cash

TIJUANA, Mexico — Every day, Mexican drug cartel accomplices in the U.S. shove proceeds from U.S. drug sales into their shoes, tape it to their torsos, stash it under dashboards — or just wire it electronically to Mexico. It all adds up to $25 billion a year they smuggle out of the U.S.

This compares with just $61 million seized in the past year — the $3 million blocked in banks through a highly touted U.S. Treasury Department program aimed at starving Mexican drug cartels, the Narcotics Kingpin Designation Act, and another $58 million seized by border inspectors.

The figures suggest that authorities are halting just 25 cents of every $100 in cartel profits — money that is fueling a brutal war that has killed 14,000 people in three years.

Bundles of $100 bills that add up to billions are sneaked from the U.S. into Mexico each year and then laundered into ostensibly legitimate funds at car dealerships, banks, pharmacies, restaurants and resorts.

That money pays Mexican farmers to grow more marijuana and Colombian smugglers to sneak in more cocaine. It bribes Mexican soldiers and U.S. Border Patrol agents, and pays assassins and mercenaries to take out rival smugglers or would-be prosecutors.

"This is the brilliance of the drug cartels. They pay ordinary people to get cash across the border for them, and then easily launder it into working capital to build and expand their violent and illicit operations," said Louise Shelley, who directs the Terrorism, Transnational Crime and Corruption Center at George Mason University just outside Washington, D.C.

8 major cartels in Mexico

There are eight major drug cartels operating in Mexico,and their methods of moving cash south are surprisingly similar, according to AP interviews with law enforcement agents and a review of court records on both sides of the border.

U.S. dealers are given drugs on credit and, under threat of kidnapping, attacks on their families or even death, they sell their inventory and pay the smugglers back within a week or two. The smugglers then pay someone in the U.S. to drive the cash to a "stash house" near the border, typically in Phoenix, San Diego, El Paso or Houston.

There, the cash is broken into increments of $50,000 to $300,000, lowering the risk of losing an entire load in one bust, and farmed out to trusted couriers.

They use the same methods people use smuggling drugs north: Money is hidden in the floorboards of buses and inside vehicle panels, tucked behind vehicle firewalls and inside spare tires, or stashed in custom-made compartments. Couriers wearing loose-fitting clothing tape stacks of $100 bills to their bodies.

If caught by Customs and Border Protection agents, the couriers often can forfeit the money and simply drive on; Mexican officials don't normally arrest people for failing to report money coming in. For the cartels, that risk is part of the cost of doing business.

"Cartels expect that we are going to take some of that money off," said Douglas Coleman, assistant special agent in charge of the Drug Enforcement Administration in Phoenix.

In 1969, officials stopped minting $500, $1,000, $5,000 and $10,000 bills, making smuggling harder. That leaves the $100 note as the highest denomination — a packet of 100 of those bills is less than a half-inch thick and contains $10,000. One billion dollars fits squarely atop a standard shipping pallet.

Money is also wired south

The other way to get money south is to wire it.

Since 1972, the United States has implemented a series of restrictions, including a requirement that financial institutions report deposits of $10,000 or more.

Still, authorities believe some drug smugglers use U.S. banks to move their money. In a typical scheme known as "smurfing," drug smugglers break large cash loads into less conspicuous increments, deposit them into numerous bank accounts in the U.S. and withdraw from those accounts at Mexican banks.

This approach, like other money-laundering methods, has drawbacks. Deposits can't be over $10,000, smugglers have to involve lots of people, or "smurfs," and the transactions create paper trails that can draw attention.

In another scheme, smugglers give legitimate bank account holders a small cut to use their accounts to deposit in the United States and withdraw in Mexico. Smugglers also are starting to ship cash through the postal service and shipping companies, allowing them to track it from start to finish.

It's 10% of Mexico economy

Once the money gets to Mexico, the cartels put it to work. About 10 percent of Mexico's economy — the world's 13th-largest — is based on cartel operations, analysts say.

Mexican lawmakers have refused to pass anti-laundering laws such as reporting requirements when people pay cash for mansions and luxury cars or regulations for salaries paid in cash.

"In Mexico there are still some very easy ways to launder money, and there is great reluctance among lawmakers to change that," said Ramon Garcia Gibson, an expert on financial controls. "It's everywhere: Businesses that aren't doing any business except to receive cartel cash and put it in the bank."

carnage

Mexico's brutal drug war has played out all across the country. But no place has been as hard hit as Ciudad Juarez, the industrial city just across the Rio Grande from El Paso, Texas.

