The Santa Rosa de Lima cartel, led by Jose Antonio Yepez Ortiz aka El Marro, used to be in the headlines for being an organization specialized in the theft of hydrocarbons (a practice known as Huachicoleo in Mexico). The method was easy, copying the technique already used by the Zetas, they used local population and at times their own people to drill the pipes of PEMEX. Sometimes this practice involved excavation using bulldozers which broke the pipe causing a massive flow of oil which in some cases ended up in a tragedy such as the one happening in Tlahuelilpan last year.
The leaders of the huachicol networks are not idiots, they´ve been involved in this type of activities for a long time and know that in order to obtain the most profitable oil they should drill pipes canalizing oil that has already been refined (in order to avoid the refinery process which involves time and resources, thus diminishing the final profit returns) althoguh they also drill pipes filled with crude oil. How do these groups dispose of their product (stolen oil)? I think it depends on the zone of Mexico we´re talking about. The Zetas, for example, used to drill oil and then smuggle it through the border to Texas where they sold it to Texan businessmen involved in the oil market at a lower price of course. After that the Texan oil companies involved in the scheme were able to sale their existences at a considerably lower price thus getting involved in which is commonly known as ``dumping´´ (unfair competition)
Nevertheless Guanajuato, the center for huachicoleo until last year, is far away from the border. The organizations operating here (the CSRL mainly) used their products in the local markets. How? By operating in the same way used by other oil-theft organisations in Africa/Middle East. For example in Nigeria (the biggest African oil producer) there are plenty of criminal gangs (mainly lead by members of the Igbo tribe) which drill pipes in the delta of Niger river and then store it at vessels and ships disguised as fishing boats which then start travelling parallel to the coast selling the stolen oil at a very cheap price to the businesses or fishing villages of the zone.
In the same way El Marro used to distribute its product through the local population. Local farmers, local entrepreneurs and even local people bought his cheap oil as a way of avoiding the official oil price imposed by the Gov. of Peña Nieto (during his time oil price increased by nearly 80%)
Nevertheless, after gaining so much attention due to the turf war against the CJNG el Marro was targeted as a high-profile target and the central Gov. started tackling his organization. The deployment of troops and the seriousness of AMLO´s office in the task of finishing with oil activities in Guanajuato left Marro with its main profitable activity severely damaged. Nevertheless, after nearly 2 years of continuous pumping and stable economic activity by his CSRL Marro faced to problems. First: a great stock of stolen oil which was storage nobody knows where (in secret locations, disguised bunkers and even under shell entities I suppose) Second: a great level of cash (since street level oil sales are a cash intensive business) which had to be hidden properly in order to avoid detection and forfeiture by the UIF (Unidad de Inteligencia Financiera, a branch of the Treasury Department/Ministerio de Hacienda similar to the FinCen in the US) which posed as its 2nd task in AMLO´s term to tackle huachicoleo/oil theft networks. Of course, much of these revenues were already invested in front companies such as real state, petrol stations (the best option for Marro since at the same time he could sell cheap oil and launder the profits obtained), restaurants, etc.
So, what could do an individual involved in the business of oil theft to get rid of his existences, disguise the profits and at the same time avoid the attention of authorities? The answer was quite brilliant taking into account the fact that most members of CSRL and even Marro himself are no more than a bunch of extremely violent street level thugs: CSRL created to front companies in Guanajuato. They were public transport companies which owned several buses used to the daily transport of normal people through the State of Guanajuato. The best strategy nevertheless was the oil used by these buses: it was el Marro´s profits.
