“At half a trillion dollars — $500 billion — that makes the cartel business and the drug traffic just in Mexico alone coming across to the United States bigger than Walmart, to put it in perspective. So this is larger than our largest companies.”
— Sen. David Perdue (R-Ga.), at a hearing of the Senate international narcotics control caucus, June 11, 2019
Mexico’s violent drug cartels operate in the shadows, so it’s difficult to assess how much money they make. They’re not filing tax returns or getting audited.
But that hasn’t stopped governments and researchers from trying to pin down the number. These estimates are all reverse-engineered, derived from other figures such as street values and drug-consumption rates, or the amount of U.S. dollars repatriated from Mexico to the United States.
The results are all over the map, ranging from $6 billion to $29 billion in estimates released since 2006. But none of them pegs Mexican drug traffickers’ revenue at “half a trillion dollars,” as Perdue claimed.
The underground economy for drugs is huge. The United Nations estimated in a 2011 report that worldwide proceeds from drug trafficking and other transnational organized crime were equivalent to 1.5 percent of global GDP, or $870 billion in 2009.
At a drug caucus hearing June 11, senators heard testimony from Secretary of State Mike Pompeo and several experts. Sen. Dianne Feinstein (D-Calif.), the caucus co-chair, began her remarks by noting: “The illicit drug trade is a business, valued at anywhere between $426 [billion] and $652 billion. Its reach is global. Its distribution is growing. Its leadership is criminal.”
Those numbers come from a 2017 study by Global Financial Integrity, a Washington think tank studying illicit flows of money. The report estimated $426 billion to $652 billion in the retail value of transnational drug-trafficking crime.
Perdue prefaced his remarks by saying: “I want to focus on Mexico in my first question. Having worked down there pretty much most of the last 30 years, inside Mexico and in Central America, the cartels are really still the problem. ... At half a trillion dollars — $500 billion — that makes the cartel business and the drug traffic just in Mexico alone coming across to the United States bigger than Walmart.” (Walmart reported just over $500 billion in revenue for 2018.)
But the report Perdue was relying on estimated drug-trafficking proceeds worldwide, not just what the Mexican cartels reaped. In response to our questions, Perdue’s office said he meant to speak about the global drug trade and was referring to the same report as Feinstein.
“Senator Perdue intended to cite the $500 billion figure to reference the estimated value of the entire international drug trade,” an aide to the senator said, speaking on the condition of anonymity. “The senator was doing so during a line of questioning that emphasized the outsize role that the Mexican cartels play in that trade, particularly as it relates to the United States.”
That’s hard to square with Perdue’s phrasing: “I want to focus on Mexico in my first question” and “$500 billion ... just in Mexico alone.”
It’s also hard to square with what happened next. After the hearing, Perdue’s staff issued a news release and video highlighting the $500 billion claim. Perdue’s campaign tweeted a Breitbart article about his remarks (headline: “Sen. Perdue: Drug Trafficking Business from Mexico to U.S. ‘Larger than Walmart’”). The senator’s intentions did not come through at all.
When we asked about this, Perdue’s staff modified the transcript of his remarks in their news release. It’s an odd way to go about a correction. Perdue is now quoted in the news release talking about worldwide drug trafficking, but that’s not what he said in the hearing and the news release doesn’t mention the original error.
Even the studies estimating on the low end say Mexican drug cartels pull in billions of dollars a year. But how many billions? That’s where things get hairy.
The White House Office of National Drug Control Policy’s strategy book for 2006 said: “The US Government estimates that Mexican traffickers receive more than $13.8 billion in revenue from illicit-drug sales to the United States; 61 percent of that revenue, or $8.5 billion, is directly tied to marijuana export sales.”
A 2010 study by Rand found “there is no empirical justification for this figure that can be verified” and noted that the White House drug office later distanced itself from those estimates. “Often, big numbers of dubious origin are tossed around in drug policy discussions with little thought and, frankly, little consequence,” the Rand study says.
Criticizing another estimate, the Rand study says: “The $20 billion figure appears to come from multiplying a $525-per-pound markup by an estimate from the Mexican government that 35 million pounds were produced in Mexico and then rounding up. However, no data support the claim that U.S. users consume 35 million pounds (~16,000 metric tons) per year, let alone that they consume this much marijuana from Mexico. ... This is three times the United Nations Office on Drugs and Crime’s ... upper bound for total U.S. consumption and nearly four times the amount estimated by the Drug Enforcement Administration.”
