Index


Drug Control: Update on U.S.-Mexican Counternarcotics Activities
(Testimony, 03/04/99, GAO/T-NSIAD-99-98).

Pursuant to a congressional request, GAO discussed the counternarcotics
efforts of the United States and Mexico, focusing on: (1) Mexico's
efforts in addressing the drug threat; and (2) the status of U.S.
counternarcotics assistance provided to Mexico.

GAO noted that: (1) while some high profile law enforcement actions were
taken in 1998, major challenges remain; (2) new laws passed to address
organized crime, money laundering, and the diversion of chemicals used
in narcotics manufacturing have not been fully implemented; (3)
moreover, no major Mexican drug trafficker was surrendered to the United
States on drug charges; (4) in addition, during 1998, opium poppy
eradication and drug seizures remained at about the same level as in
1995; (5) Mexican government counternarcotics activities in 1998 have
not been without positive results; (6) one of its major accomplishments
was the arrest of Jesus and Luis Amezcua who, along with their brother
Adan, are known as the Kings of Methamphetamine; (7) although all
drug-related charges against the two have been dropped, both are still
in jail and being held on U.S. extradition warrants; (8) the Mexican
foreign ministry has approved the extradition of one of the traffickers
to the United States, but he has appealed the decision; (9) in addition,
during 1998 the Organized Crime Unit of the Attorney General's Office
conducted a major operation in the Cancun area where four hotels and
other large properties allegedly belonging to drug traffickers
associated with the Juarez trafficking organization were seized; (10)
Mexico also implemented its currency and suspicious transaction
reporting requirements; (11) the Mexican government has proposed or
undertaken a number of new initiatives; (12) it has initiated an effort
to prevent illegal drugs from entering Mexico, announced a new
counternarcotics strategy and the creation of a national police force;
(13) one of the major impediments to U.S. and Mexican counternarcotics
objectives is Mexican government corruption; (14) recognizing the impact
of corruption on law enforcement agencies, the President of Mexico: (a)
expanded the role of the military in counternarcotics activities; and
(b) introduced a screening process for personnel working in certain law
enforcement activities; (15) since these initiatives, a number of senior
military and screened personnel were found to be either involved in or
suspected of drug-related activities; (16) since 1997, the Departments
of State and Defense have provided the government of Mexico with over
$112 million worth of equipment, training, and aviation spare parts for
counternarcotics purposes; and (17) the major assistance included UH-1H
helicopters, C-26 aircraft, and two Knox-class frigates purchased by the
government of Mexico through the foreign military sales program.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  T-NSIAD-99-98
     TITLE:  Drug Control: Update on U.S.-Mexican Counternarcotics 
             Activities
      DATE:  03/04/99
   SUBJECT:  Foreign military sales
             Political corruption
             Foreign governments
             Organized crime
             Drug trafficking
             Narcotics
             Extradition
             International cooperation
             Foreign military assistance
             Law enforcement
IDENTIFIER:  Mexico
             C-26 Aircraft
             Knox Class Frigate
             UH-1H Helicopter
             Foreign Military Sales Program
             
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cover.PDF A Testimony Before the Subcommittee on Criminal Justice,
Drug Policy, and Human Resources, Committee on Government Reform,
House of Representatives

For Release on Delivery

DRUG CONTROL

Expected at 10:00 a.m., EST Thursday, March 4, 1999

Update on U.S.-Mexican Counternarcotics Activities

Statement of Benjamin F. Nelson, Director, International Relations
and Trade Issues, National Security and International Affairs
Division

GAO

United States General Accounting Office

GAO/T-NSIAD-99-98


Page 1 

GAO/T-NSIAD-99-98
 Drug Control in Mexico
Page 1   GAO/T-NSIAD-99-98  Drug Control in Mexico

Mr. Chairman and Members of the Subcommittee: I am pleased to be
here today to discuss our work on the counternarcotics efforts of
the United States and Mexico. My statement today will highlight
the findings from our ongoing effort to update our June 1998
report, 1 as requested by former Chairman Hastert and Senator
Grassley. I will discuss two broad issues: (1) Mexico's efforts in
addressing the drug threat and (2) the status of U. S.
counternarcotics assistance provided to Mexico.

