Why Drug Traffickers Love Free Trade

...Once in Mexico, or most anywhere in the third world, the cash can be deposited easily...

...antidrug efforts...

...Traffickers have also formed networks to move cash through postal money orders or directly through the mail and overnight delivery...

...That is why certification of drug-infested countries like Mexico, Malaysia, and Brazil is 62 • DISSENT Free Trade a Drug Trafficking no more in doubt than China's Most-FavoredNation status, while the pariah list is normally limited to such countries as Afghanistan, Myanmar (Burma), and Syria...

...Perhaps the jolt of some drug-related financial or political disaster might stimulate new thinking...

...Certification has been no more effective than anything else in Washington's anti-drug arsenal, but it points up a fundamental contradiction in U.S...

...Through these three centers, well over two trillion dollars travels in the form of electronic messages every day, more than half moving in and out of the United States alone...

...For example, General Manuel Noriega's narco-state in Panama avoided censure because it supported U.S...

...But the principal threat to Colombia's and Mexico's sovereignty is the drug trade itself, which has exploited systemic corruption in those countries to penetrate virtually all public institutions and undermine the integrity of the economy...

...Or to thrust a market economy upon a country like Russia when it does not have a legal framework that can keep powerful criminal organizations at bay...

...It is doubtful it will seriously consider either...

...Washington was slow to focus on money laundering because the Reagan White House did not want to irritate the U.S...

...For Washington to turn around more than three decades of antidrug futility it needs to adopt two new approaches...

...If there's a delay, it's because a few editors are reading your article...

...More likely, the globalized economy will become an increasingly lawless one, to the benefit of multinational enterprises from Cali and Sicily to Zurich and Wall Street...

...Since NAFTA began, Mexican exports to the United States have more than doubled and at least 85 percent moves by truck through fifteen border crossings between Brownsville, Texas, and San Diego...

...Just as millions of cargo containers enter the U.S...

...The ethnic-ChiSUMMER • 1997 • 61 Free Trade S Drug Trafficking nese Triads and the Sicilians are masters at this, and the Colombians have learned well from them...

...Even if Washington made a substantial commitment to demand reduction it would have to be sustained for at least a generation to substantially shrink consumption, given how deeply entrenched drugs are in U.S...

...After the Sicilians and the Colombians paved the way at a 1987 summit on the island of Aruba, international crime groups achieved a level of collaboration described by Italy's late crime fighter Judge Giovanni Falcone as "a kind of operational melding...

...Last year the FATF praised new money-laundering laws adopted by the Swiss...

...Once drug money has been "layered" through multiple financial transactions in several countries, its origins are virtually untraceable...

...2) Please don't write to ask whether we're interested in such and such an article—it makes for useless correspondence...

...banking lobby...

...It allows traffickers to make pinpoint drug drops to awaiting fast boats on the high seas without having to use the types of communications that can be intercepted by U.S...

...State Department last year—and have been laundering drug proceeds for the Colombians and the Sicilians since the early 1990s...

...contra policy in Nicaragua, and was not sanctioned until Noriega turned on Washington and cozied up to Cuba and the Sandinistas...

...Drugs now find their way to market commingled with other commodities in vast networks of air freight and container shipping by sea and land...

...More drug money either originates or flows through the United States than anywhere else in the world...

...Since then the U.S...

...SUMMER • 1997 • 59 Free Trade 8 Drug Trafficking law enforcement, suspected of acting as a link between the Mexican ruling party and Mexico's powerful drug federations...

...6) Please bear with us—we have accumulated quite a backlog of material, and you may have to wait for a few issues before you see your article in print...

...No dot matrix submissions, please...

...His proposed 1997 budget does call for some increase in treatment and prevention, but the Republicans are bound to fight them...

...law enforcement officials refer to the North American Free Trade Agreement (NAFTA) as the "North American Free Trafficking Agreement...

...The only hurdle is getting the dirty cash into the global banking system...

...Nearly two million trucks a year now enter at Laredo alone...

