UC San Diego

Scholars have long argued that organized crime expanding outside their historical strongholds is extremely difficult and rare since these groups rely on local networks and are unable to operate without some degree of state protection, which they often lack outside their historical strongholds. Yet, Latin America is currently experiencing significant criminal expansion. Why do criminal organizations expand beyond their historical strongholds and what explains where they go? Moreover, what are the consequences of criminal organizations entering new political jurisdictions for local democratic accountability and citizen well-being? Looking at specialized drug cartels, I argue that government interventions in the drug market can create incentives for drug cartels to diversify their activities and expand to territories outside of their strongholds in search of new lucrative business opportunities. To protect their new activities in political jurisdictions they expand to, cartels seek to obtain state protection by capturing local state actors. This allows them to operate with impunity and worsen citizen well-being. I turn to Mexico to test my theory, and first provide evidence that Mexico's War on Drugs of 2007 pushed specialized drug cartels to diversify their activities, and particularly, that all cartels began stealing oil from pipelines. To analyze patterns of expansion, I use a novel dataset on the geographic presence of cartels in Mexico and leverage a temporal shock (War on Drugs) and geography (location of new business opportunities). I show that the crackdown pushed cartels to strategically expand to territories with oil pipelines, and that cartels entering new territories reduced electoral competition and increased violence and crime. Finally, I illustrate state capture through qualitative case studies of municipalities that saw cartel intrusion following the government crackdown.