The Peter Zeihan Podcast Series - Peter Zeihan || Cartels Part 3: The North American Drug War

Episode Date: March 16, 2023

There are a few reasons the cartels love their cocaine, mainly because it's easy to smuggle and cheap to make. But what happens when you sell it? You're left with a boatload of "dirty cash" you can't do anything with.Full Newsletter: https://mailchi.mp/zeihan/cartels-part-3-the-north-american-drug-war

Okay, we're at part three of the North American Drug War. By the way, if you want more information on this, in my first book, Accidental Superpower, the chapter that I considered the darkest, wasn't the one on the coming breakup of the European Union or wars that would happen in China. It was literally called the North American Drug War. Of all of the issues out in the international system, and this includes the disintegration of China and what's going on in Ukraine, it is our relationship with Mexico that it was going to determine the health, the wealth, and the security of the American. citizens moving forward for decades. Mexico is our number one trading partner, and it is also the vector by which we absorb cocaine into this country. So we have set up a situation where all of our interests aligned and are being dealt with in a very, very bad manner, not just by this administration, but by the previous one and the one before that, and the one before that, and the one before that. This is not a new problem. Okay, so economics of drugs. It's obviously about the cocaine. I mean, it's like you can put a half a million dollars a product in your backpack. Of course it's about the cocaine. And because it has a very high value to cost, it is very easy to smuggle. And so it doesn't really

matter if you have a wall because somebody with a backpack will just hop it and make, you know, make themselves very, very wealthy, very, very quickly. But once you get cocaine, you then are left for the big fistful of cash and you can't exactly put it in the local credit union. So what happens is the cartels try to get into businesses where there's a fair amount of cash. You're a lot of cash that flows through them. So agricultural harvesting or processing are relatively popular, as are things like real estate and rental properties. They're big fans of bars. What they do is they try to get a facility that has a lot of cash flow through, and then they just feed some of their drug profits through it and report it as income, and then it can get laundered and into the financial system

at large. And in Mexico, Indy, in the United States, this has brought them into the market. to things like avocado and line production. This has brought them into tourism. This has brought them into real estate rentals up to and including just like, you know, residential real estate multifamily housing. The more you do this in a community, the more you start distorting the local economic environment. And that means you have to put another layer into it and you have to get into the political

elite. And that means going into universities, going into institutions, going to the local government and buying them off so that the, the taxman doesn't look too close at the books. And this is how you kind of hollow out systems from the inside. And this is one of the things that Sinaloa under El Chapo started to do in places like rural Texas because it allowed him to get a foothold north of the border. South of the border, there is not a city in which this has not happened to some degree,

but it's really, really popular in agricultural regions and places where tourism is really strong, like in the Yucatan Peninsula or in Korn. Habo. Now, once a country, now, once a cartel reaches a certain point, they have enough resources, they can reach up and down the supply chain. If you go north into the United States, you go on and you start interfacing with the drug infrastructure for distribution, and that takes you head to head with a lot of the gangs that you either co-opt or kill. If you go the other direction, you go up into Colombian, Bolivia, and Ecuador, and you wipe out the local organized crime groups that do the, in first step, stomachs that, and you start interfacing with the producers of the stuff itself, and you start establishing a paramilitary presence in places like Colombian, Peru, and Bolivia. In this case, the Sinaloa has far been the most successful at doing all of that. So we've got a transnational network that spans a half a dozen to a dozen countries in order to bring us our cocaine.

And again, the solution here is very, very simple. Don't do cocaine. One more thing. I live in Colorado, and one of the things that Colorado has discovered in recent years is that they had a problem with processing the profits. So it used to be that in Colorado, you would basically have a giant walk-in safe because you couldn't put your money in the bank. You couldn't put in a credit union, which meant that everybody had all this cash line around and these dispensaries were paying for everything in cash. Well, the Federal Reserve was like, whoa, whoa, whoa, whoa, that's the money. a crime issue. So what we're going to do is we're going to send armored trucks to all of these dispensaries. We're going to pick up their cash. We're going to bring it out. We're going to iron it

out and frieze the crap out of it so it doesn't smell like pot anymore. And then we're going to make an electronic deposit into your account on behalf of the Federal Reserve. So no must, no fuss. Well, the Sinaloa hears about this. And whoa, whoa, whoa, whoa, whoa, let me get this straight. The U.S. Federal Reserve is now in the business of laundering drug money. Sign us up. And so there's a lot of this cannabis supply chain in Colorado that has been bought up on all cash offers and is de facto owned by the Sinaloa cartel. So no easy fixes aside from, don't do co-carry.