...The first big test came this past March, after a painstaking investigation exposed a senior banker who had managed the Swiss accounts of Colombian drug traffickers for nearly fifteen years...

...These advocates seem to have dismissed the ominous implications of legalization set out in a number of recent studies...

...The top tier includes the Colombian and Mexican trafficking federations, the Sicilian Mafia, the Russian and Turkish Mafias, the ethnic-Chinese Triads, the Japanese Yakuza, and the distribution networks operating under the wing of Nigeria's military rulers...

...intelligence official says, "the virtual corporation touted by management theorists as the leading contender for the dominant entrepreneurial structure of the next century...

...If a drug-ridden country has liberalized trade and finance and has been targeted by the Treasury Department, the Commerce Department, and mutual fund managers as a key emerging market, it is virtually assured of being certified...

...Initially, U.S...

...representative...

...society...

...Mexican traffickers will capitalize on this year's opening to crossborder busing and the linkage of the U.S...

...3) Type your ms double-spaced, with wide margins...

...Lhis State of the Union message last January, President Clinton promised "the largest antidrug effort ever...

...Traffickers find Canada almost as attractive as Mexico for placing drug money into the international financial system...

...Carlos Hank Rhon now wants to acquire Mercantile Bank, the principal financial institution in Brownsville, which would make him owner of the third largest bank holding company in Texas...

...Such questions threaten powerful interests...

...With no bureaucratic hurdles or budgetary limitations, international criminal enterprises are always at least a generation ahead of law enforcement when it comes to high-tech gadgets, computers, and software...

...5) We're usually quick in giving editorial decisions...

...Bank secrecy laws and tax havens provide the ultimate nesting grounds for dirty money...

...Beyond the anonymous doors of a plain concreteand-glass building overlooking the Hudson River is the privately owned Clearing House Interbank Payments System, or CHIPS...

...Under Reagan and Bush 70 percent of antidrug spending went to law enforcement and supply reduction, and 30 percent to demand reduction...

...Now, the traffickers simply haul the cash out of the country, using the same means through which the drugs are smuggled in...

...In the hands of a professional money manager, illgotten gains can become untraceable in a matter of seconds...

...Southern Command in Panama, conceded upon his appointment in 1996 that years of lawenforcement and military efforts in Latin America had not made an "operational difference," affecting neither the supply nor the price of drugs on America's streets...

...Given the certification of Mexico yet again this year, it seems that Treasury still has the last word...

...Samper and Zedillo do have a case, however, when they criticize the United States for being the largest market for illegal drugs...

...The slightest suggestions along these lines are denounced by those who gain most from the socalled "Washington consensus" in favor of free trade and unregulated markets before all else...

...A short walk from the Juarez-Lincoln bridge is downtown Laredo, a gritty jumble of bargain stores, businesses, and take-out joints, which seem all the more shabby next to the banks, the main beneficiaries of the trade explosion...

...This is not simply because of the illicit, secretive nature of the drug trade itself, but because drug trafficking and money laundering have become so enmeshed with everyday commerce and financial transactions in a globalized economy that it has become nearly impossible to distinguish the illicit from the legitimate...

...The Hank family itself is under investigation by U.S...

...The kind of questions that need to be raised if U.S...

...Coming next is the North America Superhighway, a joint project between Washington, Ottawa, and Mexico City that will allow commercial vehicles to travel straight through from Mexico to Canada and back...

...Today, there are more than five hundred companies worldwide transporting containers in giant seagoing vessels, with more than twenty million container slots available per year...

...drug policy is to be something other than an expensive sham would include the following: Is it wise to form a trade pact with a country like Mexico where drug corruption is endemic...

...It has had little success...

...They are, as a former U.S...

...In 1996 the Clinton administration finally decertified Colombia, partly to cover itself on Mexico during an election campaign...

...CHIPS has two counterparts in Europe, the Belgium-based Society of Worldwide Interbank Financial Communications, or SWIFT, and the British CHAPS...

