Motorists wait in line at the US-Mexico border to enter the United States, left, while cars head into Mexico, right in Tijuana. Cars crossing into Mexico from the US are a source of profit for the cartels.
Motorists wait in line at the US-Mexico border to enter the United States, left, while cars head into Mexico, right in Tijuana. Cars crossing into Mexico from the US are a source of profit for the cartels. Photo by Sandy Huffaker/Corbis via Getty Images.

How Drug Cartels Infiltrate Customs and Get Rich Off Cars From the US

Cross border schemes around cars crossing the U.S/Mexico international line show how Mexico's powerful criminal organizations are profiting from much more than just drugs.
July 22, 2021, 12:00pm

LAREDO, Texas — Every day, thousands of vehicles roll across the two bridges that connect Interstate 35 and this border town’s historic downtown to the city center of Nuevo Laredo, Mexico.

Drivers pay their toll at the international bridge facility on the U.S. side of the Rio Grande, then drive across the border and pass under the squat, graying office building where Mexican customs and military officials randomly inspect vehicles. 

Advertisement

That’s when the drug cartels go to work. Cartel lookouts infiltrate the customs checkpoint, pose as vendors on the bridge, and lounge on the sidewalks looking for any cars that might be crossing without the gang’s permission, as well as rivals and law enforcement officials.

The scheme goes something like this: A small number of “naturalization companies” operate on both sides of the border, identifiable by large parking lots full of cars waiting to be processed for importation. They take money from customers in the U.S., pay the taxes and fees in Mexico, then provide import permits before the vehicles cross the border. 

But between the nationalization companies and Mexican authorities sit the cartels, which add hundreds of dollars to the bill, to be divided up between the cartels themselves and corrupt Mexican officials, according to U.S. prosecutors.

GettyImages-1079386628.jpg

Numerous cars queue at the San Ysidro border crossing between Tijuana and San Diego. Photo by Omar Martinez/picture alliance via Getty Images.

Once, the feared Zetas cartel controlled the lucrative business of importing cars from the U.S. to Mexico. Now, after more than a decade of a U.S.-bankrolled drug war in Mexico has blown apart the cartels, what’s left of the Zetas is known as the Cartel de Noreste, and it’s currently fighting off incursions by the Gulf Cartel to the east and the Cartel de Jalisco Nueva Generación, one of the largest criminal organizations in Mexico, to the south.

Controlling politics and territory has always been important to drug traffickers. But as they’ve moved into schemes such as the import of used vehicles, controlling Mexican customs officials, “aduanas” in Spanish, has become a key element. 

Advertisement

“The border is so lucrative, because by controlling the border, you control aduanas,” said Arturo Fontes, a former FBI agent who worked in Texas and Mexico. “Everyone is being taxed. Everyone is getting a piece of the pie. Everything from the smuggling of people to the fayuca [consumer goods] coming in, to the cars. There's a hidden cartel tax. That's why this is so deadly, and it's so volatile and there's so much at stake as you're looking into this and the deaths are so high. There's so much money involved.”

For many years, high vehicle prices in Mexico made it a major market for used U.S. cars and trucks. Prices have dropped in Mexico, according to industry leaders, so now unscrupulous entrepreneurs import junked cars from the U.S. and sell them in Mexico. Sometimes they're imported legally with a fake title. Other times they cross the border under the guise of personal vehicles temporarily entering the country. 

Either way, corrupt officials and criminal groups control the flow, said Guillermo Rosales, the deputy director of the Mexican Association of Automotive Distributors.

"This is the consequence of the tolerance, and in many cases the complicity, of local authorities, state governments, and customs officials themselves," Rosales said. "Everyone at the border knows the modus operandi; they know who carries it out, and simply put, do nothing to stop it."

Advertisement

As a result, he said, environmentally unfit vehicles are allowed onto Mexican streets. 

"They are vehicles that have a limited lifespan," Rosales said. "They end up in tow yards, contaminating the water, above all polluting the air. They consume more fuel and therefore contribute to the country's energy crisis. And along the way, they are creating corruption and tax evasion."

