PHOTO: Cartel fighters with modern weaponry, Bret Kavanaugh on Unsplash
Emerging in the 1980s, the Guadalajara Cartel, dubbed “the Federation”, was the first organisation to monopolise Mexican trafficking routes to move billions of dollars worth of cocaine and marijuana into the US. After the collapse of the Guadalajara cartel, several cartels emerged, igniting large-scale violence, corruption and terror over trafficking routes. Modern Mexican cartels like The Jalisco New Generation Cartel (CJNG) elicit characteristics that have a functional resemblance to a state: such as exerting territorial control, a monopoly on violence, enforcement of the law, systematic taxation and the provision of social services to their populations. The organisational behaviour of modern Mexican drug cartels has shifted away from drug trafficking. What sparked this change?
Drug cartels and drug trafficking routes
If you want to know how cartels have changed, it is important to understand what a drug cartel is. Drug cartels are defined as an organisation that specialises in the production and the distribution of illicit substances, otherwise known as drug trafficking. This is achieved through the establishment of drug trafficking routes. A route is a connection of airports, roads, border crossings and tunnels which facilitate the transfer of illicit substances from across borders and transit points. These routes often cut through state borders, and move billions of dollars worth of illicit substances annually. Drug trafficking routes are expansive, well-planned and highly organised logistics networks directly tied to the financial success of a cartel. The efficiency and speed at which a cartel can move illicit substances is linked to the security and efficiency of their trafficking routes. Cartels with reliable routes enjoy favourable influence in their business deals with other criminal actors, vying for transport of their illicit produce. Due to the profit it provides to fund their operations, drug trafficking routes are considered the central asset of any cartel. Trafficking routes are frequently contested by rival cartels, the state and other criminal actors, all vying to undermine the host cartel’s business operation. Thus, controlling these assets is imperative to the success of a cartel’s criminal enterprise.
What is the difference between a transactional and territorial cartel?
A transactional cartel is a drug-trafficking network that prioritises smuggling and the logistics that support it over territorial control. Transactional cartels have few competitors. Usually, they dominate large parts of the illicit market, meaning potential challengers are overwhelmed by the cartel’s resources and war-fighting capabilities. They have a centralised command structure, maintaining large capital reserves that reduce the need for diversification, and rely more on high-level corruption than widespread violence.
In contrast, a territorial cartel is a drug-trafficking network characterised by its focus on control and taxation within territory. Territorial cartels arise in conflict-ridden landscapes where the state, cartels and other criminal enterprises fight for control over land. Continuous war means increased expenditure for weapons, manpower and bribes to safeguard their trafficking routes and protect their business operations. Consequently, these cartels operate with lower capital reserves compared to their transactional counterparts. To make up for this shortfall, territorial cartels seek to govern geographic space and extract revenue from local populations through taxation, expansion into legitimate business and consolidating control over supply chains.
The spectrum of transactional and territorial cartels
Each cartel differs in their operational methodology. A number of factors influence what type of cartel they are. Thus, modern Mexican cartels exist on a spectrum between transactional and territorial cartels. Transactional cartels operate purely as drug distributors and optimise their business around this practice; they prefer corruption over violence and avoid direct confrontation with the state. An example of this is the Guadalarajara cartel (1980-1989). However, modern ‘cartels’ like Sinaloa (1989-) and CJNG (2010-) are similar to territorial cartels, because they focus on the control and taxation of territory, use extreme violence and diversify their business activities, while continuing to traffic illicit substances. So what flipped the script? This next section digs into the forces behind this change.
The Gray Zone of Criminality
By their nature, drug cartels engage in illicit activities pitting them against the state’s law enforcement efforts. In effect, bribery is used extensively to pay off state officials in exchange for impunity. On one level, cartels require some state protection to operate in illicit markets —the scale of their business often profiting in the billions would otherwise attract scrutiny from the state. This interaction happens in a phenomenon known as the Gray Zone of Criminality: an ecosystem of coercion, corruption and criminality where actors collude for illicit gain, legal impunity or political control. Often arising in authoritarian regimes — Mexico in the 20th century under the PRI’s rule being one example — where law enforcement officials such as generals are granted informal permission to regulate the criminal underworld, this creates an opportunity for cartels to co-opt members of the armed forces, the police, politicians and judicial officials to gain protection for their illicit enterprises. Although Mexico has transitioned from authoritarian regime into a more democratic state, post-authoritarian elites failed to impose legal and security sector reforms to dismantle the Gray Zone of Criminality, which according to Guillermo Trejo and Sandra Ley, “set the stage for the dynamics of regime change to become intertwined with organized crime and the outbreak of large-scale criminal violence”. In short, understanding the Gray Zone is essential. Without it, the resilience of modern Mexican cartels cannot be explained.