Summary As I stated in last year's hearing, 2 drugs from Mexico
represent a significant threat to the United States. That has not
changed.

 Mexico is one of the largest centers for narcotics- related
business in the world.  Mexico is still the principal transit
country for cocaine entering the

United States.  Mexico is either a producer, refiner, or transit
point for cocaine,

marijuana, methamphetamine, and heroin.  Mexico is a major hub for
the recycling of drug proceeds.  Mexico's Juarez drug- trafficking
organization is as powerful and

dangerous as Colombia's Medellin and Cali cartels used to be.
Mexico's porous border and the daunting volume of legitimate

cross- border traffic provides near- limitless opportunities for
the smuggling of illicit drugs and the proceeds of the sale of
these drugs.

Because of these circumstances, the United States and Mexico face
a formidable challenge in combating illicit drug trafficking.

Last year I testified that, with U. S. assistance, Mexico had
taken steps to improve its capability to reduce the flow of
illicit drugs into the United States. I also said that it was too
early to determine the impact of these actions and that challenges
to their full implementation remained. While some high- profile
law enforcement actions were taken in 1998, major challenges
remain. New laws passed to address organized crime, money
laundering, and the diversion of chemicals used in narcotics
manufacturing

1 Drug Control: U. S.- Mexican Counternarcotics Efforts Face
Difficult Challenges (GAO/NSIAD-98-154, June 30, 1998).

2 Drug Control: Status of Counternarcotics Efforts in Mexico
(GAO/T-NSIAD-98-129, Mar. 18, 1998).

Page 2 GAO/T-NSIAD-99-98 Drug Control in Mexico

have not been fully implemented. Moreover, no major Mexican drug
trafficker was surrendered to the United States on drug charges.
In addition, during 1998, opium poppy eradication and drug
seizures remained at about the same level as in 1995. I believe it
is important to note that the heroin threat from Mexico appears to
be increasing. Heroin from Mexico now represents about 14 percent
of the heroin seized in the United States and Mexico's cultivation
of opium producing poppies increased by 3,000 hectares in 1998.

Mexican government counternarcotics activities in 1998 have not
been without positive results. One of its major accomplishments
was the arrest of Jesus and Luis Amezcua who, along with their
brother Adan, 3 are known as the Kings of Methamphetamine.
Although all drug- related charges against the two have been
dropped, both are still in jail and being held on U. S.
extradition warrants. The Mexican foreign ministry has approved
the extradition of one of the traffickers to the United States,
but he has appealed the decision. In addition, during 1998 the
Organized Crime Unit of the Attorney General's Office conducted a
major operation in the Cancun area where four hotels and other
large properties allegedly belonging to drug traffickers
associated with the Juarez trafficking organization were seized.
Mexico also implemented its currency and suspicious transaction
reporting requirements.

The Mexican government has proposed or undertaken a number of new
initiatives. For example, it has initiated an effort to prevent
illegal drugs from entering Mexico, announced a new
counternarcotics strategy and the creation of a national police
force.

One of the major impediments to U. S. and Mexican counternarcotics
objectives is Mexican government corruption. Corruption remains
widespread within Mexican government institutions, including the
criminal justice system. According to one U. S. estimate, Mexican
narcotics traffickers spend as much as $6 billion a year to suborn
government officials at all levels. Recognizing the impact of
corruption on law enforcement agencies, the President of Mexico
(1) expanded the role of the military in counternarcotics
activities and (2) introduced a screening process for personnel
working in certain law enforcement activities. However, neither of
these initiatives can be considered a panacea for the

3 Adan Amezcua was arrested in 1997 on a weapons charge and is
currently serving an 18- month sentence.

Page 3 GAO/T-NSIAD-99-98 Drug Control in Mexico

narcotics- related problems confronting the United States and
Mexico. Since these initiatives, a number of senior military and
screened personnel were found to be either involved in or
suspected of drug- related activities.

