Did the Mexican Government Invest in the Gangster El Chapo?

It's rumored that the Mexican government invested $5m to break the world's most powerful drug lord out of prison. But was it worth it?


September 18, 2015

Big Risk, Big Reward: Why Investing $5M in El Chapo Will Backfire for the Mexican Government

Mexico’s most notorious drug lord and two-time jail escapee, Joaquin “El Chapo” Guzman, is a famous gangster who’s been evading police for years.

But anonymous “insiders” suggest that the Mexican government actually treated El Chapo as an investment and sprung him from jail in hopes he could use his authority and old-school mob ethics to calm the raging drug wars and annihilate other gangs.

The question is, “Was it a good investment?”

But first, who’s El Chapo?

El Chapo, who escaped from Mexico’s maximum-security Altiplano Prison in July through a mile-long underground tunnel, is arguably the most notorious drug-lord of our generation.

Some say he has even surpassed the reach and influence of notorious Colombian drug lord Pablo Escobar. After the death of Osama bin Laden, El Chapo topped the list of most wanted fugitives in the world. His brazen and sophisticated escape sent shockwaves through Mexico and across the border to the United States.

And for good reason — as the head of the Sinaloa cartel, El Chapo is the number one supplier of illegal drugs to the U.S.

Escobar and Guzman

Did the Mexican government really help a drug lord escape prison?

The conspiracy theories go like this: the government supplied El Chapo’s lackeys with $5 million to construct his escape tunnel. The mile-long tunnel was equipped with ventilation and a motorcycle on a railroad track and perfectly constructed to fit El Chapo’s petite frame.

Others claim the tunnel was a hoax and that he simply walked out the front door of the prison. Seven prison guards are already behind bars as a result.

I wouldn’t be that surprised if the rumors are true.

All investments are a gamble — and this is not the first example of governments investing in violence and drugs. In the Iran Contras scandal, President Reagan’s administration sold arms to Iran to fund Nicaraguan anti-government groups. It’s also not the first time a government has looked to “alternative” resources to take down their enemies–like the U.S. training and supporting Osama Bin Laden to fight the Soviets during the Cold War.

I don’t know if the conspiracy theorists are right. But it isn’t that far-fetched. In the world of politics, the status quo is that you get done what needs to get done, and worry about the consequences later.

And if you consider a $5 million investment by Silicon Valley standards… that kind of money gets thrown around every day.

The value in risky investment lies in the potential for huge payouts. That’s the whole point. But, when I assess this decision solely as a high-risk investment, and not a political power play, I think the Mexican government picked a lame horse.

Allow me to explain in startup language

El Chapo’s original innovation is now an industry standard

When the Sinaloa cartel was in its infancy, El Chapo’s infatuation with levers and hidden escape tunnels led to the development of an entire network of underground passages, which propelled his massive success as a drug-lord.

At the time this was groundbreaking — literally and figuratively. While he didn’t actually invent the escape tunnel, El Chapo was behind the first drug tunnel, or narcotúnel, to traverse the US-Mexico border.

However, drug tunnels are now the status quo–they’re unearthed at an alarmingly rapid frequency. With over 150 tunnels discovered between 1990 and 2012, it would be like a startup pitching in-app messaging as its standout functionality. It ain’t gonna fly.

Invest in what something is, not what you want it to be

Despite a third-grade education, a fascination with physics, random Twitter tirades, and an obsession with beauty queens, El Chapo falls squarely into what is defined as an OG — or for anyone who didn’t listen to rap between 1990 and 2006, an “Original Gangsta.”

This requires him to live by unwritten rules that dictate his actions. He avoids wanton acts of violence, but demonstrates his power with brutal efficiency as necessary. He is driven by money, but not so much so as to make him reckless and jeopardize the integrity and future of his organization.

For many people in the Sinaloa state, El Chapo is viewed more as an “outlaw folk hero than a public enemy.” He was known to take over entire restaurants so he could eat in peace, then pay for meals of everyone he “inconvenienced.” There are even rumors that say he helps the residents of his home village of Badiraguato in small ways, like sending money or offering protection.

A rival organization, La Nueva Generación de Jalisco, on the other hand, does not respect this same code, and the cartel’s killing sprees are not limited to warring gangs and frequently target the military or civilians. Like many criminal organizations, La Generacion operates as if it is above the law. But it also blatantly disregards the OG code that cartels used to abide by.

Supposedly, this is the exact reason that the Mexican government has decided to put its eggs in El Chapo’s basket.

If they did spring him from jail, it’s because they believe he’ll rally his troops and go to war with La Nueva Generación. The government may see him as the lesser of two evils, but based on his previous behavior, why are they convinced he would consider it, even with the $5 million and offers of future immunity? Considering he amassed a net worth of $1B without government support, that seems unlikely.

La Nueva Generación
The payout

If the Mexican government is right, and El Chapo deviates from his previous ways of operating by going to war with La Nueva Generación de Jalisco, the best-case scenario is that he vanquishes the opposing cartel, but his organization is weakened in the process.

The government can then step in, have a stronger handle on the US-Mexico drug trade, and potentially bring it to a halt. Well, since they invested in El Chapo, maybe not a halt, but a serious deceleration.

There is no guarantee and probably no chance that El Chapo will go to war. More likely, he will say, “Gracias por la ayuda, pero ahora chingate!” or in English, “Thanks for the help, go fuck yourselves.”

Chapo is a prudent businessman, and will likely realize that going to war could mean the downfall of his cartel and avoid it altogether. He’ll maintain his turf and Nueva Generacion will maintains theirs, firmly continuing the status quo in Mexico two massive, murderous, and powerful gangs standing up to the government.

Only time will tell what happens next, but I think the $5M would have been put to better use as a bonfire to roast marshmallows than to assist in the escape of the most powerful gangster of our generation.

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