New York Times Defends Mexican Cartels Because US Economy

Seriously, you cannot make this stuff up. I managed to miss this New York Times article last week thanks to the barrage of Trump edicts and the furor about them:

As we’ll see soon, other countries, namely Italy and El Salvador, have reached the opposite conclusion about the importance and value of rooting out organized crime, particularly in agriculture and food supplies. Italy has been particularly concerned about Mafia participation in food production due to their success in adulterating products and evading regulations.

But first we’ll turn to the New York Times piece. The guts of the argument has two pieces. One is that some industries so depend on cartel, erm, assistance that they can’t get rid of at any time soone except at high cost. So these activities fit the Ambrose Bierce definition of partners. From his The Devil’s Dictionary:

Partners: When two thieves have their hands so deeply plunged into each other’s pockets that they cannot separately plunder a third party.

The second leg is the ambit of the terrorist definition is so sweeping that parties that one ought to consider too removed could be swept up in it. That will result in innocents being harmed, with the Times of course being particularly concerned about innocent businesses.

We’ll also note that the story is sufficiently one-sided as to smack of being planted. Even though the Times solicited comments from various thesis-sympathetic sources, it appears to be intellectually reliant on a report by FTI Consulting:

The foreign terrorist designation could lead to severe penalties — including substantial fines, asset seizures and criminal charges — on companies and individuals found to be paying ransom or extortion payments. U.S. companies could also be ensnared by standard payments made to Mexican companies that a cartel controls without the American companies’ knowledge.

Some extortion payments, even if made under duress, could be considered “material support” to cartels, said Pablo Zárate, senior managing director at FTI Consulting, an American firm that released a report laying out some of the risks of the terrorist designation.

Merely looking at some entires in our CalPERS’ Hall of Shame shows that FTI Consulting has engaged providing analysis so deficient in the interest of defending private equity that it calls their competence and/or credibility into question.¹

The article begins with alarmed comments by Samantha Sultoon, which the Times describes as “a senior adviser on sanctions policy and threat finance in the Trump and Biden administrations”. Sultoon says the idea of designating Mexican cartels as terrorist organizations has come up before, but backed off:

“But no one has done it because they have looked at what the implications would be on trade, economic and financial relationships between Mexico and the United States,” she added. “They have all come away thinking that such a designation would actually be super shortsighted and ill-considered, though prior administrations viewed the U.S.-Mexico relationship far differently than the incoming Trump administration appears to.”

So Sultoon does acknowledge that the Trump Administration does not consider harm to Mexico as a result of failing to crack down on its cartels or at least restrict their scope of action to be a US problem.²

But the second noteworthy aspect about the reliance on Sultoon and (as we’ll see soon) another ex-State Department official is that the US amusing calls “terrorist financing” as opposed to “anti-terrorist financing” is run by the US Treasury Department, not State:

Banks talk all the time to Treasury, and to State only on an exception basis. So one can infer that the fact that the Times was able to find strong opponents to the Mexico cartel designation from diplomatic/foreign policy circles suggests that the historical concern was on relations with Mexico. The story does not have anonymous quotes from US banker types saying they’d have to drop or radically cut back on Mexico business. This is all hypotheticals from parties who are not on the finance front lines

Admittedly , the Times oddly failed to that Sultoon now works for Truist Financial, a product of the merger of BB&T and Sun Trust, as “SVP | Senior Financial Crimes Director.” But her discussion was entirely about past Administrations’ decision not to go forward with the terrorist designation, and not about the impact on particular actors, above all cross-border payments players.

Nevertheless, public companies pretty much never let employees talk to the press without an internal approval and limits on the range of discussion. So why would it be in Truist’s interest to have Sultoon go on the record? One must note that the article nowhere contemplates that the most immediate impact of a new terrorist designation with respect to Mexico is a raft of new compliance procedures, as in more costs and hassle. It instead flogs worst case scenarios, of all sorts of Mexico-related activity, like remittances, coming to a full stop. For instance:

“Banks may turn away customers, because they may not think they are worth the risk if they have links to Mexico,” said Eric Jacobstein, a former State Department official in the Biden administration.