Since 1997, the Departments of State and Defense have provided the
government of Mexico with over $112 million worth of equipment,
training, and aviation spare parts for counternarcotics purposes.
The major assistance included UH- 1H helicopters, C- 26 aircraft,
and two Knox- class frigates purchased by the government of Mexico
through the Foreign Military Sales program. Last year I testified
that some of the assistance provided to the Mexican military was
of limited usefulness due to operational and logistical support
problems. In the past year, the two frigates have become
operational. Unfortunately, the situation with the helicopters has
worsened. Since late March 1998, all of the 72 UH- 1H helicopters
provided to the Mexican military have been grounded because of
airworthiness concerns. 4 In addition, the four C- 26 aircraft are
still not being used for counternarcotics operations.

Background The United States has assisted the Mexican government
in its counternarcotics efforts since 1973, providing about $350
million in aid.

Since the late 1980s, U. S. assistance has centered on developing
and supporting Mexican law enforcement efforts to stop the flow of
cocaine from Colombia, the world's largest supplier, into Mexico
and onward to the United States. According to U. S. estimates,
Mexican narcotics- trafficking organizations facilitate the
movement of between 50 and 60 percent of the almost 300 metric
tons of cocaine consumed in the United States annually.

In the early 1990s, the predominant means of moving cocaine from
Colombia to Mexico was by aircraft. However, a shift to the
maritime movement of drugs has occurred over the past few years.
In 1998, only two flights were identified as carrying cocaine into
Mexico. According to U. S. law enforcement officials, most drugs
enter Mexico via ship or small boat through the Yucatan peninsula
and Baja California regions. Additionally, there has been an
increase in the overland movement of drugs into Mexico, primarily
through Guatemala.

4 In March 1998, the U. S. Army issued a "safety of flight"
message that grounded all of its UH- 1H helicopters due to
mechanical failures in the engine. The Mexican military
subsequently grounded its 72 UH- 1H helicopter fleet, while the
Mexican Attorney General's Office continued to fly most of its UH-
1H helicopters on a restricted basis according to guidelines
outlined by the manufacturer and the U. S. Army.

Page 4 GAO/T-NSIAD-99-98 Drug Control in Mexico

Since 1996, most U. S. assistance has been provided by the
Department of Defense to the Mexican military, which has been
given a much larger counternarcotics and law enforcement role. On
the other hand, the Department of State's counternarcotics
assistance program has been concentrating on supporting the
development of specialized law enforcement units, encouraging
institutional development and modernizing and strengthening
training programs. Table 1 provides additional information on U.
S. counternarcotics assistance to the government of Mexico since
1997.

Table 1: U. S. Counternarcotics Assistance Provided to the
Government of Mexico (fiscal years 1997- 99)

a Section 506( a)( 2) of the Foreign Assistance Act of 1961, as
amended (22 U. S. C. 2318( a)( 2)), authorizes the President to
approve the provision of U. S. military goods and services to a
foreign country for counternarcotics assistance when it is in the
U. S. national interest. b Section 1004 of the National Defense
Authorization Act for Fiscal Year 1991, as amended (P. L. 101-
510) authorized the Secretary of Defense to provide
counternarcotics training and other types of assistance to drug-
producing countries. c Section 1031 of the National Defense
Authorization Act for Fiscal Year 1997 (P. L. 104- 201) authorized
the Secretary of Defense to provide $8 million in counternarcotics
assistance to Mexico in fiscal year 1997. d For fiscal year 1999,
the reduced U. S. training program will focus on providing Mexican
personnel with more technical skills such as helicopter pilot
training and helicopter and fixed- wing aircraft maintenance .

