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Three decades ago, Mexican farmers could sell their corn at about $415 per ton, on average, in today’s dollars. It didn’t make for much of a living. Roughly 4 in 10 agricultural workers at the time made less than the minimum wage, equivalent to $1.40 an hour in 2023 dollars. Corn growers — just shy of a third of the total — were near the bottom of that pile.

Then Nafta came about. Over the next 15 years, Mexican tariffs on corn imported from the US came down to zero. Government price supports were withdrawn and the wholesale price of corn fell by more than half over the ensuing decade, in real terms. And what did farmers do?  Being rational agents in a market economy, many switched to more promising crops: cannabis and opium.

“The historical abandonment of the poorest farmers pushed many to plant drug crops,” said Omar García Ponce, a political scientist at George Washington University. Here’s hoping that the Republican Party comes to understand just how stupid it is to propose that the best way to interrupt the drug epidemic is to bomb them.

Research by García Ponce with economists Oeindrila Dube from the University of Chicago and Kevin Thom from the University of Wisconsin Milwaukee concluded that the 59% drop in the wholesale price of corn between 1990 and 2005 reduced the income of rural households in prime corn-growing municipalities by 19%.

Direct data on illegal drug production doesn’t exist. But according to the authors, the drop in corn prices led to an 8% increase in marijuana eradication and a 5% jump in opium poppy eradication in prime corn-growing areas, alongside a 16.4% increase in raw marijuana seizures and an 80% increase in the presence of drug trafficking cartels.

There is a vintage feel to these events, reminiscent of the good old days when illegal drugs didn’t kill at the first try. Yet this long ago chain of circumstances highlights the variety and complexity of the forces that shape the narcotics economy to this day, when Americans’ predilections have turned to methamphetamine and fentanyl.

Nafta’s impact on Mexican corn is hardly the only stimulant of Mexico’s emergence as a  drug-exporting powerhouse. The so-called “China Shock” that pummeled US manufacturing workers over the last quarter century or so also edged Mexican manufacturers out of the US market — encouraging Mexican workers into alternative, sometimes illicit occupations.

Economists Melissa Dell, Benjamin Feigenberg and Kensuke Teshima found that Mexican municipalities whose workers were exposed to growing competition with Chinese products in the US market between 2007 and 2010 experienced significant increases in drug-related homicides, especially if a large drug cartel was present in the area. Municipalities with cartels also experienced significant increases in cocaine seizures.

“We hypothesize,” they wrote, “that when changes in local labor market conditions make it more lucrative to transport drugs through a location by lowering the opportunity cost of criminal employment, drug trafficking organizations fight to gain control.”

The ecosystem of illicit narcotics in North America has reached another inflection point. These days it looks very little like it did in the era of “Narcos Mexico.”  The illegal marijuana trade is no longer a thing, following the legalization of weed across much of the US.

From 2009 to 2020, border seizures of marijuana fell from nearly 1,500 metric tons to around 230 tons. Between 2015 and 2020 the wholesale price of Mexican marijuana in the US dropped from about $10,000 to about $2,000 per kilo. In 2020, the Drug Enforcement Administration reported that “Mexican marijuana has largely been supplanted by domestic-produced marijuana.”

Observers report farmers in Mexico have been switching away from the crop in large numbers. Some are trying their chances in the emerging legal markets for cannabis products in Mexico. Others are leaving farming altogether and moving to cities. But most seem to be trying their luck with other cash crops, like tomatoes and chillies.

Meantime drug trafficking organizations have been moving out of marijuana and on to more lucrative and harmful synthetic drugs like methamphetamine and fentanyl. While the growth in fentanyl — ingested in many forms, often surreptitiously mixed into other drugs — is hard to estimate, the RAND corporation calculated that Americans spent about $27 billion in methamphetamine in 2016, up from $15 billion five years earlier.

It’s not clear where this will lead. But the shift to synthetics is reverberating south of the border. Rising use of meth in the US may be pinching demand for cocaine, for which it is often a subsitute. RAND’s best estimate suggests Americans spent only $24 billion on cocaine in 2016, down from $29 billion in 2011 and $58 billion in 2006.

Shifts in US consumption and policy are reorganizing the entire narcotics supply chain.  The Mexican economist Fernanda Sobrino, for instance, figured out that the 2010 reformulation of OxyContin, which made it harder to crush and dissolve the pills to release the active agent oxycodone, encouraged users in the US to shift to heroin, the illegal substitute. Heroin prices in the US increased and, surprise, heroin production in Mexico rose too.

The percentage of heroin of Mexican origin seized by the DEA increased from less than 5% in 2003 to around 90% by 2015. And, of course, violence spiked in Mexican municipalities suited to grow opium poppies as cartels moved in to take advantage of the market opportunity.

Now the force of consumer demand is pushing in the opposite direction. Americans’ embrace of fentanyl has clobbered demand for Mexican heroin. One study estimated that many farmers in Mexico’s state of Guerrero have dropped opium poppy cultivation and left rural areas, after the price of raw opium fell to some $315-$415 dollars per kilo, from over $1,000 dollars in 2017.

Some of these changes offer strands of hope. Already, violence seems to be abating in the state of Sinaloa, a narco hotspot where drug traffickers would fight over control of cannabis and poppy plantations. Human rights abuses by Mexican security forces involved in marijuana eradication are also down.

“We used to live in fear of the Army. Their eradication campaigns were brutal, and they would attack anyone near marijuana or poppy plantations,” recalled one farmer who spoke to InSight Crime for a report on the decline of Mexico’s illegal marijuana industry. “Today, our relationship with them has improved considerably.”

As traffickers drop opium and marijuana to specialize in synthetic drugs like fentanyl, their symbiotic relationship with farmer communities in rural Mexico might weaken, opening opportunities to dislodge them.

The deflation of some drug markets may make it easier to offer economic alternatives to farmers and the low-skilled men who dominate the cartels’ lower ranks — be it in the form of subsidies for alternative crops, urban employment programs or new legal avenues like, say, growing opium for the pharmaceutical industry.

Who knows how effective these efforts might be, especially as drug cartels branch out into other businesses, including human trafficking and legal crops like avocados. García Ponce notes that these sorts of interventions must be done when the drug industry is just starting. “Once criminal organizations become established it’s impossible to get them out,” he said.

What the evolution of the narcotics economy makes clear is that sending a drone with a missile across the border to blast the bad guys does nothing to alter the economic dynamics that have been driving the drug trade for half a century.

It bears remembering that the first battles of the War On Drugs were over marijuana, starting with President Richard Nixon’s order to shut down the Mexican border to dent the flow of weed in 1969. That didn’t work either. Funny how history repeats itself.

• Fentanyl and Politics Are Toxic 2024 Mix for US and Mexico: Eduardo Porter

• America’s Export of Gun Violence Is a Bipartisan Outrage: Michael R. Bloomberg

• Mexico’s Democracy Is Crumbling Under AMLO: Shannon O’Neil

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(Corrects affiliation of Omar García Ponce in third paragraph.)

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Eduardo Porter is a Bloomberg Opinion columnist covering Latin America, US economic policy and immigration. He is the author of “American Poison: How Racial Hostility Destroyed Our Promise” and “The Price of Everything: Finding Method in the Madness of What Things Cost.”

More stories like this are available on <a href="https://www.bloomberg.com/opinion">bloomberg.com/opinion</a>

Eduardo Porter | Bloomberg

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