The drug cartel may be one of the most memetically potent concepts to emerge out of Latin America. More than three decades after his death, Pablo Escobar and his Medellín Cartel remains the lens through with countless Americans think about the international narcotics business, while movies like Sicario have experienced a resurgence in popularity as Latin American criminal networks have found themselves in the crosshairs of U.S. national security policymaking.
However, as most analysts and law enforcement professionals will tell you, the vision of the drug kingpin and his vertically integrated narcotrafficking operation is increasingly out of synch with reality. Modern cartels are decentralized, distributed, and networked in ways that make them highly resilient to leadership decapitation. The Jalisco New Generation Cartel was in many ways one of the last major criminal group with an identify built around a founding kingpin, but El Mencho’s operation had already undergone significant decentralization before his death earlier this year in a Mexican special forces raid.
Criminal revenue streams are also increasingly diversified, with illegal gold, timber, wildlife, and fuel trafficking bringing in billions all told for illicit enterprises. Indeed, for some South America criminal groups, illegal gold may already be a more valuable revenue stream than drugs. Meanwhile, in Mexico, fuel theft or huachicol is identified as the “most significant non-drug illicit revenue” according to the U.S. Treasury Department. Even where there are no raw materials to plunder, criminals turn to the time-honored tradition of extortion to pad out their revenues.
Imagine if tomorrow all the coca, methamphetamine, heroin and cannabis in the world vanished into the ether, while users in the U.S. and Europe miraculously decided to get clean and embrace DARE. In this world where the drug trade functionally ceased to be, would cartels vanish alongside it? And if not, would they at least be defanged somewhat?
I think the answer to the first question is a definitive “no.” Criminals would doubtless still exist in a drug-free world and would still collude with one another at scale. The second question is more interesting, and what this post aims to tackle.
I argue that a number of structural factors mean the drug trade retains its pride of place as the single most important illicit economy for Latin American criminal groups. However, there is a secular trend towards revenue diversification among transnational criminal organizations (TCOs), and for this reason, it strikes me as increasingly impractical to think about counternarcotics policy as separable from a broader counter-organized crime strategy in the Western Hemisphere.
Why Cartels Diversify
There is a good economic argument for diversification. Illicit revenue streams are almost inherently uneven, characterized by feast-or-famine cycles of profit and loss. Even if a group traffics a billion dollars’ worth of cocaine in total one year, the constant risk of interdiction means that monthly cash flow can be highly uneven.
The CJNG is a good example of how successful criminal operations diversify their revenue almost by default as they grow in power and territorial influence. Widely regarded as Mexico’s strongest criminal faction, with a reported presence in at least 27 of Mexico’s 32 states, the CJNG’s sheer geographic scope allows it access to a variety of non-drug revenue streams, often tailored to local conditions. In agricultural hubs like Michoacán and Jalisco, the cartel extorts avocado and lime growers. In central Guanajuato CJNG operatives have established a fuel theft empire. In coastal resort towns, the group engages in lower-profile, but still lucrative timeshare fraud and extortion of hotels, restaurants, and other businesses.
Fluctuations in the price of certain illicit commodities can also explain the rise and fall of various criminal industries. Gold in particular has been gaining ground and may have even eclipsed drug revenues for some TCOs already. This is in part because of a glut of cocaine supply, which has depressed prices in major markets like Europe and the United States. At the same time, the price of gold has skyrocketed, more than doubling since 2023 to reach around $4,000 per ounce. According to an August 2025 report from the Financial Accountability and Corporate Transparency Coalition, illegal gold exports are valued at $1 billion in Ecuador, $2.2 billion in Venezuela, and a whopping $4.8 billion in Peru.
Even in the case of narcotics, not all drug types are equivalent in value for cartels. Fentanyl seizures crested in 2023 and declined in subsequent years as pressure from the U.S. government as well as social stigma drove down demand for the drug. In its place, cocaine has experienced a renaissance within the U.S. drug market, trends that benefit the CJNG which, according to a Wall Street Journal investigation, struck a deal with the Chapitos faction of the Sinaloa Cartel to take over their coke trafficking routes. Although the CJNG may be the winners now, future shifts in law enforcement priorities or drug market preferences could change these fortunes, and elevate different criminal actors. This in theory should drive further diversification not just away from drugs to other illicit economies, but also experimentation within the narcotics trade.
