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World'A Feudal Regime': How Gangs Extort Mexico

22:55  23 december  2018
22:55  23 december  2018 Source:   online.wsj.com

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Extortion is becoming more pervasive across Mexico and Central America, where organized crime groups are regulators of a corrupt underground LÁZARO CÁRDENAS, Mexico —Naum Rosas runs a fleet of 30 vans that ferry workers between this busy Pacific port city and surrounding villages.

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'A Feudal Regime': How Gangs Extort Mexico© DAVID GUZMAN/EPA/SHUTTERSTOCK

LÁZARO CÁRDENAS, Mexico—Naum Rosas runs a fleet of 30 vans that ferry workers between this busy Pacific port city and surrounding villages. Until recently, when he wanted to raise fares, he didn’t go to city hall. He cleared it with gang bosses.

If Mr. Rosas refused to deliver a percentage of profits to them, or take his vans to carwash businesses run by gang members, he was warned that thugs could torch his vehicles—even with the passengers inside.

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“We call the gangs the other government, and it’s basically a feudal regime,” Mr. Rosas said.

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Mr. Rosas’ experience is part of an extortion economy that is becoming more pervasive across Mexico and Central America, where organized crime groups are regulators of a corrupt underground ecosystem.

Crackdowns that broke up big drug cartels in Mexico in the past decade succeeded in preventing any single criminal group from becoming so powerful that it rivaled the government. But they came with unexpected downsides, including an explosion in violence and extortion.

“The arrests of the big drug cartel leaders upset the incentives of criminal organizations, their structures were broken and smaller groups began to commit other types of crimes,” said Beatriz Magaloni, co-author of a recent Stanford University study on extortion in Mexico.

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Nowhere has criminal extortion gained the scale and sophistication of Mexico, experts say. There were 6.6 million cases of extortion of individuals in 2017, according to a survey conducted by Mexico’s National Statistics Institute, plus 525,000 cases of extortion against companies. Extortion was the third-most common crime committed against businesses in 2017 after robbery and petty theft, according to the institute, and the second-most common crime against individuals after muggings.

Extortion is the main reason cited by Mexicans requesting asylum in the U.S., migration experts say. Mexicans filed nearly 11,000 asylum petitions during fiscal year 2018, according to U.S. government data. While the U.S. doesn’t break down the claims by type, Carlos Spector, a U.S. immigration attorney, estimates three quarters of the asylum claims are linked to extortion.

“Instead of organized crime, we call it authorized crime,” said Mr. Spector, who tells U.S. immigration judges that many of his clients who report extortion are persecuted by criminal groups that the government won’t confront.

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Although the term ‘ feudalism ’ and ‘ feudal society’ are commonly used in history texts, scholars have never agreed on precisely what those terms mean. The term feudalism was not used by the people who lived in the Middle Ages. Neither can the feudal system, once defined, be applied uniformly

President Andrés Manuel López Obrador has made the fight against corruption and criminal violence a centerpiece of his government efforts, getting daily early-morning briefings by members of his security cabinet.

Extortion doesn’t discriminate by geography or economic sector.

Mexico’s National Agriculture Council, an industry group, estimates that more than $120 million is paid in extortion annually by farmers alone.

Gangs manipulate prices of basic goods such as limes and avocados by obstructing deliveries to food markets, said Francisco Valle, a member of the local security council in the city of Apatzingán, Michoacán, a region where armed vigilante groups have tried for years to protect local farmers against extortion.

In Acapulco, once a glitzy, but now fraying, Pacific resort, several cabdrivers were killed in September for refusing to pay protection money to gangs, security experts say. Transport firms are key extortion targets in violent cities like Acapulco. Buses are torched if owners refuse to pay extortion.

In March, bottler Coca-Cola Femsa closed its distribution center in Ciudad Altamirano, in Guerrero state, due to what it said was gang harassment and extortion threats. Pepsi bottler GEPP left in June.

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And in Reynosa, across the U.S. border from McAllen, Texas, thousands of teachers went on strike in early October and took to the streets to demand an end to extortion at schools, where they said local gangs target cooperatives and food stands. Earlier this month, teachers in Chilpancingo, the capital of Guerrero state, reported similar extortion attempts to authorities.

In Mexico City’s trendy Condesa and Roma districts, some bar and club owners said they have few options when they are approached by the local La Unión gang: pay some U.S.$300 in extortion every month or let its members sell drugs on their premises.

In the U.S. border city of Ciudad Juárez, José Alfredo Holguín said he fled to the U.S. in 2009 after his 23-year-old-son was slain by hit men after Mr. Holguín complained to union bosses that extortion payments were pushing his transportation business into bankruptcy. Mr. Holguin now heads an association of about 200 Mexicans living in in El Paso, Texas.

“Sometimes when I drive, it seems I can hear the shots that killed my son,” he said. “Mexico´s insecurity problem is a reflection of impunity.”

Lázaro Cárdenas, a nerve center of Mexico’s economy, is a window into the extortion economy in southwestern Michoacán state. More than 20 criminal cells prey on firms here, according to estimates from Moisés Kababie, who advises companies on security at the Control Risks consulting firm.

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Last year, José Luis Esquivel, head of the local chapter of the National Business Chamber and owner of insurance and trucking businesses in the port, went on local radio to encourage residents to report extortion attempts. Two days later, he began to receive death threats over the phone.

The criminals there target companies large and small, from steel giant ArcelorMittal to midsize suppliers and to mom-and-pop stores, said former executives and consultants to the companies and their suppliers.

ArcelorMittal’s suppliers were squeezed constantly, said Norman Borders, who conducted fraud and corruption investigations for the firm from 2012 to 2015.

“A lot of suppliers were targeted, from industrial glove suppliers to providers of safety equipment or spare parts,” Mr. Borders said. “Auditors wouldn’t write bad reports on vendors for fear of reprisal.”

Hit men killed the manager of ArcelorMittal’s Lázaro Cárdenas steel plant in 2013 because of his efforts to thwart criminal gangs, authorities said. Other senior executives and their relatives were also targeted. In 2014, the wife of the plant’s head of procurement was kidnapped. Criminals didn’t just ask for a ransom, they wanted invoice information and the company’s list of vendors, Mr. Borders said.

An ArcelorMittal spokesman acknowledged that the firm has faced situations that have threatened the security of the company or the safety of its staff, but declined to comment on specific incidents.

In March, some 30,000 commuters were stranded across Lázaro Cárdenas after Mr. Rosas said he and other bus operators suspended service for almost two days after they resisted extortion attempts and received warnings from gang members.

He and other co-workers went to the Michoacán state capital of Morelia to report the extortion attempt, as they feared that local authorities could be involved in the racket.

Later that week, 15 bodies bearing hallmarks of torture were found piled up on the bed of a bloodstained pickup truck a few miles from the port. Some of the victims were part of the group involved in the extortion attempt, transport providers said.

It remains unclear who killed the victims. Authorities say it was a dispute between criminal gangs.

“After we suspended service, a lot of people came to us to share their stories about extortion,” said Manuel Sánchez, the owner of another public-transport firm in Lázaro Cárdenas who filed the extortion report along with Mr. Rosas.

Write to Santiago Pérez at santiago.perez@wsj.com

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This work deserves strong support and encouragement. Earl Anthony Wayne is a public policy fellow at the Wilson Center and a former assistant secretary of state for economic and business affairs and the former U.S. ambassador to Mexico.

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