Is Mexico’s New President Just a Puppet for AMLO?

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The most recent Mexican elections have resulted in the victory of Mexico’s first female -and- Jewish leader, Claudia Sheinbaum. She will be succeeding current populist President AMLO, but how much change will this actually bring?

President López Obrador has a bit of a Robin Hood complex, spreading wealth to the poor and neglecting security concerns. These financial transfers gained him favor with the people, but he did this with no regard for sustainability. In addition, while he was spending all his time people pleasing, the cartels were able to seize control of large parts of Mexico.

But won’t all this change when Claudia Sheinbaum steps into office? Well, AMLO and Sheinbaum are close allies, and it would appear that AMLO will be sitting behind the scenes playing puppet-master. So, her ability to address these concerns will all depend on how much string AMLO gives her…

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Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

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Transcript

Hey, everyone. Peter Zeihan here. Coming to you from Vegas, where I had to get up early because it’s going to be 180 billion degrees today. Anyway, we’re going to talk about the Mexican elections. We’ve had a sweep by, the ruling Morena party. Claudia Sheinbaum, who is a woman and who is Jewish, will be the first woman of the first Jew to rule Mexico. 

There’s a long lame duck period. So it’s gonna be a few months before she’s officially in charge. But I think it’s best for us to get ahead of this. You have an idea of what is coming? she’s taken over from a guy by the name of Amlo who is a populist. He likes to call himself a leftist. 

He’s really not. He’s really just kind of, Well, a really arrogant thug. Think of him as kind of combining the worst attributes of Justin Trudeau and Donald Trump. there are two sides to animal, one of which which is broadly positive but is broadly negative. First, the positive, the way that Mexico has developed, a lot of people have been left behind has a very high rate of poverty. 

It’s one of the most unequal economically countries in the world. And he wrote, the poor people to electoral victory with his election machine, and he’s ruled with them in mind. It’s basically that huge amounts of financial transfers from the state to the poor, purchasing loyalty. Certainly. but he hasn’t done it in a way that makes it self-sustainable. 

He’s been spending more and more and more money and has not really built out the development possibilities for the places of the country that are poor. So if the money were to stop for any reason, we basically go back to where we were pre Amlo so, you know, maybe an A for effort or at least an A for intentions, but it hasn’t really worked out very well. 

the other part, which is negative, it has been a disaster. That’s been his complete ignoring of any sort of security issues as being security issues, just denying that they exist. And this has allowed the cartels to seize huge swaths of Mexican system. in essence, there’s four Mexicos in the north. The northern states have integrated with Texas, primarily in the United States, were less agree as part of NAFTA, and have done very well economically and have solved a lot of the societal issues that have plagued the rest of Mexico for the entirety of the history of the Republic. 

Then in the center, you’ve got the area around Mexico City, which is about half the population, which is this kind of sprawling megalopolis, which has all the pros and all of the cons of such a region. down in the South, you’ve got the poorer areas that are not linked into either the industrial heartland of the South or the American like section of the North. 

and then you’ve got the countryside, which is not like me. You would think of the countryside in the United States. Mexico in the south is jungle, Mexico in the north is, desert. All of it is pretty mountainous. So you don’t have a really dense population in the hinterlands, just a speckling of small communities. Well, aimless choice to ignore the cartels. 

And indoor. The security situation has allowed the cartels to largely take over in the South, where the state was weakest. And in the countryside, where the state was already nonexistent. So you’re talking upwards of a quarter of the territory of Mexico is now not ruled by Mexico. It’s ruled by the cartels. they levy taxes in the form of extortion payments. 

They provide protection rackets. They’ve branched out of the drug industry and gotten into agriculture and tourism and property, taking over local government. in this most recent batch of elections. And dozens of political candidates were shot while they were running for office because the cartel thought that they couldn’t control them. they basically have set up a parallel governing system that the Mexican government has not challenged. 

