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International Narcotics Control Strategy Report, 1998
Released by the Bureau for International Narcotics and Law Enforcement Affairs,
U.S.Department of State 
Washington, DC, February 1999

MEXICO

I. Summary

Taking full advantage of the approximately 2,000-kilometer border
between Mexico and the United States and the massive flow of legitimate
trade and traffic, well-entrenched polydrug-trafficking organizations
based in Mexico have built vast criminal empires that produce illicit
drugs, smuggle hundreds of tons of South American cocaine, and operate
drug distribution networks across the continental United States. Mexico
is the primary transit route for South American cocaine, a major source
of marijuana and heroin, as well as a major supplier of methamphetamine
to the illicit drug market in the U.S. Given the absence of adequate
controls, Mexico has become a major money laundering center and a
significant international placement point for U.S. dollars. Drug cartels
launder the proceeds of crime in legitimate businesses in both the U.S.
and Mexico, favoring transportation and other industries which can be
used to facilitate drug, cash and arms smuggling or to further money
laundering activities.

The Government of Mexico (GOM) continued to implement a comprehensive
anti-drug strategy, encompassing efforts to attack the drug trafficking
organizations, combat money laundering and chemical diversion, eradicate
drug crops, interdict drug shipments, and increase public awareness. The
GOM intensified its investigations of major narcotrafficking
organizations, particularly the Juarez Cartel, the Tijuana Cartel, the
Gulf Cartel, and the Caro Quintero Organization. The GOM arrested two
major methamphetamine traffickers and founders of the Amezcua
Organization (Colima Cartel), Jesus and Luis Amezcua Contreras. Mexican
charges were subsequently dropped but the Amezcuas are still being held
on U.S. provisional arrest warrants. Drug-related arrests and seizures
of heroin and marijuana paralleled 1997 figures, but cocaine seizures
were down 35 percent. Although overall eradication results also matched
figures from the previous year, total opium cultivation increased by
approximately 25 percent due to an increase in illicit cultivation.
Mexican Attorney General Jorge Madrazo Cuellar continued his efforts to
attack corruption within the criminal justice system. Persistent
corruption at all levels of the justice sector and frequent changes in
personnel have combined to hinder Mexico's ability to meet the goals of
its anti-drug strategy.

During 1998, the U.S. -- Mexico High-Level Contact Group (HLCG) on
narcotics control explored joint solutions to the shared drug threat,
discussed the full range of narcotics issues, promoted closer law
enforcement cooperation, and drafted performance measures of
effectiveness or gauging implementation of the U.S.-Mexico Bi-National
Drug Strategy. The GOM extradited 12 fugitives to the U.S., including
three Mexican nationals, one of whom was a narcotics trafficker sought
for the murder of a U.S. Border Patrol agent.

II. Status of Country

Mexico, a key country for U.S. drug control policy, is a significant
supplier of heroin and marijuana entering the U.S. market. The country
also sits astride the main transshipment routes for cocaine being
smuggled into the United States from source countries in South America.
An extremely porous and lightly guarded 760-mile southern frontier with
Belize and Guatemala, as well as 5,804 miles of coastline with
innumerable clandestine landing spots, help make Mexico a primary
trafficking route. Chronic problems of severe poverty, especially in
rural areas, budget constraints and weak police and criminal justice
institutions hamper Mexico's ability to combat drug trafficking
effectively. The GOM still lacks the institutional capability to
implement fully the strong anti-drug legislation passed by the Mexican
congress in 1997.

Mexico is fully aware of the threat posed to its security and democratic
institutions by drug traffickers operating throughout its national
territory. President Zedillo has identified narcotics trafficking as
Mexico's primary national security concern. Major transborder drug
trafficking organizations based in Mexico generate violence, corruption,
and other crimes in both countries. The GOM is responding by
intensifying law enforcement actions against major drug cartels,
strengthening its laws, and enhancing its cooperation with the U.S. and
other countries to fight international narcotics trafficking.

Mexican criminal organizations have become the most significant
distributors in the U.S. of methamphetamine and its precursor chemicals.
The GOM moved to strengthen its controls on the diversion of precursor
and essential chemicals. Mexico is also a significant producer of some
"designer" drugs, illicit steroids, and pharmaceuticals, such
as Valium and Rohypnol, which are smuggled into the United States and
subject to abuse.

