Mexico must balance economic and political risks to the People’s Republic of China. AFP/GETTY IMAGES
R. EVAN ELLIS/U.S. ARMY WAR COLLEGE
Second of three parts
The People’s Republic of China (PRC) has poured resources into influence-building campaigns in Mexico. Perhaps the largest overt effort by the PRC is in education, with five state-sponsored Confucius Institutes spreading the Chinese language and culture and extending the PRC’s cultural and diplomatic reach.
The PRC also has a hand in the rampant crime and violence besetting Mexico through its links to Mexican-based triads and other transcontinental criminal organizations (TCO), which act as liaisons between the PRC and the Mexican cartels, according to Reuters, the BBC and the Brookings Institution.
The PRC uses multifaceted “people-to-people” networks to expand its influence and pursue its interests in Mexico. Its Confucius Institutes in Mexico are established in two important universities in Mexico City, as well as the Autonomous Universities in Nuevo Leon, Yucatan and Chihuahua. These institutions serve as gatekeepers for capturing capable future political and business leaders with an interest in China and sponsoring the education of the most promising of these leaders at PRC institutions in China.
Beyond the Confucius Institutes, PRC-based institutions sponsor numerous trips to China for Mexican academics, consultants and journalists. These trips are intended to cultivate those Mexicans most knowledgeable of the PRC and its political and economic system to create ties of goodwill and obligation.
Within Mexico, the Chinese Communist Party also maintains a web of sponsored and directed “United Front” activities, including groups that advocate for expanded China-Mexico business penetration such as the China-Mexico Chamber of Commerce, or the Mexico-China friendship group in the Mexican legislature.
Chinese organized crime activities in Mexico are an area of increasing concern, impacting the United States through the illegal trafficking of drugs, weapons and migrants, according to the Guardian newspaper, U.S. government statistics and The Washington Times newspaper.
Chinese triads and other organized crime groups are deeply rooted in Mexico, tied to the traditions of those communities for self-organization, self-help and self-financing, according to The Washington Times.
Studies of Chinese organized crime in Mexico point to two groups from the provinces of Fujian and Guandong, which sometimes collaborate in areas such as human trafficking, according to a study by the John Jay College of Criminal Justice and Earth League International.
Mexico is a common route for human trafficking by triad groups. Local families raise money for the Chinese gangs to bring people from China through the region to Mexico, generally with the United States as the destination. The gangs arrange transportation and documentation as required, locating migrants in otherwise legitimate Chinese businesses in Mexico where they work often in conditions of indentured servitude to pay off the debt incurred to move them. Chinese migrants have been intercepted at the Mexico-U.S. border in small but increasing numbers in recent years, including 4,366 between October 2022 and February 2023 alone, according to U.S. government statistics.
Mexico has also become a hub for the importation of Chinese fentanyl and precursor chemicals, and their transformation into illicit drugs responsible for the overdose deaths of 106,000 U.S. residents last year alone, according to The Guardian newspaper and U.S. government statistics.
According to a 2014 report by Mexico’s Attorney General, the country’s most internationally focused cartels, Sinaloa and Jalisco New Generation (CJNG), have worked for years with Chinese triads such as 14K and Sun Yee On to import precursors, mostly from Wuhan. Most recently, those cartels have set up laboratories and pill presses importing Chinese precursor chemicals, transforming them, and shipping them to the United States.
In April 2023, the U.S. Treasury Office of Foreign Asset Control (OFAC) designated two Chinese chemical companies, Wuhan Shuokang Biological Tech Co. and Xiaoli Pharmatech Co., for their roles in such activities. In June 2023, the U.S. Justice Department unsealed criminal indictments against Anhui Rencheng Technology Co., Anhui Moker New Material Technology Co., Shutong Wang and Shifang Ruan for conspiring to import fentanyl into the United States.
The political sensitivity of the China-Mexico network was highlighted when, in response to concerns expressed in the U.S., Mexico’s President Andres Manuel Lopez Obrador publicly asked his Chinese counterpart Xi Jinping for help on the matter, although the Chinese denied knowledge of illegal fentanyl shipments from the PRC to Mexico, according to reporting by Deutsche Welle, a German public broadcaster.
