From Drugs to Corruption: The Growing Presence of Chinese Organized Crime in Latin America
In 2021, China's policy banks — the China Development Bank (CDB) and Export-Import Bank (Exim) — made no loans to Latin America for the second consecutive year. Beijing is now essentially focused on financing Chinese companies to operate in the region.
This shift in strategy and the resulting proliferation of Chinese companies in Latin America will increase the circulation of people and money that are no longer under the direct control of local governments. Based on current trends, Chinese criminal organizations will likely thrive in this new economic environment. Extortion, money laundering through front firms, and smuggling are already increasing, posing a severe threat to the population's safety in the region.
Drug production is one of China’s fastest-growing businesses in Latin America. After China's booming export of fentanyl or its precursors to Mexican cartels, a new market has emerged for non-fentanyl synthetic opioids such as nitazenes, also known as benzimidazole opioids such as the synthetic opioid derivative ISO, which are 20 times more potent than fentanyl.
US authorities believe that these drugs are being manufactured in China and shipped to Mexico where they are then smuggled into the US. In March, Florida Attorney General Ashley Moody issued a warning against ISO, as law enforcement agencies advised that the drug might be responsible for the recent rise in overdose fatalities. “Isotonitazene is so strong that it can kill just by coming in contact with someone’s skin or being accidentally inhaled,” stated Moody.
Concerns are growing that ISO may be manufactured directly in Mexico or other countries in the region, where Chinese criminal groups have already established production facilities for “creepy,” the name given to a potent cannabis strain popular amongst criminal grow operations, particularly in South America.
Chilean officials arrested thirteen Chinese nationals in Santiago in September 2021 for cultivation and trafficking, confiscating over 1,600 marijuana plants. The network operated between Valparaiso and the capital. A few months earlier authorities had uncovered over 1,500 plants and 250 kilograms of product in San Antonio, Valparaiso.
”We also found guns, cocaine hydrochloride, cocaine paste, and ecstasy and uncovered a vast array of offenses associated with this network, ranging from prostitution to money laundering,” said Sergio Muñoz, head of Chile's civil police.
If this criminal trend spreads to other countries, such as Paraguay, there is a good chance that conflicts over territorial control may escalate. Under the leadership of local and Brazilian criminals, Paraguay is the second-largest cannabis producer in Latin America, behind only Mexico. Furthermore, these production facilities might provide a model for establishing Chinese-run laboratories to manufacture ISO and fentanyl in Latin American nations less dominated by major drug cartels, such as Uruguay and Chile.
In countries where criminal organizations have significant territorial control, the Chinese are crucial, particularly for the money laundering services they offer; hence, these relationships continue to flourish. A recent Brazilian police investigation revealed that the First Command of the Capital (PCC) used a Chinese accountant and Chinese smugglers to launder money through front companies that were continuously opened and shut. In 2015, Brazilian authorities uncovered that the PCC transferred over $20 million to bank accounts in the US and China.
Due to the ease with which they may transfer funds, small Chinese criminal cells are taking market share from Mexican and Colombian cartels in border operations for money laundering purposes. In October 2020, the US Justice Department unsealed an indictment accusing six Chinese nationals of laundering approximately $30 million for Mexican drug traffickers over 12 years.
US authorities convicted Chinese national Xianbing Gan, a resident of Guadalajara, Mexico, to 14 years in prison in April 2021 for laundering more than $500,000 from Mexican cartels into Chinese banks. However, according to the judges, Gan handled a larger sum, between $25 million and $65 million over a period of two years.
“The defendant was part of a recent phenomenon in which a relatively small network of Chinese money brokers based in Mexico have come to dominate international money laundering markets,” said Assistant U.S. Attorneys Sean J.B. Franzblau and Richard M. Rothblatt in the government’s sentencing memorandum. “Like the defendant, many of these brokers are also engaged in legitimate business and use that business as cover for and to further money laundering activity. It does not matter that defendant never personally distributed narcotics – drug distribution and money laundering are two sides of the same malignant coin,” Feanzblau and Rothblatt added.
In May 2021, Federal police in Bahia, Brazil, detained a Chinese national on charges of laundering money for Mexican and Colombian cartels. Between April 2016 and July 2017, he washed more than $900,000 in proceeds from cocaine trafficking through the U.S. financial system and Hong Kong bank accounts.
Another Chinese money laundering method exploits trade channels. Exports from China to Mexico have almost quadrupled in the last decade, reaching 93 million dollars in 2019. Criminal networks have taken advantage of this growth to expand their operations. In 2020, the Mexican Financial Intelligence Unit discovered a network of Chinese money launderers for the Cartel Jalisco Nueva Generation (CJNG). They obtained cash by purchasing wholesale shoes in China and reselling them in Mexico.
The Chinese Mafia, known throughout the region under the umbrella term Red Dragon, is responsible for most Chinese criminal activity in Latin America. Its members evade detection due to language barriers and the ease with which they may assume many identities. Human smuggling and extortion are two of their primary activities.
Argentina is one of the countries where the Chinese Mafia often makes headlines. In March, authorities arrested Ke Deqiang, aka Matias, the leader of the La Plata Chamber of Commerce of Chinese Supermarkets, after he and a fellow countryman extorted a local businessman with knives and pistols in exchange for protection.
In Latin America, A.C, Pi Xiu, Panda, Wan Ke, and Xin are among the most prominent Chinese mafia groups. However, unknown organizations are also emerging, with local names like “Amistad” (Spanish for “friendship”) demonstrating how the Chinese mafia is gradually blending with local culture.