Juarez is a city torn apart by more than just murder. It is a city struggling unsuccessfully to find hope in a place flooded with heavily armed security forces, but where most people say they don't feel secure.

The wave of killings that has grown steadily over the last two years has spawned a secondary crime wave of kidnapping and extortion. The violence has left the city in a state of shock.

In downtown Juarez, Diana Martinez placed a small black cross with the name of her brother on a memorial banner to the thousands of people killed since 2007.

"I think we are now living in a state of paranoia," Martinez says. "All of the inhabitants of Ciudad Juarez, even the children. It's something that's completely upturned our lives. I don't feel secure in the street or even in my house."

Her brother, Rafael, sold used cars. He was gunned down in May in what Martinez believes was a robbery.

"He was a very young man — 24 years old," she says. "He leaves behind a family and three kids. It's a tragedy just like the thousands and thousands of tragedies that are repeating here every day in Juarez."

His twins, who are turning 6 this year, still don't really understand that their father is dead, she says. Even when they go to his grave they seem to think he is away on a business trip.

Unfulfilled Promises

Officials had promised things would get better in Juarez this year. Throughout 2008, two of Mexico's most powerful drug cartels fought for control of smuggling routes into El Paso.

In 2009, the Mexican military took over the Juarez police department. President Felipe Calderon sent in thousands of federal police and soldiers to regain control of the city of 1.5 million people. But the violence has only gotten worse.

Almost 2,600 people have been killed in Juarez this year, making it the murder capital of the hemisphere and giving it a per capita homicide rate more than 17 times greater than that of Los Angeles.

"The last two years have been just unbelievable — the level of violence we are living each day. The level of violence is just incredible," says Nelson Armenta, who runs a small seafood restaurant in downtown Juarez.

After Armenta was held up twice in one month, he hired a security guard to twirl a baton in front of his restaurant.

"These young guys, you know, 17 years old carrying guns. That got us worried. That's why we got the security guard," Armenta says.

Mexican soldiers with automatic weapons also patrol in front of his restaurant. Truckloads of federal police with machine guns mounted on their pickups roll through the streets, but the violence has been increasing.

Every day, Armenta reads in the paper about businesses getting shot up or burned down for not paying bribes demanded of them.

"As a businessman, I used to be afraid. I used to be afraid that something might happen to our families — kidnap, ransoms, extortions," he says. "And we just realized that we cannot be afraid of that. I mean, it's not about religion, but it's about faith. It's about, if that happens, well the least we can do is just move on."

City Of Dreams

To Americans Juarez may look like the ugly, dusty, beat-up stepsister of El Paso. But to poor Mexicans, it's a land of promise.

For decades people have flocked to the low-paying but plentiful jobs in the border factories called maquiladoras. Each day a long-line of job seekers extends outside the state attorney general's office as people apply to undergo mandatory criminal background checks for employment.

Other enterprising souls are hawking burritos, tacos and cold drinks to the people stranded in line.

Yet at the same time that the city's murder rate has skyrocketed, so has unemployment.

Jorge Podrosa, executive director of local association of maquiladoras, says the global economic downturn hit the Juarez factories incredibly hard.

"Since 2008 to 2009, we lost around 125,000 jobs," Podrosa says. That represents an almost 50-percent decline in factory jobs, the city's main source of legal employment.

Tourism is also down, a result of tighter border controls and the bad publicity generated by the deadly drug war. The U.S. military has ordered its personnel not to enter Juarez without special permission. Despite the restriction, a U.S. airman was gunned down along with five other people in a Juarez strip club in November.

The city is trying to confront the situation. The mayor has doubled the size of the local police force. He also has opened subsidized day care centers for the children of factory workers.

'A Trash Can'

But Clara Rojas, who teaches political rhetoric at the Autonomous University of Ciudad Juarez, predicts it will take decades for the city to recover.

The violence stems from deep social fissures, she says, and until those are fixed she predicts the killings will continue.

She traces the roots of the current violence to the murders of hundreds of women in the 1990s that are still unsolved. Most of the victims were young women, many of them factory workers or students, murdered and in some cases tortured and sexually abused.

Rojas says that impunity for that wave of killings sent a signal to the drug cartels and other thugs that Juarez is "fertile ground" for criminal activity.

"There is no way you can change anything if everybody thinks this city is a trash can for whatever they want to do," Rojas says.ca