Sources: U. S. embassy in Mexico, the Defense Security Cooperation
Agency and the Coordinator for Drug Enforcement Policy and
Support, Department of Defense. Dollars in millions

Source of assistance FY 1997 FY 1998 (estimate) FY 1999

(estimate)

Department of State $ 5.0 $ 5.0 $ 8.0 Department of Justice 2.0
Department of Defense International Military

Education and Training 1.0 0.9 1.0 Section 506 drawdown a 24.0 1.1
Section 1004 b 28.9 20.1 7.9 Section 1031 c 8.0 Subtotal, Defense
$61.9 $22.1 $ 8.9 d

Total $66.9 $27.1 $18.9

Page 5 GAO/T-NSIAD-99-98 Drug Control in Mexico

The Foreign Assistance Act of 1961, as amended, requires the
President to certify annually that major drug- producing and -
transit countries are fully cooperating with the United States in
their counternarcotics efforts. 5 As part of this process, the
United States established specific objectives for evaluating the
performance of these countries. According to State Department
officials, as part of the February 1999 certification decision,
the United States essentially used the same objectives it used for
evaluating Mexico's counternarcotics cooperation in March 1998.
These include (1) reducing the flow of drugs into the United
States, (2) disrupting and dismantling narcotrafficking
organizations, (3) bringing fugitives to justice, (4) making
progress in criminal justice and anticorruption reform, (5)
improving money- laundering and chemical diversion control, and
(6) continuing improvement in cooperation with the United States.
On February 26, 1999, the President certified that Mexico was
fully cooperating with the United States in its counternarcoitcs
efforts.

Mexico's Counternarcotics Efforts

Although there have been some difficulties, the United States and
Mexico have undertaken some steps to enhance cooperation in
combating illegal drug activities. Mexico has also taken actions
to enhance its counternarcotics efforts and improve law
enforcement capabilities. There have been some positive results
from the new initiatives, such as the arrest of two of the Amezcua
brothers and the implementation of the currency and suspicious
transaction reporting requirements. Overall, the results show:

 drugs are still flowing across the border at about the same rate
as 1997,  there have been no significant increases in drug
eradication and

seizures,  no major drug trafficker has been extradited to the
United States,  money- laundering prosecutions and convictions
have been minimal,  corruption remains a major impediment to
Mexican counternarcotics

efforts, and  most drug trafficking leaders continue to operate
with impunity.

5 Section 490 of the Foreign Assistance Act of 1961, as amended
(22 U. S. C. 2291( j)), requires the President to certify by March
1 of each year which major drug- producing and transit countries
cooperated fully with the United States or took adequate steps on
their own to achieve full compliance during the previous year with
the goals and objectives established by the 1988 United Nations
Convention Against Illicit Traffic in Narcotic Drugs and
Psychotropic Substances.

Page 6 GAO/T-NSIAD-99-98 Drug Control in Mexico

U. S.- Mexico Counternarcotics Cooperation

The United States and Mexico have cooperated in the development of
a binational counternarcotics drug strategy, which was released in
February 1998. This strategy contains 16 general objectives, such
as reducing the production and distribution of illegal drugs in
both countries and focusing law enforcement efforts against
criminal organizations. Since the issuance of the binational
strategy, a number of joint working groups, made up of U. S. and
Mexican government officials, have been formed to address matters
of mutual concern. A primary function of several of these working
groups was to develop quantifiable performance measures and
milestones for assessing progress toward achieving the objectives
of the strategy. The performance measures were released during
President Clinton's February 15, 1999, visit to Mexico. A
binational law enforcement plenary group was also established to
facilitate the exchange of antidrug information.

Despite these cooperative efforts, information exchange remains a
concern by both governments because some intelligence and law
enforcement information is not shared in a timely manner, which
impedes drug trafficking operations. Operation Casablanca 6
created tensions in relations between the two countries because
information on this undercover operation was not shared with
Mexican officials.

In the aftermath of Operation Casablanca, the United States and
Mexico have taken action to strengthen communications between the
two countries. An agreement reached by the U. S. and Mexican
Attorneys General (commonly referred to as the Brownsville Letter)
calls for (1) greater information- sharing on law enforcement
activities; (2) providing advance notice of major or sensitive
cross- border activities of law enforcement agencies; and (3)
developing training programs addressing the legal systems and
investigative techniques of both countries. 7

Data for 1998 show that Mexico has, for the most part, not
significantly increased its eradication of crops and seizures of
illegal drugs since 1995. While Mexico did increase its
eradication of opium poppy, eradication of

6 Operation Casablanca, a 3- year undercover operation led by the
U. S. Customs Service that targeted money- laundering operations
in Mexico, netted about $100 million in illicit drug proceeds.

