International Journal on Criminology Volume 2, Number 1, Spring 2014 | Page 9

The Long Arm of Crime and Financial Crisis
World Bank to save it from the damaging
effects of the "shock therapy" was diverted
and placed outside Russia.
"The Tequila Crisis" 1994
The 1994–1995 Mexican financial
crisis, known as the "Tequila Effect"
was, more than anything, a "cocaine
effect". Mexican traffickers acquired a very
large share in the revenues from Colombian
drugs exported to the United States at
the beginning of the 1990s, earning themselves
more than US$10 billion per year.
The business privatizations under the Salinas
presidency (1988–1994) provided
an opportunity for "recycling" the profits
from narcotics through a banking sector
that had itself been privatized. Following
the 1994–1995 crisis, the banks owed more
than US$180 billion for which the State
Treasury was forced to assume liability.
Combined with an influx of international
capital, this money laundering
contributed to a massive injection of enormous
sums of cash into the economy and
the creation of a double real estate and
stock market "bubble". Although they represented
only 1% to 3% of Mexican GDP in
the beginning, both in trade and in banking,
the narcotics dollars distorted markets
in favor of Mafia networks. The "money
laundering premium" earned by the drugs
barons made them more competitive and
able to "absorb" their competitors and yet
still focus on short-term speculative investments.
Access to credit enabled them
to recycle dirty capital and to increase the
power of its impact. The injection of narcotics
dollars weakened trade and precipitated
payment defaults, causing the Peso to
be devalued and bringing on the financial
crisis. It cost the Mexican Treasury more
than US$100 billion and increased unemployment
threefold.
“The Thai Bubble”
The 1997 Asian Crisis started in
Thailand, where the scenario was a
similar one. The equivalent of 10%
of Thai GDP was controlled by organized
crime networks which earned their income
for the most part from illegal gaming, prostitution,
and trafficking in drugs exported
from Burma. As in Mexico, the influx of
short-term foreign capital accelerated a
speculative trend. The deterioration in external
accounts made worse by the increase
in the value of the US dollar and shrinkage
of expert opportunities precipitated the devaluation
of the Baht.
However, the local political and financial
system also played a role by massively
encouraging the laundering of illegal
and Mafia earnings. At the end of 1999, despite
a 10% fall in Thai GDP in 1998 and real
estate overcapacity in Bangkok estimated at
more than three hundred thousand units,
sales prices held their ground. The reason
for this stability, impossible to comprehend
in market terms, becomes clear if we consider
the money laundering circuit impact.
4
On this crisis see a number of articles by Jean-François Gayraud: "La Dimension Criminelle de la Crise des
Subprimes (The Criminal Dimension of the Subprime Crisis), Diplomatie, Special Edition No. 8, April–May
2009; "Crises Financières: la Dimension Criminelle Un An Après" (Financial Crises, the Criminal Dimension
One year On), Défense Nationale et Sécurité Collective, December 2009; "Capitalisme Criminel: Subprimes ou
Subcrimes?" (Criminal Capitalism: Subprime or Subcrime?), Cité, No. 41, PUF, March 2010.
5
See Noël Pons, "La Crise des Subprimes: une Aubaine pour les Criminalités?" (Subprime Crisis: A Bonanza for
Criminals), Cahiers de la Sécurité, No. 7, January–March 2009.
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