editorial comment A drug crisis a year keeps the drug warriors happy.....The republic of fear is alive and well. paraphernalia will stick to the Daily Show

America's methamphetamine crisis is now rooted in Mexico, where drug cartels are illicitly obtaining tons of pseudoephedrine, the key ingredient needed to make the potent stimulant.

Mexico's imports of the cold medicine have jumped to 224 tons from 66 tons in the past five years, customs records show. That's roughly double what the country needs to meet the legitimate demands of cold and allergy sufferers, an analysis by The Oregonian newspaper of Portland, Ore., found.

U.S. officials say meth production in Mexico is rising because Mexican traffickers can no longer easily obtain pseudoephedrine in the United States and Canada, which have cracked down on companies that sell cold pills. The number of Mexican-run "superlabs" found in California has plummeted in the past three years, the officials say, yet Mexican-made meth remains widely available on U.S. streets.

Although some U.S. officials predicted three years ago that traffickers would start acquiring massive amounts of pseudoephedrine in Mexico, the U.S. and Mexico failed to prevent it from happening.

U.S. officials say they have been talking to the Mexican government about the country's surging imports of pseudoephedrine powder since 2003.

But those discussions have been largely confined to officials below the Cabinet level. Senior U.S. law enforcement officials have not raised the issue in their public testimony before Congress.

Mexican authorities have moved to restrict the number of cold pills consumers can buy in pharmacies and have shut down a number of distributors. But only this year is Mexico beginning to roll back the amount of pseudoephedrine companies can import.

Mexican officials have told the U.S. Drug Enforcement Administration that they have reduced their import quota 30 percent this year. That reduction, U.S. officials say, applies to 2004 import levels.

But those reduced import levels will still leave traffickers an ample surplus from which to obtain the pseudoephedrine they need.

The newspaper's analysis, drawn from demographic data and independent market research, offers the first publicly available estimate of how much cold medicine Mexico legitimately needs. The analysis suggests that Mexico's legitimate demand is between 90 and 130 tons -- roughly 100 tons less than the country imported last year.

The Oregonian's assessment includes data from one of Mexico's largest discount pharmacy chains and other industry sources. Some statistics, such as precisely how much pseudoephedrine is distributed by public health agencies, could not be directly obtained.

Mexican health officials have told international authorities that the country's legitimate demand may be as low as 70 tons, or a third of what Mexico imported in 2004. That estimate was presented as tentative and the Mexican government is still refining it.

The International Narcotics Control Board in Vienna, which tracks the global drug trade, is examining Mexico's pseudoephedrine imports and suspects the recent increases cannot be explained by the legitimate market. DEA officials say they have not tried to calculate Mexico's legitimate demand. They do not know whether Mexico's planned import reductions will be enough to eliminate illegal diversion.

The failure to halt diversion of pseudoephedrine products made in Mexico has profound consequences for cities and towns across the United States.

U.S. law enforcement officials report the cartels are making new inroads in the United States, setting up distribution hubs as far east as Atlanta.

"We had bad problems with the mom and pop labs, but 50 mom and pop labs aren't half of one of these shipments we're seeing here," said David Nahmias, U.S. attorney for the Northern District of Georgia. The Mexican cartels will replace the supply from local labs, Nahmias predicted, "with double the volume, double the purity, double the quality."

Superlabs in Mexico, which DEA officials say produce half the meth sold in the United States, cannot sustain their market of 1.3 million users without acquiring massive quantities of the drug's essential ingredients.

A series of articles in The Oregonian last year revealed that ephedrine and pseudoephedrine originate in only nine major factories around the world. The series showed that restricting the flow of these chemicals can force traffickers to cut production. The drug becomes more expensive and less potent, and users quit.

But authorities have been unable to maintain the pressure because traffickers simply rerouted their pseudoephedrine purchases to countries with weaker controls.

"It's only natural that they would seek the path of least resistance, or less resistance," said Scott Collier, the DEA's chief of dangerous drugs and chemicals.

Even as Mexico begins to tighten access to the chemical, traffickers already may be exploring new routes: Argentina's imports of bulk pseudoephedrine doubled from 2000 to 2003; Colombia's tripled; and Indonesia's rose tenfold.

"It doesn't take a genius to see that you can go south of Mexico, and there are opportunities in every country in Central America and South America to do a similar thing," Collier said.

U.S. and Mexican officials acknowledged in recent interviews that there's a problem with Mexico's rising pseudoephedrine imports, but differed over its severity.

