August 30, 2022

Credit: The Wall Street Journal, Jon Kamp, José de Córdoba, and Julie Wernau

CULIACÁN, Mexico—At a half-built house in a barrio, a longtime Sinaloa cartel employee used a shovel to mix chemicals in a simmering oil barrel.

His concoction was an illegal form of fentanyl, which Mexican criminal organizations are churning out at high volume in laboratories and smuggling across the border. In a six-day workweek, the cook said, he can make enough fentanyl for hundreds of thousands of doses.

With business savvy and growing power in Mexico, the Sinaloa and rival Jalisco cartels dominate the market for supplying fentanyl to the U.S. They cornered the market after China cracked down on fentanyl production several years ago and are now churning out bootleg versions of the highly potent synthetic opioid that, in its legal form, is used under prescription to treat severe pain.

Fentanyl’s inexpensive, easy-to-replicate formula has boosted its appeal to criminal networks. It is also fueling an overdose crisis that claimed more than 108,000 lives in the U.S. last year, a record.

“If it were an athlete, people would call it ‘The G.O.A.T.,’ ” said Jim Crotty, who served as deputy chief of staff at the Drug Enforcement Administration from 2019 to 2021. “It is in fact the most pernicious, the most devastating drug that we have ever seen.”

Like a factory worker at a multinational corporation, the 25-year-old fentanyl cook is part of a globe-spanning production line manufacturing the cartels’ highly profitable export. These crude labs—it is unknown how many there are—can be set up inexpensively and quickly, torn down and moved or abandoned to evade security forces.

The cook said he makes up to $2,500 a week running his one-man lab, where he dons a hazmat suit, dark glasses and a black cloth mask. If he gets queasy, he said, he drinks milk. Jugs line the roughly 10-by-10 foot lab, including one containing a clear liquid marked “Pure Acetone.” Others are marked “Fentanyl XXX,” and “Chinese Chemical.”

The two cartels are named for their respective strongholds in states on Mexico’s Pacific Coast. Sinaloa is a decades-old criminal organization deeply embedded in the economy, politics and culture of Mexico’s wild northwest, analysts and officials said. Jalisco, farther south, is a relative upstart, and has violently challenged Sinaloa for market share.

Fentanyl production is simpler than heroin, because it is entirely synthetic and doesn’t require cultivating the poppies needed for heroin. Busts of Mexican labs or large seizures at the border can be quickly offset by new batches without having to wait to harvest crops or pay farmers.

It is also less expensive to make. The plant-based opium needed to produce a kilogram of heroin can cost producers about $6,000, while the precursor chemicals to make a kilogram of fentanyl cost $200 or less, according to Bryce Pardo, associate director of the Rand Corp.’s Drug Policy Research Center, who helped lead a recent bipartisan report on synthetic opioids.

“Synthetic opioids offer economic and tactical advantages that allow criminals to vastly outpace enforcement efforts,” the report said. Illegal drug exports to the U.S. from Mexico are worth tens of billions of dollars annually, it estimates, with fentanyl a growing share of the business.

Heroin’s profile has been shrinking as fentanyl becomes more available. Some Mexican poppy farmers in the mountains of Sinaloa say they have lost income as cartels shift away from heroin, and have abandoned their fields.

‘Principal product’

The Sinaloa cartel is the market leader, said Renato Sales, Mexico’s former security chief. U.S. and Mexican officials likened it to how a company works, manufacturing and marketing an array of illegal drugs and cultivating links to suppliers in dozens of countries in Latin America, Europe and Asia. The cartel is believed to have different units handling jobs such as security, money laundering, transportation, production and the bribing of public officials.

The cartel dominates the economy and life of Culiacán, a semitropical city of luxury cars, gated neighborhoods and barrios. The downtown includes a shrine to Jesús Malverde, a bandit whom many of Sinaloa’s drug traffickers have adopted as a popular saint. A cemetery housing air-conditioned tombs three stories tall is a hallowed resting place for prominent drug lords, and their not-so prominent hit men, some of whose plots are bought in bulk by their bosses.

