On the Record: JESUS REYES HEROLES

Attorney Gen. Janet Reno opened a can of worms recently when she announced
the arrest of Mexican bank officials and the seizure of $150 million in
laundered drug money after a 3-year sting called Operation Casablanca.
Mexican authorities, unaware of the operation, formally protested and
received an apology for the secrecy from President Clinton. But he did not
rule out similar future operations.

Mexico responded last week by demanding the U.S. turn over the customs
agents and informers responsible for Casablanca to face criminal charges
there.

Q: The Mexican government was criticized for responding slowly to the
announcement about Operation Casablanca. Why did it take two days to issue
an official protest?

A: It is necessary to distinguish various stages in the reaction to a
paradoxical situation given that both governments agree that combating the
money laundering is central to the struggle against drug trafficking. In
this sense, there have been a series of programs and investigations carried
out in a coordinated, binational manner.

Given this, it is inconceivable that this undercover operation was
implemented without the knowledge of our government. Our first reaction was
one of surprise and irritation because we had not been notified ahead of
time, and we started with the assumption that the operations had been
carried out in the United States.

Q: But is it not true that there was early evidence that the majority of
the operations was carried out in Mexican territory?

A: This information radically changed the situation. Then it became not an
issue of whether or not we believe it is important to combat money
laundering but one of trying to determine the implications that this
operation has on agreements concerning not only the fight against drug
trafficking but also, in broader terms, on bilateral relations.

I believe in these matters it is necessary to be prudent. It took hours for
the Mexican government to understand what was being announced. This is the
saddest part of the situation. The surprise could have been avoided by
working collaboratively as we do in many other cases of money laundering.
Nevertheless, the operation was carried out without our knowledge,
provoking a scandal with repercussions in other areas of bilateral
relations.

Q: Is President Clinton's apology adequate?

A: There has been an apology on behalf of President Clinton concerning that
he laments that events happened the way they did. I would think that the
U.S. response will continue. I believe that we have entered a complicated
moment because it is necessary to see the true nature and scope of the
operation that occurred in Mexico.

Q: Why didn't the U.S. consult with the Mexican government?

A: The question is not only why didn't the United States consult with
Mexico in its investigation but also why were so few people in the United
States aware of it? It is alleged that this is how undercover operations
work.

In any case, it appears to us that it was not done in the best spirit of
cooperation and does not reflect the nature of dialogue that we have in
many aspects of bilateral relations, including in the fight against drugs
and money laundering. This is what has been surprising to me in this
matter. This kind of operation was so unnecessary.

Q: Has the narcotics trade infiltrated the Mexican banking system?

A: It is necessary to evaluate the facts. It is estimated that more than
$200 billion are laundered internationally from the illegal sale of drugs
every year. The consumption of drugs in the United States is on the order
of $53 billion annually. Frankly it is ridiculous to talk about operations
that detected $120 million within these parameters. The people who were
arrested are managers of relatively minor bank branches in Jalisco, Baja
California and Sinaloa. They are individuals who are very low in the
Mexican banking hierarchy.

Q: Is this just the tip of the iceberg?

A: It is erroneous to use this evidence to deduce that the entire Mexican
banking system is a mechanism to launder money. One of the things that has
been the most surprising and irritating is the fact that this operation
reported no financial counterpart in the United States nor any other
country except for Venezuela. Not one U.S. citizen was implicated in this
operation.

Q: Should the United States conduct a similar operation in its territory?

A: If there is a follow-up to this investigation, it is naturally going to
land somewhere. Where is the $53 billion from illegal drug sales in the
United States laundered? The laundering is not done in the Mexican
financial system, but rather it begins in the U.S. financial system. The
facts indicate that Operation Casablanca has a much smaller scope. I am not
slighting the importance of the operation. It was good that there was
progress in this direction, but I believe that the facts demonstrate that
there was much less progress made than was promoted.

Q: Is the Mexican government going to demand a guarantee that similar
undercover operations will not be conducted within its borders?

A: As Secretary of Foreign Relations Rosario Green has pointed out, the
situation obligates Mexico to not only seek a precise explanation of the
facts about the operation but also implies a need to rethink the terms in
which bilateral cooperation can continue in the fight against illegal drug
trafficking and money laundering.

Q: Is there confidence on the part of U.S. business and financial sectors
in the Mexican banking system?

A: I would say there is even some sympathy in those sectors because of the
irritation Operation Casablanca provoked in Mexico.

On the other hand, our relationship with the U.S. is wide and complex. Now
we have a situation that must be solved, but it has nothing to do with
commerce, cultural exchanges and immigration issues.

Checked-by: (Joel W. Johnson)