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      How Chinese Mining Companies Sustain Organized Crime in Mexico

      How Chinese Mining Companies Sustain Organized Crime in Mexico How Chinese Mining Companies Sustain Organized Crime in Mexico How Chinese Mining Companies Sustain Organized Crime in Mexico
      Photo by Laurence Cuvillier

      Americas

      How Chinese Mining Companies Sustain Organized Crime in Mexico

      By Laurence Cuvillier

      Miguel thought that the iron mine he owned in Michoacán would end up costing him his life. In the last few years, virtually anything that generates money in this western state of Mexico has ended up being extorted by the Knights Templar cartel. The region’s profitable mines were first to be targeted. Yet, in the end, Miguel, who asked to be identified by a single name, said his mine is what saved him.

      A mustachioed, sturdy man in his early 40s, with a typical ranchero look and dusty blue jeans, Miguel has dedicated his whole career to extracting metal ore. The Templars were content to extort him at every level of his business, just as they do with farmers, restaurant owners, and shopkeepers of every kind.

      In 2010, the cartel kidnapped him. After five days in captivity, Miguel was freed. “They let me go because they wanted me to keep working, so I could keep paying them,” he told VICE News.

      There are similar testimonies in at least five other Mexican states. In Michoacán, where the cartels La Familia and The Knights Templar have reinforced their grip on most industries in the last 12 years, the miners claim that Asian, often Chinese, companies also pay fees to the cartels.

      Little is known about the extortion of Asian business interests by Mexican drug gangs, but Miguel’s calculations suggest the Knights Templar could be taking millions of dollars a month from foreign companies at Michoacán's key seaport city, Lázaro Cárdenas. The issue has never surfaced to the political mainstream in Mexico and remains totally shrouded, even though President Enrique Peña Nieto has taken strides in his first years in office to further open trade with China.

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      Miguel's iron ore mine in Tepalcatepec. All photos by Laurence Cuvillier.

      Authorities would not speak with VICE News on the record to confirm Miguel’s story and others like his.

      If it weren’t for his mine, Miguel explained, the Knights Templar would have murdered him. They killed the other kidnapped victims during the hell that he witnessed at their concrete “torture center” in an isolated region of the Tierra Caliente, or the Hot Land, of Michoacán.

      Authorities admit that nearly 1,700 such kidnapping cases were registered in 2013 in Mexico, although officials estimate this figure might reflect only a tiny fraction — as little as 2 percent — of the total of kidnappings since the start of the drug war in 2006. Mexicans generally decline to file complaints related to kidnapping for fear of retaliation from corrupt local police, who are widely believed to work for the cartels.

      “I was tortured with a Taser that they use to electrocute people in their private parts. They make you see many terrible things,” Miguel continued. “I saw them cut off someone’s hands, they cut off another one’s ear, and another was terribly beaten.”

      Mexico’s government appears willfully blind to the realities that miners like Miguel face.

      Up until last year, Miguel was still paying “interest on freedom” to the men who tortured him. He had already paid almost $400,000 for his life, money his family and associates had gathered to free him from the torture center.

      When the Templars began extorting him in 2010, they demanded $2 for every ton of mineral that he extracted. By early 2013, they were charging him $4. He stopped paying when his village rose up in arms against the Knights Templar in February 2013, triggering a large civil movement against organized crime in Michoacán that became known as the autodefensas.

      In May, these armed vigilantes agreed with the Mexican government that they would stop carrying their unlicensed weapons, while others were integrated into a new police corps called Fuerza Rural [Rural Force], to prevent the cartels from taking their villages again. Only a few weeks later, the Rural Force is already plagued with infighting and outbursts of violence.

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      An illegal mine on the road between Coalcomán and Aquila.

      Everyone pays
      Mexico’s government appears willfully blind to the realities that miners like Miguel face.

      The economy secretariat touts on its website that: “Mexico is the country with the fifth best environment for the mining industry, according to a report from [consulting firm] Behre Dolbear Group, published in April 2013.” Of course, by “environment,” the government is referring to the fiscal environment — the mining companies pay a ridiculously low 7.5 percent annual tax, making Mexico a Disneyland for mining investments in Latin America.

      According to the Fraser Institute, a Canadian public policy think tank, Mexico in 2013 also ranked 88 on a list of 96 jurisdictions in terms of security for conducting mining business, worse than Myanmar and Zimbabwe but not as bad as Nigeria or the Philippines.

      According to Miguel’s calculations, for each vessel, at least $720,000 lands in the hands of the Templars.

      Miguel is just one link in the chain of extraction, transportation, and export of the metal that is used in China for steel girders in construction or for its electronics manufacturing industry. The sequence also involves property owners, machinists, transportation companies, export firm, Chinese and Korean buyers, and shipping companies.

      At each stage the Templars request their cut. In total, Miguel calculates, “they take approximately $12 to $13 per ton of iron.”