And in the best of circumstances. And these are not those rooting up that sort of alternate system is going to be very difficult, very violent, very time consuming, and very expensive. Which brings us to the new leader, Sheinbaum. she has a better record than Amlo with admitting that security issues are security issues, and she’s actually been reasonably competent in running Mexico City, where she was mayor, in terms of beefing up security. 

the problem is, she’s not just part of the band. She’s a cult leader. when it comes to Amlo, she she really is a believer in his cause. And Amlo has made it very clear that he has no intention of stepping back from power. He intends to rule indirectly through her, something that she seems to be broadly okay with. 

So continuing the transfers of funds to the poor and makes a certain amount of sense, especially if you can bring her more scientific acumen into the process in order to actually build out long term potential for these people to earn money for themselves. but on the security issue, it’s a question of how forceful will Amlo be in making what he wants to happen happen? 

Will he be a quiet ruler behind the scenes? Or he’s going to just treat her like a puppet? We’re not going to know that for the better part of a year. but the danger is very, very clear. Amlo is one of those leaders who has definitely left the country in a worse position than when he took it over, and he is now seeking to use unofficial means to continue his rule. 

That’s not great. 

North Capital Forum: Crazy Little Thing Called Geopolitics

In October of 2023, I sat down with Enrique Perret, Managing Director of the U.S.-Mexico Foundation (USMF) & President and Founder, North Capital Forum (NCF). We discussed the opportunities and challenges that lie ahead for North America.

Through a geopolitical lens, we examine North America’s strategic positioning in the evolving global landscape, with a keen eye towards energy and tech. We’ll also discuss the current economic and political situations to help inform key stakeholders and decision makers in this region.

If you’d like to learn more about the U.S. – Mexico Foundation or their North Capital Forum, I encourage you to click the link below…

MORE ON THE US-MEXICO FOUNDATION

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First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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What Role Do the Cartels Play in US – Mexico Trade?

As industries like manufacturing ramp up between Mexico and the US, how will the Sinaloa and Jalisco New Generation cartels factor into that equation?

These two cartels operate very differently. The Sinaloa treat their operation like a business, and violence is a means to an end. Jalisco New Generation treats violence and fear as an essential part of their operation.

Despite their violent tendencies, the cartels (1) are uninterested in the complexities of manufacturing, (2) lack the necessary skills to disrupt that sector (from the participant side of things, anyway), and (3) would rather target “easy to manipulate” businesses.

So far, issues caused by the cartels have been relatively manageable. The real risk lies in the power struggle between these two cartels and how that could reshape perspectives on US-Mexico trade.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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TranscripT

Hey everybody. Good morning from a chilly colorado. A lot of you have written in with some questions about what’s going on with the cartels. And that’s something we haven’t talked about a little bit. The big issues are that there’s two cartels to really follow. The first is the Sinaloa. That’s the the one that thinks of drug smuggling as a business.

And so, as a general rule, is not willing to shoot people who are among its consumers. And so they don’t think there should be violence in places where their businesses are critical. So they don’t want to shoot people in Mexican cities or certainly not on the north side of the border if they can help it. It’s not that they’re nice.

It’s not that they’re kind of it’s not that they’re murderous thugs. They are all of those evil. They just see violence as a tool rather than an end. And on the other end of the spectrum, you’ve got political new generation who has the opposite view. When they move into a town, the first thing they do is shoot the police chief and anyone who looks interesting because their whole idea is if everyone’s scared of you, then they’ll either work for you or get out of your way.

Two different theories, both very violent. One is more applied in that violence. So that’s kind of the background I’ve been going on and on and on and on and on about how Mexico is going to be an integral part of the American manufacturing and trading system moving forward for decades, if not over a century. That hasn’t changed. The question is, to what degree do the cartels complicate that picture?

Not as much as you might think. The cartels are into things that fit one of two categories. One are small, have high value, are easy to fit into a backpack and smuggle. Obviously, narcotics fall into that category. Methamphetamines falls into that category or they want industries that they can push a lot of cash through in order to launder it.

And that takes something into things like real estate or avocados, where there’s a very clear business on the other end that is integrated into the broader system. So those are kind of the two types of businesses they go for. Anything else gets a little complicated for them because it’s not their skill set. And when it comes to interfering with trade, it doesn’t really work.

