Moving Out of Soft Powder, into Hard Power
When I was going through school, there were soft drugs like tobacco, marijuana and magic mushrooms and hard drugs like cocaine, pills and speed. Hard drugs, always carry more sequences, more monetary costs and seriousness with the law. I began writing this because you can say that criminal organizations throughout Central and North America are moving onto the “the hard stuff” now. Although, would you be shocked to find out I’m not talking about drugs at all? However, it’s just as serious.
Whether it be due to social media, mainstream media or Netflix-esque movies, many assume that drug cartels, particular those headquartered in Mexico are only in the business of moving various illicit drugs and human trafficking. Of course, they dabble in other crimes as well, but I’m sure you’re imagining someone taking the form as a “bandit” who is only doing illegal things because they’re illegal.
The reality is that these organizations function almost identical to any government–they are motivated by power and power is achieved mostly by money and fear. Money, is therefore the fuel that motivates their operations and as you’ve known from my articles, can be made in many more ways than simply selling drug powders.
If you want to feel safe, or perhaps unsafe (depending on how you interpret it…) take a guess at who owns the resorts in Mexico. That’s why you’ll remain safe on resort, it’s a cash cow that is incentivized to remain healthy. Crime against this cash cow, hurts their revenue streams and hence, reduces their power. Money is ultimately their main form of leverage, not drugs.
I believe, the next stage of operations will graduate to the next level.
These organizations will try to exploit an untapped form of tremendous profit: Mining
It’s no secret that oil theft is an active source of revenue for some organizations in Mexico– some in fact are exclusively fueled, pardon the pun, by these revenues. However, mining for gold and silver, commodities that have real history in Mexico, remains yet to be fully explored. I can reference you to two articles I wrote why I believe silver is about to explode in price and why that change can offer a whole new opportunity to extract wealth for those who desire it the most. I believe for this article post to make sense you have to conceive of an organization that is hardly limited by costs, influence and sophistication any longer. Like I said, anything the state of Mexico or the free market can do–so can these organizations. I believe this to be important because investors may be overlooking or perhaps not considering this threat AT ALL.
As I recall, I posted a few news reports about illegal mining in Peru, French Guiana, and Ecuador in the WHAT, IN THE WORLD? report
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4 Parts
Part 1:
How Cartels would operate would they would effectively become the Private Security of the mining operations. They would do so by being a legitimate, perhaps legal private security company that would normalize their operations. In other words, they’d be a real private security company, indistinguishable from another company. Of course mining companies do not want theft or complications and as part of their annual expenses they allocate ‘X’ percent to mitigate issues, especially with difficulty navigating the landscape, they will contract these security companies to ensure stability. For the record, this (private security) is not uncommon throughout all of Mexico with both legal and illegal operations–it’s not a mining matter. It’s a major revenue maker either way. Mafiosas on steroids.
Part 2:
There are lots of areas of in Mexico that are gifted with many natural resources, but they happened to be in states with very well-established cartel activity such as Sinaloa, Sonora, Michoácan & some others. Just like the first operation of charging for protection, the cartels are smart, and take advantage of their existing presence/influence. Since the stakes are higher, this “honest private security” company has the rights to say that “Look, we’re doing our service for you, that’s great, we’re doing a good job señor, but as you’ve probably seen on your nightly news theres a lot of bad guys in this area. So, we will have to charge extra to negotiate with them or keep them at bay [cough cough, even though we’re those bad guys]”. This gives the gangs a right to charge higher-than market fees for their protection racket services.
Part 3:
The cartels are far more sophisticated than most can imagine, and perhaps far more wealthy than people realize. They, in some sense, are controlling and working with governments from all over the world. As a consequence, aspirations to be a security guard and collect the same ol’ same ol’ drug revenues is no longer interesting. Now we’re at the stage where these organizations are wealthy & strong enough to begin their own mining ventures.
They will either do this by working with artisanal miners themselves to get a sense where there may be large strikes of a resource or mineral. Or, they will behave more sophisticated yet and be directly involved in the mining procedure itself.
Part 4
It’s been remarked that the Mexican government, essentially another head on the hydra, have been supporting both sides of these fights in order to not only displace the innocent locals, but the cartel members themselves. Then, when all the blood has soaked into the dirt, they can dig it up again with the silver/zinc ore after they fix a deal with the Canadian mining companies. This strategy sounds like it would hardly be necessary if the Cartels weren’t already directly involved with the mining assets. In other words, the government could simply just create a partnership with some Vancouver listed company for the assets…why bother fund various groups?
You’ve already seen this take place with Chinese parent companies who paid out funds to police departments (essentially organizations) to clear the way so that this frees up opportunity for them/the Mexican Government. This has happened in Sonora, Tamaulipas and it appears it is occurring in poor Chiapas.