And an eyepoppingly odd source:

Banks could ultimately decide to avoid entire sectors perceived as high risk, said Fabian Teichmann, a Swiss lawyer and expert on terrorist financing. Mr. Teichmann singled out Mexico’s avocado trade, where cartels have drastically expanded their operations, as one area that could come under greater scrutiny.

A SWISS lawyer? Seriously?

And MAGA types would argue reducing Mexican supply of avocados to the US wound be beneficial, in that California and other states are perfectly capable of growing them. They might also regard the PMC having to pay more for avocado toast as an additional gain.

We have to get well into the article to find out where the cartels seem to be more deeply involved in US business:³

The terrorist designation would also hurt American companies that are firmly north of the border but rely on Mexican labor. The designation is so broad and vague that ranches in Texas or farms in California could be swept up by the penalties if their employees send remittances to family members in Mexico who are involved in organized crime.

If money transfer companies like Western Union also stop transactions to Mexico over worries about properly vetting Mexican clients, it could affect the remittances the country relies on. That would be devastating for the Mexican economy, which received $63.3 billion in remittances in 2023, nearly 5 percent of the country’s gross domestic product.

One can turn this possibility on its head. Widespread reports in the press contend that the cost of Trump expelling all illegal immigrants as on the order of $1 trillion over ten years (which assumes a Vance or similar administration to keep pursuing the program). Given the 80/20 nature of most activities in life, even Trump’s immediate focus on expelling the 1.3 million with outstanding final deportation orders and the (depending on who is counting) 400,000 to 600,000 actual criminals would likely add up to a much bigger than proportionate outlay.

So if cutting all remittances off were to lead to Mexicans who are here to earn money to remit home to depart (which admittedly would also hurt recipients from legal migrants), the Trump Administration could write a $60 billion a year check to Mexico for say 5 years for a transition, cut way back on its deportation efforts, and call it a win.

In other words, even if you don’t buy the illustrative math above, the Trump team could also view choking way down on remittances as a feature, not a bug.

Let’s contrast the Times account with a 2018 in the Financial Times, How the mafia got to our food. The headline suggests that the Mafia involvement in food production and distribution is harmful to consumers outside Italy (“our food”). The piece proper gives some grim examples:

Siphoning off farm subsidies does not carry the same dubious “glamour” as the racketeering or drug running usually associated with the Mafia. But it has become a highly lucrative income stream for Italy’s organised-crime syndicates. Their forays into farming do not end there: in recent years, they have infiltrated the entire food chain…

According to Professor Umberto Santino, a Mafia historian from Palermo, the Mob’s interests in the agricultural industry now extend to “human trafficking, money laundering, extortion, loan sharking, illegal breeding, backstreet butchering and baking and the burial of toxic waste on farmland. It’s an integrated cycle, a full package of systematic interactions.”…

For the consumer, counterfeiting is the main danger. “The falsification of food products is now the second-most profitable enterprise in the EU after drug trafficking,” says Europol’s Chris Vansteenkiste. “Food is where the profit is. Women buy a handbag every few months but you have to eat every day.”

Counterfeited organic food is the most profitable area. In one operation, Italian gangs were found importing wheat from Romania and labelling it as organic, which commands a price three to four times higher. Knock-offs of prestigious Italian products such as mozzarella di bufala campana and Parmigiano-Reggiano cheese have increasingly entered the market.

The DIA oversees operations against the agromafia conducted by all of Italy’s different police and law-enforcement forces. Specialist police tasters work to uncover adulterated foods, especially olive oil. Their taste buds are considered so precise that the findings are even admissible in Italian courts.

Records reveal a mind-boggling — and nausea-inducing — range of food fraud. Mozzarella has been found whitened with detergent, olive oil mixed with cheap imported north African oil, bread made with asbestos or sawdust and cheap wine repackaged as Tuscany’s Brunello di Montalcino.