Drug abuse in Mexico is low compared with most countries in the Western
Hemisphere, but the GOM is concerned about indications that it is
increasing along its border with the U.S., in large metropolitan cities
with a university population, and in heavily traveled narco-transit
tourist areas. Abuse of inhalants among street children and other
vulnerable population groups is prevalent in Mexico's large cities.
Public and private sector programs aimed at increasing public awareness
of drug and substance abuse are being established throughout the
country. The GOM conducted a national drug use survey in 1998, which
will provide a sharper picture of increases in drug consumption since
the previous survey in 1993. Bilateral cooperation with the U.S. in
demand reduction oriented matters, including epidemiological studies is
excellent. Mexico also continues to participate actively in regional
efforts in this area through the OAS.

Mexico is a major money-laundering center. Increasingly effective U.S.
anti-money laundering measures are forcing money launderers to turn
towards Mexico for initial placement of drug proceeds into the global
financial system. Measures enacted by Mexico in 1996 and 1997 have
provided the means for more effective control of money laundering. Court
decisions, however, have made convictions difficult as judges have ruled
that a prior conviction on illegal enrichment or other underlying
offenses is necessary to convict on money laundering. The GOM has
submitted legislation to the Mexican Congress to strengthen asset
forfeiture regulations and allow Mexico to cooperate with other
countries as well as participate more actively in international asset
sharing.

III. Country Actions Against Drugs

Policy Initiatives. Mexico's national anti-drug strategy encompasses the
full range of actions called for in the 1988 UN Drug Convention and
highlights the importance of international cooperation, particularly
with neighboring states. As a follow up to the May 1997
"Declaration of the U.S.-Mexico Alliance Against Drugs" and
the "U.S.-Mexico Bi-National Drug Threat Assessment," the two
nations released the "U.S.-Mexico Bi-National Drug Strategy"
in February 1998. Since then, working groups have drafted, and adopted
in February 1999, performance measures of effectiveness to enhance
implementation of the Strategy and permit the governments to evaluate
progress toward its goals. In November, the GOM applied to the Caribbean
Financial Action Task Force (CFATF) as a cooperating and supporting
nation; if followed through, this indicates its interest in becoming
more active in international money laundering fora.

Prompted by further revelations of official corruption, including within
dedicated, elite counternarcotics units, the GOM intensified its efforts
to purge its counternarcotics entities of corruption and strengthen
their ability to combat narcotics trafficking and related criminal
activities. The Office of the Attorney General's (PGR) Confidence
Control Center, established in 1997, has screened more than 1,200
current and prospective members of the Office of the Special Prosecutor
for Crimes Against Health (FEADS) and the Organized Crime Unit (OCU).
This screening has led to the dismissal or reassignment of many members
of these units and underscores the need for periodic re-screening and
following up with swift remedial action.

In December 1997 and January 1998, the Zedillo Administration submitted
to the Mexican Congress several ambitious legislative proposals to:

Change the labor law so that corrupt police and military can be fired
for cause without possibility of reinstatement; Regulate seized property
to allow forfeited assets to be used in law enforcement activities and
to be shared with other cooperating countries; Amend the criminal code,
the code of criminal procedure, and the law protecting constitutional
guarantees ("amparo") to ensure that the accused are tried and
sentenced without escape on legal technicalities and that punishments
are in proportion to the nature of the crime; and


Modernize the code of criminal procedure by reducing the imbalance
between the rights of accused criminals who can afford the best legal
counsel and the ability of prosecutors and the judiciary to act against
them; Reform the federal firearms and explosives law; Require
enterprises manufacturing or selling motor vehicles to ensure the
vehicles have been properly registered.


The Mexican Senate has passed some of these proposed laws, but none have
become final.

The GOM played a major role in planning the June 1998 UN Special Session
on Drug Control and in drafting the political declaration and action
plans, which obligate participating states to carry out specific actions
against narcotrafficking. Recognizing the threat to national sovereignty
from criminal activities, the Zedillo administration proposed in
November the formation of a 10,000-member national police force that
would be charged with investigation and prevention of criminal
activities that fall under federal jurisdiction. The GOM and the U.S.
cooperated on a program of training for Mexican law enforcement
personnel that concentrated on increasing capabilities and
professionalism to enhance public confidence.

Accomplishments. In November, the GOM extradited Bernardo Velardes
Lopez, a Mexican national narcotics trafficker charged with the murder
of a U.S. Border Patrol agent. The case demonstrated Mexico's
willingness to extradite Mexican national fugitives once legal barriers
are overcome. The U.S. continues to press for the extradition of Mexican
national drug fugitives.

