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Legalizing Marijuana: The Road to Security South of the Border

Three years ago, James Farwell and Rafal Rohozinski published an excellent piece entitled Mexico: America’s Number One Threat wherein they dissect the direct threat to the United States that a drug cartel ridden Mexico poses. Two years later the piece is just as important, and its argument is bolstered by El Chapo’s, the leader of Sinaloa Cartel, escape from prison. Not only does his escape place one of the drug world’s most powerful men back in a position to consolidate power, but it risks further escalation of violence by cartels “if the Mexican government tries to prove they are doing everything they can to recapture him”. Additionally, with alleged alliances between cartels arising, it’s unlikely that the violence will die down naturally. The question obviously becomes what do we do?

With marijuana legalization initiatives being pushed in multiple states, it seems like the tide on US drug policy is changing, and marijuana will be either slowly legalized on a state to state basis, or a change to the Controlled Substances Act will be made at the federal level. The former risks the creation of so called “grey markets” in limbo states (which would foster smuggling and crime to sell legally grown marijuana to states where it is illegal). On the other side, the latter would likely spark political debate and make this coming election more interesting. Given the long timeframe of state by state legalization and the quasi-legal nature of grey markets, broad federal legalization is desirable because, among other things, it would give the US the financial leverage it needs to crush cartel growth in Mexico.

2008 RAND study found that between 40 and 67 percent of exported marijuana goes to the US. To put that in perspective, in 2008’s drug landscape marijuana accounted for up to $2 billion in gross income for cartels. In addition to the raw numbers, however, is the fact that if marijuana were legalized suddenly the shock to cartels would force a reshaping of their investments and would weaken cartels to the point that they would have “less capacity to corrupt the judiciary and the police in Mexico with crumpled bills in brown envelopes”. Finally, a sudden and major disruption of cartel profits would damage already fragile market integration hierarchies in other illicit sectors by forcing cartels to shuffle around resources and reorganize their business model quickly and covertly. This would have the impact of crippling cartel’s attempts to “shift” away from marijuana giving law enforcement the time, and resources they are currently wasting fighting grey markets and quasi-legal marijuana, they need to strike the final blow to cartels that will be approaching huge profit losses in all sectors.

In fact, we’ve already seen cartel’s profits and marijuana exports drop sharply since states have started legalizing marijuana. Not only have Mexican law enforcement officials seen a 32% drop in illegal marijuana exports, but the domestic marijuana market grew 74% in one year and directly took away at least $2.7 billion of cartel revenue. In an ironic twist, life-long marijuana growers in Mexico are saying, as their profits are squashed, “I wish the Americans would stop with this legalization”.

Thus we come back to the question asked at the beginning of this post, what do we do? Given the already fragile nature of the Mexican state, the grey markets popping up around states that have legalized recreational marijuana, and the potential to hit cartels where it hurts, the solution seems simple; federally legalize marijuana by amending the Controlled Substances Act and removing marijuana as a schedule 1 drug. If nothing else, it will end the foolish DEA game of whack-a-mole that is wasting government resources and letting harder, more dangerous drugs slip through the border.

UPDATE: It will be interesting to see what happens given the Mexican government’s statement that they recaptured El Chapo.


UPDATE 1/10/16: Analysts recently commented that the capture of El Chapo “won’t have a significant impact [on Sinaloa’s functioning] other than a moral victory”, reports Gawker.