The parade of numbers goes on:
- In a 2007 report, the Government Accountability Office said: “According to the National Drug Intelligence Center, drug proceeds in Mexico in 2005 ranged from $2.9 billion to $6.2 billion for cocaine (including Central America), $324 million to $736 million for heroin, $3.9 billion to $14.3 billion for marijuana, and $794 million to $1.9 billion for methamphetamine. Mexican drug traffickers also grow marijuana in the United States; therefore, the amount of proceeds returned to Mexico is likely greater than the reported estimates.” Adding up the midpoints for each range, the total would be roughly $15.5 billion, though we note there’s a wide disparity in the marijuana estimates.
- The Department of Justice’s National Drug Intelligence Center estimated in 2008 that “Mexican and Colombian DTOs [drug-trafficking organizations] generate, remove, and launder between $18 billion and $39 billion in wholesale drug proceeds annually, a large portion of which is believed to be bulk-smuggled out of the United States at the Southwest Border.”
- In 2010, the Department of Homeland Security was working with a different range. In a passage that doesn’t mention Colombia, a DHS report said “an extraordinary amount of cash — estimates range from $19 [billion] to $29 billion — travels annually from the United States into Mexico to fuel the operations of the increasingly violent and brazen criminal enterprises involved in drug trafficking.”
- The U.N. Office of Drugs and Crime in a 2011 report said: “According to estimates collected for a study on US-Mexico Security Cooperation (2010), the Mexican Government estimated drug-related cash flows from the USA to Mexico at some US $11 [billion] per year.” Mexico’s attorney general in 2007 said “Mexican banks receive about $1 billion from their US counterparts annually, but return up to $16 billion, of which about $10 billion ‘does not have an explanation … and could be attributed to the flow of drug trafficking money,’ ” this report adds.
- Reuters reported in 2018 that “the cash-rich cartels [are] believed by the Mexican government to generate well over $21 billion each year.”
- The nonpartisan Congressional Research Service in a 2018 report noted that the Sinaloa cartel, until recently run by Joaquín “El Chapo” Guzmán, “by some estimates ... had grown to control 40%-60% of Mexico’s drug trade by 2012 and had annual earnings calculated to be as high as $3 billion.” That would indicate the drug trade in Mexico was $5 billion to $7.5 billion, assuming El Chapo brought in $3 billion a year and had cornered 40 percent to 60 percent of the market.
- The 2010 study by Rand is careful to limit its scope. It estimated $6 billion to $8 billion in Mexican drug-trafficking organizations’ gross revenue from export and distribution of marijuana, cocaine, heroin and methamphetamine to wholesale markets near the American Southwest. The lead researcher, Beau Kilmer, told us that covers product trafficked by the Mexican cartels, but the drugs themselves might come from Mexico or another country such as Colombia.
Kilmer said he wasn’t aware of any credible estimate of total drug revenue for Mexican traffickers, who make money through other means such as smuggling migrants across the border and charging them several thousand dollars, according to DHS, or tapping pipelines in Mexico to siphon fuel and sell it on the black market.
“We did not estimate DTO revenues from moving the product throughout the U.S. or attempt to calculate their revenues from non-drug-trade activities,” Kilmer wrote in an email. “I’ve been looking for funding to update that analysis, but have not had any success. Given changes in U.S. drug use patterns, state-level drug laws and drug prices, I’m sure that the distribution of the export revenues attributable to cannabis, cocaine, heroin and methamphetamine has changed. I wouldn’t be surprised if the total figure grew larger, but I cannot tell you by how much.”
Kilmer was sure of this much: “The export revenues would be in the single- or double-digit billions, not triple.”
The Pinocchio Test
There’s a world of estimates for the Mexican drug trade, none of them remotely approaching $500 billion a year. The highest we found was $39 billion and it includes Colombia. Perdue took a report with global figures and applied them solely to Mexico.
We’re told Perdue meant to reference the worldwide drug trade. But there was no ambiguity in what he said: “I want to focus on Mexico” and “at half a trillion dollars — $500 billion — that makes the cartel business and the drug traffic just in Mexico alone coming across to the United States bigger than Walmart.” Perdue said twice that his question was focused on Mexico to the exclusion of other countries, and his office and campaign later amplified these remarks. His intentions were completely undetectable.
This would have been an easy Four Pinocchios had Perdue dug in. After we reached out, Perdue’s staff conceded the error, and after we reached out again, his staff corrected the news release that repeated the $500 billion claim. The correction was oddly done, but at least it stanched the misinformation.
As regular readers know, we often withhold Pinocchios when a politician acknowledges an error. Perdue barely avoided Pinocchios in this case because of his efforts to set the record straight. In that spirit, his staff should seek a correction from Breitbart and his campaign should add a note to the tweet linking to their article.
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