      Although falling in value, the international market currently values one ton of iron ore at just above $100. A dozen vessels full of iron leave each month from Lázaro Cárdenas. Each ship transports at least 60,000 tons of iron — a vessel that was detained by authorities on April 30 for transporting illegally extracted iron was transporting 68,750 tons.

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      Ex-leader of the Coalcomán autodefensas militia, Misaíl González at an illegal mine.

      So according to Miguel’s calculations, for each vessel, at least $720,000 lands in the hands of the Templars. Multiply this by 10, the average number of ships that leave each month, and Miguel estimates that the cartel could gain at least $7.2 million a month to fund their trafficking business at the Lázaro Cárdenas port alone.

      The Chinese companies that import iron from Michoacán are perfectly aware of the nature of their business, Miguel claimed. They too pay their share to organized crime, he said.

      “Here in Michoacán, there are around 35 foreign companies; they are all paying. Anyone who comes to our country to buy minerals now has to go though them first, and make an arrangement, and then come to us.”

      Doing Business With the Chinese
      The federal highway that links the cities of Coalcomán and Aquila, in western Michoacán, is the only route between them. Since the beginning of 2012, the Templars have extracted iron from along the edge of this road, in open view, without the permission of the property owners.

      I’m here with the ex-leader of the Coalcomán autodefensas militia, Misaíl González, who now dares to stop his pickup next to an abandoned mining site. On this misty late winter afternoon, the place feels cold and lonely. Yet just recently, although everyone knew what was happening here, locals couldn’t even turn around to look at the illegal extraction without running the risk of getting into some serious problems with the Templars.

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      “Here the man in charge was El Flaco. He was in charge of sales; he didn’t have to pay anything for the concession, and they hired companies to extract the mineral and transport it; they charged the people who transported it 4 percent,” Misail explained. “And the company that operated the machinery that extracted the stones was charging 8 percent. By charging illegal taxes, the Templars became business magnates. The Chinese were doing business with them, as if they were any other legal company!”

      None of the Asian companies’ websites that are registered in the Mexican Mining Chamber mentions having activities in Michoacán, except for one called Korean Mo-Jiaki Minerals.

      I asked the Chinese Chamber of Commerce in Mexico about the issue. “We are sorry to say that at the moment we do not have information to answer that question,” they replied.

      Doors were similarly closed to my inquiries at the Camimex (Mining Chamber of Mexico), and at Canacero (Mexico’s National Chamber of the Iron and Steel Industry).

      'No one is going to want to talk to you about this,' a lawyer's secretary told me.

      Mexico’s law enforcement agencies also withhold information about illegal Chinese mining activities in the country, even when a chance arises to reveal some aspect of the network. The federal prosecutor’s office, for example, did not name the Chinese company involved with the vessel that was seized on April 30 in its official report, effectively preventing any independent investigation of the incident.

      According to a VICE News count of reported seizures, approximately 300,000 tons of illegally extracted iron ore have been seized by authorities between the ports of Lázaro Cárdenas and Manzanillo since the start of 2014. All of the vessels were headed for China.

      Wooing China
      Peña Nieto has arguably made a concerted effort to get on the good side of the Chinese president Xi Jinping, meeting him a number of times.

      The stakes must be worth it for Mexico overall, as it is projected that China’s demand for iron will continue its steady rise until 2025. During Xi’s last official visit in June 2013, several commercial agreements were signed but none of the security issues in the region were discussed — at least not publicly.

      The flow doesn’t appear to have slowed, even after the arrival of federal security forces at the Lázaro Cárdenas port to clamp down on smuggling. A new public terminal was inaugurated there last year, which allowed iron exports to increase from 1.5 million tons in 2012 to 4.5 million in 2013.

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      The port of Lázaro Cárdenas.

      Michoacán is not an isolated case in Mexico: Infiltration by criminal organizations in the mining industry has also been documented in states like Chihuahua, Coahuila, Guerrero, Oaxaca, Morelos, and Tamaulipas.

      As I saw myself in Lázaro Cárdenas, the second biggest export harbor to China after Manzanillo, it is extremely difficult to acquire independent information about illegal mining by Asian companies, even in the privacy of a lawyer’s office.

      “You know what? I am going to say this straight: No one is going to want to talk to you about this,” a secretary told me at the premises of a lawyer who specializes in the mining industry.

      I asked the director if he would speak with me, but he declined. At the port, a few officials were willing to be interviewed, under the condition that we not touch the topic of organized crime. It was useless.

      For Miguel, his mine remains his savior. While his village was “freed” of the brutal hold of the Knights Templar by the local self-defense militia, Miguel still trades with Chinese companies. But now he can take home a little more, as he no longer pay “taxes” to his ex-kidnappers. For now.

      Topics: americas, iron ore, mexico, enrique peña nieto, michoacán, china, illegal mining, iron, knights templar cartel, xi jinping, la familia, tierra caliente, fuerza rural, rural force, south korea, construction, steel, electronics, coalcomán, aquila

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