7 On February 15, 1999, the Attorneys General of Mexico and the
United States signed a follow- up agreement. The new agreement
established points of contact, timing, and forms of notification
and provides for the exchange of annual reports by the two
Attorneys General on compliance.

Page 7 GAO/T-NSIAD-99-98 Drug Control in Mexico

other crops and seizures have remained relatively constant.
Cocaine seizures in 1998 were about one- third lower than in 1997.
However, the large seizure amount in 1997 was attributable, in
part, to two large cocaine seizures that year. (See app. I for
eradication and seizure trend data.)

While Mexico's eradication of its opium poppy crop grew in 1998,
its opium cultivation increased at a greater rate. As a result,
the amount of heroin produced in Mexico rose from about 4.6 metric
tons in 1997 to an estimated 6 metric tons in 1998. According to
the Drug Enforcement Administration (DEA), almost all of this
heroin will reach the U. S. market. Mexican heroin dominates the
market in the western states and, according to DEA, Mexican-
produced heroin represents 14 percent of all heroin seized in the
United States. A current study by DEA indicates that as much as 29
percent of the heroin being used in the U. S. is being smuggled in
by Mexican drug- trafficking organizations. DEA has also reported
that these organizations are attempting to produce higher purity
heroin. To do this, they are seeking the expertise of Colombian
chemists to convert Mexican opium base into the much purer white
heroin. 8

Executive and Legislative Action

Last year I testified that the government of Mexico took a number
of executive and legislative actions, including initiating several
anticorruption measures, instituting extradition efforts, and
passing various laws to address illegal drug- related activities.
I also said that it was too early to determine their impact, and
challenges to their full implementation remained. While some
progress has been made, implementation challenges remain.

Anticorruption I testified last year that corruption was pervasive
and entrenched within the justice system-- that has not changed.
According to U. S. and Mexican law enforcement officials,
corruption remains one of the major impediments affecting Mexican
counternarcotics efforts. These officials also stated that most
drug- trafficking organizations operate with impunity in parts of
Mexico. Mexican traffickers use their vast wealth to corrupt
public officials and law enforcement and military personnel, as
well as to inject their influence into the political sector. For
example, it is estimated that the Arelleno- Felix organization
pays $1 million per week to Mexican federal, state, and local
officials to ensure the continued flow of drugs to

8 The purity of heroin causing the deaths of 25 individuals in
Plano, Texas, during the past 18 months ranged from between 30
percent to 60 percent, with some heroin reaching a purity level of
70 percent.

Page 8 GAO/T-NSIAD-99-98 Drug Control in Mexico

gateway cities along Mexico's northwest border with the United
States. A recent report by the Attorney General's Office of Mexico
recognized that one basic problem in the fight against drug
trafficking has been "internal corruption in the ranks of the
federal judicial police and other public servants of the Attorney
General's Office."

As we reported last year, the President of Mexico publicly
acknowledged that corruption is deeply rooted in the nation's
institutions and general social conduct, and he began to initiate
reforms within the law enforcement community. These include (1)
reorganizing the Attorney General's office and replacing the
previously discredited drug control office with the Special
Prosecutor's Office for Crimes Against Health; (2) firing or
arresting corrupt or incompetent law enforcement officials; (3)
establishing a screening process to filter out corrupt law
enforcement personnel; and (4) establishing special units within
the military, the Attorney General's Office, and the Secretariat
of Hacienda the Organized Crime Unit, 9 the Bilateral Task Forces
10 and Hacienda's Financial Analysis Unit to investigate and
dismantle drug- trafficking organizations in Mexico and along the
U. S.- Mexico border and investigate money- laundering activities.
Additionally, the President expanded the counternarcotics role of
the military.

