Cartel Capitalism: Assessing the Macro and Micro Economic Effects of Cartel Activity on Mexico's Agricultural Industry Performance

Abstract

Since the early prohibition era, cartels have played a violent, impactful, and inextricable role within Mexican society. Cartel influence has grown exponentially, with current operations leading to a $500-million USD net negative economic effect annually. However, the scale of Mexico’s illicit economy and cartel influence has fluctuated with exogenous economic factors and global events and is felt most strongly in some industries rather than others. This thesis analyzes the microeconomic and macroeconomic impacts of Mexican cartels on the nation’s agricultural sector following three key economic events i) political regime changes, ii) NAFTA, iii) the War on Drugs, and the ways political instability allowed for corruption to flourish and cartel expansion to take place. Ultimately, this thesis concludes that major economic shocks, when not met with adequate microeconomic policy, facilitate cartel operational expansion and illicit market growth. I argue that cartels have a significant economic impact in reducing production and export capacities and times of economic hardship or major points of economic change catalyze greater cartel activity as there is less oversight, policy, and economic stability, making cartels appeal as an alternate income source.