El Chapo Boomerang

This is an analysis, greatly simplified, regarding a slice of the geo-political economic forecasting we provide to our clients. The purpose here is to provide context to past, present, and future events, particularly as they relate to organized crime and drug trafficking. What we're witnessing, both in border states and beyond, such as here in Florida, is part of a much larger and more complex picture.

Bear with.

On the 22nd of September, I followed with sparked interest the reports from northern Mexico, specifically from the state of Sinaloa, where at least 100 murders and multiple abductions have taken place. This is a direct consequence of the ongoing breakdown within the Sinaloa Cartel, one of the most powerful organized crime syndicates in the world. Historically, the Sinaloa Cartel has been unique in its business approach, where it hasn’t solely been about money or power in the traditional criminal sense. Rather, the cartel operated as a well-oiled, sophisticated business enterprise.  Don’t roll your eyes or dismiss the statement: “the cartel operated as a well-oiled, sophisticated business enterprise.”

At the helm of the cartel was Joaquín "El Chapo" Guzmán, a man with the traits of a ruthless criminal but also with remarkable managerial skills. El Chapo ran the cartel with a strategy that mirrored corporate governance, convening meetings with chapter leaders, comparing best practices, and coordinating operations to ensure the smoothest possible drug trafficking routes into the United States. A key part of this approach was the practice of maintaining good relations with the local communities and law enforcement to avoid drawing unwanted attention. The operating principle was simple: "Don’t defecate where you sleep." This pragmatic approach allowed the cartel to thrive, and Sinaloa became the largest organized crime group in Mexico.

However, this level of success placed El Chapo squarely in the crosshairs of the United States government as he got to big and successful.  Eventually, he was captured, extradited, and is now serving life sentences in an American prison, effectively removing him from his position of power. What followed was a leadership vacuum within the cartel, as the leadership dynamics changed significantly. While El Chapo was certainly a criminal, his ability to maintain cohesion within the organization was unmatched. He combined ruthless violence with calculated business acumen, traits that are rare in such a volatile underworld. While murder of business and political rivals is not as common in the United States, it does occur.

Since El Chapo's incarceration, the factions within the cartel have started to splinter. This unraveling became particularly pronounced back in July when Ismael "El Mayo" Zambada, one of the senior figures in the cartel and a key accountant for operations, was lured into a trap. El Mayo, now in his 70s, was convinced by one of El Chapo’s sons to travel to Texas under the pretense of a business opportunity. Upon landing, U.S. law enforcement apprehended him. It's widely believed that this son of El Chapo betrayed him, turning him over to the authorities.

As for accountants, recall the movie “ The Untouchables” with Sean Connery and Kevin Costner.

This betrayal sparked internal conflict among the cartel’s factions, particularly as several of El Chapo’s sons, known as "Los Chapitos," each control their own branches of the organization. Without the steadying hand of El Mayo, infighting has escalated over control of his share of the cartel’s operations. But it's important to note that cartels are not monolithic entities. The Sinaloa Cartel, like many organized crime groups in Mexico, is a loose federation of local groups that operate semi-independently. These groups may have different names, leadership structures, and operational styles but nominally report to the central leadership. The current situation is akin to a dysfunctional political system, where local fiefdoms act autonomously when the central authority falters.

Historical Political Context: This loose confederation within the Sinaloa Cartel bears a striking resemblance to the political and structural challenges faced by the original 13 colonies of the United States under the Articles of Confederation. After declaring independence from Britain, the colonies formed a confederation that granted significant autonomy to individual states, much like the semi-independent factions within the cartel. The Articles of Confederation created a weak central government, unable to effectively unify the states or address key issues like taxation, trade, or defense. This lack of cohesion led to dysfunction, as the states often pursued their own interests at the expense of collective goals, resulting in economic instability and political fragmentation. Recognizing the limitations of this system, the framers of the U.S. Constitution convened to create a more robust federal structure in 1787, replacing the Articles with a Constitution that established a strong central government, capable of coordinating efforts among the states while maintaining a balance of power. This shift from a loose confederation to a unified republic underscores the importance of central authority in maintaining stability—something the Sinaloa Cartel currently lacks, which is why it is falling apart as factions turn inward. The U.S. experience demonstrates that a decentralized system can only survive for so long before internal weaknesses prompt either reformation or collapse.

The comparison of the Sinaloa Cartel’s loose confederation with the early United States under the Articles of Confederation also offers a framework for understanding how modern political parties, such as the Republican and Democratic National Committees, function. Much like the original 13 colonies, the national political parties operate as a federation of semi-autonomous state and local organizations, each with its own leadership and priorities. The Republican and Democratic National Committees provide overarching coordination, but state and local party organizations often act independently, focusing on regional concerns and frequently pulling in different directions, leading to a lack of cohesion, especially during election cycles. This confederation-like structure, while offering flexibility, often results in disjointed and chaotic political strategies, where candidates must fend for themselves, building independent campaign infrastructures that often succeed despite, rather than because of, the support of local party apparatuses.

In Florida, this fragmented structure is particularly evident in how the political parties, especially the Republican Party of Florida, are organized. While the state party acts as a central body, much like the United States under the Constitution, it is still divided into 67 counties, each with its own local leadership. These county organizations resemble a confederation, where precinct committee people elect county chairs, vice chairs, secretaries, treasurers, and state committeemen and women. This decentralized system often leads to internal power struggles and disjointed efforts at the local level, mirroring the challenges faced by the original 13 colonies under the Articles of Confederation. Rather than working in unison, these factions frequently battle for control, leading to inefficiencies and chaotic political activities.

