In a report released late last week, the Combating Terrorism Center at West Point painted a picture of Mexican drug kingpin Joaquin "El Chapo" Guzman Loera as the face of "deviant globalization", itself just a new terms to describe the growing expanse of traditional black market goods and services. In listing his global forays in narcotics distribution, it becomes clear that El Chapo is more Tim Cook than meth cook and that the success of his Sinaloa Federation cartel came through smart business practices.

When then-President of Mexico Felipe Calderon attempted to crack down on the country's narcotics cartels throughout the late 2000s, El Chapo responded by taking his operations global and implementing traditional business practices. First, the report explains, El Chapo expanded his cartel's operations to Central and South America to ensure upstream access to cocaine. This move allowed his group to maximize profits on every kilogram of cocaine sold in the U.S., Europe, and the rest of the world. With his bread and butter product secured, the Sinaloa Federation focused its efforts on Asia to secure the foundation chemicals needed for high-grade methamphetamine (all this while you have to show four forms of ID and sign your life away just to get some cold medicine).

Once his supply chain was secured for two very profitable products, the report says El Chapo branched into Africa and Europe and, with some dispute, Australia, where it's noted that $5K of product is sold at 50 times its cost. In doing so, the cartel had to plan its logistics based on detection risk, landed costs, and even the exchange rate when priced on the Euro. Once a supply line was established, the report states the cartel prefers to align itself with existing criminal groups in a country, empowering and training them rather than fighting them for control. The Sinaloa Federation's success in working on a global scale, and its violence-free method of establishing a presence in a country has earned it the "narco-holding" moniker, as it behaves like a holding company for smaller subsidiaries located around the world.

The lessons to be learned here (aside from the "drugs are bad" boilerplate):

  • Lock your supply chain down, getting exclusive rights to a product or component in demand if possible
  • Examine your logistic plan's every detail, including efficiency, capability, and total landed cost
  • Know when to partner up
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Nicholas Hamner

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