Mexican Drug Cartels Now Make Fortunes Exporting Ore

Mexico Drug Cartel Mining
AP/Agencia EsquemaMexican army soldiers enter the iron ore mine in the town of Aquila, Mexico, in August 2013. A resident of Aquila said that since 2012, the Knights Templar cartel has demanded residents hand over part of the royalty payments from the local iron ore mine.
By MARK STEVENSON

MEXICO CITY -- Mexican drug cartels looking to diversify their businesses long ago moved into oil theft, pirated goods, extortion and kidnapping, consuming an ever larger swath of the country's economy. This month, federal officials confirmed the cartels have even entered the country's lucrative mining industry, exporting iron ore to Chinese mills.

Such large-scale illegal mining operations were long thought to be wild rumor, but federal officials confirmed they had known about the cartels' involvement in mining since 2010, and that the Nov. 4 military takeover of Lazaro Cardenas, Mexico's second-largest port, was aimed at cutting off the cartels' export trade.

That news served as a wake-up call to Mexicans that drug traffickers have penetrated the country's economy at unheard-of levels, becoming true Mafia-style organizations, ready to defend their mines at gun point.

Three Michoacan state detectives were wounded in an ambush earlier this week when they were traveling to investigate a mine taken over by criminals. When reinforcements arrived, those officers were also ambushed, part of a string of attacks on police in Michoacan on Wednesday and Thursday that left two officers dead and about a dozen wounded.

The Knights Templar cartel and its predecessor, the drug gang known as La Familia, have been stealing or extorting shipments of iron ore, or illegally extracting the mineral themselves and selling it through Pacific coast ports, said Michoacan residents, mining companies and current and former federal officials. The cartel had already imposed demands for "protection payments" on many in the state, including shopkeepers, ranchers and farmers.

But so deeply entrenched was the cartel connection to mines, mills, ports, export firms and land holders that it took authorities three years to confront the phenomenon head-on. Federal officials said they are looking to crack down on other ports where drug gangs are operating.

"This is the terrible thing about this process of [the cartel's] taking control of and reconfiguring the state," said Guillermo Valdes Castellanos, the former head of the country's top domestic intelligence agency. "They managed to impose a Mafia-style control of organized crime, and the different social groups like port authorities, transnational companies and local landowners, had to get in line."

Valdez Castellanos said that even back in 2010, La Familia would take ore from areas that were under concession to private mining companies, sometimes with the aid or complicity of local farmers and land owners, then sell the ore to processors, distributors and even, apparently, foreign firms.

Mexico's Economy Department said the problem was so severe that it prompted the government to quietly toughen rules on exporters in 2011 and 2012 and make them prove they received their ore from established, recognized sources.

Many exporters couldn't. In 2012, the department denied export applications from 13 companies, because they didn't meet the new rules. And the problem wasn't just limited to Michoacan, or the Knights Templar cartel.

"Since 2010, evidence surfaced of irregular mining of iron in the states of Jalisco, Michoacan and Colima," the department said in a statement to The Associated Press.

"That illegal activity was encouraged by the great demand for iron by countries such as China, to develop their industries," according to the department. "Many trading companies began to build up big stockpiles of legally and illegally obtained iron [ore], that was later shipped out for export."

A Mexican federal official, who was not authorized to speak on the record, said the cartels would use a combination of threats and outright theft to get the ore from mines. He said the nexus between the cartels and export companies was key.

"They extort the merchandise from mining companies and then export it through legal companies, or they rob trucks full [of ore] that later turn up in a legal manner," the official said.

Ofelia Alcala, a resident of the Michoacan mining village of Aquila, said that since 2012, the Knights Templar cartel has demanded residents hand over part of the royalty payments from a local iron ore mine operated by Ternium, a Luxembourg-based consortium. Alcala, a member of a self-defense group that rose up in arms in Aquila this summer to kick the cartel out, said the cartel also had been hiring people to extract the ore without permits, and then exporting it through another Pacific coast port, Manzanillo.

"They weren't content with getting our money and robbing our trucks, so they began secretly extracting our minerals," said Alcala.

Ternium said in a statement that it has received reports of irregular mining near its operations in Aquila.

"Those have been passed on to the appropriate authorities," the company said in a statement.

Government figures show the amount of iron ore being exported to China quadrupled between 2008 and the first half of 2013, rising to 4.6 million tons per year, precisely during the period the La Familia cartel and later the Knights Templar cemented their control over Michoacan.

In 2008, Lazaro Cardenas handled only 1.5 percent of Mexico's iron ore exports to China; by mid-2013, the seaport was shipping out nearly half.

In 2010, the attorney general's office estimated the cartels shipped 1.1 million tons of illegally extracted iron ore abroad that year.

Officials said the export scheme may have involved other sea ports, and that more military takeovers may be necessary.

The cartel mining issue also resurfaced last year in the coal-mining state of Coahuila bordering Texas. The former governor, Humberto Moreira, called a press conference to claim that Heriberto Lazcano, leader of the Zetas cartel, was running illegal coal mining ventures and partnering with legitimate ones. So far, none of the accusations have been proven.

