InSight Crime: Jalisco Cartel Cashing In On Mexico's Illegal Cigarette Market

Reposted by "narcomappingmx" for Borderland Beat

8 JUN 2022 BY PETER APPLEBY

The powerful Jalisco Cartel is allegedly taking strides to control the production of illicit cigarettes in Mexico, by controlling a key criminal group behind the trade and staving off competitors.

The Jalisco Cartel New Generation (Cartel de Jalisco Nueva Generación - CJNG) has been ramping up the production and sale of illegal cigarettes in Mexico through a group known as the Tobacco Cartel (Cártel del Tabaco), according to a recent report by Mexican newspaper Milenio.

The Tobacco Cartel, a network which reportedly manufactures cigarettes and forces vendors to sell them, is allegedly run by three brothers who own three cigarette factories in the State of Mexico, Jalisco and Campeche, said the report. Production is carried out under three registered companies, Sijara International Manufacturing, Braxico Manufacturing and Burley & Virginia Tabaco Company. The first two are subsidiaries of another legal entity, Tobacco International Holdings (TIH), according to Milenio.

While the companies and factories are legitimate, some of the cigarettes produced allegedly lack security codes proving compliance with the country's tax agency (Servicio de Administración Tributaria - SAT), meaning they “fall into the realm of illegality,” the newspaper found. InSight Crime wrote to these companies for comment but received no response.

The lack of a security code, which all tobacco products sold in Mexico must have, suggests they do not comply with SAT requirements. According to SAT guidelines, products without the code should be destroyed. Milenio also found that Braxico no longer has a valid sanitary certificate with Mexico’s Federal Commission for the Protection against Sanitary Risk (Comisión Federal para la Protección contra Riesgos Sanitarios — COFEPRIS).

The cigarettes manufactured by the so-called Tobacco Cartel are then pushed to vendors, who are forced to sell them. As InSight Crime previously reported, the Jalisco Cartel has supported the Tobacco Cartel by coercing vendors to only sell TIH products. Since 2017, stocks belonging to other cigarette brands have been destroyed and vendors have reportedly been threatened, tortured and shot for not complying.

The Tobacco Cartel's sphere of influence has grown to include ten states, Milenio said. The gang produces over 30 cigarette brands, with prices as low as 35 pesos (approx. $1.79). The price of regular cigarettes is between 62 and 70 pesos (approx. $3.17-3.58), according to El Economista.

Those allegedly behind the Tobacco Cartel have come under pressure from authorities. The three brothers named as being at the center of the trade had their bank accounts frozen last year, though they were later released. According to investigative platform Emequis, the brothers are former federal agents for the Attorney General's Office and receive support from current investigators there.

The registered owner of TIH, José Guadalupe Varela González, was investigated for drug trafficking in 2006, according to Proceso.

This expansion of CJNG into the illegal tobacco trade takes place as Mexican-made illegal cigarettes are becoming more popular. About 19 percent of cigarettes consumed in Mexico are illegally produced, up from 2 percent in 2011, according to one report.

InSight Crime Analysis

While the CJNG's relationship with the so-called Tobacco Cartel dates back several years, it is unlikely that pursuing the illicit cigarette market is a central part of the group's plans.

Jaime López Aranda, a security and judicial expert, told InSight Crime that the demise of the marijuana market, the lack of strong growth in demand for cocaine globally and the CJNG's ongoing wars have resulted in local groups within the cartel muscling in on “low-hanging” economic activities. Other such examples include extorting avocado farmers or illegal fishing.

“I don’t think this is a cartel-level strategy,” said Aranda. “It’s so easy to traffic cigarettes that I don’t think the people involved in this effort are major players; it’s more likely to be a local-level franchise strategy,” he said.

The financial reward is comparatively meager. “We’re not talking about drug trafficking money. Not by a long shot,” Aranda explained.

But the business plan makes sense for local actors. Though not as profitable as drug trafficking, the tobacco market remains large: Oxford Economics found that illicit cigarettes accounted for 18.7 percent of all cigarettes consumed in Mexico in the first six months of 2021, over 7 billion cigarettes in total. This has certainly been enough for nodes within the CJNG network to make money selling via retailers they control as well as via social media, Milenio’s report noted.

And with the support of the CJNG, the Tobacco Cartel's demands are likely to be met.

“So fearful is the CJNG’s reputation, and so apparently obvious are their links to all forms of criminal activity in Mexico, that few people will question a person who claims to be part of the cartel,” said Cecilia Farfán-Méndez, an organized crime expert and the head of Security Research Programs at the Center for US-Mexican Studies at the University of California, San Diego.

Additionally, this has been happening amidst changes in the logistics of illicit cigarette manufacture. In the past, Mexico has sourced illegal cigarettes from a range of countries, including China and Paraguay. Yet, Mexican-produced cigarettes have come to dominate this criminal economy. This may have been helped by government efforts to reduce contraband entering Mexico via seaport, the usual route for cigarettes.  

Source: InSight Crime