So if they were to go into, say, a manufacturing facility in Nogales and try to take over, it’s not like they would know how to operate it. They would be just a protection racket, and that would mean they’d have to be there presently all the time. Assuming that Mexican law enforcement couldn’t deal with it, I think they could.

Then the American investors in that factory would probably lose interest in the whole thing would shut down. So there’s no profit center there. They could raid things that were going in and out of the facility. But manufacturing in Mexico, as a rule, deals with intermediate manufacturers. So you’re not dealing with a lot of finished cars or even finished carburetors.

You’re dealing with things like spark plugs and casings and seat linings. And, you know, if you get a semi full of seat lines and bolts, you know, that’s not exactly something that’s easy to dispose of. You then have to find the next step in the manufacturing chain that wants it, and that requires a degree of logistics that they don’t have a degree of understanding of the industry, that they don’t command and contacts that are completely unrelated to what they do currently.

The biggest risk that I see to the trading relationship is the fight between these two big cartels. Sinaloa is the number one organized crime group in the United States. How that’s going to generation is rapidly growing to be the number one within Mexico. And at the moment, Sinaloa and some other smaller cartels control all the plazas going into the United States for the smuggling of the drugs.

Politico is challenging those other cartels, especially Sinaloa, for control of each and every one of them. And if they do succeed in commanding a plaza and they do pour into our side of North America and bring their business model with them, then Americans are going to be thinking about Mexico and trade in a very different way. Now, that hasn’t happened yet.

They’ve been trying to get into this country for three years now, and organizationally they’re just not nearly as competent as the Sinaloa. Even after their leader, El Chapo, was arrested, extradited and says it’s a prison forever, it’s just a very different mindset. But if you’re going to worry about something in the trade relationship, I think that’s the number one concern.

So far, it’s proven manageable. So far, the culture clash, if you will, is working for us, but that would still be the dangerous spot. All right. I mean, go inside. It’s cold out here, but.

 

Why The US Needs Mexico: Replacing Chinese Manufacturing

If you’re an American considering picking up a new language and have narrowed it down to Chinese or Spanish – it should be a no-brainer. As China slips into utter collapse, our southern neighbors will pick up the slack and “hola” will get you much farther than “nǐ hǎo”.

As the US pulls manufacturing from China, we’ll look to Mexico City to fill that void. This region not only holds over half of Mexico’s population but also represents the largest untapped workforce globally. So, the workforce is there, but we’re still missing a couple of pieces of the puzzle.

A massive industrial buildout will have to happen for this transition to work – and quick, too. I’m talking about new rail and border infrastructure, beefing up the I-35 corridor and improving connections within the US manufacturing industry.

If the US and Mexico can execute this buildout within the next five years, finding an alternative to Chinese manufacturing will be much easier. However, if the two amigos don’t get aggressive soon, we might have to throw a couple more languages into the curriculum.

Prefer to read the transcript? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:

First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.

Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.

And then there’s you.

Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Transcript

Hey everybody. Peter Zeihan here coming to you from Mexico City. And for those of you back in the States, this is a town you’re going to all have to get used to get to know very well, because it’s the solution to a lot of the upcoming problems. Now, for those of you guys who have been following me for a while, you know that I have been very concerned that the Chinese system is breaking, the demographic situation is terminal.

The government itself seems to be incapable of making decisions now. And Chairman Xi is basically purge the entire system of anyone with a positive IQ. Which means that all of the manufacturing industrial base that exists in China is something going to have to get by without very, very soon. The question is whether that’s one year from now, four years from now or ten years from now, but certainly no more than that, which means if we still want stuff, we’re going have to make it differently.

And that’s where Mexico comes in. Now, a lot of folks point to the nexus between Texas and northern Mexico as being a very successful model. And I agree. Over the last 35 years, the industrial plant that’s built up there has made itself all by itself the third or fourth largest on the planet next to China ink, of course, and the German system in Europe.

But that is not probably something that we can pull off. Again, I mean, yes, there are ways to improve that with infrastructure, with labor, with capital. Tech. I agree with all of that. We should do all of that. But the bottom line is that Texas has run out of people and it has now had to recruit from the rest of the United States just to expand its footprint from where it is now.

