The recent extradition from Mexico to the United States of Ovidio Guzmán is a most welcome development. As U.S. Department of Justice indictments against him and the rest of the Chapitos, the sons of Joaquín “El Chapo” Guzmán and leaders of the main branch of the Sinaloa Cartel showed, Ovidio’s responsibilities within the cartel centered on the production and trafficking of deadly fentanyl to the United States. Bringing him to justice, far more likely in a U.S. court than a Mexican one where effective prosecution rates still remain abysmally low, is very important. On July 27, the head of the U.S. Drug Enforcement Administration (DEA) Anne Milgram highlighted Ovidio’s role during a U.S. Congress hearing on “Drug Enforcement Administration Oversight.” In this four-part series, I have been analyzing some of these key takeaways from Milgram’s fascinating testimony that was full of important insights into the China-Mexico-United States fentanyl traffic. In my previous oped in the series, I analyzed what Milgram’s testimony told us about the Mexican cartels’ operations, including Ovidio. In the first oped, I focused on the international fentanyl traffic, the role of China, the global synthetics drug revolution, and the public health effects of fentanyl prevalence in the United States. In today’s oped, I discuss several important aspects of the Mexican cartels’ operations and new supply trends about which Administrator Milgram did not speak in her testimony. In my next column, the concluding piece in the series, I will analyze the big changes in the DEA’s policies that Administrator Milgram presented and suggest further policy recommendations.
A very dangerous development in the U.S. illicit drug market about which Milgram’s testimony did not comment is the spread of xylazine. Nonetheless, as part of the Biden administration’s strategy for countering the threat of xylazine mixed into fentanyl (officially unveiled in July 2023) Milgram had repeatedly spoken out about the risks of unauthorized xylazine use, describing xylazine as “making the deadliest drug threat our country has ever faced, fentanyl, even deadlier.”
A tranquilizer used in veterinary medicine for surgery on large animals, xylazine is a non-opiate sedative, analgesic, and muscle relaxant. Over the past several years, its presence in street drug use on the U.S. East Coast has escalated dramatically and its spread westward appears to be mimicking the spread of fentanyl a decade ago. Amidst the already most lethal drug epidemic ever in human history, xylazine poses further grave threats. Its use causes horrific morbidity, such as tissue necrosis so bad it often leads to amputation. It generates its own addiction. And, crucially, by suppressing the central nervous and respiratory systems, it can cause death. Because it is not an opioid, it does not respond to naloxone, undermining the effectiveness of naloxone to reverse lethal drug overdose.
The death rate from xylazine overdoses increased 35 times from 2018 to 2021. The DEA has found fentanyl-xylazine mixtures in 48 states, and in 2022, about 22% of fentanyl powder and 7% of fentanyl pills seized by the DEA contained xylazine. Although almost 110,000 U.S. residents died of drug overdose in 2022 – 300 people a day! — the actual number of drug overdoses that did not result in death (although might have caused potentially lifelong health impairment) was many times higher. If xylazine starts spreading through U.S. drug use, we can see a further dramatic escalation of drug deaths from an already terrible baseline.
Like fentanyl, xylazine is frequently mixed into other drugs without users knowing it.
Yet little is known about how and where xylazine is added into street drugs. Its use as an illicit drug adulterant was first registered in Puerto Rico in the early 2000s. A decade later there, it circulated as a drug of abuse on its own. Xylazine has many of the same effects in recreational use as opioids, but the high lasts longer. Indeed, one supposition is that it was Puerto Rican drug trafficking networks, widely present in New York, that introduced the drug into street use. As of October 2022, the U.S. Drug Enforcement Administration believed that xylazine was being mixed into the drugs at the retail level.
