A Mexican drug cartel’s largest customer base is in the United States, and so much of its revenue is in U.S. dollars. Being a cash business, the next step is to get the money into Mexico and converted to pesos.
As with food and toilet paper, the drug supply chain has also been disrupted by COVID-19. The price of methamphetamines has doubled in just a few months. And the cash has been piling up, literally. The problem is that the pandemic has also messed up the money-laundering business.
Until about a decade ago, the cartels smuggled the dollars into Mexico, and converted them to pesos. When Mexico began limiting what banks could accept in U.S. dollars, drug traffickers had to change their methods. Enter the middleman. A broker pays a trafficker pesos for the dollars. The broker then pays dollars to exporters who ship goods — typically clothing, sportswear, cosmetics or jewelry — to a retailer in Mexico who pays the broker in pesos.
And the cycle goes on. Until now. Apparently cosmetics and jewelry are not considered essential. The forced closure of businesses has interrupted the flow of cash. And the stacks of currency grow higher.
Drug cartels in China have a similar situation with somewhat different particulars. They want to convert their yuan into dollars and park the money in the U.S., where the meddlesome Chinese government can’t get its hands on it.
A broker arranges payment to a factory that produces chemicals used in manufacturing methamphetamine or fentanyl. The factory ships the raw materials to Mexico, where they’re made into drugs, smuggled into the United States and sold for dollars. The broker orchestrates the cash delivery to a relative or an associate of the Chinese national, who now has the drug money safely sequestered.
Until now. Most of these chemicals are made in Wuhan — yes, that Wuhan — ground zero for the coronavirus. The factories are now shut down.
Money-laundering, like most businesses, has its own challenges.