And Northern Mexico has run out of people because they’re all already working in that Texas Mexico synergy. And it’s great and it’s wonderful and it’s not done, but it can’t double or triple. And that’s exactly the scale of what we need to do. The solution is to integrate the rest of the United States with the rest of Mexico, specifically the Greater Mexico City region, which is home to over half of Mexico’s population.

And it’s the largest untapped workforce in the world at the moment. That means massively expanding the infrastructure that connects the two countries. Today, about 80% of the traffic and manufacturing between Texas and northern Mexico is by truck, which is among the least efficient ways that you can move things. But it does allow for a lot of small connections with small and medium sized enterprises on both sides of the border, contributing to very complicated supply chains, particularly in automotive.

We need to think bigger. We need a better transport system to take things at bulk so there’s not necessarily less integration between the various stuffs on both sides of the border. But the value add can really explode because we can do things at scale. And for that, we need rail. We need a rail system that connects areas beyond the Texas Triangle to the Mexico City core.

Right now, there’s only one multimodal rail system at all that comes south from the border, as far south as the very edge of the Mexico City complex. We need to expand that system by at least a factor of four in the not too distant future. In addition to expanding the border infrastructure, in addition to expanding America’s I-35 corridor, in addition to expanding the Texas Triangle’s connections to the rest of the manufacturing zones in the United States.

If we pull this off in the next five years, we’re going to be in great shape. And if we don’t, well, then we’re going to have to figure out what sort of stuff we don’t actually want. No pressure.

Mexican Demographics: Where Are All the Kids?

Most of the developing world has relatively similar demographics…the defining characteristic being a boatload of kids. And until recently, Mexico was no exception to that.

The first chart shows Mexico’s demographics before the new data was released. The only thing of note is the drop-off around age 25, where Mexico starts to move from a pyramid to a column shape. This is essentially a warning sign that if nothing changes, there will be a demographic collapse down the road.

The second chart shows Mexico’s demographics with the new data. Where did all the kids go? Well, a combination of the global financial crisis, COVID, and drug wars made people a tad less interested in raising kids. On top of that, America has shifted to a closed border system, which forced Mexican families to move to the US full-time instead of sending the men over for seasonal work.

This isn’t the nail in the coffin for Mexico, but they must change things up. And for the Americans, they best start treating their Mexican population like the precious resource it has become.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Why is the Mexican Energy Sector Collapsing?

Coming to you from the edge of Giants Playground in CO’s Lost Wilderness. Today we’re talking about Mexico’s energy sector.

As I was heading out on this trip, a fire broke out in Mexico’s Cantarell oil field, which has long been Mexico’s largest oil-producing asset. However, even before this fire, oil production from this field was already down to but 1/8 of peak production.

The Cantarell field was developed over a century ago and has accounted for most energy production in modern Mexican history. This meant Mexico never had to develop the infrastructure or workforce for a broad-based energy sector.

Even though Mexico has plenty of accessible oil fields, they can’t develop them due to a lack of skill and strict anti-investment laws. So energy production in Mexico is falling off, and there’s no reason to expect that to stop anytime soon. Within a few years, I expect Mexico to become a net energy importer (with most of that being refined product coming from the US).

But it’s not all bad…Mexican energy production might be slowing, but consumption is also rising. And thanks to NAFTA, Mexico is tied at the hip to the US. So even without a strong energy sector, Mexico’s future still looks bright. If government officials would stop lining their pockets and put that money where it should be, Mexico’s future could be even brighter.

Prefer to read the transcript of the video? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey everybody. Peter Zeihan here. Coming to you from the edge of the Giants playground in Colorado’s Lost Wilderness. Today, we’re talking about energy in Mexico. Specifically, just before I left on this trip, there was a fire at the Cantarell offshore oil field, which has long been Mexico’s single largest oil producing asset. At its peak, it was producing about 2 million barrels a day. It’s down to less than an eighth of that now. And that was before the fire. Probably talking about about 150 right now as – 150,000 barrels per day that is – as they go through recovery operations.