According to the GOM, Mexican law enforcement and military entities
seized or destroyed:

22.6 metric tons of cocaine (down 35 percent from 1997) 1,062 metric
tons of marijuana (up 2 percent) 121 kilograms of heroin (up 9 percent)
150 kilograms of opium gum (down 54 percent) 96 kilograms of
methamphetamine (up 146 percent) 7 clandestine laboratories (down 1 from
1997)


Jesus and Louis Amezcua Contreras, major methamphetamine traffickers and
leaders of the Colima cartel, were arrested in 1998. They were
subsequently cleared of Mexican charges and are being held solely
pending extradition proceedings on U.S. charges. Besides the Amezcua
brothers no other major cartel leaders were arrested in 1998. However,
several significant traffickers, as well as former government officials
who protected major traffickers, were arrested. Some 7,251 individuals,
including 7,064 Mexicans and 255 foreigners, were arrested on
drug-related charges in 1998 (down 7 percent). Some of the most
significant of these arrests included:

General Jorge Maldonado Vega, former military commander of Baja
California, who aided and abetted drug traffickers, primarily the Amado
Carrillo Fuentes Organization (ACFO); Adrian Carrera Fuentes and Ramon
Baez Marquez, former Federal Judicial Police (FJP) chiefs who aided the
ACFO, subsequently sentenced to four years incarceration;


Key convictions and sentences for drug-related crimes in 1998 include:

Major drug trafficker brothers Pedro and Oscar Lupercio Serratos--prison
terms of 13 years, 6 months each for narcotics trafficking activities;
Former "Drug Czar" General Jesus Gutierrez Rebollo--sentence
increased by three years for a total sentence of over 31 years;
Francisco Cabrera, Tijuana Cartel hitman--40 years imprisonment for
involvement in the 1996 murder of Tijuana FJP commander Ernesto Ibarra
Santes; Former Army General Alfredo Navarro Lara--20 years for offering
U.S.D one million monthly bribe to Army commanding general of Baja
California to protect AFO operations; Carlos Enrique Tapia, reputed
founder of Juarez cartel--27 years, 6 months for smuggling 6 tons of
cocaine found in Los Angeles in 1989; and Ernesto "Don Neto"
Fonseca Carrillo, arrested and serving time for 1985 murder of DEA agent
Camarena--an additional 11 years, 6 months for cultivation of marijuana
and illegal currency transactions to U.S.


Law Enforcement Efforts. Mexico's anti-drug enforcement actions included
air, land, and maritime drug interdiction, organized crime
investigations, a pronounced increase in the amount of seized property
and assets, money laundering investigations (see money laundering
annex), chemical diversion control (see chemical control annex), and
other enforcement actions. In late 1998, the PGR seized 45 metric tons
of marijuana and at least three luxury hotels, scores of homes, ranches,
offices, restaurants, yachts, luxury cars, and other property from raids
against suspected drug traffickers in 14 states in what the media termed
a "pre-Christmas blitz". Narcotics investigations were carried
out by the PGR's Organized Crime Unit (OCU), Special Investigations Unit
(SIU), and Bilateral Task Forces (BTF) located in eight major cities.
The GOM expanded and improved the capability of the FEADS and the OCU,
but better equipment, more personnel, and improved training are needed
to bring these units to full force.

The role of the Mexican military in counternarcotics continued to expand
in 1998. The Secretaries of Defense and the Navy publicly acknowledged
that counternarcotics issues are now the primary mission of their
respective services. The Army and Navy were engaged in a cooperative
effort to seal off Mexico's large, isolated coastal areas from use by
narcotraffickers. The Army took steps to create and equip a special
amphibious force to operate in these areas and supplement the efforts of
the Mexican Navy. The Mexican Navy continued its fleet modernization
program, begun two years ago, by designing and producing medium-sized
patrol boats with state-of-the-art electronics and intercept capability
and by proceeding on the conversion of two Knox class frigates purchased
from the U.S. for counternarcotics operations. While not related to
drugs, Mexico's significant helicopter capability was mobilized during
Hurricane Mitch to aid the Governments of Central America in conducting
search and rescue missions.

