Disruptions to global supply chains due to the spread of the coronavirus is hampering production of methamphetamine and fentanyl by Mexico’s cartels, according to VICE sources.
Sinaloa cartel operatives in Mexico told VICE this week that importing the chemical precursors they need to make methamphetamine and illicit fentanyl has become harder and more complicated, which is creating a shortage and pushing up prices.
“Now we are all struggling to get the chemicals to Sinaloa from China,” one drug trafficker told VICE from Culiacán, Sinaloa. Production of methamphetamine and fentanyl is still happening, he said, but at lower rates than usual.
“We haven't stopped producing, but the price of meth is getting pushed up because of the scarcity of chemicals from China….transporting them this far is also getting much more expensive,” the cartel operative said.
China has historically been the main supplier of precursor chemicals and illicitly manufactured fentanyl to Mexico’s cartels. Much of this has been supplied in bulk in cargo rather than via the postal system. The chemicals are often mislabeled to conceal what they are, and shipped to major ports in Mexico such as Lazaro Cardenas in Michoacán and Mazatlán in Sinaloa. Some of the substances are not controlled, such as ammonium chloride and formaldehyde, according to the Drug Enforcement Administration (DEA), making them easier to source through legitimate companies in China to legitimate or front companies in Mexico.
Mexico’s two major criminal organizations, New Generation Jalisco Cartel and the Sinaloa Cartel (with strongholds in each of those states respectively), are though to have control of sea ports. They are Mexico’s biggest producers of both meth and fentanyl, according to recent research.
Even though China appears to be turning a corner on COVID-19, the most recent data showed that Chinese companies have been operating at 50 percent capacity, with around half of their normal staff, according to research earlier this month by the Institute for Supply Management (ISM). As a result, six in ten companies are experiencing a delay in delivery and a delay loading goods at Chinese ports.
“For their illicit production purposes, they’re not going to be able to keep up the normal cadence of production,” said Tom Derry, chief executive of the ISM. “They’re dealing with the same economic conditions that every legitimate industry is.”
Chinese manufacturers and vendors of drug ingredients told Reuters in early March that “logistical hurdles and labor shortages” were delaying production and shipments.
Methamphetamine seizures have been on the rise in the United States in recent years, and the purity and potency of the drug have been increasing. The vast majority of meth consumed in the United States comes from Mexico, and users could soon start to see street prices increase north of the border if scarcity of chemical supplies continues for Mexico’s cartels. Prices in Mexico are already rising, another Sinaloa cartel operative in Culiacan, the capital city of Sinaloa, told VICE.
“A pound of meth, wholesale, used to cost between 1,500 and 2,500 pesos ($66 to $110). Now it’s around 6,000 to 7,000 pesos ($264 to $308),” he said. These price changes took place two or three weeks ago.
Dark web dealers in the United States are also warning of price increases in meth due to the difficulty of bringing in the necessary precursors.
The DEA told VICE that it was too early to make an assessment on the impact of coronavirus on supply chains to Mexico’s cartels, but other observers said that it was logical that Mexico’s cartels would be affected.
“The legitimate chemical-pharmaceutical industry is having problems getting active pharmaceutical ingredients out of China, so I’d suspect many of the drug trafficking organizations are as well,” said Bryce Pardo, who has done extensive research on illicit drug supply chains for the Rand Corporation.
“All in all, coronavirus is going to fundamentally alter things across the board. As it pertains to drugs, demand will decline as people are less likely to go out and party, less likely to congregate, and the most chronic of users are likely to be in poor health and succumb to the virus.”
Pardo said it’s possible that some of the more sophisticated branches of the cartels could have prepared for such shortages from chemical-supplying countries by stockpiling chemicals.
But price shifts and shortages on the ground, although anecdotal, suggest that like the rest of the world, Mexico’s drug trafficking organizations didn’t anticipate the business impact of coronavirus, and are unprepared to deal with prolonged shortages of the chemicals that drive their profits.
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