The only known arrests related to cartel mining operations occurred in Michoacan in 2010, when Ignacio Lopez Medina, an alleged member of La Familia, was accused of selling ore illegally to China, the federal Attorney General's Office said at the time.

But the arrest apparently came to little; the Attorney General's Office could not say whether Lopez Medina had been tried or convicted of that crime, nor could The Associated Press determine if he is represented by a lawyer or is still in custody.

The Chinese Chamber of Commerce did not immediately respond to requests for information on companies that have been involved in buying ore from cartels, knowingly or otherwise.

The Chinese Foreign Ministry declined to comment on whether China had any measures in place to ensure the legal provenance of such imports.

The iron ore, meanwhile, has both swelled the cartels' bankrolls, giving them more money to buy guns and bribe officials, and fed the hunger of Asian steel mills.

And it may be a two-way trade: Precursor chemicals the cartel uses to make methamphetamines often arrive from China at both the Lazaro Cardenas and Manzanillo ports.

Associated Press writer E. Eduardo Castillo contributed to this report.

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60 Comments

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rjggoldstandard

Mexico is lost.

December 03 2013 at 1:15 AM Report abuse rate up rate down Reply
rhanleyinv

There would be no drug lords, killings and corruption in Mexico or the U.S. if the U.S consumer did not buy the drugs. The U.S buyer comes from all economic and social levels and is destroying our country and themselves. It is time for them to be accountable. Anyone you know who is taking drugs help them stop.

December 02 2013 at 10:43 PM Report abuse +1 rate up rate down Reply
harryb2378

Just have Walter White cook up some whoop a%% and take care of business.

December 02 2013 at 10:03 PM Report abuse rate up rate down Reply
Dan Crabtree

well always good to know as we now have OVER thirty million here illegally

December 02 2013 at 10:00 PM Report abuse +1 rate up rate down Reply
bluetoolpro

we should be using drones on mexican drug lords , lets free the mexicans so they will stay in their own country

December 02 2013 at 5:10 PM Report abuse +2 rate up rate down Reply
Sherry

China again! This country should be banned from exporting anything to the USA, maybe their need for oil will be no more if we stop buying their garbage.

December 02 2013 at 4:35 PM Report abuse rate up rate down Reply
psvi

FACTS:

* In 59 voting districts in the Philadelphia region, Obama received 100% of the votes with not even a single vote recorded for Romney. (A mathematical and statistical impossibility).

* In 21 districts in Wood County Ohio, Obama received 100% of the votes where GOP inspectors were illegally removed from their polling locations - and not one single vote was recorded for Romney. (Another statistical impossibility).

* In Wood County Ohio, 106,258 voted in a county with only 98,213 eligible voters.

* In St. Lucie County, FL, there were 175,574 registered eligible voters but 247,713 votes were cast.

* The National SEAL Museum, a polling location in St. Lucie County, FL had a 158% voter turnout.

* Palm Beach County, FL had a 141% voter turnout.

* In one Ohio County, Obama won by 108% of the total number of eligible voters.

NOTE: Obama won in every state that did not require a Photo ID and lost in every state that did require a Photo ID in order to vote. Imagine that.....

P.S. ARE WE THE DUMBEST NATION ON THE PLANET OR WHAT?

......YES!

December 02 2013 at 3:23 PM Report abuse rate up rate down Reply
1 reply to psvi's comment
Bill

This is not a fact, it's a lie

December 03 2013 at 12:30 AM Report abuse rate up rate down Reply
harlson

Besides US banking, mafia whom the US government caters to, you left out insurance compnaies, our commander and chief sold out on that one with NOBAMACARE!

No people do not need to understand what is going on in Mexico with cartels other than nothing is being done. DRONE their asses, get a well trianed militia to strike move out strike again! Pay those folks a ton to rid MET E CO from main stream businesses!
America is weak now and needs to return to the kick ass nation we once were!

December 02 2013 at 2:36 PM Report abuse rate up rate down Reply
weilunion

And then there is the US banking and mafia cartels. They work hand in hand with the US government. Look at the banking fraud, the laundered monies from drugs, the pay off of the DEA and other such agencies.

People must understand that what is going on in Mexico with cartels becomiing main stream businesses happened in the 1950's, 60's and 70's in America. Also the 1980's when the Savings and Loan debacle hit. This too was cleansed mafia.

America is a banana republic just like Mexico and others. We just do not see it, for appearance mugs reality every time.

December 02 2013 at 1:55 PM Report abuse rate up rate down Reply
salmo60

This isn't about the Affordable Care Act. It's about our Southern border fast becoming a war zone. The Repubs and Dems care more about stupid "stuff" like same sex marriages or "the war on Christmas" ect ect.
All the while, the Mexican Drug Cartels are now positioning themselves to rule whole states In Mexico such as Sinaloa State. The Mexican Army or Federales will not even enter Sinaloa.
Tons of Mexican Meth enter the US through the various Arizona access points and how much does the DEA think they interdict? About 10%

December 02 2013 at 10:06 AM Report abuse rate up rate down Reply