On August 10, the Australian Federal Police seized 750 kilograms of the drug ice, which arrived in Sydney from Mexico hidden in cowhides. In January, US law enforcement, working with Australian counterparts, seized a container with $AU1.2 billion worth of drugs, including ice, cocaine, and heroin, bound for Melbourne. The drugs also originated in Mexico.
On September 17, Mexican forces arrested Ovidio Guzman, son of Sinaloa Cartel leader Joaquin "El Chapo" Guzman. They had located him in the city of Culiacan, the capital of the state in Mexico from which the cartel draws its name. Guzman, like his father once was, is wanted in the United States on drug trafficking charges.
Soon after the arrest, Culiacan became a war zone as hundreds of heavily armed cartel members attacked police stations, burned cars, blocked highways, incited a jail riot and engaged in heavy shootouts with the army, state police and the national guard. As the violence intensified, the Mexican government made the unprecedented decision to release Ovidio Guzman. Later it was revealed that the cartel had taken a number of soldiers hostage, prompting the government's decision. Official figures count eight dead and 16 wounded, as well as close to 50 criminals who had escaped from jail.
The showdown in Sinaloa reinforced the status of El Chapo's organisation as one of the most powerful, well-armed and well-organised criminal organisations in the world. Mexico is not a failed state: it has a very weak rule of law but its military is strong and well-armed, and its "war on drugs" is supported by the United States. Yet its government was embarrassingly overwhelmed by the cartel. The way in which the Sinaloa Cartel traded hostages for Guzman is reminiscent of tactics more akin to terrorist organisations than organised crime. This is a slippery slope.
Why should all this matter to Australia? It is as far from Mexico as one could get. Its commercial ties with Mexico - while the largest in the Latin American region - pale in comparison to other countries. However, this is a growing relationship. For example, in 2017 BHP signed a landmark agreement to explore a large Mexican oilfield in the Gulf of Mexico, a project potentially worth billions of dollars.
An emboldened Sinaloa cartel - as it will surely be after humiliating the Mexican government - is perilous for Australia on two fronts. First, it is a growing risk to Australian firms investing in the country. Businesses seek rents, and instability increases risk, which makes investors jittery. Currently over 150 Australian firms do business in Mexico, a decent enough number. The potential for growth in this area is great, but visible signs of a weak rule of law and even more increased violence will hamper this at a time when Australia is looking for opportunities to sustain its economic growth.
The second point relates to the home front. Drugs in Australia provide some of the highest profit margins in the world. As the size of the seizures mentioned above reveal, there is high demand for narcotics here. The Australian Institute of Health and Welfare monitors drug use and reveals, that despite all efforts, from 2001 to 2016 overall drug consumption increased steadily in Australia, especially of cocaine and ecstasy. It is estimated that in 2016 the Sinaloa cartel (not the only one operating in Mexico) commanded about 35 per cent of the cocaine trade worldwide. Australia is a new economic frontier for organised drug trafficking groups, and they will use their considerable resources to satisfy demand here.
With drug markets in North America and Western Europe already well served, it is logical for Mexican cartels to look elsewhere for further profit. The low supply and high prices paid for drugs in a very wealthy country like Australia make it an ideal destination for expansion. On top of this, due to the very efficient distribution systems they already possess, and the seeming supply of willing commercial partners in Australia (think outlaw motorcycle gangs), it is no surprise an organisation such as the Sinaloa cartel may attempt to bring drugs into Australia, challenging the skills of police forces and policymakers here.
Furthermore, it is foreseeable that channels to smuggle narcotics may also be used to smuggle other illicit goods into the country, such as firearms or explosives. This has not yet come to pass, and while Australian law enforcement has had some success against drug trafficking, as evidenced above, it would be wise to expect cartels' efforts to redouble in the near future. This may have significant national security implications. The Australian government must plan for this by supporting law enforcement and constantly reviewing its drug policies.
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