There are also advantages that transfer over from one illicit sector to another. If you already have the clandestine airstrips, muscle, and money-laundering infrastructure set up to protect your coca plantations, it’s not terribly difficult to repurpose some of that to break into the illegal gold trade and vice-versa. Organizations like Earth Leage International refer to this as crime convergence, and it is especially notable in the case of illicit activities that degrade the natural environment.
Expansion into commodities like gold also offers advantages from a logistical standpoint. A kilogram of cocaine will be regarded as an illicit substance most anywhere it goes, gold on the other hand, is perfectly legal to buy and sell once it has been adulterated into legitimate supply chains. Separating out illegally mined from legal gold remains a major challenge, further complicated by the prevalence of artisanal mining operations in countries like Peru, Ecuador, and Colombia where local communities mining for gold may or may not be connected to criminal networks.
There are also opportunities to arbitrage different levels of law enforcement scrutiny. Whereas being caught with a kilogram of cocaine will likely result in steep criminal penalties, including almost certainly jail time, getting caught with a sack full of gold could merely lead to that being seized but the trafficker going free.
Finally, the structure of the criminal economy lends itself to innovation. This has been documented especially well in the case of Ecuador, which is at the forefront of a globe-spanning transformation in the business of crime. European criminal groups, including the Albanian mafia and Italian Ndrangheta, alongside Colombian cocaine growers and Mexican cartels all converged to make the small Andean nation the epicenter of South American drug flows.
In lieu of cash payments, Ecuadorian criminal outfits often received weapons and were trusted to figure out for themselves both how to secure cocaine shipments to Europe, and how to earn cash themselves on the side. For most, their bread and butter would be extortion and kidnapping, but some, including the CJNG-affiliated Lobos, also expanded into illegal mining, logging, and wildlife poaching. New revenue streams allowed the most successful of these groups to buy more weapons and recruit more gunmen, inflaming the intra-gang wars and pushing Ecuador’s security crisis into the conflagration it is today.
Why Drugs Still Matter
Even if we acknowledge that drugs are not the only thing cartels traffic in these days, it still seems like, the biggest, baddest criminal actors are still the ones that have managed to stake out a position in the drug trade.
This could simply be a case of crime convergence, in a vacuum we would expect that the most powerful drug cartels would have an easier time branching into new areas. However, it also seems as though the more powerful gangs become, the more they tend to converge on becoming drug trafficking organizations. Brazil’s PCC and CV for instance trace their origins back to running protection rackets inside prisons, but today both groups vie for control over lucrative Amazonian drug smuggling routes and domination over key ports like Santos. In a similar fashion, Ecuador’s gangs were relatively weak in the grand scheme of things until the country’s importance as a cocaine transshipment hub saw money and guns flood into the country from global drug markets.
One reason is scalability, whether it is the industrial coca plantations covering tens of thousands of hectares of Colombian territory, or the laboratories pumping out thousands of ultra-potent fentanyl-laced pills, modern drug markets operate at frightening scale. Contrast this with, say, the jaguar trade in countries like Suriname, or Totoaba bladder harvesting in Mexico. In both cases, poaching has led to a depletion of local populations, making it difficult for cartels to meet demand, especially from China. Criminals are innovative, but none of them seem to have cracked factory-farming for jaguars yet.
For another comparison, let’s return to the gold and cocaine markets. Even as illegal gold mining may be eclipsing cocaine as the primary money-maker for South American TCOs, there has been no slowdown in coca cultivation either. In fact, in 2023 the UN Office on Drugs and Crime estimated as much as 3,700 tons of cocaine were produced, roughly equivalent to the amount of legal gold mined that same year. criminal access to gold is limited by geography, geology, and technology, with most groups lacking the sophisticated surveying or separation processes used by multinational mining firms like Newmont and Barrick.
