Small Wars Journal

Threat Analysis and Spillover Effects of Organized Criminality

Mon, 07/07/2014 - 12:23am

Threat Analysis and Spillover Effects of Organized Criminality

Irina Alexandra Chindea and Byron Ramirez

In our previous essay, we re-opened the dialogue on the challenges criminal groups generate.  We argued that criminal organizations are resourceful and strategic entities, which makes them particularly challenging to governments and societies.  Moreover, we introduced the analytical framework that we propose to systematically conceptualize the numerous threats the activities of criminal groups yield across five levels of analysis – individual, local, national, regional, and transnational.

The purpose of this second essay is to develop our analytical framework in more depth and provide a detailed analysis of the particular threats that emanate from criminal organizations, and the corresponding spillover effects that accompany them across various levels of analysis. Specifically, the essay is structured in two main sections. The first section (or section A) discusses the threats posed at each of the levels of analysis, and the upstream spillover effects they engender. By upstream spillover effects we refer to the direction in which these effects flow: from the individual (or micro-level) to the state, regional and transnational (or macro-level). In the second section (or section B), we examine the downstream spillover effects or the way in which the activities of criminal groups generate an impact from the macro-level to the immediate lower levels of analysis.

Table 1: Criminal Groups Threats - Spillover Effects Matrix

Hence, our main argument is that the threats criminal groups pose across the five levels are interdependent, and what happens at one level – be it individual, community, or the state – does not remain contained at that specific level, but progressively touches and influences both the lower and upper-levels. Additionally, this interdependence across levels of analysis equally applies to the responses and reactions the activities of organized criminal groups generate among the population and the security agencies charged with suppressing organized crime at the state, regional and international level. The third essay in this series provides a comprehensive analysis of the responses and policy measures these threats engender across each level of the framework that we propose, in both upstream and downstream directions.

Criminal Groups Threats - Upstream Spillover Effects

Individual Level

The activities of organized criminal groups often translate into damaging effects on the health, wellbeing and physical security of the individual who may end up engaged in illegal activities that involve violence or a degree of coercion, or as the direct victim of drug abuse, human, sex, and organ trafficking.  Also included in the individual level of analysis are family members of those who become addicted, are being trafficked, disappeared or murdered in connection with criminal activities, or by criminal organizations.

The New York Times recently reported on the current situation and consequences of escalating heroin addiction rates in the small town of Hudson, Wisconsin.[1] The stories of several individuals who lost close family members to heroin addiction are telling. They also provide a perfect illustration of the way in which the aggregated effect of individual decision-making and opportunities provided by organized criminality translate into negative effects on the overall community. Unfortunately, the mounting levels in heroin use and addiction in Hudson, Wisconsin, do not represent an isolated case, but a rising problem throughout several communities across the United States.

Local Level

The individual level spills over into the local level through various mechanisms. First, an individual user – besides damaging his own health – may have a negative impact on his immediate family members. Additionally, she may end up involving and corrupting other members of the community in the respective illegal activity.

Second, in a similar vein, an individual peddler or trafficker often corrupts other members of the community by encouraging the use of illegal substances and making them available. In this way, he is deliberately spreading the ill into the community. He may also frequently engage in the recruitment of other members of the community into the trafficking of illegal substances.

The first two levels of analysis deal with the toll organized criminality has on:

  • The individual who either works for these organizations and/or is a consumer of the substances trafficked by the organization, and
  • The family members, friends and co-workers who are part of the immediate community in which the individual carries out his or her daily activities.

An individual in this case can be simultaneously both victim and victimizer, and often fall back and forth from one category into the other over time.

The activities of criminal groups also pose threats at the local political level.  Besides the cases of corruption of law enforcement and political leaders who may turn a blind eye to the activities of organized crime, and thus let perpetuate the ill outcomes resulting from such activities, organized crime yields a negative impact as well on the local economy. The activities of criminal groups stifle competition and raise barriers to entry for new firms by raising the cost of doing business in a certain environment in which legal players are coerced into paying “pizzo” or protection money to the criminal organizations that operate in the area. 

Also, legal players have to pay higher bribes to local officials in order to get the necessary licenses and approvals to set up their business, which places an additional burden on the existing businesses that need to pay “pizzo” (or the Spanish version “piso”) to criminal groups. In this way, the legitimate business organizations often end up paying higher bribes in order to compete with the criminal establishment for the attention of local officials who are increasingly dis-incentivized to perform their duties without the “de riguer” kickbacks. Hence, the local level is where the vicious circle of corruption and related-ills starts with long-range negative impacts on governance, the rule of law, and State capacity.