The Organized Crime Unit and the Bilateral Task Forces were
involved in several counternarcotics operations in 1998, for
example, the capture of Jesus and Luis Amezcua and the recent
seizure of properties belonging to alleged drug traffickers in the
Cancun area, as well as the seizure of money, drugs, and precursor
chemicals at the Mexico City Airport.

However, many issues still need to be resolved some of them the
same as we reported last year. For example,

 there continues to be a shortage of Bilateral Task Force field
agents as well as inadequate Mexican government funding for
equipment, fuel, and salary supplements for the agents. (Last year
the DEA provided

9 The organized crime unit was established through the organized
crime law to conduct investigations and prosecutions aimed at
criminal organizations, including those involved in drug-
trafficking activities.

10 The Bilateral Task Forces are specialized units within the
Special Prosecutor's Office for Crimes Against Health and are
responsible for investigating and dismantling the most significant
drug- trafficking organizations along the U. S.- Mexico border.

Page 9 GAO/T-NSIAD-99-98 Drug Control in Mexico

almost $460,000 to the Bilateral Task Forces to overcome this lack
of support);  the Organized Crime Unit remains significantly short
of fully screened

staff;  there have been instances of inadequate coordination and

communications between Mexican law enforcement agencies, and
Mexico continues to face difficulty building competent law
enforcement

institutions because of low salaries and the lack of job security.
Additionally, increasing the involvement of the Mexican military
in law enforcement activities and establishing screening
procedures have not been a panacea for the corruption issues
facing Mexico. A number of senior Mexican military officers have
been charged with cooperating with narcotics traffickers. One of
the most notable of these was General Jesus Gutierrez Rebollo,
former head of the National Institute for Combat Against Drugs--
the Mexican equivalent of DEA. In addition, as we reported last
year, some law enforcement officials who had passed the screening
process had been arrested for illegal drug- related activities. In
September 1998, four of the Organized Crime Unit's top officials,
including the Unit's deputy director, were re- screened and
failed. Two are still employed by the Organized Crime Unit, one
resigned, and one was transferred overseas.

Extradition Since my testimony last year, no major Mexican
national drug trafficker has been surrendered to the United
States. In November 1998, the government of Mexico did surrender
to the United States a Mexican national charged with murdering a
U. S. Border Patrol officer while having about 40 pounds of
marijuana in his possession. However, U. S. and Mexican officials
agree that this extradition involved a low- level trafficker who,
unlike other traffickers, failed to use legal mechanisms to slow
or stop the extradition process. According to the Justice
Department, Mexico has approved the extradition of eight other
Mexican nationals charged with drug- related offenses. They are
currently serving criminal sentences, pursuing appeals, or are
being prosecuted in Mexico.

U. S. and Mexican officials expressed concern that two recent
judicial decisions halting the extradition of two major
traffickers represented a setback for efforts to extradite Mexican
nationals. The U. S. officials stated that intermediate courts had
held that Mexican nationals cannot be extradited if they are
subject to prosecution in Mexico. U. S. officials believe that
these judicial decisions could have serious consequences for the
bilateral extradition relationship between the two countries.

Page 10 GAO/T-NSIAD-99-98 Drug Control in Mexico

In November 1997, the United States and Mexico signed a temporary
extradition protocol. The protocol would allow suspected criminals
who are serving sentences in one country and are charged in the
other to be temporarily surrendered for trial while evidence is
current and witnesses are available. To become effective, the
protocol required approval by the congresses of both countries.
The U. S. Senate approved the protocol in October 1998; however,
the protocol has not yet been approved by the Mexican congress.

Organized Crime Law According to U. S. and Mexican officials, the
1996 organized crime law 11 has not been fully implemented, and
its impact is not likely to be fully evident for some time.
According to U. S. law enforcement officials, Mexico has made some
use of the plea bargaining and wiretapping provisions of the law.
However, U. S. and Mexican law enforcement officials pointed to
judicial corruption as slowing the use of the wiretapping
provision and have suggested the creation of a corps of screened
judges, who would be provided with extra money, security, and
special arrangements to hear cases without fear of reprisals.
Additionally, results of Mexico's newly created witness protection
program are not encouraging-- two of the six witnesses in the
program have been killed.

