Many fans of the western movie genre will be familiar with the 1960’s hit The Magnificent Seven. It even has a 2016 version starring every major motion picture star you can think of (Denzel Washington, Manuel Garcia-Rulfo, etc..). This classic tale tells of how a band of 7 hired guns save a town from a huge marauding gang that is exploiting and terrorizing a small town.
Insight Crime recently produced an incredible piece on how Mexican organized crime uses the same methods of intimidation and violence, to force entire States of Mexico to buy tobacco products only from them. By doing so, choice of cigarettes and other tobacco products are simply blocked from the market. So long to free market access!
The corporate black hat wearing bandidos in this instance are Tobacco International Holdings (TIH) and Burley & Virginia Tobaco Company. This new “Tobacco Cartel'' uses some pretty extreme “sales” methods to grow their business and it is no doubt from the influence of their partners in business the one and only Cartel de Jalisco Nuevo Generacion (CJNG).
“An Offer You Can’t Refuse”
If you were wondering how small shop owners in Mexico were being terrorized, well here is how. CJNG, seemingly with the consent of corrupt government officials, use the same market grabbing techniques that they use in the illegal drugs trade – overwhelming intimidation and when needed violence. It’s the only technique that they are familiar with, and that is unfortunate for the already traumatized population of Mexico.
On the retail sales side of things the violent methods are well documented. Men dressed as police show up and tell the owner to destroy all cigarettes that they have. Once all that is destroyed the shop owner is forced to buy cigarettes only from the cartel. In 2018 when there was an investigation done on this by Milenio, they cited 300 cases of this intimidation. The poor shop owners were told, “if you sell again, you will be killed.” This horrifying practice was further demonstrated in Michoacan State according to reports in Milenio with instances of actual kidnapping!
Who’s the Sheriff in this Town?
The Sheriff sadly is part of the scheme it seems. There is evidence of links between the Mexican Attorney General’s Office, TIH and CJNG. The more obviously linked individuals are Carlos Cedano Filippini and Genaro Cedano Filippini, both brothers formerly worked under the Attorney General's Office -which was then named Procuraduría General de la República (PGR)-. Carlos as well as others in the Filippini family are employed in various capacities in TIH. On the surface nothing fishy, but the same family has a criminal record of involvement with organized crime. Carlos himself has been in prison in the U.S. for organized crime offenses. So, when it comes to calling the cops for help? Remember that shop owner intimidation came from people dressed as police? Maybe these “cartel agents” were not genuinely police, but the message is clear.
Where There’s Smoke There’s Fire
Cigarettes may not gather as much passion for public action as other products. In Mexico there have been several studies online that show overall the smoking rates of the public in decline. That said, organized crime has changed the rules across the board when it comes to cigarettes. On top of the monopolization of cigarette selling outlets, they’ve also worked on the verticals using the same criminal techniques that work for drug trafficking.
Cigarette smoking decline is linked heavily with increased government taxation policies. Tax more? People lower their demand because the price of the luxury goes up. Organized crime uses smuggling to evade import taxes. That allows them to sell cheaper and at the same time weakens law enforcement budgets. In the Insight Crime article, that illegal volume has jumped from 2% in 2011 to 19% of cigarettes consumed today! It’s a win-win scenario for TIH, Burley & Virginia Tobaco Company and CJNG.
Unfortunately it’s a disastrous result for communities and the government programs that need tax money for their programs. This is not small money. An indication of the scale of imports being smuggled is clearly illustrated in the case of Jose Francisco Guerra (of Victor M. Guerra Inc.) of Texas.
In January of 2020 police stopped a truck full of cigarettes without the tax stamp put on the cigarettes en route to Mexico. That breaks U.S. law, but it also shows that none of these 17 million cigarettes en route were going to pay a peso of Mexican taxes. Police in the U.S. later seized an additional 400 million cigarettes from two warehouses controlled by Victor M. Guerra Inc..
In this instance, the US authorities were able to monitor the in and out of goods from the bonded warehouse effectively. They were able to prevent the sale of cigarettes into Mexico that if done legally would have garnered over USD 10 million in taxes for Mexico.
As mentioned above the illegal smuggled untaxed amount of cigarettes in Mexico as a whole is basically one in five. An Oxford Economics study supported that and compiled a total damage of lost tax revenues in Mexico of 13.5 billion pesos (nearly USD 718 million). When you consider the number of doctors (over 139,000) and teachers (over 175,000) that could be paid by this lost revenue - the loss to the people of Mexico is staggering. Cigarettes are just one of the products being smuggled and sold into Mexico tax free as well.
Organized crime moving into seemingly legitimate businesses is not new. It affords ways to make money, launder drug money, get loans even and in many ways can offer a way out from the violent drug trade. Cigarettes could however just be the start. As the success of unfair business practices are rewarded, it only makes sense to expand into new industries. Before long Mexico could find itself to be the world’s largest narco state.
Can Mexico come up with its own “magnificent seven” to tackle this? Don’t look to Hollywood to sort this one out. The Mexican people need some heroes to step up!