The Guadalajara Cartel as a Transactional Cartel
Founded by Rafael Caro Quintero, Ernesto Fonseca Carrillo and Miguel Ángel Félix Gallardo, the Guadalajara Cartel, or “the Federation”, was a pioneer in the drug trafficking industry. Led by Félix Gallardo, the cartel would dominate Mexico throughout the 1970s and 1980s. The cartel was the first Mexican organisation to partner with Colombian cartels, including Pablo Escobar’s Medellín Cartel, to smuggle cocaine into the US, making it a powerful regional organisation. Because Félix Gallardo integrated all the major plazas into his organisation, the Guadalajara cartel monopolised all trafficking routes in and out of Mexico, developing sophisticated air and land networks to supply billions of dollars of cocaine, marijuana and heroin into major US cities during the 1980s. Additionally, the Guadalajara cartel corrupted the highest levels of the Mexican political and security landscape, allowing the cartel to earn more than $5 billion USD annually or $20 billion USD (AU$28 billion) today. The use of corruption by the Guadalajara cartel can be understood through the lens of the Gray Zone of Criminality corrupting the top levels of Mexico’s political security apparatus across the country. It co-opted the Federal Security Directorate, bribed the defence minister and had an extensive network of political and judicial officials on its payroll. This allowed it to operate with impunity, and expand and consolidate its power within Mexican society. The measures the Guadalajara Cartel took to establish their illicit enterprise effectively eliminated any rivals capable of challenging their power. The state was co-opted through corruption and existing ‘plazas’ were absorbed into the cartel. In effect, the cartel solely focused on ensuring drugs flowed freely into the US, rather than controlling territory, which is why scholars characterise it as a transnational cartel.
The shift from transactional to territorial cartels and the collapse of the Guadalajara Cartel
The impunity the Guadalajara Cartel enjoyed through the 1980s was upended after the cartel tortured and murdered US DEA agent Enrique (Kiki) Camarena. Camarena’s death led to increased pressure on Mexico from the US to combat the drug trade and hold Kiki’s murderers responsible. In effect this pressure superseded the millions of dollars of bribes paid out to Mexican state officials, with Félix Gallardo and Quintero Carrillo arrested and imprisoned by 1989. In the absence of a centralised authority, the cartel devolved into infighting and splintered into new cartels like Tijuana Cartel, Juárez Cartel, Sinaloa Cartel, Gulf Cartel and Mileno Cartel. During the 1990s and 2000s, these groups competed with each other over drug trafficking routes, state protection and political influence. This sparked numerous conflicts such as the Sinaloa War and the Sinaloa-Tijuana and Sinaloa-Juárez wars. This transition from a single dominant organisation to a fragmented, warring network of cartels would create a violent landscape that lacked the stability and relative peace the Guadalarajara Cartel enjoyed. Through the 1990s and 2000s, the violence from inter-cartel wars was relentless. In 2006, 10,452 homicides were recorded nationally, many of them from cartel-fueled violence. In response to this violence, the Mexican government responded with a crackdown dubbed ‘Operation Michoacán’. These factors cultivated a fragmented and violent environment of cartels, forcing them to change their organisational behaviour to survive.
Operation Michoacán: a catalyst for the rise of territorial cartels
Newly elected President Felipe Calderón (2006-2012) launched Operation Michoacán, a militarised campaign intended to fully dismantle powerful cartels and restore state authority. This operation targeted cartel leadership and deployed over 45,000 troops by 2007, representing the first comprehensive state crackdown on cartels.
Utilising a ‘kingpin strategy’, this operation removed the leaders of cartels; in turn fragmenting these organisations into smaller, more violent factions. The operation attracted violent reprisals from cartels. According to Guillermo Trejo and Sandra Ley, “between 2007 and 2012, drug cartels murdered 15 state government officials, 64 mayors, 45 municipal government officials, 7 party candidates, and 25 party activists”. Operation Michoacán exacerbated cartel-fuelled violence. Estimates suggest that between 40,000 and 60,000 people were killed in drug-related fighting between 2006 and 2012. All of them from drug-related fighting.
Successive Mexican administrations tried varied approaches to dealing with cartels. Peña Nieto’s administration (2012-2018) focused on violence reduction and poverty alleviation. Andrés Manuel López Obrador’s administration (2018–24) focused on a “hugs, not bullets” approach, which weakened police, judicial and prosecutorial capacity, allowing cartels to expand aggressively. Claudia Sheinbaum (2024-) has pursued an aggressive militarised approach targeting high-level cartel operatives, echoing the strategy used in Operation Michoacán. All these approaches have been relatively ineffective at curbing cartel power and stopping the violence.
Since 2006, cartels have faced a two-front war against their rivals and the state, and cartels were forced to shift from merely having a territorial presence to actively controlling territory. Operation Michoacán disrupted cartels’ business operations by targeting transit points for drugs, disrupting trafficking routes, reducing efficiency and slashing profits. Bloody cartel wars like the Sinaloa-Tijuana conflict continuously threatened these same transit points. It made territorial control essential for protecting routes from disruptions by rivals and the state.