Now, the Cantarelll was originally developed over a century ago, and it’s unique as formations go in that it’s a giant, basically a volcano with all the pressure building to the top. And so all you have to do is put a few holes in the cap rocket attack offshore and the pressure does the rest. You can see every well that taps the controls to per field from all of the other wells. And it has been the mainstay of Mexican energy production for the entirety of modern Mexico’s history. That means that we’ve got a problem here. The Mexicans never had to develop what you consider a broad based energy sector, and so they never had to really develop the intellectual capacity and the labor force to do broad scale oil production in multiple zones. And so there’s a lot of oil production in Mexico that by global standards would be very easy to develop. But the Mexicans absolutely lack the techniques and the skills and the capital that is necessary to do it themselves. In addition, they have the world’s most draconian anti investment laws. Makes it almost impossible for anyone outside the United States to play. Now, as a country that borders the United States, those laws were set up with the idea of keeping the Americans out because they see that as a geopolitical weakness. I can see that point from them, their point of view. But it does mean that Mexico has seen their energy production drop bit by bit by bit for decades, and there’s really no hope to expect it to reverse anytime soon, even though they do have some super fields, some of which are onshore, they just can’t develop them themselves.

Now, there’s another problem because of the general incompetence of the Mexican state oil company Pemex. Mexico also is one of the world’s largest importers of refined product, even though they’re still technically a exporter of crude. And every drop of that comes from the United States. It’s gotten so bad in recent years that Mexico, at least on paper, is actually using more American refined fuels than they generate for themselves. The current government, under AMLO, that’s Lopez Obrador, is his last name, is building a refinery that honestly, they probably don’t know how to operate. And even if they did, it’s kind of hard to have confidence that it’s going to work because they already have refineries that are doing horribly. So we’ve got a bit of a boondoggle where the money should have been spent on things like, I don’t know, skills development that is estén instead going on white elephant projects that are designed to make Mexico City sound good to itself.

Where this takes us is Mexico is in basically a not so slow motion collapse as an energy producer of any type. And within the next few years, Mexico will certainly be a net energy importer no matter how you’re going to run the math. Now, that’s not as bad as it sounds. It’s not just the production that is falling. It’s also consumption that is rising. Remember that courtesy of NAFTA, NAFTA to Mexico or the United States are bolted together at the hip. And. Whereas, the United States is really good at the high end labor stuff for things like semiconductors and tech design, it’s also really good at the low end stuff would use a shale revolution and turns it into things like precursor materials, plastics. Mexico’s good at everything in the middle, and it’s value add is arguably the best in the world. So it’s not that the Mexicans don’t have skills. They just don’t have energy skills in the state monopoly sector. So it’s perfectly capable for Mexico to have a successful future, even as it becomes more and more vulnerable to anything the United States does in energy. Now, with a country that is literally leaking mechanics and is excellent in middle manufacturing, should we get a change in approach in Mexico City? The idea that Mexico can get back into the energy game is not, it’s not a ridiculous idea. But the current government is definitely more interested in lining its own pockets and making ideological statements than solving any of the endemic, misaligned skills and corruption issues that have plagued the Mexican energy sector for the bulk of the last century.

So at a minimum, we need a change at the top before we can get a change in the energy sector. I don’t see that happening this year. We can talk about it next year or the year after.

Alright. Take care.

Cartels Part 3: The North American Drug War

There are a few reasons the cartels love their cocaine, mainly because it’s easy to smuggle and cheap to make. But what happens when you sell it? You’re left with a boatload of “dirty cash” you can’t do anything with.

The solution is what has enabled the cartels to put down roots in the Mexican and American economies. And yes, we’re talking about everyone’s favorite pastime: money laundering!

So the cartels get involved with high cash flow businesses, think agriculture, real estate, bars, legalized weed, etc. And now we’re not just talking about a disorganized group of dudes carrying backpacks full of blow; we’re talking about multi-million dollar businesses with deep pockets and lots of connections.

Unfortunately, I can’t offer any quick fixes to this problem…other than STOP DOING COCAINE.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

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Cartels Part 2: Origins of the Drug Trade

Flashback to the 80s with me for a moment…we can leave out the big hair and leg warmers…but let’s talk drugs. Most of the cartel activity came from one place, Colombia. If you’ve ever seen Miami Vice, you get the idea. But once the US caught onto the cartels’ “distribution strategy,” new ways of getting “product” into the US had to be created.