Many of those drugs and precursors are brought in through Mexican ports operated by the Chinese company Hutchison, including Manzanillo and Lazaro Cardenas, as illustrated by a high-profile drug intercept in May 2023, according to the BBC and the Center for Strategic and International Studies.
Beyond fentanyl, Chinese organized crime groups are increasingly involved in money laundering for Mexican crime groups, greatly complicating efforts by authorities to track and prosecute cartel financial networks.
The expanding role of Chinese TCOs in money laundering reflects the synergy between the previously noted local presence of Chinese organized crime groups in Mexico, their longstanding ties with Mexican drug cartels, and the opportunities afforded by growing Mexico-PRC trade and financial ties, according to the Brookings Institution. Mexican cartels have used PRC-based banks and other institutions for trade-based money laundering for more than a decade. In 2012, for example, Mexico fined its largest Chinese bank, HSBC, for lax money laundering controls involving transactions connected to the PRC, according to reports in Small War Journal and Reuters, an international news agency.
Chinese triads now employ their international networks to launder the cash earnings of Mexican cartels in the United States and elsewhere in ways that significantly decrease the risks and costs for the cartels over traditional means, while increasing the rapidity with which they obtain their money. In one scheme pioneered by Mexico-based Chinese criminal operative Li Xizhi and as reported in ProPublica, referred to as “flying money,” triad members would pick up dollars from the cartels in the United States and deliver them the equivalent number of pesos in Mexico, in a matter of hours, charging the cartels commissions as low as 2%. They would sell the dollars to wealthy Chinese wanting to move their renminbi out of China, then provide the RNB obtained through such deals to companies in Mexico needing Chinese currency for buying goods in China. Each of these steps takes advantage of the opacity of Chinese financial institutions to make the transactions almost impossible to track for Western authorities, reported ProPublica.
PRC military engagement with Mexico has been relatively limited, but Mexico’s Army and Navy have periodically visited and received delegations from their counterparts in the People’s Liberation Army (PLA), and limited numbers of Mexican military personnel have gone to China for professional military education and training courses.
China-based private security companies have had a minor presence in Mexico, including the “Mexico-China Security Council” formed in 2012 by former PRC official Feng Chengkang to protect Chinese personnel from gangs.
Nonetheless, the Mexican military has not purchased Chinese weapons or received significant donations of Chinese military equipment. Nor have the countries signed defense cooperation agreements as the PRC did with Peru and other countries in the region.
The Mexican state’s heavy involvement in petroleum, electricity and other sectors discourages some other investors, including PRC-directed investment, which would otherwise flock to Mexico for nearshoring.
The balance that the next Mexican government – to be elected in June 2024 – will pursue toward the PRC and the United States is difficult to predict.
An evaluation of the country’s engagement with the PRC in terms of the country’s long-term interest, in the context of the geography that Mexico finds itself, is recommended. That geography defines not only imperatives for Mexico’s continuing cooperation with its neighbor to the north on matters of security and migration, but also the economic relationships that make the most sense for Mexico, from the perspective of the attractiveness of the North American market for Mexican exports, and the value to Mexico from integrated supply chains connecting Mexico to the North American market, with the administrative and legal predictability and other investment incentives provided by the U.S.-Mexico Canada Free Trade Agreement (USMCA).
Mexico as a sovereign state has every right to pursue political, economic and other relationships with the PRC. But the inherent role of the PRC as a structural competitor to Mexican industry and its efforts to capture the value added of manufacturing and technology supply chains for the Mexican people is a fundamental consideration for Mexican policymakers.
As with other governments in Latin America, it is recommended that the cornerstone for engagement by Mexico’s next government with China is transparency and good governance. Both will help ensure that the deals are in the best interest of the Mexican people.
Evan Ellis is a research professor of Latin American Studies at the U.S. Army War College.
The Watch is a professional military journal published by U.S. Northern Command to provide an international forum for military personnel and academics involved in homeland defense. The opinions expressed in this piece do not necessarily represent the policies or points of view of the command or any other agency of the U.S. government.
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