...Drug certification was instituted in 1986 by a U.S...

...Since the end of the cold war, drug policy has been subordinated to the primacy of geocommercialism under the Bush and Clinton administrations...

...Or take a chance and send us your article...

...The other approach would begin by acknowledging how the global drug juggernaut actually functions, followed by a reconsideration of commercialism as the driving force of U.S...

...Decertified countries are subject to economic sanctions...

...Nothing new there...

...In 1989 the G-7 countries established the Financial Action Task Force (FATF) to promote international cooperation against money laundering...

...Under Clinton the spending ratio has changed hardly at all...

...Switzerland is the central star in a global constellation of nearly fifty of these financial entrepOts...

...Their attraction to legalization is understandable...

...Last winter I stood on the Juarez-Lincoln bridge, enveloped in the exhaust fumes of trucks backed up five miles into Mexico...

...Years back, he recommended Ratil to his private banker at Citibank in New York, and provided the initial two million dollars Ratil used to open an account...

...foreign policy...

...policy...

...To move either cash or drugs the traffickers have established their own interconnecting importexport companies that act as fronts by engaging in legitimate business...

...This is why vast international criminal organizations now compete for preeminence in the global economy with such outfits as Nike, Sony, and Shell...

...Last year, even the State Department considered the middle option—decertification but with a waiver to suspend economic sanctions...

...Banks around the globe are linked by phone line, computer, and satellite into any of the 142 New York banks that act as their U.S...

...Even drug czar General Barry McCaffrey, former head of the U.S...

...For years, the law requiring that banks report transactions of over $10,000 was barely enforced...

...Congress can overturn a White House certification with a majority vote in both houses...

...Since the early 1990s the DEA has pressed during annual interagency meetings to decertify Mexico...

...A year later McCaffrey was reduced to threatening physicians in Arizona and California who prescribe marijuana for medicinal purposes and laboring to explain why the White House certified Mexico as cooperating on drugs after McCaffrey's Mexican counterpart was found to be in the pay of Mexico's most powerful drug lord...

...Still, the Clinton White House continues to emphasize the same failed strategies— stopping drugs through interdiction and greater punishment for dealers...

...officials concede that more than 90 percent of the cocaine and heroin shipped through Mexico from South America gets past them...

...It mandates that the White House certify annually that drug-producing and drug-transit countries are cooperating fully with U.S...

...Carlos Hank Rhon, his oldest son, was a college classmate of Ratil Salinas, brother of former Mexican president Carlos Salinas...

...Computers at the New York bank read the signal and then alert CHIPS to make a transfer of funds between the banks...

...GPS is a world-wide system of two dozen satellites developed by the Pentagon...

...Those are the prevailing trends or conditions in the world today, and every means the worlds of business and finance have to offer, linked by wireless and fax transmissions, are today used by traffickers and the managers of their illicit proceeds...

...It used to be that legalization champions were found mostly in counterculture circles and among the readers of High Times...

...Customs agencies in the industrialized world are overwhelmed, and most in the developing world have been corrupted by traffickers to one degree or another...

...Still, even the best-equipped specialists cannot truly measure the extent of the problem...

...President Samper and Mexican President Ernesto Zedillo claim the certification process interferes in their nations' sovereign affairs...

...63 Free Trade B Drug Trafficking gue that drugs should be legalized...

...But in Washington, amid finger-pointing about who's soft on drugs, no one on either side of the aisle wants to admit that nothing favors drug traffickers more than the nature of the modern global economy itself...

...All utilize professional money managers culled from the world's finest business schools to make market assessments, study trade patterns, and stay on top of the latest innovations in global finance and investment...

...In a decision that must have pleased no one more than the traffickers themselves, a Swiss court found the banker not guilty of money laundering, but ordered him to return the $1.1 million he earned for managing the Colombians' accounts...

...Justice Department has been trying to determine whether $120 million siphoned out of Mexico and into secret offshore accounts by Citibank on Ratil's behalf is drug money, and whether any passed through Laredo National...