Developments since suggest that the mixing may also take place during the wholesale supply, but not enough is known what role Mexican cartels play in the distribution of xylazine. A May 31, 2023 Financial Times article asserted that Mexican cartels were mixing xylazine into fentanyl. The Director of the U.S. Office of National Drug Control Policy (ONDCP), Rahul Gupta, also suggested that beyond online sales from China and Puerto Rico, to a lesser extent some drug traffickers were mixing xylazine into fentanyl in Mexico. The fact, as detailed below, that xylazine has been detected in fake drugs sold by Mexican pharmacies to Western tourists strongly suggest that at least some Mexican illicit drug traffickers are also involved in mixing xylazine into drugs, whether at the wholesale or retail levels. But we need to know far more than just that. Which of the Mexican cartels peddle and mix xylazine into drugs? Both Sinaloa and CJNG? Are the Chapitos themselves directing the mixing of xylazine into other drugs or does the mixing happen more downstream? The interrogation and trial of Ovidio Guzmán should focus on those questions.
Xylazine is readily available for purchase on the internet. Chinese suppliers price a kilogram of xylazine powder between a mere US $6 and US $20. Like synthetic drugs overall, and particularly synthetic opioids, that makes is dangerously cheap. But far more needs to be known about whether and how Chinese suppliers are selling the drugs to illicit markets. Are the sellers the same Chinese sellers that also knowingly sell fentanyl precursor chemicals to Mexican cartels? Xylazine is not internationally a scheduled drug (even though in February 2023, the U.S. Food and Drug Administration restricted its unauthorized import). Will the United States thus find itself in a situation where vast numbers of Chinese suppliers ship the drug to the United States, as was the case with fentanyl before China scheduled the entire class of fentanyl-type drugs, further increasing prevalence of use?
A second highly pernicious development in the China-Mexico-U.S. drug trafficking not mentioned in Administrator Milgram’s testimony is the spread of pharmacies in Mexico, particularly in major international tourist areas, that sell fentanyl-laced drugs and other dangerous substances. Proliferating over the past three years in places such as the Mayan Riviera, Los Cabos, Puerto Vallerta, and Los Algodones, a small border town in Baja California, known for the more than 300 hundred dental clinics catering to U.S. citizens, these pharmacies are physical buildings that look like other Mexican pharmacies. Yet they openly advertise drugs such as antibiotics, anabolic steroids, and prescription opiates, and sell them illegally without a prescription. Investigative work by The Los Angeles Times and separately by Vice discovered that drugs sold as Percocet, for example, also contained fentanyl, methamphetamine, and xylazine. During my June 2023 fieldwork in Mexico, shop assistants in these pharmacies claimed they could mail any of these drugs to the United States even in the absence of prescription.
U.S. citizens have long been used to buying medications that are too expensive in the United States from Mexico. Unwittingly, intending to buy other medication, they may end up buying drugs causing lethal overdose or addiction. The legitimate veneer of these pharmacies also exposes a much wider set of potential customers to fentanyl and other dangerous drugs, ranging from teenagers to the elderly. Because the pharmacies aggressively target international tourists in major vacation resort areas, they can export the fentanyl epidemic to other regions of the world, such as Western Europe. Many of these pharmacies are likely linked to the Sinaloa Cartel and Cartel Jalisco Nueva Generación (CJNG). Further funding the Mexican cartels and other drug trafficking networks, a geographic spread of fentanyl use would augment the global public health disaster.
These pharmacies greatly magnify the threats to public health – in the United States, but also Europe and other areas from which international tourists come to Mexico. They are far more dangerous than informal street sale of illegal drugs. Their veneer of regulatory authorization gives customers a false sense of safety and mimics the crimes of the U.S. pharmaceutical industry that deceived and captured regulatory bodies and health providers in the United States with fallacious claims about prescription drugs, setting off substance use disorder in far greater numbers of people than an illegal market ever could. In a sense, the Mexican cartels are copying the illegal practices of U.S. pharmaceutical companies in the 1990s and 2000s.
The adulteration of fake medications with fentanyl and methamphetamine is not the sole problem. The unauthorized sale of antibiotics without prescription at these pharmacies also poses other massive global public health, economic, and security harms, such as the intensified emergence of drug-resistant bacteria.