National Level

The local level leads to spillover effects at the national level by extending the realm of criminal activities and the corruption of State officials associated with it. Once criminal activities extend from one geographic region of the country into another, corruption extends both horizontally and vertically across hierarchical levels while weakening the State even further. An equal weakening of the licit economy takes place as foreign direct investment and financial market stability are impaired, and they are followed closely by damages to the social fabric of communities across the country. With rising levels of criminal activity, related violence, and illicit drug addiction, more pressure is placed on the State to tighten security measures at the local, regional and national level together with tightening border related regulations, and retraining their law enforcement.

Another area where the effects of rising drug addiction rates are felt is the medical sector.  If the domestic medical sector is not privatized and instead is heavily supported or subsidized by the State, additional stress is placed on State finances and budgets that in most cases are already strained in weaker States such as Mexico, and other Central American countries. 

Colombia in the late 1960s illustrates an example where a State with a weak rule of law in a country with grave income inequality can facilitate the conditions for the rise of criminal groups.  At that time, Colombia was besieged by pervasive poverty and substantial economic inequality, and the illegal drug trade surfaced as an alternative means for earning a living. Many disenfranchised understood that the country’s oligarchy had no concern for the poor, and, after perceiving no economic opportunities, some decided to pursue the drug trade as a viable option.

Most who entered the illegal drugs industry were opportunists seeking wealth.  The State effectively failed in many areas. From a political perspective, Colombia was inundated with corruption.  The rule of law did not exist.  Institutions were weak. Thus, by the early 1970s, a perfect storm had formed while the Colombian State failed to recognize the magnitude of the problem, and consequently failed to address the inequality and corruption and ensuing socio-economic issues that compounded the problem. In this context, drug trafficking became a proverbial economic substitute good. Many who had never enjoyed income and much less wealth were seduced by the money and power that flowed from the illegal drug trade. 

Although within the same country the dynamics at the local level can be very different from those at the state and federal level (for political units with federal structures) or at the national level (for unitary states), there is no significant variation in the content of the set of threats posed across the various domestic levels. The extent of the threats can vary across local, state and national levels with some threats more prevalent and potent in one community versus others or at one domestic level versus the other. At the same time, as a conceptual term of reference, the challenges faced at the community and state level tend to draw on similar factors.

For instance, in Mexico different sub-cultures are dominant in certain regions of the country, such as the norteño sub-culture alongside the U.S.-Mexico border which is distinct from the sub-cultures found in the states of Yucatan and Quintana Roo.  Although regional differences are likely to result in different threats being more prevalent in one region versus another and in different local reactions to the threats coming from the drug cartels, the communities across the country face overall a similar range of threats from organized criminality.

Thus, the threats posed at the local, state and national levels include the weakening of governing structures due to the corruption of politicians, law enforcement and other government officials.  Other threats that fall under the local and national level include adverse effects on licit economic markets, the stifling of licit businesses in many cases, and additional fiscal pressure on the State and local governments to combat criminal activity. Criminal organizations also compromise governance, the rule of law, and State sovereignty at the national level.  Besides, drug addiction and violence related to criminal activity affect the social fabric of the communities whose members engage in criminal activities with serious repercussions to the security, health and overall wellbeing of all citizens.

Regional Level

Once criminal groups establish greater operational and distributional capacity and increased network reach, most of them extend their activities across national borders in search for customers, often irrespective of the extent of the pressure placed on them by law enforcement and militaries. When domestic law enforcement is lax, criminal groups can flourish and prosper within the borders of their country of origin, and once the groups have established a strong operational foothold they are ready to cross the national border into neighboring countries.

On the other hand, if the domestic law enforcement pressure on these groups is very high but does not succeed to completely annihilate all players (which is an impossibility in practice), then the balloon effect comes into play, and these criminal groups (or whatever remains of them) cross the national border to take shelter in neighboring countries, and set up operational command there, as in the case of the Mexican Zetas cartel establishing a foothold into Guatemala,[2] and that of the FARC crossing over into Venezuela.[3]

Unfortunately, without a more robust, complex, and adaptive strategy on the part of the State, it has been demonstrated that a purely repressive law enforcement approach to organized crime does not suffice to squelch the activities and existence of such criminal groups once and for all. To a certain extent, the frustration felt by domestic law enforcement officials who aim to contain the problem and eradicate it is fully understandable in the face of the whack-a-mole game that is currently taking place. Thus, once organized crime becomes entrenched in one State, it is only a matter of time for its effects and influence to spillover into neighboring countries.  Subsequently, regional contagion is made even more likely by the inherent weakness of the surrounding States.