Money started flowing through Mexico, and the drug trafficking business was the place to be; it wasn’t long before the cartels we know today began to form. It’s important to note that not all of these cartels operated the same.

To most cartels, violence was a necessary aspect of the drug trade. The Sinaloa Cartel worked a bit differently; they treated this like a business, and El Chapo was the “CEO.” They partnered with the community, bribed law enforcement, and crime stayed relatively low while they were around.

Once El Chapo was captured and the Sinaloa Cartel started to fall off, groups like Jalisco New Generation surged back onto the scene. Unfortunately, this new wave of cartels brought back the violence and crime levels we see today.

For the US, carrying out military strikes on these cartels across the border just doesn’t make sense…it would be like shooting a fly with a handgun. However, beefing up border security to prevent these cartels from crossing into the states is probably a good idea.

Prefer to read the transcript of the video? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

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TRANSCIPT

Hey Peter Zeihan here, still in Vegas, still talking about cartels. The thing to remember is if you go back to the 1980s, most cartel activity was not Mexican, it was Colombian because that’s where the cocaine came from. And it would flow up into the Caribbean. It would avoid Cuba like the plague, because the Cubans would just kill everybody who was associated with the drug trade at that time and would flow into Miami almost exclusively. And this is literally the setting for the show. Miami Vice, all the drug wars, continental in scope, going into a single place. But by the time we got to the 1990s, the United States started to shoot down small planes that were flying ten feet over the water at night with no lights on because those were not scuba divers and the cartels were forced to change the way they shipped. And so they started sending shorter hops not to the United States directly, but into Central America, where they go on land and then go up through Mexico to the U.S. border where there’s a 2000 mile border. And before you say, building a wall will help with drugs. No, no, no, no, no, no. You can put a half a million dollars of product in your backpack. A wall is not going to impede you, especially since a wall requires 50 construction roads going down to the border to build the road in the first place. Which means you have no obviated half of the physical border of a Sonora in the Chihuahuan Desert. So if anything, the road has made it a lot easier for illegal migrants and drugs to get into the country. So remember Donald Trump, most pro narcotic, most pro illegal migration president the United States has ever had. Now, where was I? All right. Okay.

So when the cartels were going on land, that meant that the Colombian cartels had to either find middlemen and or bribe the locals in order to help with transit that generated the money flows that ultimately led to the rise of drug trafficking groups within the Mexican system itself. Now, if you fast forward to about 2012 to 2015, one of these cartels took a fundamentally different view of drugs from the rest. The other saw it as a means to power, and they were basically gangs at scale. But the Sinaloa cartel rose up and thought differently. It saw drugs as a business, and anything that interfered with the core business was something to be ruthlessly rooted out from within the organization. So you don’t steal ladies purses, you don’t shoot up the cops, you buy them off, you make them your friends. Because as long as you can bring drugs through a community, you are making money. And that is your primary reason to be. And that sort of attitude allowed them to put roots deep into Mexican society and expand north of the border fairly easily, where they interfaced with the American gang infrastructure.

If it was a Hispanic gang, you had the choice of joining them or dying. Most died. And if you were a black gang, you were probably just killed. One of the reasons that the murder rate in the United States dropped so precipitously in the 2000s is that the Sinaloa in the United States killed the people who were doing the killing. So use that to inform our general assessment of how much progress we’ve made. Now in the United States this allowed Sinaloa to not just become the largest cartel in Mexico, but in the United States and the largest organized crime group in the world. So the Obama administration worked with the Mexican government to capture the leader of that cartel, El Chapo. And then he got out and we got him again. And this started the disintegration of the Sinaloa cartel. El Chapo’s former accountant has tried to take over a chunk of it. Some of his lieutenants have tried to take a chunk of it. Some of his sons have tried to take a chunk of it. One of his sons is on the process of being extradited to the United States right now, but they all lead their own factions. And so this umbrella organization that was Sinaloa really doesn’t exist anymore in the way that it used to. And whenever you’ve got factions in a system, you’ve got violence. And it’s going to sound weird. But when El Chapo was in charge and when Sinaloa was a top down organization, Mexico was reasonably peaceful because there wasn’t infighting within his own organization and Sinaloa was able to cut a series of deals with the Mexican government to go after the other cartels.