U. S. and Mexican officials continue to believe that more efforts
need to be directed toward the development of a cadre of competent
and trustworthy judges and prosecutors that law enforcement
organizations can rely on to effectively carry out the provisions
of the organized crime law. U. S. agencies continue to provide
assistance in this area.

Money Laundering Mexico has begun to successfully implement the
currency and suspicious transaction reporting requirements, 12
resulting in what U. S. law enforcement officials described as a
flood of currency and suspicious transaction reporting. Mexican
officials also indicated that Operation Casablanca resulted in a
greater effort by Mexican banks to adhere to anti11

The organized crime law was passed in November 1996 and authorized
the use of plea bargaining and confidential informants,
established a witness protection program, and allowed for the use
of controlled deliveries and court- approved wiretaps. The Law
also has provisions for asset seizures and forfeiture.

12 In May 1996, money laundering was made a criminal offense, with
penalties of up to 22 years in prison. In March 1997, Mexico
issued regulations requiring banks and other financial
institutions to report currency transactions of over $10,000 U. S.
dollars and to report suspicious transactions. Under the prior
law, money laundering was a tax offense, there was no reporting
requirement, and violators were only subject to a fine.

Page 11 GAO/T-NSIAD-99-98 Drug Control in Mexico

money- laundering regulations. However, U. S. officials remain
concerned that there is no requirement to obtain and retain
account holders' information for transactions below the $10,000
level. No data is available on how serious this problem is and
there is no reliable data on the magnitude of the money-
laundering problem. 13

Between May 1996 and November 1998, the Mexican government issued
35 indictments and/ or complaints on money- laundering charges;
however, only one case has resulted in a successful prosecution.
The remaining 34 cases are still under investigation or have been
dismissed.

Chemical Controls Last year we reported that the new chemical
control law 14 was not fully implemented due to the lack of an
administrative infrastructure for enforcing its provisions. This
is still the case. Mexico is currently in the process of
developing this infrastructure as well as the guidelines necessary
to implement the law. However, U. S. officials remain concerned
that the law does not cover the importation of finished products,
such as over- the- counter drugs that could be used to make
methamphetamines.

New Initiatives Over the past year, Mexico has announced a new
drug strategy and instituted a number of new counternarcotics
initiatives. The government of Mexico also reported that it has
channeled significant funds-  $754 million during 1998-- into its
ongoing campaign against drug trafficking. Mexico also indicated
that it will earmark about $770 million for its 1999
counternarcotics campaign. 15

During 1998 and 1999, the government of Mexico announced a number
of new initiatives. For example,

13 We recently issued a report on alleged money laundering
involving Raul Salinas. Private Banking: Raul Salinas, Citibank,
and Alleged Money Laundering (GAO/OSI-99-1, Oct. 30, 1998). 14 In
May 1996, trafficking in drug precursor and essential chemicals
was made a criminal offense. Although some chemicals that the
United Nations recommends be controlled were not included in the
law, Mexico passed additional legislation in December 1997 that
included all chemicals, thus bringing Mexico into compliance with
the 1988 United Nations Convention Against Illicit Traffic in
Narcotic Drugs and Psychotropic Substances and other international
agreements. Mexico has also taken further action to control
chemicals by limiting the legal importation of precursor and
essential chemicals to eight ports of entry and by imposing
regulatory controls over the machinery used to manufacture drug
tablets or capsules.

15 Prior years' funding information for Mexican counternarcotics
activities is not available.

Page 12 GAO/T-NSIAD-99-98 Drug Control in Mexico

 a federal law for the administration of seized, forfeited and
abandoned goods that will allow authorities to use proceeds and
instruments seized from crime organizations for the benefit of law
enforcement is being considered,  a federal law that will
establish expedited procedures to terminate

corrupt law enforcement personnel is also being considered, and
the government of Mexico recently announced the creation of a new

national police force. In addition, the government of Mexico has
initiated an operation to seal three strategic points in Mexico.
The purpose of the program is to prevent the entry of narcotics
and diversion of precursor chemicals in the Yucatan peninsula,
Mexico's southern border, and the Gulf of California.