Shutting down these unscrupulous pharmacies to minimize the criminals’ market access and to reduce exposure to customers is imperative. Simply seizing illicit pills while letting the pharmacies operate is inadequate. Shutdowns and strong prosecutorial actions are necessary against suppliers. Yet while these pharmacies operate in violation of Mexican laws, in plain sight, and visibly saturate major tourist areas, Mexico’s Federal Commission for Protection Against Sanitary Risks (COFEPRIS) only just began taking action in recent months. In June 2023, COFEPRIS finally raided three such pharmacies in Los Cabos, arresting four employees and seizing some 25,000 pills. Seizing problematic pills is not enough as illegal suppliers will simply bring in more. Thus, more importantly, at the beginning of August, COFEPRIS shut down 23 pharmacies selling illegal or restricted drugs in the Mayan Riviera.
Such law enforcement operations cannot remain isolated. COFEPRIS and the other Mexican regulatory and law enforcement agencies must continue diligently and continuously monitoring the sales of Mexican pharmacies, shutting down those that act illegally, and investigating, arresting, and effectively prosecuting the trafficking networks behind them.
Administrator Milgram’s testimony laid out various ways Mexican cartels launder money. The National Drug Intelligence Center of the U.S. Department of Justice estimated in 2011 that Mexican and Colombian drug trafficking groups earned between US $18 billion and US $39 billion a year from wholesale drug sales. Other estimates from the United Nations Office on Drugs and Crime, research organizations, and news media have assessed Mexico’s drug export revenues to have been in the range of US $6 billion to US $21 billion a year between 2010 and 2018.
Milgram’s testimony highlighted the increasing use of cryptocurrencies in the illegal drug trade, as well as the rise of Chinese money laundering actors and methods. In 2019 and 2020, the U.S. Department of Treasury and Europol characterized Chinese money launderers as “key threats.” They have been outbidding and displaying Latin American money launderers, such as those linked to the Black Peso market. As described in detail in Drazen Jorgic’s Reuters special report, the Chinese brokers mostly manage to bypass the U.S. and Mexican formal banking systems, thus evading anti-money laundering measures and simplifying one of the biggest challenges for the cartels, namely moving large amount of bulk money subject to law enforcement detection. The only interface with the formal banking system takes place in China, into which U.S. law enforcement agencies have little-to-no visibility, such as the Bank of China.
But Milgram’s testimony did not mention a novel and highly pernicious method of laundering money and value transfer across illegal economies also linked to China: the increasing payments for Chinese drug precursors originating in Mexican wildlife products. These often illegally-sourced wildlife products are coveted in China for Traditional Chinese Medicine, aphrodisiacs, and other forms of consumption, or as a tool of speculation, such as in the case of the highly prized swim bladder of the endemic and protected Mexican totoaba fish poached for Chinese markets. I have detailed this method in my 2022 investigative report “China-linked Wildlife Poaching and Trafficking in Mexico.”
Other wildlife commodities used for money laundering, tax evasion, and as barter payments between Mexican cartels and Chinese precursor networks include abalone, jellyfish, and lobster. Instead of paying in cash, Chinese traffickers are paid in commodities. The amount of value generated by wildlife commodity payments, likely in the tens of millions of dollars, may not cover all of the precursor payment totals, but could cover a substantial percentage since the total payments for precursors likely amount to tens of millions of dollars also. Wildlife barter may not displace other methods of money laundering and value transfer. But the increasing role of this method can devastate natural ecosystems and biodiversity in Mexico as the cartels steadily seek to legally and illegally harvest more and more of a wider range of animal and plant species to pay for drug precursors. In Mexico, poaching and wildlife trafficking for Chinese markets are increasingly intermeshed with drug trafficking, money laundering, and value transfer in illicit economies.
That is hardly surprising as Mexican criminal groups are increasingly controlling larger and larger portions of Mexico’s territory, people, illegal and legal economies, electoral processes, and institutions.
* Vanda Felbab-Brown is a senior fellow in the Center for 21st Century Security and Intelligence in the Foreign Policy program at The Brookings Institution in Washington, DC. Twitter: @VFelbabBrown