Mexican officials say the country's consumers are demanding more cold medicine as their economy grows. Jose Luis Santiago Vasconcelos, Mexico's top drug prosecutor, said the cartels are obtaining only small amounts of pseudoephedrine from the domestic pharmaceuticals industry. "The legal market is not the main source," he said.

But Harry Matz, a senior trial attorney and expert on chemical control at the U.S. Justice Department, said diversion of Mexican-made cold pills "is obviously fueling the explosion in meth labs in Mexico."

Above the customs house at Mexico City's Benito Juarez International Airport, a guard watches closely as a forklift moves pallet after pallet of barrels from a caged section of the warehouse into the back of an armored truck.

The sensitive cargo is part of a three-ton shipment of Indian pseudoephedrine. A mounted video camera swivels to follow the armored truck as it heads for the front gate.

This amount of pseudoephedrine landed here every five days in 2004, the paperwork on each shipment checked by the health minister, the attorney general, Mexico's consulate in the exporting country, and the International Narcotics Control Board in Vienna.

The deliveries are typically arranged by chemical brokers who bring the raw material into the country. Then the pseudoephedrine is bought by pharmaceutical companies, which make it into pills. The drug is sold to wholesalers, who supply the nation's pharmacies.

At each step, transactions involving pseudoephedrine are overseen by government authorities under a 1997 Mexican law that requires reports and thorough recordkeeping for companies that handle drug-related chemicals. Officials audit the records and inspect the companies. Mexican officials last year also limited the amount consumers may buy and announced that only pharmacies may sell pseudoephedrine products.

Yet somewhere along the line, huge amounts of pseudoephedrine, mostly in pill form, are finding their way to the drug cartels.

The chemical is vulnerable from the moment it leaves the customs warehouse. Last June, not 100 yards from the airport gate, gunmen stole three tons of pseudoephedrine powder -- enough to make 18 million doses of meth -- from a truck parked in an unlocked parking area. The truck driver had decided to wait overnight to deliver his load to a Mexico City chemicals broker.

The circumstances make Mexican authorities believe it was not a "natural" robbery, said Vasconcelos, Mexico's deputy attorney general for organized crime.

"There are a lot of strange things there that I didn't like," Vasconcelos said. "They moved the truck to a place where there were no cameras. People entered, and nobody saw anything, when a lot of people could have seen what was going on."

The intended recipient was the largest importer of pseudoephedrine in the country, Sica S.A. de C.V., whose imports increased from 21 tons in 2000 to 68 tons in 2004. Vasconcelos said investigators are now examining why the company's imports have grown so large.

Maria del Rocio Alpuche, a manager at Sica, declined to discuss the theft, Vasconcelos' investigation or the company's patterns of imports. She said Sica's customers "all know us, since we have 40 years in the market in Mexico."

Other major importers also declined to comment. Only six companies accounted for 90 percent of Mexico's pseudoephedrine imports in 2004, which came mainly from India, China and Germany.

The Mexican subsidiary of BASF, which imports pseudoephedrine from its factory in Germany and sells it to drug companies, said it was impossible any of its product had landed in illegal channels because it is closely regulated.

Asked why BASF's sales in Mexico grew from 10 tons in 2002 to 52 tons in 2004, spokesman John Schmidt said only the company's customers would know the answer. "It sounds to me like you're trying to put the onus on BASF," Schmidt said.

The risk of diversion rises after Mexican pharmaceutical companies turn the powder into pills. Sometimes, the cartels buy large quantities of cold medicine from dishonest pharmacies. Other times, they use front companies to buy pills from drug wholesalers.

Mexican authorities said they learned in 2004 that the Mayo Zambada-Chapo Guzman organization, an emerging leader in Mexican meth production, had enlisted a major pharmaceutical wholesaler in Guadalajara.

"What did we find with this distributor?" Vasconcelos said. "That one of its managers was selling large quantities of pseudoephedrine to pharmacies that didn't exist, or to pharmacies that did not have the authorization of the secretary of health to sell that type of controlled medicines."

Pharmacies pose an even bigger problem, he said. The government has "constant surveillance over the distributors," Vasconcelos said. "Where it gets more difficult is with the pharmacies on the street, because there you can't have control. They can say they sold 50 cases when they only sold five cases, and the other ones were diverted."

Farmacias Similares, a leading pharmacy chain in Mexico, has rejected a number of suspicious orders. Spokesman Vicente Monroy said a supposed wholesaler last year requested a large load of cold pills containing pseudoephedrine, anti-diarrhea formulas and other medications. The other medicines could wait, the wholesaler said, but he needed the cold pills immediately.

