Along the Arizona-Mexico Border

Donald Trump, one of the leading contenders for the Republican presidential nomination, has suggested building a huge wall along the almost 2,000 mile U.S. border with Mexico to control illegal immigration and drug smuggling. Most serious analysts believe the wall project with its $6 billion price tag would be mostly ineffectual. During his strident commentary on border problems, Mr. Trump neglected to mention that the immigration reform bill passed by the U.S. Senate (S.744) in June 2013 contained many of the provisions for improving border security recommended by conservatives. In the spirit of continuing Washington’s political gridlock, the House of Representatives has studiously ignored the Senate bill.

As a savvy businessman, Mr. Trump should know better. A bit of economic development assistance aimed at boosting Mexico’s flagging private sector would be a better option than building a wall. Although Mexico’s economic growth rate is in the 2.5 percent range and reforms are slowly being implemented, the country continues to suffer from corruption, arbitrary law enforcement, a lack of worker training, inefficient small firms that can’t grow and peasant farmers stuck on small plots of land. As a consequence, about half of the country’s population of 120 million remains in poverty.

Arizona’s exporting enterprises appear to be doing well. The state’s exports totaled $21.2 billion in 2014, the largest destinations were Mexico, Canada, the United Kingdom and Germany. Arizona’s exporters shipped $8.6 billion in merchandise exports to Mexico in 2014. For the first half of 2015, the value of shipments stood at $4.75 billion. If the trend holds, Arizona’s shipments to Mexico will reach $9.5 billion this year.

The United States is afflicted with a drug problem. It is estimated that illegal drug users in the United States spend between $100 billion to $400 billion a year on cocaine, heroin, marijuana, and methamphetamine (meth). The U.S. is home roughly 24 million one-time, occasional and addicted drug users, slightly over 9 percent of the population.

The drug consumption patterns are changing, heroin use has now surpassed that of cocaine and meth. The government crackdown on opioid pain killer abuse helped fuel the switch to heroin. As pills became harder to obtain, pill addicts turned to heroin. The Mexican cartels spotted the opportunity and began producing high quality heroin powder. It is a standardized product, easier to smuggle because it takes up less room.

To supply America’s demand, the drug cartels based in Mexico supervise a complex supply chain extending from the farm to the user. They oversee the growing and production of the high-quality heroin power that appeals to American drug users. They have expanded their distribution system, it now includes many smaller cities. The financial rewards continue to be enormous. It costs about $5,000 to produce the kilo of heroin in Mexico that sells for $80,000 to suppliers in the U.S. A street dealer can make up to $300,000 by selling a kilo of diluted heroin to addicts in one-tenth gram caps.

Since the business is illegal, the drug cartels fight each other for control of market access routes, they don’t sue in court. They are also engaged in a continual struggle with Mexican law enforcement units. Since 2006, the death toll in Mexico from drug related violence has climbed to over 110,000. The ferocious fighting has hindered economic development and has had a corrosive effect on Mexican society. As long as the outsized demand exists, the drug traffickers will continue to service the highly profitable American market.