If we take into account the portfolio of a public transport company we can distinguish between fixed costs (those which do not vary and are always the same such as electricity, wages, tire repairing in this case, rents of facilities, etc) and variable costs (such as the price of raw materials involved in the creation of a product) For Mexican public transport their main cost, of course, is oil. Mexico used to be an oil net exporter. Its huge oil reserves and the State approach to this industry through PEMEX State monopoly was in my opinion one of the greatest ideas of the Mexican Gov. Nevertheless, the widespread mismanagement, corruption and political clientelism has changed the Mexican oil market into a chaotic and rotten industry which suffers huge price blows. In fact, the most common reason for Mexicans to demonstrate in the streets (excluding of course corruption and violence) is the constant raising of oil prices. Remember the mutinies during Peña Nieto´s term caused by this factor?
As things stand for public transport companies the highest variable cost is oil. Their books are constantly out of balance due to the fluctuations of oil price. As a consequence, the fees of these enterprises are constantly increasing. Mexico is still a rural country, in my opinion. A lot of the people living in these rural areas do not have access to cars or prefer to travel with more people for large trips across the States or the country. Thus the buses are a very common mean of transport.
What would happen if suddenly a Bus Company started offering a fixed price for its trips? El Marro had access to stolen oil. Nothing stopped him from cutting costs by using a product which hadn´t been bought but stolen. Thus, El Marro´s buses could offer cheaper trips since they hadn´t to monetize an important part of their consumable assets (oil)
This fact enabled Marro to get rid of his competence by offering lower prices in a market known for its instability. This practice is known as dumping and is usually used by big companies to get rid of competitors. If a company is big enough to suffer profit loses during a certain amount of time by offering the lowest price the most probable thing is that its competitors won´t be able to offer an even lower price thus retiring from the market because of the fact they can´t afford to enter into the price-war.
Dumping is in most of the cases illegal. In Europe this practice is commonly used by strategic alliances of big firms which form what is known as Competence Cartels. The European Commission takes this behavior very seriously and is constantly imposing penalties and fees to this companies for such practices.
But in Mexico, in the turbulent State of Guanajuato, a place where the death toll increases each week who cares about fair competition between businesses?
As happens always in Mexico, the disposition of such a business isn´t possible for people who are masters at beheading and ambushing techniques. They need people to grant the licenses, lawyers to form the companies, accountants to launder the profits and alter the books and relatives or trusted personnel to be used as frontmen.
El Marro´s Public Transport Network wasn´t the work of a thug. It was conceived and executed by someone who was an expert in his/her field. As it usually happens in Mexico and other parts of the world were criminal economy prevails the figure of the Operador Financiero (Financial Operator) comes on stage. Entrepreneurs with financial difficulties and in hurry for cash, legal advisors and respectable lawyers, local politicians and even successful businessmen are always involved in the finance world of criminal organizations in Mexico. In El Marro´s case I don´t exactly know who these persons were and still are. It´s always the best hidden secret because in the end the only thing that matters in this world is money and these guys are the ones who know how to manage, disguise and hide it.
This is the network used by El Marro to launder his ill gotten gains through to public transport front companies which enabled him to get rid of his incriminating stolen oil existences and at the same time join a market troubled by increasing costs offering a fixed and low price destroying his competitors in an economic way, without using AR15s, chainsaws or his usually butcher-style business techniques.
His wife was one of the main beneficiaries since she was the owner of the companies which received the money generated by the transport companies and invested it in a very diversified portfolio which included racing horses (exactly as the Zetas did), fine cattle, trailers and vehicles. It´s a very common practice for proffesional money launderers to diversify the inverstment portfolio to avoid the risk of detection and a full-range confiscation and this is just what El Marro did.
The whole scheme was torn apart by the UIF in the december 2019. By the time of its discovery El Marro had already partnered with businessmen form the neighbouring State of Queretaro to start offering its products there thus expanding even more his activities at a time when his dear Guanajuato was pressed by the GN and the CJNG always searching for him.
I´ve found this business strategy quite courious. I know that lately I´ve been posting some cases which are minimalistic and quite simplistic, but I think it might be interesting to stress the fact that these organizations are always acting with the aid of proffesionals and private sector individuals which in my opinion are the ones who give the criminal organizations their savage economic behaviour.
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