US POT GROWERS CUT INTO MEXICAN TRAFFICKERS' PROFITS

ARCATA - Stiff competition from thousands of mom-and-pop marijuana
farmers in the United States threatens the bottom line for powerful
Mexican drug organizations in a way that decades of arrests and
seizures have not, according to law enforcement officials and pot
growers in the United States and Mexico.

Illicit pot production in the United States has increased steadily for
decades. But recent changes in state laws that allow the use and
cultivation of marijuana for medical purposes are giving U.S. growers
a competitive advantage, challenging the traditional dominance of
Mexican traffickers, who once made brands such as Acapulco Gold the
standard for quality.

Almost all of the marijuana consumed in the multibillion-dollar U.S.
market once came from Mexico or Colombia. Now as much as half is
produced domestically, often by small-scale operators who
painstakingly tend greenhouses and indoor gardens to produce the more
potent, and expensive, product that consumers now demand, according to
authorities and marijuana dealers on both sides of the border.

The shifting economics of the marijuana trade have broad implications
for Mexico's war against the drug cartels, suggesting that market
forces, as much as law enforcement, can extract a heavy price from
criminal organizations that have used the spectacular profits
generated by pot sales to fuel the violence and corruption that plague
the Mexican state.

While the trafficking of cocaine, heroin and methamphetamine is the
main focus of U.S. law enforcement, marijuana has long provided most
of the revenue for Mexican drug cartels. More than 60 percent of the
cartels' revenue - $8.6 billion out of $13.8 billion in 2006 - came
from U.S. marijuana sales, according to the White House Office of
National Drug Control Policy.

Now, to stay competitive, Mexican traffickers are changing their
business model to improve their product and streamline delivery.
Well-organized Mexican cartels also have moved to increasingly
cultivate marijuana on public lands in the United States, according to
the National Drug Intelligence Center and local authorities. This
strategy gives the Mexicans direct access to U.S. markets, avoids the
risk of seizure at the border and reduces transportation costs.

Unlike cocaine, which the traffickers must buy and transport from
South America, driving up costs, marijuana has been especially
lucrative for the cartels because they control the business all the
way from clandestine fields in the Mexican mountains to the wholesale
dealers in U.S. cities such as Washington.

"It's pure profit," said Jorge Chabat, an expert on the drug trade at
the Center for Research and Teaching in Economics in Mexico City.

The exact dimensions of the U.S. marijuana market are unknown. The
2007 National Survey on Drug Use and Health estimated that 14.4
million Americans ages 12 and older had used marijuana in the past
month. More than 10 percent of the U.S. population reported smoking
pot once in the past year.

Mexico produced 35 million pounds of marijuana last year, according to
government estimates. On a hidden hilltop field in Mexico's Sinaloa
state, reachable by donkey, a pound of pot might earn a farmer $25.
The wholesale price for the same pound in Phoenix is $550, and so the
Mexican cartels could be selling $20 billion worth of marijuana in the
U.S. market each year.

"Marijuana created the drug trafficking organizations you see today.
The founding families of the cartels got their start with pot. And
marijuana remains a highly profitable business they will fight to
protect," said Luis Astorga, a leading authority on the drug cartels
at the National Autonomous University of Mexico, who grew up in
Sinaloa in 1960s and recalls seeing major growers at social functions
in the state capital, Culiacan.

Led by California, 13 U.S. states now permit some use of marijuana. In
many cities, marijuana is one of the lowest priorities for police.

To some authorities, the new laws are essentially licenses to grow
money. With a $100 investment in enriched soil and nutrients, almost
anyone can cultivate a plant that will produce 2 pounds of marijuana
that can sell for $9,000 in hundreds of medical marijuana clubs or on
the street, according to growers.

High-end marijuana grown under such special conditions often fetches
10 times the price of poor-quality Mexican pot grown in abandoned
cornfields and stored for months in damp conditions that erode its
quality further.

"What's happened in the last five years, it's just gotten totally,
totally out of hand, as far as a green rush of people coming from all
kinds of different states and realizing the kind of money you can
make," Jack Nelsen, commander of the Humboldt County Drug Task Force
in Northern California. County residents who have a doctor's
recommendation can legally grow as many as 99 plants.

Authorities found and destroyed about 8 million marijuana plants in
the United States last year, compared with about 3 million plants in
2004. Asked to estimate how much of the overall marijuana crop was
being caught in his area, Wayne Hanson, who heads the marijuana unit
of the Humboldt County Sheriff's Office, said: "I would truthfully say
we're lucky if we're getting 1 percent."