...They even haul it by all-terrain vehicles across remote areas of the Mexican and Canadian borders...

...intelligence...

...As we're not an academic journal, we prefer that they, wherever possible, be dropped altogether or worked into the text...

...The first is to apply substantially more resources to drug treatment, education, and prevention...

...Special underground cables link the New York banks to CHIPS...

...An exact replica with duplicate computers exists across the Hudson in New Jersey and can quickly be brought on line in the event a terrorist attack or natural disaster takes out the New York facility...

...We will not consider manuscripts submitted simultaneously to several publications...

...But the Treasury Department prevailed with the argument that anything less than full certification of Mexico would be considered a no-confidence vote by global markets and jeopardize NAFTA...

...The public is normally kept out, but a few years ago reporters for the Miami Herald were allowed in...

...Federal Reserve, which approved his purchase of Laredo National without question in 1994, was in April still considering his application to buy Mercantile...

...Gary Jacobs, the president of Carlos Hank Rhon's Laredo National Bank, for example, said to El Financiero just before I arrived in town, "Anti-drug policy must not be carried out at the expense of trade...

...Not until 1986, when Congress finally passed a stronger federal statute against money laundering, could traffickers no longer deposit laundry bags of cash into a bank without the Internal Revenue Service being informed...

...every year, millions leave...

...Much of it actually passes through a room just blocks from the DEA's office near Manhattan's meat-packing district...

...In the case of Mexico, the Bush and Clinton administrations covered up the true extent of drug-trade penetration so as not to provide ammunition to NAFTA opponents, as was initially reported in 1995 by the Mexican daily El Financiero, and later by the New York Times...

...Numerous studies, including one by the Pentagon-friendly Rand Corporation, have shown that a concerted effort in these areas can begin to significantly reduce drug consumption...

...If a drug trafficker or money launderer were asked what are the optimum conditions for conducting their operations, the answer would be low trade barriers, deregulation, relaxed international banking standards, border-erasing technology, and weak rule of law...

...When a bank in, say, Mexico wants to move...

...Use WordPerfect 5.1 or standard text ASCII format, and send us the disk...

...Rail's globe-spanning portfolio was discovered only because the U.S...

...Check all your figures, dates, names, etc.—they're the author's responsibility...

...As the line of eighteen-wheelers inched toward U.S...

...But once in office he caved into attacks by Republicans that he was soft on drugs...

...Carlos Hank Gonzalez, the family patriarch, made himself a billionaire during a career in government, which he explained by saying, "A politician who is poor is a poor politician...

...Ultimately, it does not matter, because there is no evidence that decertifying a country produces results...

...The transfer is made in an instant...

...It gives anyone with the proper receiver the ability to locate a precise longitude and latitude...

...Please use inclusive language so that we don't have to make adjustments during editing...

...Colombian traffickers plugged into GPS—Global Position Satellites— as soon as the technology became commercially available...

...According to an estimate by the U.N...

...Joseph Califano, for example, former cabinet official in the Carter administration and president of the Center on Addiction and Substance Abuse at Columbia University, has concluded that "legalizing drug use would write off millions of minority Americans, especially children and drug-exposed babies, whose communities are most under siege by drugs...

...But the DEA cannot touch it, let alone stop it...

...For the time being, the prospects are that little will change in Washington regarding drug policy...

...Money-laundering laws are either nonexistent or, as in Mexico, weak and rarely enforced...

...Capitalizing on expanding EastWest trade, they have spread drug-smuggling and money-laundering tentacles throughout Europe, Asia, the United States, and the Americas...

...A recent article in the Wall Street Journal referred to the bank as "a virtual poster boy for the North American Free Trade Agreement...

...Some are new, gleaming glass and metal structures, while the old Laredo National Bank has been redone in elegant hacienda style, its interior adorned by the finest Mexican art...

...Customs, I wondered which ones held hidden caches of drugs...

