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Mexico's Cartels and the Economics of Cocaine

bskelton828 Wrote: Jan 06, 2013 7:05 AM
Why have cocaine prices been stable for 30 years ? What unseen hand is at work here?
johnm h Wrote: Jan 06, 2013 7:49 AM
Our interdictions act as non tariff barriers raiseprofits in the US and help the cartels eliminate competition. The consolidation of the cartels enable them to control prices by controlling the amount of cocaine that enters the market. Even giant busts have no impact on market prices as supply quickly responds. When there is a temporary surplus, the drug lords give more away to help hook new users or rat on new competitors. The drug war is the source of the drug problems and key to stable prices. It's an important part of the business model.

At Stratfor, we follow Mexico's criminal cartels closely. In fact, we are currently finishing our 2013 cartel forecast, which will be released later this month. As we analyze the Mexican cartels, we recognize that to understand their actions and the interactions between them, we need to acknowledge that at their core they are businesses and not politically motivated militant organizations. This means that although violence between and within the cartels grabs much of the spotlight, a careful analysis of the cartels must look beyond the violence to the business factors that drive their interests -- and their bankrolls. 

There are several distinct business factors that have a...