Several leaders have been arrested in Latin America. In 2016, in Misiones, Argentina officials apprehended Lin Qian Li as he attempted to enter from Paraguay using a fraudulent identity. He is the leader of the triad Xin, which has operated in Argentina for at least 15 years and is infamous for extorting retailers. Argentina officials detained Yong Ye in the same year, accusing him of leading the Pi Xiu Mafia.
Along the Tri-Border Area, which is the border between Argentina, Brazil, and Paraguay, a region with a high crime rate, the Chinese groups Fuk Ching, Flying Dragons, and Tai Chen operate as smugglers.
Cigarettes manufactured in China are the most trafficked items in almost all of Latin America. They are entering at an alarming rate through a network of shell firms in the Colón, Panama free zone. In countries such as Colombia and Ecuador, smuggled cigarettes from China already outnumbered those from Paraguay, which is the major supplier of illicit cigarettes in the region.
According to Organized Crime and Corruption Reporting Project (OCCRP), China National Tobacco Corporation (CNTC) brands such as Golden Deer and Silver Elephant have been illegally flooding into Latin America. As Big Tobacco did in the past, CNTC allows the smuggling of its products to place pressure on local governments to legalize them.
As revealed by the Colombia Institute of Political Science, the cigarettes often travel straight from China, concealed among shipping containers arriving at Buenaventura, Colombia's port. In July 2020, officials seized an immense amount of cigarettes, enough for all of Colombia's 50 million inhabitants to consume two packs. Other seizures occurred in the regional port of El Callao in Peru, where authorities confiscated 8 million cigarettes in 2019, and San Antonio in Chile, where 427 thousand packages of Chinese cigarettes were found in 2015.
In addition to cigarette smuggling, China's criminal strategy in Latin America also includes the looting of natural resources. In Chile, the world's largest producer of copper, 257,000 tons were stolen in 2020. Copper is essential for Chinese telecommunications companies and 5G development. However, its theft has implications for mining companies and communities, who are left in the dark when power cables are cut or stolen. In March, Chilean authorities busted an international network, including Chinese people, stealing copper cables and then smuggling them to China. In January 2020 near Santiago, police seized 80 tons of copper heading for China.
The illicit wildlife trafficking between Latin American countries and China is also growing. Many illegally harvested terrestrial and marine species, such as reptiles, sharks, sea cucumbers, totoaba, and abalone, travel from Mexico to China through the US. Illegal wildlife trade allows money to move in illegal markets and circumvent anti-money-laundering procedures in the US, Mexico, and China.
A National Geographic report revealed that more than 800 jaguars were killed in Central and South America between 2012 and early 2018, with their teeth, skins, and skulls smuggled to China. In October 2021, Bolivian police detained five Chinese nationals in Santa Cruz de la Sierra. Along with them, authorities recovered jaguar canines and skins.
Furthermore, 2.4 million individuals in Latin America are affected by illegal fishing, the world's third most profitable criminal business. The bulk of the region's illicit ships is Chinese, putting designated marine reserves like the Galapagos Islands in jeopardy. As a result, stocks have been depleted, and food chains have been disrupted, posing a threat to local economic and environmental security. Illegal fishing also provides an opportunity for corruption, money laundering, tax evasion, labor violations, and even drug trafficking.
According to the Argentina news website Urgente 24, 450 Chinese vessels were already illegally operating in Argentina waters when the fishing season started in February. Around 750,000 tons of fish are illegally collected from Argentina waterways each year. The same is true for the waters of Colombia, Ecuador, Brazil, and Chile.
Additionally, algae theft is likely to be an attractive illicit activity due to the Chinese food market's strong demand. In recent years, authorities in Chile have recovered an average of 250,000 tons of illegally extracted algae every year.
Chinese predatory strategy in Latin America along with the growing presence of its criminal organizations exacerbates local corruption. In November 2021, the Peruvian police investigated the governor of the Madre de Dios department in the Amazon rainforest on suspicion that he had accepted bribes in exchange for granting concessions to Chinese logging companies.
A month before, Oscar Balderas, a Mexican investigative journalist, reported that the Mexican Attorney General's Office allegedly accepted bribes to authorize the export of 25 containers of rosewood previously confiscated by police. Rosewood is a protected, high-demand timber in East Asia that the Chinese are smuggling from Mexico.
In Brazil, authorities arrested Zeng Xiao Tu, also known as Marcos Zheng, the vice president of the Chinese Association of Brazil, in 2020, at the height of the COVID-19 emergency. In one of Zheng's warehouses, officers discovered guns, 15,000 COVID-19 tests, and two million pieces of protective equipment stolen from Guarulhos airport. Zheng reportedly intended to resell these items by using his political connections. After his arrest, Zheng said he promoted friendly relations between Brazil and China and served as a mediator between then-São Paulo Governor João Doria and hospitals in Wuhan.
The left-wing political momentum in Chile, Peru, Bolivia, Argentina, and most likely Brazil and Colombia following their 2022 presidential elections, will likely boost anti-US sentiments and, conversely, strengthen commercial and political ties with China. As a result, some Chinese criminal elements will likely increase their penetration into local economies accompanying the more legitimate and legal Chinese commercial activity. To mitigate this risk, large-scale trade with China, which depends on Latin American commodities, might be a powerful tool for holding the Beijing government accountable for Chinese illicit activities in the region. Also, anti-corruption and anti-money laundering mechanisms should be prioritized since the financial component is a crucial asset for Chinese criminal organizations in the region. In addition, the US should encourage and help Latin American countries to engage with Beijing over Chinese regulation of uncontrolled new synthetic opioids such as ISO.