Authorities have confiscated millions of Mexican-made pseudoephedrine pills from airports, buses and meth labs.

Victor Clark Alfaro, a Tijuana human rights advocate who has interviewed numerous meth cooks, said Tijuana has a major source of pseudoephedrine pills in every one of its 729 neighborhoods. "They always tell me, `Victor, it's very easy. You can buy from this woman 10,000 boxes,"' Clark said.

Traffickers who acquire the pills use sophisticated metallic presses to remove the pills from foil blister packs. The pills are dipped in a solvent to remove inactive ingredients and then transformed into meth.

At least 16 of the roughly 50 pseudoephedrine brands made in Mexico have turned up in the hands of suspected drug traffickers since 2000, reports from Mexican military and police agencies show.

Cold pills made by Productos Farmaceuticos Collins are among the most frequently seized by Mexican federal police. In March, a shipment of 200,000 of the company's Lovarin P cold pills was intercepted at a delivery service in Mazatlan, one of at least 15 seizures involving Collins' products over the past five years.

The company's imports of pseudoephedrine have risen almost sixfold since 2000, from three tons to 17, customs records show. Collins officials did not respond to written questions and telephone calls seeking comment.

A spokesman for Schering-Plough's subsidiary in Mexico, the country's leading seller of pseudoephedrine products, said the company is "extremely concerned" that its Afrinex pills have been frequently confiscated by narcotics officials.

Assistant General Manger Sergio Ulloa said Schering-Plough S.A. de C.V. cooperates with the authorities in every investigation, sells only to well-established distributors and turns away business when it has doubts. The company delivers its product directly to the distributor's warehouse. What happens after that, Ulloa said, is "something that is out of our control."

Mexico's pseudoephedrine surplus is fueling a rise in the availability of Mexican meth in the United States -- a connection illustrated vividly in October, when U.S. investigators linked a meth lab outside Mexico City to a group of Atlanta traffickers.

Mexican prosecutors said federal police found the lab after arresting three men in a pickup hauling a load of Schering-Plough's Afrinex pills. At the lab was a vehicle with a hidden compartment containing 22 pounds of finished meth, enough for about 100,000 hits. Its destination, Mexican officials said, was points north.

Atlanta is now awash in Mexican-made meth, according to U.S. law enforcement officials. As recently as 2003, federal agents were seizing shipments of four to seven pounds of meth at a time. Last year, it was 20 to 70 pounds. In January, DEA agents intercepted 125 pounds headed to Atlanta from the border town of Brownsville, Texas. Then, in March, they nabbed 174 pounds. It was one of the largest seizures in U.S. history.

Sherri Strange, special agent in charge of the DEA in Atlanta, said the Gulf cartel and the Armando Valencia organization, both based in Mexico, are now battling for turf in Atlanta. The city has become a command center for distributing the drug from Miami to New York, according to federal law enforcement officials.
"I'm more concerned about this drug than any drug issue in the district or the state," said Nahmias, the federal prosecutor in Atlanta. "We've had this rising tide. Now it's like a tidal wave, and it's about to crash down on us because of the huge amounts we're seeing."

Mexican drug traffickers have cranked up production of meth unimpeded because Mexico's soaring imports of pseudoephedrine make the chemical easy to obtain. Yet documents, interviews and public testimony show that the growth in imports has caused little stir among top U.S. policymakers.

The topic receives no mention in the DEA's latest unclassified intelligence report on Mexico, published in November 2003; the National Synthetic Drugs Action Plan, published in October; or the U.S. State Department's International Narcotics Strategy Report, published in March.

Robert Charles, chief U.S. diplomat on narcotics issues from October 2003 until March 2005, said he was never alerted to the problem.

"That's a dramatic uptick," Charles said in April, when told by The Oregonian that imports had grown to 224 tons in 2004. Charles said that if he seen those numbers while in office, he would have raised questions directly with Mexico's attorney general and senior U.S. officials.

U.S. Attorney General Alberto Gonzales was briefed on the pseudoephedrine imports in April, before meeting with Mexico's attorney general. During a Senate hearing in May, U.S. Sen. Patty Murray, D-Wash., asked Gonzales what the United States was doing to smash the cartels' supply of pseudoephedrine. Gonzales replied that U.S. and Mexican authorities were working together, but he didn't tell her about the surge in legal pseudoephedrine imports.

