How Is China Involved In Organized Crime In Mexico?

Over the last few years China’s presence in Mexico has expanded in both legal and illegal activities. According to preliminary data, trade between China and Mexico topped $100 billion in 2021, a new record. Imports from China account for over 90% of total trade between China and Mexico. Chinese foreign direct investments in Mexico tallied $189 billion in 2020. But, while legitimate commerce between Mexico and China is growing, Chinese groups are also becoming more involved in drug trafficking and money laundering in Mexico. In 2007, police in Mexico City seized $205 million in cash from a home owned by Chinese businessman Zhenli Ye Gong. More recently, U.S. police have arrested several Chinese nationals for their involvement in sophisticated money laundering operations.  In order to discuss China’s involvement in Mexico’s organized crime underworld, I reached out to Vanda Felbab-Brown, a senior fellow at the Brookings Institution, a Washington D.C.-based think tank. Felbab-Brown has been working on extensive research and field-work on the topic.

Nathaniel Parish Flannery: What’s the most interesting thing you learned during your recent research trip to Mexico?

Vanda Felbab-Brown: What struck me most in my research on China’s role in Mexico’s illicit economies was the intensifying intermeshing of drug trafficking and wildlife trafficking. Chinese criminal groups, suppliers, and consumers increasingly play a significant role in Mexico’s drug trafficking and wildlife trafficking.

In drug trafficking, Chinese brokers are the dominant suppliers of scheduled and non-scheduled, unregulated precursor chemicals for the production of methamphetamine, fentanyl and other synthetic opioids and previously also of finished fentanyl and its analogs. Mexican drug cartels then sell fentanyl and methamphetamine throughout North America and increasingly beyond. Chinese actors also launder money for Mexican drug trafficking cartels.

China is also a massive hub of demand for wildlife from around the world, including increasingly from Mexico. An expanding array of terrestrial and marine species, many illegally hunted, heads from Mexico to China, though the United States, including its Hispanic and Chinese communities, remains an important locus of demand for wildlife poached in Mexico.

The legal and illegal wildlife trade between Mexico and China is also increasingly becoming a mechanism to transfer value in illicit economies and bypass anti-money-laundering mechanisms in U.S. and Mexican banks and China’s capital flight controls. For example, the highly desirable swim bladder from the Mexican endemic fish totoaba macdonaldi, cooked as a soup delicacy in China and used for financial speculation, as well as other marine and terrestrial wildlife products and timber are used by the cartels to pay for precursors necessary to manufacture illicit drugs. The huge markups that wildlife products register between source and retail makes them an ideal tool of money laundering and value transfer.

It is not clear for what percentage of money laundering the wildlife-precursor barter accounts. However, the amount of value generated by wildlife commodities, likely in the tens of millions of dollars, may come close to the totals Mexican cartels owe to Chinese brokers for precursors – likely also in the tens of millions. Still, wildlife barter is unlikely to displace other methods of money laundering and value transfer. But the increasing role of this payment method can devastate natural ecosystems and biodiversity in Mexico, as the cartels seek to legally and illegally harvest more and more of a wider and wider range of animal and plant species to pay for drug precursors.  

Parish Flannery: How has Chinese involvement in organized crime activity in Mexico evolved over the last decade?

Felbab-Brown: Even though the presence of Chinese criminal networks in Mexico is growing, they are getting a tougher deal from the Mexican cartels. Members of the growing Chinese diaspora in Mexico broker the sourcing of precursors and finished drugs in China, transfer value between the Mexican cartels and Chinese suppliers, and launder money. Most diaspora members are, of course, not involved in illicit economies. But the Chinese diaspora community has become the go-to recruitment pool for both Chinese and Mexican criminal groups.

Until the recent effort by Mexican organized crime groups to monopolize illegal and legal fisheries in Mexico, Chinese traders often directly interacted with Mexican fishers, such as during the first years of sea cucumber harvesting off Yucatán and initially in abalone and totoaba poaching on the Pacific Coast. Chinese traders would hand out contracts to local fishers for desired seafood species and buy directly from them. The Chinese traders organized transportation to collection hubs and ports in Mexico and then the rest of the way to China.

Now Mexican criminal groups have pushed out Chinese traders from direct purchases from local fishermen. Mexican fishers are now compelled to sell to Mexican criminal groups who then sell to the Chinese brokers.

Crucially, many of the Chinese seafood traders with whom the Mexican criminal groups deal sell marine species authorized for harvesting and transport, or a mix of legal and illegal commodities and operate other businesses in Mexico such as supermarkets and restaurants. Several large Mexican seafood exporters and officials of fishermen’s federation I interviewed told me that Chinese buyers “are keen to have legal papers for the export of the fish from Mexico” and provenance documents of the seafood, though “they don’t care how the papers were obtained, whether they are genuine or fake, as long as they get some papers to make it look OK with authorities.” In turn, Mexican cartels are violently forcing seafood processing plants to treat the seafood the cartels bring in and furbish it with fake permit documents.

In contrast, in China, where Mexican drug trafficking groups extensively source their precursors from China, their physical footprint in China is minimal, mostly consisting of a few individuals and business trips.

Parish Flannery: What actions can the U.S. and Mexican government take to address Chinese involvement in organized crime activity in Mexico and the US?

Felbab-Brown: The Chinese government’s cooperation to counter drug and wildlife trafficking between China and Mexico is very limited. For the most part, the Chinese government rejects China’s responsibility for the smuggling of drug precursor chemicals into Mexico and for poaching and wildlife trafficking in Mexico for Chinese markets. It insists that these problems are for the Mexican government to solve. Cooperation has been minimal and sporadic. As former Mexican diplomats told me, Chinese government has not been keen to formalize either China-Mexico or China-Mexico-United States cooperation against either illegal trade, preferring informal case-by-case cooperation. The dominant position of the Chinese government has been that it is up to the Mexican government to enforce its laws within Mexico and to counter poaching and wildlife and drug trafficking there.

However, while in situ law enforcement is key, the prospects that Mexico could do it alone are poor. Mexican environmental regulatory and enforcement agencies lack resources, personnel, and mandates and are often plagued by pervasive corruption. Disinterested in protecting Mexico’s biodiversity or confronting Mexican organized crime groups, the López Obrador administration decimated the already meager budgets and authorities of Mexican environmental agencies and decreased law enforcement against criminal groups.

Mexico thus needs every bit of international collaboration, including from China, to reduce poaching and wildlife trafficking and the flow of precursors chemicals to Mexico. Such collaboration requires both China’s willingness to share intelligence with Mexico and the United States, interdiction against violators of China’s laws and traders who obviously cater to cartels, and actions to reduce demand in China for wildlife products smuggled from Mexico.

Every so often, under intense international pressure, the Chinese government has taken some such law enforcement actions: In 2018, for example, it moved beyond port seizures of the totoaba bladder smuggled to China and undertook several interdiction raids against Chinese retailers selling the protected totoaba. The raids pushed the visibility of the illegal retail out of public scrutiny — behind closed doors and onto private online platforms, but trafficking continues.

It is time for China to up its interdiction operations against both precursor traders catering to Mexican cartels and retailers of smuggled wildlife. Such law enforcement actions must be smartly designed and implemented and won’t end either of the illegal trade, but they will make it trafficking more difficult and give more of a survival chance to Mexico’s biodiversity and to people using synthetic drugs.