At the city’s airport gift shop, visitors can buy baseball caps emblazoned with the number 701, a reference to the ranking in the 2009 Forbes list of richest people of Joaquin “El Chapo” Guzman, the drug lord and Sinaloa native son serving a life sentence in a supermax prison in Colorado.

The U.S. attorney’s office in San Diego in June said 26 people were indicted following a two-year investigation into what law-enforcement officials described as a sprawling operation extending from Sinaloa. Drugs seized included methamphetamine, cocaine, heroin and nearly 500,000 fake pills laced with fentanyl, investigators said. The DEA identified alleged couriers, stash-house managers and people who smuggled proceeds back to Mexico.

A separate DEA operation in 2020 led to the arrest of more than 600 alleged Jalisco cartel members in the U.S. That cartel is Mexico’s fastest-growing and most violent. It is fighting with Sinaloa for control of seaports where fentanyl’s chemical ingredients arrive from China as well as routes through the country and border crossings into the U.S.

Illegal fentanyl production has flared in the past. A 2005 fentanyl surge in parts of the U.S., including the Midwest, led authorities to a single illegal lab in the city of Toluca, near Mexico City. Shutting it down helped stem the problem for a time.

Fentanyl metastasized into a broader crisis in the 2010s, as drugs flowed from China, sometimes through Mexico, and the cartels ramped up their own production. The eastern half of the U.S. was particularly hard-hit as powdered fentanyl was mixed into the heroin supply, sometimes catching users off guard and leading to an increase in fatal overdoses.

In May 2019, under pressure from the U.S., China put fentanyl-related drugs under a controlled regulatory regime. The next year, seizures of fentanyl from China in the U.S. dropped sharply, according to a Government Accountability Office report.

“As we all know, China is not a democracy,” said Jim Carroll, U.S. drug czar under former President Donald Trump. “They can take very quick adverse action against these producers.” Chinese chemical manufacturers continue to sell the ingredients for fentanyl, many of which have a range of legitimate uses.

Marketing savvy

Mexican cartels were primed to take advantage. They already had established trafficking networks built around drugs like cocaine, marijuana and heroin, said Uttam Dhillon, who served as acting DEA administrator under Mr. Trump. And they had relationships with Chinese chemical makers, and expertise running drugmaking labs, through their production of methamphetamine, another synthetic drug they are sending to the U.S., Mr. Dhillon said.

The DEA said the cartels are pushing their synthetic wares into more parts of the U.S. Methamphetamine is more present in some eastern states where that drug was once rare. And fentanyl is growing in the West. Its potency and the lack of quality control in the black market make it easy to cause overdoses—including when users don’t know that fentanyl is laced into or simply sold as other drugs.

The drug often arrives in the form of fake tablets made to look like prescription drugs, including pain pills, law-enforcement authorities said. The DEA believes these dupes—often stamped to look like real 30 milligram oxycodone pills—are aimed at driving prescription drug users toward an illicit, cartel-made product.

The cartels “don’t just fill a void, they create a market,” Mr. Dhillon said.

The pills are so ubiquitous that they have been falling in price, creating pressure on the cartels to roll out new products, according to a 27-year-old fentanyl producer who runs a clandestine lab in Culiacán. He said he and a partner are experimenting with a new version meant to be 30% more potent than the typical fake oxycodone tablets, known as M30s.

The new pills, colored pink, yellow and green, have the shape of a skull, an iconic Mexican folkloric image, and don’t try to mimic real medication. They are also made with butter flavoring so that, when melted on foil with a flame, the pills leave a golden trail and smell like caramel popcorn, telltale signs of quality, said the producer.

He said he has made as many as one million pills in a week. Another worker in his lab had to periodically stop one of their machines—a $4,000, Chinese-made pill press—to clear jams as it ran on a recent, humid day.

“The M30 is not working very well. Everybody is making them,” the producer said. The new pill, he said, “will generate a lot of demand.”

Common chemicals

Fentanyl market dynamics have proven hard to disrupt. One problem is that many of the precursor chemicals made in China are also used in legitimate pharmaceuticals. Even when some are controlled, fentanyl makers can pick different inputs among an array of available chemicals, the recent U.S. bipartisan report said.