Furthermore, the Mexican government recently announced a
counternarcotics strategy to crack down on drug traffickers.
Mexico indicated that it plans to spend between $400 million and
$500 million over the next 3 years to buy new planes, ships, radar
and other military and law enforcement equipment. In addition to
the new spending, Mexico reported that its new antidrug efforts
will focus on improving coordination among law enforcement
agencies and combating corruption more efficiently. A senior
Mexican government official termed this new initiative a total war
against the scourge of drugs.

Status of U. S. Assistance

Last year we noted that while U. S.- provided assistance had
enhanced the counternarcotics capabilities of Mexican law
enforcement and military organizations, the effectiveness and
usefulness of some assistance were limited. For example, two Knox-
class frigates purchased by the government of Mexico lacked the
equipment needed to ensure the safety of the crew, thus making the
ships inoperative. We also reported that the 73 UH- 1H helicopters
provided to Mexico to improve the interdiction capability of
Mexican army units were of little utility above 5,000 feet, where
significant drug- related activities and cultivation occur. In
addition, we noted that four C- 26 aircraft were provided to
Mexico without the capability to perform intended surveillance
missions and without planning for payment for the operation and
maintenance of the aircraft.

Mr. Chairman, let me bring you up to date on these issues. The two
Knox- class frigates have been repaired and are in operation.
According to U. S. embassy officials, the government of Mexico is
considering the purchase of two additional frigates. However,
other problems remain. For

Page 13 GAO/T-NSIAD-99-98 Drug Control in Mexico

example, in late March 1998, the U. S. Army grounded its entire
UH- 1H fleet until gears within the UH- 1H engines could be
examined and repairs could be made. The government of Mexico
followed suit and grounded all of the U. S.- provided UH- 1H
helicopters until they could be examined. 16 The helicopters were
subsequently tested, with 13 of the Attorney General's 27
helicopters and 40 of the military's 72 helicopters receiving
passing grades. According to Department of Defense officials, the
helicopters that passed the engine tests could be flown on a
restricted basis. U. S. embassy officials told us that the Office
of the Attorney General has been flying its UH- 1H helicopters on
a restricted basis, but the Mexican military has decided to keep
its entire fleet grounded until all are repaired. Finally, the
four C- 26 aircraft still are not being used for counternarcotics
operations.

This concludes my prepared remarks. I would be happy to respond to
any questions you may have.

16 To assist the government of Mexico in its drug interdiction and
eradication efforts, the United States has provided 33 UH- 1H
helicopters to the Attorney General's Office and 73 UH- 1H
helicopters to the Ministry of Defense since 1989. One Ministry of
Defense helicopter and 6 Attorney General helicopters were
subsequently destroyed in accidents.

Page 14 GAO/T-NSIAD-99-98 Drug Control in Mexico

Appendix I Seizure and Eradication Trend Data Append i x I

Figure I. 1: Mexican Cocaine Seizures, 1990- 1998

Source: Department of State .

0 10

20 30

40 50

60 1990 1991 1992 1993 1994 1995 1996 1997 1998

Metric tons

Appendix I Seizure and Eradication Trend Data

Page 15 GAO/T-NSIAD-99-98 Drug Control in Mexico

Figure I. 2: Opium Poppy Eradication and Available Harvest, 1990-
1998

Source: Department of State.

0 1,000

2,000 3,000

4,000 5,000

6,000 7,000

8,000 9,000

10, 000 1990 1991 1992 1993 1994 1995 1996 1997 1998

Eradicated Harvested

Hectares

Appendix I Seizure and Eradication Trend Data

Page 16 GAO/T-NSIAD-99-98 Drug Control in Mexico

Figure I. 3: Marijuana Eradication and Available Harvest, 1990-
1998

Source: Department of State .

0 5,000

10, 000 15, 000

20, 000 25, 000

30, 000 35, 000

40, 000 1990 1991 1992 1993 1994 1995 1996 1997 1998

Eradicated Harvested

Hectares

(711411) Le t t e r

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