The overlap of organized crime and corrupt government officials, Part 1

Sometimes criminal organizations capture the government. Sometimes the government runs its own criminal organization.

The recent newsletter on the corruption of General Cienfuegos in Mexico hinted at a larger problem confronting the region and the next US administration. There is an overlap between organized crime and government officials in a number of countries in this hemisphere. That overlap harms democracy, rule of law, human rights and efforts to improve citizen security.

The overlaps can be placed into three tiers that are not mutually exclusive:

  1. Criminal organizations bribe government officials for transactional events (cross a single border, bribe to avoid arrest).

  2. Criminal organizations are able to infiltrate governments at the highest levels through systemic bribery. At this tier, criminal groups “own” government officials and are able to use it to their strategic advantage.

  3. Government officials organize and run their own criminal operations, working with, funding and providing support for illegal groups.

The lines between the tiers are not clear divisions. It’s a fairly subtle transition from 1 to 2 and 2 to 3.

(I think I heard a variation on the above framework from either Jeremy McDermott at InSight Crime or Roberto Deniz at Armando.Info. I apologize for not remembering who to credit for helping spark the idea.)

The ability of the Sinaloa Cartel and BLO to bribe government officials such as Cienfuegos and Garcia Luna in Mexico is a good example of tier two overlap. These criminal organizations exist separate from the Mexican government but managed to buy off officials at a strategic level that changed the dynamics of the criminal conflict in the country. This is a form of “state capture” that analysts fear if criminal organizations become too powerful.

Organized crime, particularly at the tier three level, goes beyond drugs

Analysts often conflate drug trafficking with organized crime in the hemisphere because some of the largest, most violent and most visible criminal groups obtain a substantial portion of their revenue from illicit drugs. The regimes that pose the biggest tier three threats (Venezuela, Nicaragua and Honduras) all have some ties to drug trafficking. However, there are plenty of other examples over the past decade in which government officials have created criminal organizations to obtain and launder money that is relatively unrelated to drug trafficking.

While it’s true that the Maduro regime and Cartel de los Soles engage in some drug trafficking, they are almost certainly making more money at the moment off the illicit gold trade. In the past they’ve made money off food and gasoline smuggling, corruption within government contracting and currency arbitrage. Allies of Juan Orlando Hernandez have been indicted for helping the Sinaloa Cartel smuggle cocaine through Honduras, but they also made a lot of money stealing from the social security system and other government contracts.

Beyond those countries:

  • The scandals in Guatemala that led to the arrests of President Otto Perez Molina and Vice President Roxana Baldetti included bribes at ports to evade taxes.

  • Construction contracts such as those from Odebrecht led to large networks of kickbacks and laundering involving government officials in a dozen countries in the region.

  • Emilio Lozoya’s management of Pemex in Mexico can be seen as the creation of a criminal enterprise to direct government funds to personal bank accounts.

Above: CICIG diagram of the criminal structure from the La Linea case in Guatemala involving numerous government officials including the vice president.

Thinking about organized crime only in terms of drugs or extortion misses this other criminal activity that has a direct impact on how governments function.

There is not a clear, direct causation between tier three corruption and violence. Homicides and other violence have gone down in recent years in Honduras and Guatemala in spite of notable examples of corruption and organized crime within government. It’s not really possible to directly link the corruption from Odebrecht or Pemex to a rise in violent crimes. However, it is clear that this sort of corruption undermines rule of law, which is critical to providing citizen security over the long term.

Thanks for reading

I hope to build on this piece with two more parts in the coming two weeks. The first will focus on what this sort of overlap between organized crime and governments means for 2021. The second will look at how this issue of state overlap with organized crime will present challenges to the Biden administration Latin America policy.

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