The number of used cars imported into Mexico from the U.S. increased in the first half of this year as COVID-19 pandemic restrictions have slowly lifted, according to Rosales. Every winter, the number of people heading south into Nuevo Laredo exceeds 10,000 a day as caravans of “paisanos,” Mexican citizens and their families living in the U.S., cross the border for the holidays. Many of them bring along used vehicles to sell or give to family members.

And while the Zetas are a shadow of their former selves, cartels are still in control of the auto-importation business. They’re just fighting harder over the turf and the cash.

“It has not changed,” said Timothy Tubbs, the Deputy Special Agent in Charge who oversees Homeland Security Investigations along much of the Texas-Mexico border. “Basically the name ‘Zetas’ is no longer being used by the cartel that runs Nuevo Laredo. They still have a strong infrastructure, a strong management structure. They have a strong cartel in Nuevo Laredo. Basically they continue conducting these same transactions, these schemes. It’s the same group, the same leadership, same operations. Basically they just rebranded themselves.”

IMG-0428 (1).jpg

Grupo MCA in Laredo, Texas was at the center of a scheme that saw the Zetas cartel generating cash from the nationalization of American Cars into Mexico. Photo: Jason Buch for VICE World News.

Laredo is one of the busiest ports on the U.S.-Mexico border. Along with the two downtown bridges and two international crossings on the city’s western edge, the combined northbound and southbound commercial truck traffic tops 10,000 vehicles a day. 

Agents and prosecutors face a daily deluge of drug, cash, weapons, and human smuggling cases. Cartel activity around the auto importation business isn’t a priority because it’s smaller-scale and very time-consuming to investigate, and the minute law enforcement makes headway, the cartels quickly change business models. “They’re more complicated. They require more investment in time, resources, experience, and knowledge,” said Janice Ayala, a former Homeland Security Investigations official who ran the agency’s Laredo and San Antonio offices before heading DHS’s Joint Task Force for investigations.

Advertisement

The last big successful prosecution of corruption in the auto importation business in Laredo came in 2015. At that point, the Zetas cartel was so deeply ingrained in the used vehicle industry that they created a monopoly, deciding which companies could import used vehicles and demanding payment for every car that crossed the border, according to court filings.

“The four companies hold this monopoly with the assistance of the Zetas Drug Cartel, which received a kickback for each vehicle nationalized into Mexico,” prosecutors wrote in 2015. “In return for the kickback, the Zetas Cartel allowed the companies to conduct business and through the use of (permits) controlled the car nationalization business.”

Federal prosecutors eventually indicted 11 people in connection with that scheme, including the owners of the four nationalization companies, which are businesses with branches on both sides of the border that handle the paperwork and calculate and pay Mexican import taxes for used vehicles.

But despite that prosecution, and the fact that the Zetas have since fragmented, gangsters in Mexico continue to profit off used vehicles crossing the border, current and former law enforcement officials said. 

At the time, investigators saw it as a sign drug cartels had matured to the point where they sought other revenue streams. Businesses that rely on government permits or contracts, especially in areas where officials are easily corrupted, are particularly vulnerable. 

Cartels are “really expanding into everything,” Ayala said. “You’re talking about trade. Extortion schemes. They’ve found ways to make money off every legal and illegal movement.”

Sometimes that means finding an existing bribery scheme, such as companies paying kickbacks for government contracts or permits, and forcing those involved to pay for protection. Other times, cartel operatives will develop their own ways of squeezing money out of business owners.

“It really goes both ways,” said Tubbs. “If the Zetas identify anybody who’s conducting illicit business … they will force themselves to be a part of that business to take either a percentage of it or use that business to launder their money. They also identify specific schemes they can establish to launder their proceeds.”

Advertisement

The Laredo federal prosecution showed how much the Zetas business model had advanced since they were essentially created by the Gulf Cartel as an extra wing of armed muscle in 2010. It also showed the difficulties that U.S. officials face when they try to investigate murky cross-border schemes that involve legitimate businesses.