Chiapas
Chiapas is particularly precarious due to the fact that there are numerous cartel organizations focused on this state; they are the only state with an indigenous cartel known for their violence. While there are unexplored resources in this state, you can imagine that the real potential here would be controlling the Mexican-Guatemalan border. If the US border is game-set-match (and still open by the way) then there’s nothing more to control or monitor here. In effect, the US Border is now the Guatemalan border–a valuable region. Our source on the ground in Mexico had just hit me with this message:
people are leaving Chiapas, because cartels are fighting there–they are displaced to her state now
10,000 in Chiapas have been displaced into Guatemala in mere months
Fighting for territory not only has an impact of holding ownership of the property but it also displaces locals who live in these small towns (because of crime rates or due to homicides) further freeing up the land for the taking.
https://nacla.org/article/what-lies-beneath-oil-subsoil-and-chiapas-conflict
South America’s Mining from Cartels
What Makes This All Possible?
People have to realize the level of sophistication some of these groups now operate at now. Many groups within groups not only have US weapons, but US training and technology. This training may relate to lots of weapons proficiency and tactics, forensics, close quarter combat, surveillance, land navigation, technological awareness and operation, even medical training. They’ve utilized drone warfare long before it was popularized in the Ukraine. They’ve used cell phone network jammers, anti-air weaponry, submarines, camera destabilizers and others. It comes as no surprise therefore if the same group, motivated by money first and foremost adopts an 1890 type business model of mining. Once you divorce of the idea that there are illegal and legal activities in Mexico that are distinct, it is not a stretch of the imagination to think they’ll develop mining operations on their own soil.
This comes at a time when many of these cartel organizations are utilizing drone warfare, are advancing their explosives capability, are in some instances highly trained, utilizing new technologies such as their own telecommunications systems, and tunnel development–all amounting to expertise than can be put towards mining.
Metals, Now
The scary-looking Netflix type narcos you see are indeed scary and crazy, but they are not the big decisions behind these organizations–those are done by genuinely high-intellect, highly educated, worldly and experienced experts. If you and I can see the bull market appearing in precious metals, so can they. Perhaps another point worth mentioning is that Trump’s actions taken thus far pose legitimate concerns to the Narcos on not their ability to sell fentanyl or cocaine (that won’t change) but their ability to launder money [which is essentially how the Mexican government stays together]. Creating another avenue of profit making and money laundering is timely, regardless of what the macroeconomic markets suggest.
The most clever of all this is the legitimacy of it. It is not illegal to own land, to own a mining license, to receive income for providing security services. The same goes for owning restaurants, hotels, resorts, and all the rest of it. The line between legal and illegal is so transparent there hardly exists one. How do you catch someone playing by the good rules and not subject to the bad rules? This is why I’m so convinced that this sector will not be untouched.
These brutal events are already happening: https://www.infobae.com/mexico/2024/02/16/captan-en-video-el-momento-exacto-del-asesinato-de-empresario-zacatecano-en-un-restaurante-de-aguascalientes/
The murdered businessman and his companions were in the establishment seeking to reach an agreement, as part of a copyright litigation that was taking place in Zacatecas, related to a patent for mining explosives, and for which there was a considerable economic dispute.
The head of the Secretariat, Manuel Alonso García, explained that since 2019 Óscar Octavio Aguilar Vera was immersed in a trial in Zacatecas for the intellectual property of a formula of explosives used in mining , which he claimed as his, but that had begun to be used by third parties. Third parties you say? Hm…
I’ll admit, I’ve bought mining stocks in Mexico before…but now I wouldn’t put a considerable sum into a company operating in Mexico. The risk is not properly considered in markets
Closing
Drugs, Coyotes and extortion of businesses is old news. These revenue streams are so well established that no more be done or expanded upon. Now, the cartels are going after the metals and energy. Movies and silly shows have narrowed people’s minds on criminal groups. The fact of the matter is that they go where the money is–money is power and freedom–and if this can be done by hunting for plata, they’ll do it and nobody will stop them. I know investors reading this who feel comfortable giving someone hundreds of thousands of dollars want to think otherwise, but as I say, it’s the land of wolves. This is the beginning of a whole new cartel war in Mexico and I dare suggest that Mexicans are woefully unaware.
Of course, I try to throw an investor slant on all of my posts and the implications of this new war is tremendous for investors in the precious metals & in exploration companies (both in Mexico and abroad). One can now make the argument that mining stocks in Mexico are carrying a whole new level of risk.
While I pride myself on my ability to predict trends and see where things are headed–it’s too challenging (perhaps I’m too ignorant) for me to see what shape Mexico will end up in by the end of the decade. However, trends in motion tend to stay in motion and the current trend is nightmarish.
We’ll keep an eye out and continue to do more research. Till then please,
#StayOnTheBall
