By Megan Erickson and Lucas Owen

Has growing demand for licit goods caused an increase in violence among Mexican criminal organizations? We theorize that cartels enter licit markets to supplement and diversify revenues from the drug trade, and that the incentive to do so changes with revenues in licit markets. Given their comparative advantages in agricultural production and violence, we expect cartels to react to increasing demand in agricultural markets by fighting to maximize territorial control and monopolize production. Using a difference-in-differences design, we test the hypothesis that a positive shock in demand for avocados from municipalities in the states of Michoac´an and Jalisco led to an increase in cartel violence. We ultimately find the opposite of what we expect. The enactment of a U.S. phytosanitary policy in June of 2016, which extended U.S. demand for avocados to municipalities formerly unable to export to the United States, led to a significant decrease in cartel homicides compared to municipalities that were unaffected by this policy. Given that cartels were present in most areas of Michoac´an and Jalisco before the policy, we interpret this result as coming from cartels anticipating increased territorial contestation. Since cartels expect others to challenge their territory, they bolster their defenses, reducing incentives for territorial contestation.

Working Paper, Washington Political Economy Forum, 2020. 31p.