On May 18, 1998, the U.S. Departments of the Treasury and Justice
announced the culmination of a three-year Customs Service money
laundering investigation, code named Operation Casablanca, targeting
Mexico's Juarez and Colombia's Cali drug cartels. It was one of the
largest drug money laundering case in U.S. law enforcement history, with
scores of arrests, indictments against Mexican banks and bankers, and
seizure of more than $100 million in drug proceeds. The GOM initially
responded positively to operation Casablanca and provisionally arrested
five bankers implicated in the case. It later strongly protested and
criticized the operation after learning that U.S. agents had conducted
part of the undercover operations in Mexico without approval of current
GOM officials. Mexican authorities investigated the possibility of
bringing charges against the U.S. agents and declined to provide
assistance in locating and apprehending fugitives in the case (other
than the five bankers arrested as part of the initial takedown). In
February 1999, a Mexican judge denied extradition of the five bankers,
but the GOM affirmed it would try the bankers in Mexico. The policy
issues affecting the bi-national relationship were largely resolved
through development of guidelines for consultation on sensitive law
enforcement activities by the two Attorneys General as set forth in a
July 2 letter to the Presidents and a bi-lateral agreement signed in
February 1999. This incident was the low point of counternarcotics
cooperation in 1998.

Corruption. Federal authorities have made combating corruption a top
priority because of the threat it represents to Mexico's democratic
institutions. The GOM investigated corruption cases and was active in
multilateral fora against corruption. Mexico is a signatory to the
anti-corruption agreements of the Organization of Economic Cooperation
and Development.

Despite public statements and efforts by President Zedillo and other key
government officials, corruption continues to be serious a problem in
Mexican institutions, including federal, state, and local police
agencies. The GOM has generally responded to revelations of corruption
with administrative reorganization of the corrupted agency and dismissal
or reassignment of the compromised officials. This situation is
beginning to change because of better screening and internal controls as
well as moves to prosecute corrupt officials.

In 1998, the GOM uncovered evidence of corruption in the special vetted
units that had been specially created to avoid corruption. This appears
to have resulted in the compromise of several investigations in which
the U.S. supplied investigative information. Revelations of corruption
at the highest levels of the OCU undermined the confidence of U.S. law
enforcement in its working relationship with the unit. Law enforcement
officials from both countries are working to restore mutual confidence.

In the past, most of the law enforcement personnel dismissed by Attorney
General Madrazo and former Attorney General Lozano for corruption sought
relief under Mexico's strong labor laws and many were reinstated. An
encouraging sign has been the recent change in Mexican labor laws
permitting corrupt police officers to be fired for cause without the
possibility of reinstatement. Also, Mexico has made initial efforts to
establish a national police registry and a Confidence Control Center to
screen all officers.

In the fight against corruption, the new national registry of public
security personnel was used to match active-duty police against those
persons who had judicial proceedings pending against them. The Mexico
Federal Judicial Police (MFJP), executing outstanding arrest warrants,
conducted simultaneous raids on police barracks in Mexico City as well
as in the states of Mexico, Morelos, and Hidalgo in a concerted
anti-corruption effort. Government Secretary Francisco Labastida
declared these arrests the beginning of a fundamental and radical purge
of the nation's police.

While there have been successful corruption investigations and
prosecutions, more are needed - yet ensuring police integrity is only
part of the solution. The Ministry of Government (SEGOB) plans to
administer examinations to 47,000 auxiliary and judicial police
nationwide in 1999. This will give SEGOB the opportunity to check
whether the examinees have outstanding warrants against them and permit
it to dismiss poor performers. Those who pass these exams will receive
additional training, a pay raise, increased benefits, and will help
bring about enhanced professionalism, performance, public image, and
lifestyle.

The Mexican military, which traditionally has enjoyed a better
reputation for integrity than the police, has not escaped the taint of
narco-corruption. In August 1998, 14 enlisted personnel of the elite
Airmobile Special Forces Groups (GAFES) assigned to the Mexico City
airport were arrested on charges of drug trafficking and alien
smuggling.

To date, successive reorganizations and announcements of new programs
have only brushed the surface of corruption in Mexico. Combating
corruption is a long-term challenge that requires sustained effort at
all levels of government and society. The GOM has made progress through
development of new personnel and information databases and institutional
improvements to deter corruption. It is critical that Mexico continue to
investigate all allegations of corruption and take strong action against
personnel who have been compromised, both for the integrity of its
institutions and the confidence of its international partners.

Agreements and Treaties. Mexico has bilateral narcotics accords with 22
countries. Colombia signed an additional agreement with Mexico in
December to improve the exchange of information and technology to help
fight drug trafficking.

