or operation begins to be targeted by cartel members, it is advised to evacuate all personnel immediately from the site, while avoiding any interaction with the criminal groups where possible.

Remain cognizant of local media updates regarding areas with a significant cartel presence, given the dynamic nature of the violence.

Do not travel alone and be sure not to follow travel routines; use varying routes.