Mexico cartels are shaking businesses down for money. 'Narcoinflation' is leading to higher prices

Mexican cartels have been diversifying their business models — and that may be impacting the price we pay for some products — especially at the grocery store. That’s because of extortion or shake-down schemes the cartels are using on Mexican farmers and businesses — in some cases, very small businesses.

Ioan Grillo is a journalist and writer based in Mexico City. He specializes in covering drugs and organized crime. In a recent piece for the New York Times, he writes about this concept of "narcoinflation."

Grillo joined The Show to talk more about this.

Full conversation

MARK BRODIE: And Ioan, when folks think about cartels, avocados and other produce are usually not the first things that come to mind. So how is it that cartels got into this business?

IOAN GRILLO: Yeah, so the cartels, which are basically networks of paramilitary organized crime, really came together as drug trafficking organizations. But over the last 20 years, they have massively diversified to a whole bunch of crimes and basically taking over a bunch of regular crimes, things like human smuggling, product piracy, taking over things like prostitution and then getting into just shaking down regular businesses. And so this has really impacted all kinds of sectors, including agricultural sectors, but also street vendors and some big businesses as well, like mines and so forth.

BRODIE: And when you talk about these shakedowns, basically it works kind of like what we remember from the old mob movies, right? Like where, somebody comes in and says, hey, if you don't want to run into trouble, you got to give us some amount of money. Nice shop here. It'd be a shame if something happened to it.

GRILLO: Yeah, that's basically it. I mean, alongside that, there is a lot of very real violence. taking place to remind people that they need to pay. So you see shops being burned down, you see people being shot dead, people being kidnapped and tortured, their bodies dumped. So you've got very, very real violence at the side of this.

You know, there's one woman I talked to in the city ... who described this, she was getting phone calls for a long time and not you know, ignoring them. And then somebody came into her store and put a cellphone to her ear. And the person said, look, we know who you are. We know who your children are. We know what schools they go to. We know what their jobs are. We know who their partners are. And you're going to have to pay us half a million pesos or something very bad is going to happen to your family.

BRODIE: Is that generally the amount of money that that business owners and others have to pay for this quote unquote "protection"?

GRILLO: So the amount of protection money varies massively. So in some cases, it can be very small amounts. It can be, you know, a few dollars that people are taking regularly from people who have stalls on the side of the street. But it can be substantial. It can be 10%, 20%, 30% of the income of a small store. and then what you see with a lot of businesses it's become very organized by cartels and things like avocado production or lime production or meats you know cattle farms they'll do charging per kilo so they'll say every kilo you sell we get a cut and they'll also often do these shakedowns at various links in the chain.

So they might go and shake down people who have farms, but then also shake down people who have warehouses and transport companies. So they're almost acting like a shadow government in like trying to extract almost like a tax on this in many places in the chain. And then sometimes where you do have things like gold mines, silver mines, it can be very big, substantial amounts that they're paying as a form of extortion or protection to the cartels.

BRODIE: OK, so if they're kind of acting as a shadow government, what is the actual elected government doing about this?

GRILLO: Yeah, I mean, this really puts the elected government, you know, it really raises the question about the role of the elected government in providing security for people. So there's been a security failure in Mexico that's gone on for the last two decades, really. At the same time, you've had these big cartel wars and the military fighting cartels. You've had so many crimes against regular civilians. So many murders, so many disappearances, and the government's really looking unable to deal with this.

However, there has been now some effort by the government to respond to this. The current president, Claudia Scheinbaum, she is responding to the general security situation and has been trying to reduce the murder rate. And according to the official numbers it has gone down although some opposition people say, well, although the official murder rate's gone down, the cartels are simply disappearing more people to cook the books, to cook the numbers that they're making there.

But also there has been an effort and we've seen in the last few days, and since the editorial in the New York Times came out, we've seen some significant arrests of some cartel figures who are majorly involved in the crime of extortion and a new law being approved.

BRODIE: Yeah, well, and as you write, you know, President Sheinbaum is generally pretty popular. Her approval ratings are generally pretty high. Seemingly, this is maybe one of, if not the issue, that can sort of put a kink in that.

GRILLO: Yeah, absolutely. Claudis Scheinbaum won on a very big margin. She beat the opposition candidate by like two votes to one. However, there's also a sector of people who dislike the government very much, who consider them very corrupt. And this particular area of extortion is one thing, although it's a problem that has been going on for a lot of years with the crime cartels, they've expanded extortion a lot recently.

And this is something which really affects people. we say often that the two biggest things for people, two biggest issues for voters, is the economy and crime. But this is crime that affects your personal economy.

BRODIE: Yeah. So in addition to the very real personal and economic toll this is all taking on folks in Mexico, it also is seemingly having an impact on consumers in the U.S. In fact, there's a phrase for this “narcoinflation.”

GRILLO: Yeah, absolutely. As well as seeing general price rises for a bunch of conditions around the world, this is adding to that as well. So if you have people who are growing limes and you have an organized crime group getting a 10%, 20% tax on that, that price then goes into the limes as they sell, as they sell in Mexico and as they arrive in a bar in New York, so you could be putting a lime into a cocktail.

The same with avocados, you get these extra prices, this “narcoinflation,” adding more to the cost of living. And the cost of living has really gone up in Mexico. So this is also affecting a lot of people and angering a lot of people that might not be directly being extorted, but this is hitting their pocket as well.

BRODIE: Does it seem as though there's any optimism that this will end or decrease in large numbers anytime soon?

GRILLO: Generally, a lot of people, I feel, are quite pessimistic about the ability of the government to really deal with crime. And they can believe in the president for other reasons, but genuinely, quite a lot of pessimism. However, personally, although I've covered this for 20 years and seen how crime has really taken hold here, I still want to keep that hope there. There is always hope.

BRODIE: Ioan Grillo is a Mexico City-based journalist and writer specializing in drugs and organized crime.