Economics of Narcotrafficking and the Rise of Mexican Cartels

Open borders, illegal immigration, and lax law enforcement have empowered drug cartels to expand their reach across the U.S., killing over 100,000 Americans annually with drugs and committing violent gun crimes that liberal jurisdictions often fail to police or prosecute.

The largest category of murders in the U.S. is drug and gang-related, with about one-third of gun homicides in some cities linked to gang activity. Globally, around 22% of all murders are gang-related.

Meanwhile, school shootings, though a focus for many liberals, have claimed an average of only 53 lives annually over the past eight years, including both adults and children.

Gangs are central to the drug crisis, as they primarily fund their operations by selling drugs. The resulting gun violence often arises from drug deals gone wrong or turf wars over distribution control.

The high profit margins in the drug trade make it enticing for individuals to risk their lives as distributors.

Meanwhile, the Mexican cartels, raking in billions, are difficult to rein in, as the income they generate far surpasses that of most legitimate alternatives, making it nearly impossible to persuade them to shift to lawful business ventures.

Mexican cartels profit from marijuana, cocaine, and fentanyl, but an analysis of the economics reveals why fentanyl has become their top earner. Fentanyl now drives about 80% of overdose deaths and fuels countless gang-related murders in the U.S., making it the new moneymaker for cartels.

Marijuana, which is bulkier and less concentrated than other drugs, has a lower wholesale value, ranging from $3,500 to $10,500 per kilogram, and a less dramatic street-level markup.

In contrast, cocaine is far more profitable, with import costs between $93,000 and $163,000 per kilogram, yielding substantial profits when broken down into smaller quantities for street sales. Fentanyl represents a major economic shift.

Priced at just $1,500 to $3,000 per kilogram, it can be cut and sold in pill form, generating up to $20 million in revenue. These numbers are illustrative and may not reflect the exact, current prices of drugs.

Having said that, the stark difference in profit margins is still clear, particularly with synthetic drugs like fentanyl, which highlights the economic incentives driving Mexican cartels’ dominance in trafficking, further cementing their influence in the global drug trade.

Over the past forty years, Mexican drug cartels have transformed from marijuana and heroin traffickers in the 1980s into dominant forces in the drug trade. Initially, they lacked the flash and influence of Colombia’s Medellín and Cali cocaine cartels, which at the time controlled the lucrative cocaine market and wielded significant political and economic power across the Americas.

However, in the 1990s and 2000s, as Colombian cartels weakened due to law enforcement and internal conflicts, Mexican cartels expanded their role in transporting cocaine from South America to the U.S. Seizing this opportunity, they gradually gained control of much of the cocaine trade into the U.S., growing more powerful and wealthy in the process.

By the 2000s, Mexican cartels had expanded beyond cocaine, controlling marijuana, heroin, and emerging synthetic drugs like methamphetamine and fentanyl which are sold at tremendous mark up.

The versatility of cartels like the Sinaloa Cartel and Jalisco New Generation Cartel (CJNG) has made them even richer and more powerful as they move into new synthetic drugs and other illicit activities.

Human trafficking, now a major revenue source, generates more money for some cartels than drug trafficking. Additionally, Mexican and Latin American cartels partner with U.S. street gangs like MS-13, the Latin Kings, and Tren de Aragua to control distribution networks for drugs, illegal labor, and sex trafficking across U.S. cities. These partnerships ensure cartel dominance in both the drug trade and other criminal enterprises.

In addition to their illicit activities, cartels have diversified into legitimate businesses, such as avocado exports, where they control farmers and demand protection money. The rising popularity of avocados in the U.S. has provided cartels with another lucrative revenue stream.

They also invest in mining and real estate, further solidifying their financial power. Like any business, diversification helps cartels weather market fluctuations. When one market slows, another thrives.

Selling drugs, prostitution, and other vices offers a key advantage—they are largely recession-proof. Cartels continue profiting during economic downturns as more people turn to vice during hardship.

Meanwhile, economic recessions and political instability in Latin America fuel a constant supply of individuals desperate to be trafficked into the U.S., generating more income.

In some cases, cartels traffic individuals on credit, trading debt for labor once they arrive, securing cheap and captive workers. This is cartel economics 101—adaptation, diversification, and profit regardless of market conditions.

This entire system of crime, drugs, violence, overdoses, prostitution, cartel power, and gang proliferation in the U.S. is perpetuated by open border policies that not only allow illegal entry but incentivize it with the promise of potential citizenship.

There is little deterrence for those crossing illegally, as they know that in most cases, they will not face significant prosecution. At worst, they may be caught and released or sent back to Mexico, only to try again.

This lack of serious consequences fuels a continuous cycle of trafficking, as individuals see minimal risk, while cartels profit from the steady flow of migrants, offering entry in exchange for future labor or hefty fees. This creates a lucrative, sustainable business model for the cartels, further solidifying their power.

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