Consequently, candidates for federal, state, and local offices frequently bypass the dysfunctional local party structures entirely. Well-organized, independent campaigns allow these candidates to wrest control of the political narrative in their regions, operating parallel to, but not directly in concert with, their local political parties. Ironically, many of the most successful candidates in Florida’s political landscape have only a passive involvement in these often fractious county committees, opting instead for highly disciplined and strategic campaigns that are run independently. This dynamic highlights the tension between a confederation-like party system at the local level and the need for centralized, organized efforts to win elections—a tension that echoes the historical transition from the Articles of Confederation to the United States Constitution.

Continuing: In a country like Mexico, where transportation and communication infrastructure can be challenging, these semi-independent cells thrive. A strong central leader can keep such a structure together, but with El Chapo in prison, El Mayo now captured, and El Chapo’s sons turning on each other, the cartel's cohesion is quickly unraveling. What we are now seeing is the breakdown of the largest organized crime group in Mexico. Sinaloa, once the cartel's heartland, is now ground zero for this internecine violence. Unfortunately, this violence will likely spread beyond Sinaloa as factions battle for control over various territories and resources. Local chapters, sensing weakness in the central leadership, are likely to assert more independence and further fragment the cartel.

The effects of this breakdown will not be confined to Mexico alone. El Chapo’s approach to drug trafficking as a business enterprise allowed the cartel to expand its operations far beyond Mexico's borders, making it one of the largest organized crime groups in the world, with extensive operations in the United States. As leadership struggles play out in Sinaloa, we will also see disruptions in the cartel’s operations north of the border. Local distribution networks in the U.S., many of which are controlled by street gangs and smaller criminal organizations, are likely to start acting independently. This will lead to increased violence as these groups resist any attempts by the fractured Sinaloa leadership to regain control.

Moreover, these disruptions will have significant economic consequences. We can expect to see drug prices rise due to interruptions in the supply chain. The U.S. drug market, much like any other market, responds to supply and demand dynamics. As distribution becomes more fragmented and less coordinated, prices will spike. Unfortunately, this also means more violence, both in Mexico and in the U.S., as factions vie for control over the increasingly unstable and profitable drug trade.

While it’s difficult to determine whether this breakdown in the cartel’s operations will have long-term positive or negative effects, the immediate future looks grim. Increased violence, both within Mexico and the United States, is almost inevitable. The once-stable drug trafficking network that El Chapo built is now collapsing under the weight of its internal divisions, and the consequences will be felt on both sides of the border.

This analysis of political, economic, and criminal structures must also consider the role of force and violence, which remains a constant factor across all levels of society—whether we are talking about drug cartels, national governments, or political factions. The common thread across all of these entities, from Genghis Khan’s Mongol Empire to modern political parties, is that those willing and able to use force, or threaten its use, often come out on top. While many might argue that force plays little role in a civilized society, the reality is far more complex. Governments, even democratic ones, are underpinned by the willingness to enforce laws, seize assets, and exert control through law enforcement officers—who, in essence, serve as the muscle for the state.

In the context of criminal organizations like the Sinaloa Cartel, the willingness to commit violence is explicit. Power struggles between factions within the cartel, or between rival cartels, are often settled through murder, abduction, and intimidation. Whoever is willing to go to the greatest extremes tends to win. The same principle, though less overt, is true in political rivalries. Though physical violence is rarely employed, political power struggles can still reach a point where force, in the form of legal action, the use of executive power, or strategic coercion, becomes the tool of choice. The use of violence or the threat of it is not always physical; it can be structural, as in the seizure of assets under civil forfeiture laws, or legal, as in the application of executive orders that carry the weight of law.

Throughout history, this dynamic has played out repeatedly. Figures like Genghis Khan, Pol Pot, Mao Zedong, and Stalin all demonstrated an extreme willingness to employ force to achieve their goals, often to devastating effect. Their control over vast military and law enforcement apparatuses ensured that dissent was crushed, and their rule cemented. Even in modern democracies, leaders like Joseph Biden or his predecessors wield a different kind of power, one less visible but no less potent. While Biden may appear weak to some, his authority to issue executive orders—actions that can reshape national policy without the need for legislative approval—serves as a modern-day “stick” that underscores the point that force need not always be overtly violent to be effective.

The use of force extends beyond individuals to institutions and governments. Law enforcement officers serve as the enforcers of government mandates, ensuring that laws, whether criminal or civil, are respected and followed. In many ways, they are the visible expression of a government’s monopoly on the legitimate use of force. This structure allows for the peaceful resolution of most conflicts, but the latent threat of violence—whether through police action, military intervention, or the use of executive power—remains a critical tool in maintaining order.

In this way, civilized society is not free from the dynamics of power and force; rather, it operates under the pretense of law and order, with an understanding that ultimate authority is backed by the willingness to use force, whether that be through a police officer, an executive order, or the seizure of assets. The real question then becomes not whether force will be used, but who controls it, and how far they are willing to go to see their wishes accomplished. Those who wield force, or who can manipulate structures that control it, often hold the greatest power—whether they are cartel leaders or national politicians. It always comes down to who is willing to push the boundaries to achieve their ends.