Ever since the outbreak of COVID-19 and ensuing global lockdowns and cessation of international travel, the supply chain of global drug cartels emanating from China has been rendered dysfunctional. China is a major source of chemicals, synthesizers and drugs for the Mexican cartels.
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Drug Cartels hit by Coronavirus
The global lockdown over coronavirus seems to be impacting not just the legal economy but also the illegal economy. A FOX News report names two drug cartels, Sinaloa (Sinaloa reportedly controls around 90% of the entrance of synthetic drugs to the United States) and Jalisco “New generation” or CJNG being largely unable to source chemicals and synthesizers necessary to manufacture drugs such as heroin, methamphetamines and fentanyl.
Another prominent cartel is La Unión de Tepito, a group which is struggling to support its other important business – that of sourcing counterfeit goods from China and selling them in Mexican markets. Now, the lockdown has grounded the group and its activities. And it is not just the Chinese line, a parallel Columbian drug supply chain is also believed to be suffering.
The U.S. DEA (Drug Enforcement Agency) estimates there are close to 5,000 illegal drugs and chemical manufacturing laboratories in China, who would use toys, automotive equipment, food items, fruits, packaged goods and trinkets to stuff illegal substances.
Under a lockdown in the U.S., the cartels have also found it difficult to move money and personnel, though packages could still be moved as authorities would be looking for a “needle in a haystack.”
The role of India as a major backup source of raw material and chemicals is also not impertinent in the supply chain of global drugs. Andrew Lewis, a former Defence Department staffer and the president of a private intelligence firm, the Ulysses Group said, “Under normal conditions, the cartels could shift to Indian suppliers to augment supply, but Indian ports are experiencing slowdowns and backlogs of containers as government directives limit port activity.” India entered a full lockdown since the 25th of March, thus crippling the auxiliary supply line as well.
Prices of drugs spike up, though sales have crashed
The Mexican cartels have raised prices of illegal drugs to 4x the regular price, as underlying demand has grown stronger. However, volumes have crashed in the U.S. by up to 80%, partly because of economic suffering and partly because of enormous supply chain disruption. Estimates are that the cartels have lost about 10-15% of revenue in 2020, which is an impact of $3-5 billion in absolute terms.
Darknet dealings have also declined sharply, according to a Forbes report, with weekly Bitcoin spend dropping from $5.5 million in the last week of December, 2019 to around $3 million in the second week of March, 2020. According to a report by Chainalysis, the last quarter of 2019 had seen a huge $600 million worth of Bitcoin transacted in Darknet market.
Change in business model
Necessity is the mother of all innovation, even for criminal gangs. In Honduras, COVID-19-impacted human traffickers reportedly changed their business model to help people and contrabands get in and out of the country during the lockdown!
For Mexican cartels though, there is no evidence yet to suggest that their business model has changed. Most experts feel that they can ride this tough time out as it is a highly profitable business. There is an opinion within the Immigration and Customs Enforcements agency, or ICE, that the cartels can shift from land crossings to more ocean crossings. According to another international opinion, drone-based deliveries may become more popular for smaller packages such as deliveries by post from one location to another.
Extreme violence and abuse could spike
If the lockdown and supply chain disruptions last longer than anticipated, authorities fear that kidnappings and extortions could rise abruptly as gangs would resort to extreme means in desperation. A Guadalajara based source noted that wealthy Mexicans have either been vacating their areas or been buying bulletproof SUVs and other modes of self-protection, apparently fearing a rise in violent crimes.
Depraved clients would also end up indulging in drug overdose – over half a million Americans have died in the last decade. In 2019, 69,000 people in the U.S. died from drug overdose, data from the Centers for Disease Control and Prevention (CDC) show.
For latest updates on the outbreak check out our Coronavirus Coverage.
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