...Swiss investigators said in April they had already concluded that the more than $100 million Ratil had on deposit in their country's banks was largely provided by drug traffickers...

...Commission on Narcotic Drugs, the global trade in illegal drugs is now a $500 billion-a-year industry—a figure equal to international trade in telecommunications, greater than international trade in oil, and dwarfing the gross domestic products of nearly all nations...

...Ratil Salinas was jailed in Mexico in 1995 on murder and corruption charges...

...If you are submitting to Dissent electronically, our e-mail address is dissent@igc.apc.org . (4) Notes and footnotes should also be typed double-spaced, on a separate sheet...

...With Customs applying most of its resources to detecting drugs—it still inspects fewer than 3 percent of containers coming in—traffickers ship cash out by the ton...

...and Mexican rail systems through railroad privatization in Mexico...

...But President Ernesto Samper, whose election was financed by more than $6 million from the Cali Cartel, remains defiantly in power, while coca crops, from which cocaine is produced, increased nearly a third by 1997...

...The U.S...

...The account turned out to be Rail's, although his personal money manager at Citibank had opened it for him under a false name...

...CHIPS is a giant computer room that holds two Unisys super processors...

...If Canada, a G-7 member, is unwilling to cooperate, the FATF can hardly expect to improve oversight in corrupt, money-laundering bastions like Venezuela, Thailand, India, or the United Arab Emirates...

...After eight years, Canada still does not have mandatory bank-reporting requirements, nor does it impose crossborder currency reporting...

...The leaders of the new legalization lobby include Milton Friedman, George Shultz, and the editors of the Economist and Latin Trade, a glossy Miami-based monthly...

...At the same time, billions in dirty profits disappear into an array of front companies and interconnected financial institutions that operate in secrecy in tax havens around the world, and that are able to span nations at the click of a computer mouse twenty-four hours a day...

...Despite stepped-up border inspections since 1995, U.S...

...It would rid them of having to answer nettlesome questions about how the global economy facilitates the drug trade, and it dovetails with the view that the laws of supply and demand supersede the laws made by men and women...

...Is bank secrecy truly necessary for achieving economic growth and development...

...Congress incensed by the killing of DEA agent Kiki Camarena in Mexico and the cocaine death of American basketball star Len Bias...

...But the FATF only can recommend that governments tighten lax controls, and try to shame them by publicizing questionable practices...

...Drug Enforcement Administration (DEA) convinced Swiss banking officials that there were strong indications an account it was monitoring was used to hide drug money...

...THE EDITORS 64 • DISSENT...

...Interestingly, some of the principal proponents of a deregulated global economy now arSUMMER • 1997...

...antidrug efforts were subordinated to cold war politics...

...Russian crime groups now control a significant portion of Russian banks—up to 25 percent of Moscow's banks alone, according to a source cited by the U.S...

...Look at our last few issues to see if your idea fits in...

...The Russian Mafia, for example, is actually a collection of three thousand to four thousand criminal groups that feed on Russia's practically unregulated market economy, gather strength from close ties to government officials and 60 • DISSENT Free Trade 8 Drug Trafficking former communist intelligence networks, and have little to fear from Russia's dysfunctional legal system...

...To Our Contributors A few suggestions: (1) Be sure to keep a copy of your manuscript...

...In 1992 candidate Clinton vowed to greatly expand treatment and prevention...

...Laredo provides but a snapshot of borderless crime in the borderless economy...

...dollars to a bank in Hong Kong or the Cayman Islands, it generates an electronic signal that flashes by satellite or ocean cable to its representative bank in New York...

...Laredo National was purchased in 1994 by Carlos Hank Rhon, scion of one of Mexico's most powerful families...

...The DEA says that at least threequarters of Latin American drug proceeds are laundered through New York City...

...Every president since Richard Nixon has declared a war on drugs, each has outspent his predecessor, yet by the end of every administration the drug trade had expanded...

...And please remember that we can't return articles unless they're accompanied by a stamped, self-addressed envelope...