Now, on the other side of the equation, the cartel that suffered the most from that alliance with the Gulf or the Zetas cartel. Two different groups that have kind of interwoven history. One group was the enforcers to the other. But once the government and the Sinaloa both turned on them, they basically shattered. And if you go to the eastern third of Mexico, you’re in a situation which is gang on gang violence, nominally under the name of Gulf and Zetas. And the Americans who disappeared and were kidnaped and killed this past week were people who fell in with the Gulf and the Zetas. So if you want to go with this idea of wanting military strikes south of the border against the Gulf, that’ll do nothing, because that’s basically going after the Crips or the Bloods with military hardware. It will do nothing to change the environment because there is no hierarchical organizational structure to disrupt in the first place. You’d literally be going after street thugs, and that’s just not the right tool for the job. And this group, it’s breakdown. That is the primary reason why Mexican murder rates are so high, because you just have gang on gang action, not just at the regional level or the city level, but the block by block level. And they’re fighting over the income that comes from the drug trade.

Now, in the middle, you have another group that used to be at least partially affiliated with Sinaloa that calls itself a Jalisco New Generation. They were led by a dude named El Mencho. Now, El Mencho does not have the same view of El Chapo. So El Chapo, you could basically sum up his position as don’t shit where you sleep. Well for El Mencho the violence is the point.

We’re a gang that gets money from drug trafficking, not we’re drug traffickers who happen to be a gang. So the first thing he tells his people to do when they move into a town is go shoot up the mayor’s office, the police office and any gang headquarters that you can find. Make it very clear to everyone who’s in charge and who has the guns and what the penalty for noncooperation happens to be. And that has made Jalisco New Generation very hierarchical, very violent, and has contributed massively to the violence south of the border. Now they are in the process of attempting to go north of the border to challenge Sinaloa in basically what is the the great fields of income generation opportunities in the United States. They haven’t succeeded yet and if there is a fight to be had in the United States, it is at the plazas and the border cities to make sure all this go. New generation does not cross in because if they do, wow, we think our murder rate went up because of COVID. Holy crap, Jalisco would go into Phoenix and Dallas and El Paso and Houston and Austin and San Diego and just start killing people to prove to everyone that they can. And if you want a 1930 Chicago level of violence in the United States and every city within 500 miles of the border, that’s exactly what will happen if Jalisco New Generation punches forward.

So military strikes south of the border. This isn’t going to fix anything, but perhaps an increased security presence in the city specifically to prevent Jalisco from crossing north that might be a pretty good idea.

Alright. Next time, we’ll talk about some of the economics of drugs and those things have changed.

Cartels Part 1: Americans Caught in the Crossfire

On March 7th, two of the four US citizens kidnapped shortly after crossing the border into Mexico were found dead. This raises several questions, but perhaps the most significant is how this will change the United States’ policy on Mexican cartels.

The cartels have a long and deep-rooted history of flushing the American system with drugs, laundering money, and other illicit activities. However deserving of the designation as a terrorist group, we have seen in recent history how our actions on terrorist groups have played out…just look at Pakistan.

Any action taken against the cartels would ultimately damage American and Mexican relations. As the US moves away from its ties with the Chinese, that’s the last thing anyone wants. It’s a tricky situation, and the solution isn’t black and white…but maybe everyone should lay off the white stuff for a while.

Prefer to read the transcript of the video? Click here

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY

TRANSCIPT

Hey everybody. Peter Zeihan here coming to you from Las Vegas. Today is the 7th of March. And if you’ve been following the news, you knew that there were a few Americans who went down to Mexico to get some tummy tuck surgery. And shortly after they crossed the border, they were assaulted, kidnaped. And some of them have now turned up dead. And so the discussion in Washington is whether or not we should designate cartels in Mexico as terrorist groups and start doing cross-border strikes. I’m not saying I’ve got a solution to this problem because I do not. Well, actually, I do. We’ll get to that. But military strikes on Mexico are not not not the solution. It’s not that the cartels are not deserving. I mean, these are people who have basically been preying on civilians now for decades, shoving drugs into our system. First cocaine, now fentanyl. And they’re into any number of criminal enterprises and they’re trying to launder their money through other licit sectors in Mexico, in the United States, which has made the money go deep and go far.