Mexico is a party to the 1988 UN Drug Convention, the 1961 UN Single
Convention on Narcotic Drugs as amended by the 1972 Protocol, and the
1971 UN Convention on Psychotropic Substances. It also subscribes to
regional drug commitments, including the 1996 Anti-Drug Strategy in the
Hemisphere and the 1990 Declaration of Ixtapa, which commit signatories
to take strong action against drug trafficking, including controlling
money laundering and chemical diversion. Mexico and the U.S. are parties
to numerous bilateral treaties and agreements relating to cooperation in
law enforcement, including a 1987 Mutual Legal Assistance Treaty (MLAT),
an executive agreement on asset sharing dated May 22, 1995, and the
Financial Information Exchange Agreement (FIEA). The two countries
worked toward the goals of the Bi-National Drug Strategy in 1998.

The U.S./Mexico extradition treaty dates from 1978. A U.S. -- Mexico
Protocol to the Extradition Treaty permitting temporary surrender of
fugitives was passed by the U.S. Congress in October 1998 and signed by
President Clinton in January 1999. The GOM has not yet submitted the
Protocol to the Mexican Congress.

The U.S. considers extradition an important tool in combating
international drug trafficking and organized crime. At the end of 1998,
there were approximately 45 persons in custody and subject to
extradition proceedings in Mexico based on U.S. provisional arrest and
extradition requests. In 1998, Mexico effected the extradition of three
Mexican nationals to the U.S., one of whom was charged with the murder
of a U.S. Border Patrol agent while attempting to smuggle drugs into the
country and the others with the sexual assault of minors. Mexico also
extradited six U.S. citizens and three third country nationals to the
U.S. These persons were charged with drug trafficking (4), homicide (1),
fraud (3), and sexual assault of a minor (1). Mexican drug traffickers
whose extraditions were approved by the GOM in 1998, but who are
contesting their surrender to the U.S. through the Mexican judicial
appeals process, include Jesus Amezcua Contreras, Florentino Blanco
Mesa, and Arturo "Kitty" Paez Martinez.

There were also some setbacks in our bilateral extradition relationship
in 1998. First, Mexican appellate courts, in two separate cases,
overturned GOM decisions to extradite Mexican national narcotics
traffickers Oscar Malherbe and Jaime Gonzales Castro. In these cases,
the courts ruled that the Mexican Penal Code requires that Mexican
nationals wanted for crimes committed abroad be prosecuted in Mexico,
despite provisions in the U.S.-Mexico extradition treaty and Mexican
extradition law that give the GOM discretion to extradite Mexican
nationals in exceptional cases. Although these court decisions do not
apply to any case other than the two that were handed down, they could
affect future extradition cases. Because these decisions involve issues
of statutory interpretation, the problem ultimately may need to be
resolved legislatively.

A second extradition setback involved the issue of life imprisonment. In
an appeal of a GOM decision to grant the extradition of two Argentine
narcotics traffickers, who faced a maximum penalty of life imprisonment,
a Mexican court ruled that the fugitives could not be extradited unless
the U.S. provided an assurance that the fugitives would not receive life
imprisonment. This decision was based on Mexican Supreme Court decisions
from the 1930's holding life imprisonment unconstitutional in Mexico. As
a result, Mexico has asked for life imprisonment assurances in at least
one other extradition case, despite the fact that there is no basis for
it in the extradition treaty. This development is especially troubling
since the majority of fugitives currently in custody in Mexico for the
purpose of extradition to the U.S. are charged with serious crimes that
carry with them possible life sentences, precluding any U.S. assurances
about limits on sentencing

Mexican concern over undercover activities during the Casablanca money
laundering investigation led to a GOM investigation of whether U.S.
Customs Service agents violated Mexican law. The Mexican Attorney
General announced in February 1999 that there was no technical violation
of Mexican law, but reasserted that such operations by foreign agents
were unacceptable to Mexico.

Cultivation and Production. Mexico is a major producer of marijuana and
a producer of heroin, most of which is destined for the U.S. Lands used
for illicit cultivation are subject to seizure, but many drug crops are
grown on public land to thwart tracing ownership. Mexico's eradication
program is one of the largest, oldest and most sophisticated in the
world. The aerial spray program conducted by the PGR now accounts for
about 25 percent of eradication totals. The Army's considerable field
presence in manual eradication operations, some 20,000 troops daily and
more during peak seasons, combined with Mexican Navy eradication efforts
in coastal areas and along navigable rivers, is responsible for about 75
percent of the eradication performed.

