Mexico Under Siege

CULIACAN, MEXICO, FEELS THE PAIN OF A DRUG-INDUCED RECESSION

The Mexican Government's Crackdown on Drug Traffickers Has Sent the
Big Players Underground, Along With All Their Free-Flowing Dollars.

A ruby-red Hummer glistened idly on the quiet showroom floor, its only
visitor a janitor polishing its doors and bumpers. The dealership had
no customers.

Sales are down here and at scores of businesses across this western
Mexico city. But this recession has nothing to do with stock-index
dives on Wall Street, the weak peso or collapsing banks. This is a
narco-recession.

When army troops rolled into Culiacan this year as part of a massive
government campaign to fight drug traffickers, the big players went
underground. From the looks of things, they took their free-flowing
dollars with them.

"No one wants to be ostentatious right now," said Raul Gustavo Pina
Ibarra, manager of the Hummer and Cadillac dealership.

That's bad news for a city that is the birthplace of Mexico's
multibillion-dollar illegal drug trade and the embodiment of its every
excess.

The hardest-hit enterprises in this recession are the purveyors of the
typical narco's favorite toys and pursuits: Flight schools. Yacht and
luxury-car dealerships. Dollar-changers. Love-in-the-afternoon motels.
Even the Jesus Malverde temple.

A mustachioed Robin Hood figure in Mexican folklore, Malverde is
considered the patron saint of the thousands of people who dedicate
themselves to smuggling and merchandising cocaine, marijuana and
methamphetamine.

In boom times, admirers and believers swarm the shrine erected here in
Malverde's honor. They paper the building's walls with photographs of
themselves (sometimes with their guns, multiple cellphones and
snakeskin cowboy boots showing) in an effort to seek his blessing.
They hang plaques praying the saint will protect them on their
"journey" from Culiacan to San Diego or Chicago -- their smuggling
routes.

The temple was deserted during a recent visit save for Dona Tere, a
caretaker, and a couple of forlorn souvenir salesmen who hawk candles,
Malverde key chains and painted busts in all sizes of the not quite
Vatican-approved saint.

Dona Tere, bobbing relentlessly in a rocking chair, said business and
visitors had dropped by about half over the last few months. "It's way
down here, like everywhere around here these days," she said.

Across town, hard times have hit the itinerant money-changers in the
city's historic district, where rows of stores cater to low-level
traffickers who come down from the mountains to stock up on groceries,
clothing, tools and generators.

"We can't stand the guachos," said a fat man with a fatter gold watch,
using a slang term for the soldiers. His eyes darted back and forth on
Benito Juarez Street in search of a potential customer: a car that
might slow, its passengers with dollars to sell. There were none.

"At least the narcos gave us work," he said.

Considering it's the capital of a state, Sinaloa, whose main legal
source of income is the tomato, Culiacan, has an awful lot of
mansions, casinos, sushi restaurants and spas. That's because as much
as 20% of Sinaloa's gross domestic product is based on drug
trafficking and the chain of production, transport and intelligence
involved, according to Guillermo Ibarra, an economist and professor at
the Autonomous University of Sinaloa.

The government's offensive against traffickers has had mixed results.
Violence has soared in many parts of the country. In places like
Sinaloa, the gains seem temporary. Authorities confiscate a fleet of
planes belonging to drug runners, and days later gunmen steal them
back.

For now, at least, Sinaloa's drug lords are having more trouble
converting their cash into big-ticket items such as houses and
resorts, or depositing it in banks. Instead, they move the money to
other countries. Or they simply hide it in safe houses, hoping they
can outlast the pressure and launder it later; a recent spike in the
number of multimillion-dollar caches found during army and police
raids seems to support this assessment.

"Narcos are beginning to hide their money in mattresses like little
grannies," Ibarra said.

At the opposite end of the economy, Ibarra said, an estimated 50,000
Sinaloa families keep their heads above water thanks to handouts or
work linked to the drug trade, or through remittances sent from
relatives living in the U.S. The narco-recession, combined with a drop
in remittances because of hard times up north, now threatens to plunge
those families into poverty, Ibarra said.

Discounts and enticements such as free drinks are now being offered at
scores of motels that dot the highways leading in and out of Culiacan.
The motels are the venues for trysts between drug traffickers and
their mistresses, but business there is also in decline.

Some of these establishments are elaborate, with turrets and high
walls and names that evoke Far Eastern pleasure palaces. They were
briefly shut down by the army when it first arrived, over suspicions
that they were involved in money-laundering schemes.

At the Paris Motel, whose roof sprouts a replica of the Eiffel Tower,
the attendant in charge said army patrols had made it uncomfortable
for customers. "This is about privacy," he noted.

The motel's white-stucco front gates were adorned with a big black bow
in memory of the owner, who was shot to death by gunmen this month in
what authorities said was a battle between rival drug gangs.

Jose Luis Aispuro Calderon, 38, president of the Culiacan Chamber of
Commerce, said Sinaloa began feeling the effects of its recession long
before other parts of the world. Army pressure has created a climate
of uncertainty that makes people fear for their jobs. Among the
wealthy, it has dampened enthusiasm for home purchases, which in turn
triggers a slowdown in construction.

Even worse, said Aispuro, the big drug traffickers have left the
lower-echelon operators in Culiacan with no source of income.

Aispuro, who runs a family paint business, believes that has led to a
surge in crime, including armed robberies of banks and stores. One
pharmacy chain reported 20 assaults in a recent month.

"What worries us now," Aispuro said, "is what comes next."