The economic burden of continuous warfare was evident; cartels increased spending on the weapons, soldiers and bribes needed to protect their business and trafficking routes. They also could not count on reliable and consistent profits from drug trafficking alone. Unlike the Guadalajara Cartel which monopolised the drug trade and enjoyed large scale state protection, modern Mexican cartels were forced to diversify into different industries to sustain their profits; illegal fishing, avocado farming and fentanyl manufacturing to name a few.
In Mexico, legitimate industries like the US$1.9 billion (AU$2.65 billion) fishing industry are prime targets for cartels. In Baja California, the Sinaloa Cartel has consolidated control over the vertical supply chain of fishing, from catch to processing, in a bid to generate legal revenue free from state scrutiny.
The development of parallel governance systems and the role of the Gray Zone of Criminality
To counteract the disruptions and subsequent lower operating revenue, cartels began to develop systems of parallel governance to extract revenue from local populations and secure their trafficking routes.
Counterinsurgency scholar David Kilcullen argues that criminal groups that control territory must effectively govern through law creation, enforcement, investment and taxation of local residents in order to establish an effective parallel governance system separate from the state.
PHOTO: An alleged Jalisco New Generation Cartel gunman fleeing after intentionally lighting a fire at a gas station in Jalisco amid unrest after the killing of El Mencho, unknown author on Wikimedia Commons
Modern cartels have extensively engaged in the Gray Zone of Criminality. Some concerning examples included the alleged $100 million bribe to formerPresident Peña while in office, the infiltration of Mexico’s top organised crime unit and law enforcement actors ignoring murders in Coahuila due to alleged bribery. Without the sustained corruption of the state’s institutions, the cartels’ territorial governance would be severely hampered.
This wide network of corruption is a stepping stone into broader territorial control. By weakening state institutions, it allows cartels to consolidate their control over illicit markets, legal institutions and the local population.
Case study: CJNG and Sinaloa cartels
In the modern landscape, Mexican cartels like the CJNG and Sinaloa Cartel operate as parallel governance structures, blending their authority with functions of the state into organised crime networks to control local populations and operate their illicit businesses with impunity, stability and security.
The corruption of law enforcement allows cartels to enforce their version of the law without scrutiny from the state. In Baja California Sur, the Sinaloa Cartel has become a de facto law enforcement agency punishing street criminality since gaining control over the area. According to Brookings, “municipal police officers started sending local people complaining about theft and house robberies to the Sinaloa Cartel” illustrating how the cartel became the de facto authority in its territory. Moreover, corrupt local officials turn a blind eye to cartel extortion of business. Hotel chains are taxed in San Lucas — an arrangement that is described as ‘reasonable’ because of the predictability of the payments and the stability the cartel brings through suppressing petty criminality in the region. This builds political capital with the local population, valuable to the cartel because it makes law enforcement efforts difficult in an area which enjoys the stability the cartel provides. By fostering a sense of unity among the community it discourages co-operation with the state and rival criminal actors.
Additionally, non-enforcement of legal codes allow cartels to distribute goods and services to local communities, helping to build their legitimacy. CJNG intertwines extreme violence through public executions with frequent displays of its firepower against the state through the provision of social goods. During the COVID-19 pandemic CJNG provided petty cash, food, toys to children, cleaning supplies to families and computers to schools. The corruption of security services allows CJNG to monopolise violence in its territory by carrying out brutal executions without scrutiny. Like the Sinaloa Cartel, CJNG provides social goods to increase the social cohesion in the area it rules, building legitimacy with the local population. CJNG blends social provision with violence to discourage co-operation with the state and rival criminal actors.
As of May 2024, estimates suggest Mexican cartels exert direct control over a third of Mexico’s territory. These are major factors for why Mexico ranks 141 out of 182 countries in the 2025 Corruption Perceptions Index with a score of 27/100.
PHOTO: Mexico by unknown author on Wikimedia commons
In the 21st century, transactional cartels have declined in number within Mexico. Firstly, in Mexico, multiple criminal actors compete over a limited number of trafficking routes and territory, breeding continuous warfare and disruption to the flow of drugs. Combined with direct state action against cartels, cartels evolved away from purely trafficking drugs; expanding into other industries. This evolution continues to be facilitated through the Gray Zone of Criminality, where bribes are exchanged for legal impunity. In effect, territorial cartels, who establish parallel governance systems to safeguard their trafficking routes and illicit enterprises from rivals and the state, have exploited corrupt state actors to consolidate control over territory. Territorial cartels tax, enforce the law and provide social goods for communities, not only to increase their revenue, but to foster a sense of unity and discourage cooperation with the state and rival criminal actors, improving their own security.