The GOM does not produce statistical estimates of illegal drug crop
cultivation, but U.S. analysts estimate that in 1998 that Mexican
growers cultivated approximately 15,000 hectares of opium poppy, up from
12,000 in 1997, and 14,100 hectares of cannabis, down from 15,300 in
1997. The increase in poppy cultivation is partially worrisome as it led
to a net increase in heroin production despite a massive eradication
effort.

The GOM reported that the PGR and military forces eradicated 17,449
hectares of opium poppy in 1998, down slightly from 17,732 in 1997, and
23,928 hectares of cannabis, also a minimal decrease from 23,578 in
1997. Incorporating this information, U.S. analysts estimate the GOM
effectively eradicated (removed from production for a full growing
season) 9,500 hectares of opium poppy, up from 8,000 in 1997, and 9,500
hectares of cannabis, down from 10,500 in 1997. This left approximately
5,500 hectares of opium poppy in production, up from 4,000 in 1997. This
could have yielded 60 METRIC TONS of opium gum, up from 46 in 1997, or 6
METRIC TONS of heroin, up from 4.6 in 1997. For cannabis, it would have
left approximately 4,600 hectares of harvestable cultivation, down from
4,800 in 1997, which could have yielded 2,300 METRIC TONS of usable
marijuana, up from 2,500 in 1997.

Drug Flow/Transit. Mexico is the principal transit route to the United
States for cocaine produced in South American source countries. U.S.
agencies estimate that almost 60 percent of the Colombian cocaine sold
in the U.S., several hundred metric tons, passed through Mexico, most of
it by land or sea, but also by small aircraft.

The detected use of general aviation aircraft to smuggle cocaine
directly from Colombia has decreased dramatically in recent years due to
the threat of interdiction by Mexican forces. However, cocaine now
arrives in Mexico via every kind of commercial and non-commercial
transportation means available. In 1998 this included: smuggling across
the land border with Guatemala; entry in legitimate air or containerized
maritime cargo; smuggling by fishing or other non-commercial vessels;
non-commercial flights to clandestine landing points in Mexico; and air
drops to go-fast boats off its coasts. Once inside Mexico, illegal drugs
are moved to northern border areas for stockpiling and entry into the
U.S. Cocaine is smuggled across the U.S. border in everything from
containerized cargo, commercial trucks, rail cars, airplanes,
automobiles, and off-road vehicles to willing and coerced human
"mules," including undocumented migrants and children, who
backpack or strap the drugs to their bodies.

The eastern Pacific is one of the principal transit corridors used by
air and maritime drug traffickers because of vast ocean areas and a lack
of natural choke points. Multiple maritime events are estimated to occur
there monthly using go-fast boats, fishing vessels and commercial
carriers.

Demand Reduction Programs. During a December seminar on the role of the
media against drugs, Attorney General Madrazo warned of increased drug
consumption in Mexico. Mexico now has an extensive network of
government, volunteer and community organizations involved in drug
prevention, research, education, treatment, and rehabilitation. A
growing incidence of illicit drug or other substance abuse, especially
inhalants and pharmaceuticals, has alarmed federal and state officials
and strained available treatment resources.

Mexico and the U.S. have made considerable progress in enhancing
cooperation and communication in demand reduction. The bilateral working
group on demand reduction not only met several times during the year to
exchange information, research findings and observations, and establish
performance measures of effectiveness for the Bi-National Drug Strategy,
but helped to generate a broader hemispheric dialogue on the subject
through the OAS/CICAD experts group.

The Secretariat of Health conducted a national household drug use survey
and continued the epidemiological surveillance system on addictions,
drug information report system, and case reports from youth centers
located in 56 Mexican cities. A handbook and guideline for the diagnosis
of addictions will be developed in 1999 and made available to the health
services in all Mexican states.

IV. U.S. Policy Initiatives and Programs

Policy Initiatives. U.S. narcotics control policy toward Mexico is aimed
at supporting the political commitment and strengthening institutional
capability of the GOM to take effective measures against drug production
and trafficking and related crimes. U.S. policy seeks to work more
closely with Mexico to apprehend and prosecute trafficker leadership,
disrupt or dismantle their operations, combat money laundering and
precursor chemical diversion, and reduce the demand for drugs. In
addition, the U.S. seeks support the GOM's efforts to strengthen
institutions to improve training for its personnel, to modernize the
justice sector, and to initiate anti-corruption reforms. Developing
cooperative initiatives along our common border to increase the
effectiveness of counternarcotics operations is also a priority. The
U.S. is committed to ensuring that its interdiction activities along the
border complement Mexican efforts.