Targeting those schemes is difficult. U.S. citizens and residents who pay bribes abroad can be charged under the Foreign Corrupt Practices Act. But that law has an exception when extortion is paid “under imminent threat of physical harm.” 

The Justice Department can also prosecute people who launder the proceeds of some crimes committed abroad in the U.S., but those cases can be difficult to prove. 

And while the case against nationalization services wrapped up quietly in 2018—the owners of Grupo MCA, a company U.S. officials alleged at one point processed all Zetas-approved vehicle imports, agreed to turn over real estate valued at more than $10 million and most of those indicted pleaded guilty to lesser charges—U.S. President Joe Biden has said he will make fighting foreign corruption a priority.

On a recent weekday, Grupo MCA seemed to be doing brisk business at its brown stucco building watched over by security cameras and wedged between industrial parks and big-box stores in west Laredo. The company’s car lot, surrounded by a high wrought-iron fence, was full of vehicles when VICE World News visited. A receptionist said the owners weren’t available for an interview. 

Advertisement

For each car the companies helped import—the taxes they collect from their clients and pay in Mexico are based on the vehicle’s estimated value—they charged an additional $920, to be divided between the Zetas and the corrupt officials in Mexico. 

Sometimes the money was taken across the border as cash; the owners of the other three nationalization businesses admitted to “smurfing,” sending cash across the border in increments of less than $10,000 to avoid reporting requirements, more than $2.5 million between 2010 and 2014. Other times, it was wired. Between 2011 and 2013, more than $24 million passed through the bank account of a staffing firm that worked with the companies, according to court records. 

Nearly half of that money came from Grupo MCA, the company that prosecutors alleged for a time acted as a clearinghouse for all Zetas-approved car nationalization companies in Laredo. Not all of the money went to paying bribes, however. At least some of it was used to buy property in Texas, according to the court records.

Juan Carlos and Alejandro Cerda, Grupo MCA’s owners, wouldn’t comment for this story. In court, they argued they were victims of extortion and didn’t have a choice. Grupo MCA had been operating long before its owners were forced to start paying kickbacks, their attorneys said. Neither the company nor its owners have faced allegations of wrongdoing since the prosecution was resolved three years ago.

“Our clients were threatened,” Marc Gonzalez, a lawyer representing Grupo MCA’s owners, told VICE World News. “In Mexico, it’s not like you can just go to the cops for help. That was not an option for our clients. And they felt that because they’re not U.S citizens, they couldn’t ask for protection on the U.S. side.”

Advertisement

The prosecution of Grupo MCA was the first time Gonzalez had seen anyone charged with operating an unlicensed money-transmitting business, a statute more often used to combat terrorism.

The law, which comes with a penalty of up to five years in prison, was passed in the 1990s but amended in 2001, after the 9/11 terrorist attacks, to target illicit finance networks. The new version allows prosecutors to bring charges against anyone who transfers money on behalf of another person without a state or federal license to operate as a money-transmitting business. In contrast, to prove money laundering cases, prosecutors have to show someone tried to hide the origins of money they knew was dirty.

“It was a way to attack terrorism funding, but instead they started using it in the narco context,” said Oscar O. Peña, who represented the owner of an outsourcing company who was caught up in the prosecution. “Someone got the bright idea at DEA or at State or whatever that they were going to start stopping the flow of money. They took out this group of businesses that was paying the cuota.”

The charge of operating an unlicensed money-transmitting business allowed prosecutors to indict people who’d facilitated the kickback scheme, whether they knew about it or not.

“They never even bothered to say that my client knew they were sending money to the Zetas or anything like that,” Peña said. “They didn't have to prove that. All they had to do was show she sent the money and didn't have a license. So it was a perfect case to advance this policy of, ‘Let's knock out the infrastructure [of money] being sent to Mexico.’ It was a crushing policy.”