It also could be that the profit margins for illicit drugs are simply that much greater than for other forms of illicit economic activity, even if gross revenue fluctuates. Even considering labor costs for illegal mining operations are negligible given the use of modern-day slavery by many TCOs, wildcat mining still features high capital costs in the form of construction equipment and chemical inputs like mercury used to separate out valuable ore.
Furthermore, when it comes to otherwise legal commodities like gold and fuel, the ability of cartels to set prices is counterbalanced by the licit market. Illicit actors are not the only game in town, and barring structural factors preventing buyers from accessing legitimate suppliers, most of customers can simply buy from the legal market if criminal prices rise too high. Indeed, huachicol in Mexico is premised on the counterfeit fuel being cheaper than what consumers would pay at the pump.
Extortion is another good example of why drug running is still attractive to cartels with diversified revenue streams. Whereas narcotics prices are pegged to the willingness to pay of consumers in wealthy countries, extortion rates must be calibrated to the value of economic activity in cartels’ own backyards. Shaking bus and taxi companies down for a few hundred dollars a month may allow gangs to remain solvent, but it will never rival the million-dollar paydays that just a single successful drug shipment can net.
If anything, extortion-driven criminal groups are self-sabotaging since their predations shrink the overall size of the economic pie. For this reason, Central American gangs like MS-13 and Barrio 18, which primarily depend on extortion, never reached the same heights of wealth and organizational sophistication that characterize the leading Mexican cartels to their north.
All this suggests that there are still good reasons for the primacy of drugs writ large as the illicit economy of first resort, but unlike the cartels of yesteryear, modern TCOs are doing their best to minimize their reliance on drug revenues alone. We can no longer afford the privilege of arguing about counternarcotics policy in isolation from other illicit economies.
Beyond Supply and Demand
The debate around counternarcotics policy in the United States typically center on the question of whether supply side or demand side interventions are better. Supply side policies have become tarnished by their association with the interminable “war on drugs” and more recently with the ongoing U.S. boat strike campaign in the Caribbean and Eastern Pacific. Demand side advocates, meanwhile, argue for broad decriminalization of drugs and greater support for addiction treatment and prevention campaigns.
While on balance I think demand side interventions show more promise if your metric for success is the impact on drug users, this debate itself obscures the true complexity of the organized crime threat.
It is simply not the case that drug decriminalization would result in the death of the cartels, even if it did succeed in dramatically reducing criminal profits. The revenues that the most sophisticated cartels pull in from other illicit economies would likely be enough for them to remain big sources of destabilization in the countries where they operate. If anything, a major drop in drug profits could spur greater disruption in the short term as TCOs would likely increase their reliance on extortion to make a quick buck. Although gangs that depend on extortion are weaker than those plugged into global drug markets, they remain highly corrosive for the societies they prey upon.
This doesn’t mean there’s no hope in trying to drive down drug revenues. Instead, I think we need a better model for modern TCOs operate.
One potential theory would be that most modern criminal networks are trying to find an equilibrium between centralization and distribution. Too much centralization leaves cartels vulnerable to leadership decapitation like the Medellín Cartel or American mobs. Too much distribution and groups lose the cohesion and sheer numbers to manage complex logistics like moving tons of cocaine or running wildcat mining operations.
In my opinion, the key task for counter-crime policy lies in pushing groups out of equilibrium towards the distributed end of the spectrum. Neither blowing up drug boats from the air, nor decriminalizing scheduled narcotics can achieve this. Instead, it is the slow, hard work of building state capacity and presence in areas dominated by organized crime that is needed not just to choke off supply or suppress demand, but to dismantle the infrastructure these groups rely on to exploit and extort.
Do you think decriminalizing drugs would not be worth it however? I understand there are other benefits to that, it's not just about trying to get rid of organized crime (for example, it should save the gov a lot of money)?
In every society a certain % of young men will desire to participate in a violent tournament for dominance. Drugs, whores, dice, extortion...these are all just excuses for the tournament, which is the main point. They will find something to fight over, it's the fight and not the object of the fight that is the driver.