I strongly urge you to read the Financial Times account in full. It’s an impressive job of reporting, with a strong focus on how Italian officials, at considerable risk to their safety, are working to roll back Mafia control of the food industry. It also gives very good detail on how the mob became so deeply involved in the first place (the very short version is lots of spare cash needing to be laundered versus a fragmented industry where farmers and small businesses regularly come under stress, and even more so during the financial crisis).

Official action against the Mafia in Italian food supplies got more headway in 2019, as the Financial Times recounted in Police target vast mafia profits from food fraud and mislabelling. But that was before Covid. Perhaps Italy-knowledgeable readers can provide an update.

Another riposte to the New York Times’ special pleading for cartels comes from El Salvador president Nayib Bukele (hat tip Not the Bee)

Been there, done that https://t.co/YPDDDrbLeW pic.twitter.com/PnF8mzJtKh

— Nayib Bukele (@nayibbukele) January 23, 2025

The money quote:

The reality is that crime is crime. Period. And if you allow it, they will always win in the war of incentives.

____

¹ From Why Did CalPERS Pay FTI Consulting $224,625 for a Garbage-In, Garbage-Out Private Equity Whitewash?:

Last week, we said we’d discuss an attorney-client privileged report by FTI Consulting on some of CalPERS’ private equity investments. Violating attorney-client privilege, FTI provided a redacted copy to another California public pension fund, LACERA, as part of a business pitch. Several parties, including your humble blogger, obtained the report via California’s Public Records Act and were able to expose the redacted parts.

The document shows the lengths to which CalPERS is willing to go to whitewash private equity misconduct. The study took place in 2015 and appears to be in response to the hard-hitting reporting by Mark Maremont of the Wall Street Journal and Gretchen Morgenson of the New York Times about private equity fee abuses, along with knowledgeable outsiders pressing CalPERS about them at the time.

But this wasn’t an effort to get to the bottom of things and set the table for demanding restitution from private equity grifters. It’s obviously a garbage-in, garbage-out purposeful whitewash. CalPERS’ staff, if they are remotely competent, had to have recognized that. Not only was the methodology hopelessly deficient, but as we will demonstrate, public records, which FTI’s project scope shows it was not directed to check, reveal that s some of its positive assessments are false. Given how little it is possible to observe directly about private equity, this level of verifiable failure is damning.

FTI Consulting violating attorney-client privilege to win new clients is rich.

Similarly, from Why Is FTI Consulting Making It Look Like Apollo Overpaid Its Real Estate Execs $50 Million? based on another CalPERS’ attorney-client privileged report that FTI Consulting astonishingly gave to LACERA:

But today we will focus on the way FTI did a disservice to yet another client, Apollo, in making its pitch to LACERA. As we’ll discuss in more detail, the pitch contains both descriptions of relevant client projects, most of which are confidential, and then a list of clients for who FTI did relevant work. A reader looking at both sections of the proposal, which are right next to each other, would be likely to connect a project discussing a serious failure in internal controls that led to $50 million of excessive compensation being paid out, to Apollo. Needless to say, Apollo would not be happy to learn it’s been made to look guilty, particularly by a firm Apollo presumably paid well

And if we have two improprieties of this magnitude in a single proposal, how much supposedly privileged information is FTI casually tossing over the wall in its efforts to get new business?

² This idea is not as crazy as it sounds. I believe the long-standing Japanese deal with its yakuza is still operative: they could run all sorts of rackets like prostitution and illegal gambling, provided they did not deal in hard drugs and could be relied on to stop the entry of other gangs that attempted to do so.

³ A further sob story:

The multinational banana producer Chiquita Brands was found liable in 2024 for killings by a Colombian right-wing paramilitary group that was designated as a terrorist organization. Chiquita Brands said that it had been extorted by the paramilitary group and forced to make payments to protect its Colombian employees. Plaintiffs, however, argued that the company had paid the paramilitary group to run out residents to buy land at depressed values.