Nor did DEA Administrator Karen Tandy address Mexico's legal pseudoephedrine imports when she was asked about Mexican meth production during congressional testimony in March.

U.S. officials instead have highlighted a smaller source of pseudoephedrine in Mexico: Hong Kong. DEA officials say drug companies in Hong Kong have illicitly shipped 450 million cold pills to Mexican traffickers since 2003 -- enough to yield 13.5 tons of pseudoephedrine a year. By comparison, The Oregonian's analysis suggests traffickers obtained 95 to 132 tons from products made by Mexico's own pharmaceutical industry.

Mid-level U.S. officials say they are aware of the growth in Mexico's legal imports of pseudoephedrine, which began in 1998, and have been discussing it with their Mexican counterparts.

"We talk to them very frankly about any suspicions we have," said Collier, the DEA's chief of dangerous drugs and chemicals. "I think movement by them on this issue indicates that they do understand and are taking steps, at any rate, to try and at least prevent diversion from the legitimate marketplace."

U.S. Embassy spokeswoman Diana Page said it was the Mexican government that contacted U.S. officials about the country's massive influx of pseudoephedrine. She said Mexican health officials asked for help creating a computer registry of imports and domestic sales, saying to U.S. officials, "We know we have a problem."

Even as Mexico reduces its pseudoephedrine imports by 30 percent, it still leaves a surplus of 28 to 65 tons of the chemical, The Oregonian's analysis shows.

Charles, the former assistant secretary of state for international narcotics and law enforcement affairs, said the problem has not risen higher on the U.S. agenda with Mexico because of competing concerns such as corruption, immigration and trade. The list is so long, he said, that "no one issue seems to be ever able to fully dominate the discussion."

"More pressure has to be applied to Mexico than has been applied," said Charles. "But you're talking to the guy who believes that the most versus a trade guy, who would say to you, `Now, now, now. That's not the No. 1 priority."'

Even if the Mexican government succeeds in clamping down on pseudoephedrine, there is little to prevent traffickers from leapfrogging to other countries for their essential meth ingredient. For more than a decade, the traffickers have done just that, rebounding from each new restriction on meth ingredients by finding sources that U.S. authorities ignored.

Mexico's Amezcua brothers pioneered mass production of the drug in the early 1990s by ordering ephedrine powder direct from manufacturing nations: India, China, Germany and the Czech Republic. When those countries cracked down in 1995, Mexican cartels began buying pseudoephedrine pills in the United States. U.S. officials tightened their rules in 1997, and traffickers turned to Canada, which lacked any restrictions.

Canadian companies began importing dramatically more pseudoephedrine powder, much of which DEA said was converted to pills and sold to cross-border smugglers. U.S. officials responded vocally, repeatedly flagging Canada's rising imports in State Department narcotics reports. President Bush and congressional leaders leaned on Canada to act.

What U.S. officials failed to note, however, was that Mexico's pseudoephedrine imports were rising just as fast. United Nations trade statistics show Mexico's imports of pseudoephedrine matched Canada's increase roughly ton for ton starting in 1998, the year DEA officials pegged as the start of the Canadian boom.

By 2002, a joint report by the DEA, State Department, Central Intelligence Agency, White House drug czar and other agencies theorized what would happen when the Canadian pipeline closed. Mexican traffickers would move production to Mexico, the report said, "where chemicals could be more easily obtained."

DEA agents and the Royal Canadian Mounted Police eventually snared hundreds of smugglers, and Canadian officials enacted new regulations over pseudoephedrine in 2003. The flow of pills from Canada to the United States dried up, while Mexico's imports kept rising.

Facing a shortage of Canadian pseudoephedrine, Mexican traffickers scaled back production in California dramatically. The number of superlabs found in the United States fell from 244 in 2001 to 53 in 2004. They moved to Mexico, U.S. officials say. Shipments of finished meth found moving across the U.S. border grew from 2,600 pounds in 2002 to 4,500 pounds in 2004.

U.S. officials expect other countries to become targets for the cartels as Mexico tightens its controls.

If that happens, the agency most likely to spot the trend would be the Vienna-based International Narcotics Control Board, which tracks imports and exports of drug chemicals globally. The board's three chemical investigators, sifting through export documents, succeed in halting hundreds of suspicious orders annually.

But the board's power, like its staffing, is limited. With narcotic drugs such as codeine, the agency publishes limits on how much each country should import based on an estimate of medical need. If countries exceed those limits, the board can announce they are violating international law. It has no such authority over pseudoephedrine.