However, we have seen exactly this sort of situation in recent American history. We know exactly where it leads. So during the Afghan war, we discovered that there were militants operating in northwest Pakistan in a place called North-West Frontier Province that were launching assaults against American forces and Afghan forces backed by the United States north of the border in Afghanistan. And then they would retreat back south of the border. And so we ended up carrying out a number of military operations on both sides of the border to chase them down. The problem we rapidly discovered is that Pakistan is a weak state and they do not control North-West Frontier Province. And by launching strikes south of the border we were inflaming local passions of Pakistanis, even if they were not in support of these militant groups. And we ended up weakening the Pakistani state, which made it even easier for these groups to operate.

So in this case, strikes across the border just poured fuel on the fire. If we were to do this in Mexico, two problems. Number one, Mexico is a weaker state than Pakistan. And so anything that inhibits its ability to function would probably make the situation even worse. And second, the most pro-American portion of Mexico are the northern tier of states where we would be likely to launch these strikes. So we’d be taking our regional allies who are not just political allies, but economic partners. Remember that the United States and Mexico are now each other’s largest trading partners, and especially if we decide we want to move away from the Chinese system, we need help with mid-skill, mid-range manufacturing. And that is a sector in which Mexico absolutely excels, is arguably the world leader. And launching military assaults on what is the location of our most important and most tightly integrated supply chain networks would be a disaster for aerospace and automotive and manufacturing in general. So I really would encourage you to think otherwise.

This is a thorny problem. The solution is not to not get tummy tucks in Mexico, although I would argue that maybe common sense would tell you that you don’t need to do that anyway. The solution is to stop using so much goddamn cocaine, because as long as we are providing the financial existence of the system, it’s going to persist.

Now, this is far too big of a topic for me to do in a single video, so I’m going to be breaking this into a few different topics where you talk about some of the individual cartels and the economics of the drug war and how it has evolved in recent years. So think of this as a starter, and in the days to come, we’re going to be turning this into a full on series. So stay tuned. See you soon.

Mexican Cartels: The Fallout of El Chapo

We all know the story of El Chapo’s capture and escape…and capture. But the lesser known – and perhaps more important story – is the disarray he left behind.

The Sinaloa Cartel, once the world’s most powerful organized crime group, owes its success to a business-first approach (violence was just a means to an end). The power struggle caused by El Chapo’s vacancy has changed everything.

The Jalisco New Generation Cartel, emerging as the new big-dog, has settled on a shoot-first-ask-questions-later approach…and while effective, it has garnered some unwanted attention for the cartel’s operations.

Here at Zeihan On Geopolitics we select a single charity to sponsor. We have two criteria:
 
First, we look across the world and use our skill sets to identify where the needs are most acute. Second, we look for an institution with preexisting networks for both materials gathering and aid distribution. That way we know every cent of our donation is not simply going directly to where help is needed most, but our donations serve as a force multiplier for a system already in existence. Then we give what we can.
 
Today, our chosen charity is a group called Medshare, which provides emergency medical services to communities in need, with a very heavy emphasis on locations facing acute crises. Medshare operates right in the thick of it. Until future notice, every cent we earn from every book we sell in every format through every retailer is going to Medshare’s Ukraine fund.
 
And then there’s you.
 
Our newsletters and videologues are not only free, they will always be free. We also will never share your contact information with anyone. All we ask is that if you find one of our releases in any way useful, that you make a donation to Medshare. Over one third of Ukraine’s pre-war population has either been forced from their homes, kidnapped and shipped to Russia, or is trying to survive in occupied lands. This is our way to help who we can. Please, join us.

CLICK HERE TO SUPPORT MEDSHARE’S UKRAINE FUND

CLICK HERE TO SUPPORT MEDSHARE’S EFFORTS GLOBALLY