Take the chemical 4-piperidone, which is a common fentanyl component that is also used for legitimate pharmaceutical research.

Some 160,000 companies in China produce chemicals used in drug assembly in batches as small as tens of metric tons, the State Department estimated in early 2021, although estimates vary widely.

Rahul Gupta, director of the Biden White House’s Office of National Drug Control Policy, said the U.S. is asking China to enforce proper labeling of chemical shipments and to agree on which regulated chemicals can be used to make fentanyl so they can be tracked.

A 2021 report from two researchers at the Institute of Criminal Investigation of People’s Public Security University of China, the country’s highest police academy, pointed to weak training and unclear lines of command within China’s drug enforcement divisions. The researchers said those inspecting chemical plants often don’t have the means or know-how to identify fentanyl precursor chemicals.

The U.S. wants China to apply what are known as “know your customer procedures” to chemical makers so that manufacturers are accountable for where their products go, Dr. Gupta said.

China disputes the U.S. characterization of China’s role in the illicit fentanyl supply chain. A statement from the Chinese embassy in Washington, D.C., touted China’s efforts to control drug precursors and said it was untrue that these chemicals undergird the U.S. fentanyl problem. “The U.S. has itself to blame for the root cause of fentanyl abuse in the country,” it said.

A stiffer Chinese crackdown on precursors might not disrupt the market or slow the cartels because they could buy chemicals from other countries, including India. “There’s lots of places these same chemicals can come from,” said Rep. David Trone (D., Md.), who co-chairs a federal commission on synthetic opioid trafficking, which is behind this year’s bipartisan report, during a recent conference.

To try to stop fentanyl precursors from entering Mexico from Asia, President Andrés Manuel López Obrador put the country’s ports and its largest airport in Mexico City under the control of the Mexican navy.

The navy said in June it had seized around 320 tons of illicit-drug chemicals in the past six months. Mexican authorities have also destroyed about 1,000 labs, 90% of them in Sinaloa producing synthetic drugs, mostly methamphetamine, in the 3½ years since Mr. López Obrador took office, a senior Mexican navy officer said.

Since 2017, Mexico has dismantled some 22 fentanyl production sites, said Oscar Santiago Quintos, head of the criminal intelligence agency of the attorney general’s office. In a bust in July, Mexican soldiers captured 543 kilos of what they said was fentanyl, the single largest seizure in Mexican history.

U.S. seizures last year included 20.4 million fake pills, according to the DEA. Fentanyl and other drugs are often ferried across the southern border hidden in secret compartments of vehicles.

U.S. officials and analysts in both countries have criticized Mr. López Obrador for failing to curb the cartels’ growing power. The Mexican president has said he is focused on what he calls the economic roots of Mexico’s lawlessness and violence, rather than dismantling the cartels.

Cross-border cooperation over security matters has been strained since U.S. agents arrested a former Mexican defense minister on drug conspiracy charges in 2020. The U.S. dropped charges after Mexico threatened to curtail cooperation. Mexico passed legislation that U.S. officials said made it harder to work with their Mexican counterparts.

The Sinaloa cartel was forged from close-knit families in the mountains near Culiacán, who for generations grew marijuana and the opium poppies that provided the base for heroin. Alliances with Colombian cartels in the 1980s ramped up Sinaloa’s control of the flow of cocaine on routes to the U.S. In Culiacán, the cartel runs what amounts to a shadow government in a company town.

The fentanyl cook started with the cartel as a 14-year-old lookout. He measured by eye while cooking the fentanyl, holding two fingers against a bottle marked “chlorine” before pouring some into the oil-barrel mix. “We have our own formula,” he said. His efforts yielded a grayish-white, dough-like paste, which would be dried in the sun and packed as kilograms of powder for shipment across the border.

As he worked, an associate whispered that a car was coming to pick up cargo from the next room. Wrapped in plastic, the 16 kilograms, which represent about three days work, were marked with different codes—X30, Coco, PO8—identifying buyers. Each kilo could potentially yield tens of thousands of doses. “They are leaving tonight for the U.S.,” he said.