Bilateral Cooperation. Senior GOM and USG officials held numerous
consultations on narcotics issues throughout 1998. Counselor to the
President and Special Envoy for the Americas Mack McLarty visited Mexico
in January to discuss counternarcotics and other bilateral issues with
key GOM officials. Presidents Zedillo and Clinton discussed combating
narcotics at their June meeting in New York. The High-Level Contact
Group (HLCG), led by Office of National Drug Control Policy (ONDCP)
Director Barry McCaffrey, Mexican Foreign Secretary Rosario Green, and
Attorney General Jorge Madrazo, met in April and December to discuss
implementation of the Bi-National Drug Strategy through the preparation
of performance measures of effectiveness (PMEs), to review progress on
1998 action plans and goals, and to develop priorities and means for
cooperative action in the near future. HLCG working groups on money
laundering, chemical control, demand reduction, and firearms control met
throughout the year to develop PMEs and strengthen bilateral
cooperation. In July, the two Attorneys General agreed to a process for
enhanced consultation and cooperation in sensitive cross-border
operations. ONDCP Director McCaffrey met with President Zedillo, Foreign
Secretary Green and Attorney General Madrazo in October to discuss
counternarcotics cooperation. Secretary of the Army Caldera visited
Mexico in October to review military cooperation on counternarcotics
issues, including helicopter operations, with senior Mexican officials
of the Secretariat of National Defense. The GOM also hosted several U.S.
Congressional delegations interested in narcotics control.

The sharing of narcotics smuggling information between the GOM and USG
improved in 1998, with daily interaction becoming the norm. To counter
illicit air traffic in northern Mexico border areas, FEADS placed a
full-time official at the Domestic Air Interdiction Coordination Center
in Riverside, California. USG/GOM teams visited Bilateral Task Force
(BTF) units in four northern Mexico cities in May to observe facilities
and USG-provided equipment. A similar team observed eradication in three
Mexican states in September. USG officials received ready access to
conduct technical observations and end-use monitoring of USG-owned UH-1H
helicopters operated, maintained and supported by the PGR. All aircraft
were found to be in good condition, well supported, and assigned to
narcotics control missions.

In November U.S. and Mexican judges participated in a joint training
seminar on the laws and procedures of both countries. Exchanges, like
the Bilateral Seminar on Interdiction in Riverside, CA, highlighted new
areas of interdiction interest, such as the recent surge in maritime
trafficking. The U.S. and Mexico also began a joint training program for
their federal law enforcement agencies on their respective laws,
criminal procedures, and asset forfeiture at the Department of Justice
training center in Columbia, South Carolina. Both sides deemed this a
particularly valuable professional exchange.

The U.S. carries out more money laundering investigations annually with
the Mexico than with any other country. The GOM's Treasury Ministry
(Hacienda) and the PGR processed 17 major simultaneous, bilateral
money-laundering investigations in 1998 in cooperation with USG
agencies. The financial information exchange agreement between Mexico
and the United States provided information on currency transactions
through financial institutions. However, in late 1998 the GOM increased
the amount of currency inbound to Mexico that requires a declaration
from $10,000 (equal to the U.S. reporting requirement) to $20,000,
potentially making it more difficult for the GOM to identify suspected
money launders.

The USG worked with the PGR to determine requirements for FEADS'
information and nation-wide communications networks to enhance CN
operations, and with the BTFs, OCU and Special Investigative Unit (SIU)
to provide equipment and training. Hacienda implemented a USG-supported
project to facilitate the automated filing of currency transaction
reports by the banking community to Hacienda's Financial Investigations
Unit.

In March, Mexico and the U.S. held an epidemiological working group
meeting in El Paso chaired by ONDCP Director McCaffrey and Mexican
health secretary de la Fuente. The USG worked closely with the National
Council Against Addictions (CONADIC) to coordinate drug demand reduction
activities. The Health Secretariat conducted the 1998 National Household
Drug Use Survey with some U.S. support. Two USG-financed NGO projects in
Mexico City helped university-aged youth and street children avoid drug
addiction through education and job training. A Chihuahua-based
USG-funded NGO worked with communities in Chihuahua to discourage drug
cultivation and promote sustainable development in the Sierra Madre
Mountains.

The USG provided training to hundreds of GOM officials in areas such as
air, land, and maritime interdiction; money laundering, and firearms
identification investigative techniques; asset forfeitures; and customs
fraud. Implementation of this training supported the Bi-National Drug
Control Strategy. Sixteen Mexicans involved in school and community drug
prevention and youth gang intervention attended a four-week,
USG-sponsored regional demand reduction course in Roswell, New Mexico.