Some U.S. lawmakers and administration officials say it is time for the United States to become more directly involved, in Mexico and beyond.

The United States must figure out how to work with the Mexican government and with producing countries to try to better track the flow of pseudoephedrine for legitimate use, said Nick Coleman, counsel for the House Government Reform Subcommittee on Drug Policy.

"It's not clear internationally that we are able to track these things," Coleman said, "because at some point, they drop off the radar."

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GROWING MEXICAN PSEUDOEPHEDRINE SUPPLY ESCAPED U.S. NOTICE

MEXICO CITY -- Mexican law enforcement officials have worked with U.S. drug agents since 2003 to end the smuggling of pseudoephedrine pills from Hong Kong, believing it to be the largest source of the cold medicine used by methamphetamine traffickers.

But an analysis by The Oregonian newspaper of Portland, Ore., shows that Hong Kong is only a secondary supply of pseudoephedrine for the Mexican drug cartels fueling the U.S. meth trade. The dominant source is cold medicine manufactured by Mexico's legitimate pharmaceuticals industry.

The newspaper reached this conclusion by estimating Mexico's legitimate demand for pseudoephedrine, something that U.S. officials have never done and Mexican officials are only now attempting. The analysis showed that legitimate demand is much smaller than the 224 tons Mexico imported last year.

Only 81 tons were required to make roughly 140 leading cold medicines in Mexico last year, the newspaper found. This figure was based on sales at 28 major wholesalers and pharmacy chains reported by IMS Health, a U.S.-based market research firm. The newspaper determined the dosage of pseudoephedrine in each product, then multiplied that amount by the number of pills or milliliters of liquid sold.

Even this estimate is generous, because the IMS data may inadvertently include illegitimate sales.

Separately, sales data provided by Farmacias Similares -- a huge discount pharmacy chain not included in the IMS survey -- accounted for another 10 tons of pseudoephedrine.

Solid statistics on cold medicine use by Mexico's extensive public health system was unavailable. But the best available data indicate that Mexico's main federal provider of health services consumed, at most, about 16 tons.

Roughly 6 tons was assumed wasted during manufacturing, based on industry standards.

An additional 15 tons went to U.S.-owned "maquiladora" factories that manufacture cold medicine for the U.S. market, according to Mexico's health ministry.

The ministry said about 1 ton was exported to other countries.

In total, these legitimate uses of pseudoephedrine accounted for 129 tons, or 95 tons less than what the country imported. And this estimate may understate the problem.

Using a different approach, The Oregonian attempted to answer what a plausible growth rate for Mexican pseudoephedrine imports might be.

From 1996 to 1998, just before Mexico's pseudoephedrine boom began, the country's imports of the chemical averaged 30 tons a year. The newspaper assumed these were entirely legitimate, then factored in the effects of population growth, rising standards of living and a ban on another popular decongestant, phenylpropanolamine.

Calculated this way, legitimate uses should have grown to 92 tons by 2004. That would leave 132 tons available for the meth trade.

An assessment by Mexico's health officials suggests the amount diverted could be even more. They have told international authorities the country could need as little as 70 tons of pseudoephedrine, an estimate that is still being refined.

Mexico's pseudoephedrine surplus of roughly 100 tons matches what meth cooks in Mexico require each year. Previous Drug Enforcement Administration analysis shows that 200 tons are needed to produce all the meth sold in the United States, and DEA Administrator Karen Tandy told Congress in March that labs in Mexico make about 53 percent of U.S. meth supply. Jose Luis Santiago Vasconcelos, Mexico's deputy attorney general for organized crime, acknowledged in an interview that drug cartels are obtaining pseudoephedrine pills made by the country's pharmaceuticals industry.

But Vasconcelos said pills made in Hong Kong are the cartels' main source. U.S. officials say shipping records and other intelligence show Hong Kong pharmaceutical manufacturers have shipped 450 million pseudoephedrine pills to Mexican front companies since 2003. On April 1, Hong Kong authorities agreed to verify each Mexican importer's credentials.

At the standard size of 60 milligrams, the Hong Kong pills would yield only 13.5 tons of pseudoephedrine a year.

June 5, 2005



(Steve Suo is a staff writer for The Oregonian of Portland, Ore. He can be contacted at stevesuo@news.oregonian.com. Suo reported this story in Mexico City and Vienna. Freelance journalist Adrienne Bard contributed to this report in Mexico.)

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