The Road Ahead. Mexico and the U.S. will continue to undertake
activities to enhance cooperative efforts against drug abuse,
trafficking, and production. The effectiveness of national and bilateral
efforts will be judged largely on demonstrable efforts in disrupting and
dismantling transnational narcotrafficking organizations. This includes
apprehending, prosecuting, and convicting major drug traffickers
identified in the bilateral drug threat analysis, and exposing and
prosecuting individuals involved in critical support networks such as
money laundering and front companies, security, transportation, and
warehousing. Draft asset seizure and forfeiture legislation submitted to
the Mexican congress, if passed, will provide an important source of
funding for drug law enforcement, courtroom modernization, drug
treatment and education, and alternative development. The U.S. welcomes
the opportunity to expand the sharing of seized assets between our
countries based on cooperation in the investigations and prosecutions
leading to such forfeitures. Mexico's recent legislative changes on
criminal investigations will significantly expand the sharing of law
enforcement and legal information and evidence. Increased cooperation on
post-seizure and post-arrest analysis will enhance investigations
against major trafficking organizations.

Full implementation of Mexico's organized crime bill and penal code
reforms will increase the effectiveness of Mexico's law enforcement and
lead to improved bilateral cooperation with the U.S. and other
countries. The development of significant investigations by vetted and
technically proficient police units is key to achieving this. Very
practical issues and problems need to be addressed such as ensuring the
specialized units are fully equipped and maintain the highest levels of
professionalism. Security for both Mexican and U.S. personnel is of
paramount importance.

In the past two years, Mexico and the U.S. have established channels of
communications, procedures and a unified system of maintaining
statistics in an effort to bring fugitives to justice. The objective now
is continued progress in pending cases according to agreed priorities.
It is important to establish a record of successful extradition of drug
traffickers, regardless of nationality, such as through the expanded use
of Mexico's "exceptional circumstances" standard to extradite
Mexican nationals accused of drug trafficking and other heinous crimes.

Continued measurable progress in reducing the net production of illicit
drugs and the flow of such drugs through Mexico into the U.S. has long
been one of our shared objectives. The U.S. stands ready to exchange
more information or experiences in specialized areas as well as to find
ways to improve both countries' eradication programs. Progress can be
demonstrated through reducing net production through eradication, by
preventing growers from expanding cultivation to offset the eradication
campaign, through increases in seizures of illicit drugs, drug crops, or
precursors, and by increases in detection and destruction of clandestine
laboratories. Narcotics smuggling, especially maritime trafficking,
continues to pose a great challenge, which suggests that additional
cooperative action is needed to address the threat of contraband
arriving by sea, air and land.

In 1999, the USG anticipates progress in initiating or implementing the
following elements of the common strategy for cooperative bi-national
action against illicit drugs:

Reducing the demand for illicit drugs in both countries through
intensification of anti-drug information and educational efforts;
Reducing the production and distribution of illegal drugs in both
countries; Focusing law enforcement efforts against criminal
organizations and those who facilitate their operations; Strengthening
U.S./Mexican law enforcement cooperation and policy coordination;
Ensuring that fugitives are brought to justice expeditiously and with
due legal process; Identifying sources of and deterring illegal
trafficking in firearms; Increasing the abilities of our democratic
institutions to attack and root out the corrupting influence of the
illegal drug trade; Enhancing cooperation along both sides of our common
border to increase security; Controlling essential and precursor
chemicals and pharmaceutical drugs to prevent their diversion and
illicit use, and improving the information exchange; Implementing more
effectively the existing laws and regulations to detect and penalize
money laundering; Seizing and forfeiting the proceeds and
instrumentalities of drug trafficking, and directing them to drug
prevention and law enforcement; Improving our respective capacities to
disrupt drug shipments by air, land, and sea; and Implementing training
and technical cooperation programs.

Despite the many significant counter-narcotics achievements realized by
Mexico and the United States through close cooperation in 1998,
traffickers continued to rapidly adopt new methods of operation to
thwart law enforcement authorities. Mexico is still relatively open to
money laundering and the diversion of precursor chemicals, and the
corruption of public officials remains a serious problem. The USG will
continue to offer technical support to Mexico in developing and
strengthening its counternarcotics infrastructure, institutions and
domestic interdiction capabilities.

[end of document]

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