Correspondingly, at the regional level, the activities of organized criminal groupings have an impact on economic and political relations among countries, especially in the case of countries that are tied together through regional free trade pacts such as NAFTA. Also affected at the regional level are countries that form part of political alliances or blocs that promote political, economic and social integration such as ASEAN, the European Union, and LAFTA/ALADI. Many countries form or join such free trade agreement blocs to bolster their economic growth and to help facilitate the movement of licit and legal goods and services across regional borders. Concurrently, however, criminal organizations take advantage of the free trade conditions to transport various types of illegal merchandise across borders.

For instance, in the case of the three signatories of NAFTA, alongside the flow of both licit goods and illicit substances across their common borders, the rise in violence on the U.S.-Mexico border as well as the export of drug-related violence from Mexico to the United States represent undesirable and unforeseen spillover effects of such free trade agreements.

Pre-NAFTA, the Nixon-era Operation Intercept, meant to inspect all vehicles crossing from Mexico into the United States,[4] almost shut down the border due to the major slowdown in traffic, and demonstrated the inefficiency of such methods of policing the border, which, moreover, would be absolutely impractical in the context of a free-trade agreement.  NAFTA had undeniably well-intended economic and trade objectives - the value of opening up the borders resulting in more economic openness and job creation, - while at the same time unforeseen consequences facilitated the growth of cross-border criminal networks. The resulting increase in volume in traded goods has also increased the probability of drugs and other illicit substances crossing borders, with the cost of doing business translating into a black market side effect.

Additionally, in the case of such regional partnerships, we can see the flow of resources from one government to another to help support and increase the security capacity of the weaker State in the fight against organized crime. Countries certainly benefit on the one hand from the deregulation of trade barriers among them, but on the other hand, incur costs due to the rise of illegal and illicit trade across their borders that in turn yield significant criminal-activity-related-violence, instability and drug abuse as the cases of Mexico, United States and Canada illustrate. At the same time, it seems that as long as the net value of licit trade versus illicit trade remains positive and represents a ‘gain’ in terms of licit flows, the negative effects and costs of economic liberalization and free trade are part of the overall cost of doing business that States are willing to accept in order to further their free market and free trade objectives.

It might seem as an irony, but one may argue that this is the way in which criminals tax the State when engaging in regional free trade. Besides the distribution of financial, logistical, and law enforcement resources towards the strengthening of security ties between such regional partners, the other downside of increased organized criminal activities is the souring in political relations. Very often partner countries end up engaging in a “blame-game” regarding who is responsible for the rise in drug trafficking, drug abuse and the violence resulting from these activities. Such a souring in relations is likely, in turn, to produce adverse spillover effects into other policy areas impairing overall intra-regional negotiations and agreements on future policy initiatives.

In such circumstances, one of the lessons policy makers may draw is that sometimes things that are ‘economically good’ may prove to be ‘politically bad’, and vice-versa. The solution though is not to undo free trade agreements, or avoid signing new ones such as the Trans-Pacific Partnership that is currently under negotiation. Rather, it is imperative for policy-makers to adopt a more robust and cohesive approach when negotiating and drafting such free-trade agreements while ensuring that they integrate both economic and political issues and their likely spillover effects.  Moreover, it is essential when negotiating free trade agreements that policy makers also take into account the rise in accompanying illicit and criminal activities likely to take place as well as their associated costs.

In terms of regional cooperation, organized crime can indirectly impair and sour political and diplomatic relationships among countries. Given the delicacy of the matter and the difficulties in proving the engagement of criminal actors in illegal activities on the territory of another State, organized criminal activities often embody the elephant in the room that no one talks about, but which inconveniences everyone with its disturbing presence.

Transnational and International Level

Besides operating at a regional level, today’s criminal groups function with ease transnationally and at a global scale. With the internationalization of their criminal activities, these organizations have become entrenched in key, hub countries such as Mexico, Colombia, Venezuela, Guinea-Bissau, Burma, Afghanistan, and Iraq, to name only a few. In this way, they extend their reach to new regions of the world and create worldwide illicit networks for a plethora of activities. Moreover, the presence of violent conflict in some of these already weakened States coupled simultaneously with an international drive towards open borders, free trade, economic cooperation and integration, only aggravates the threat of criminal groups’ activities.

Criminal Groups Threats - Downstream Spillover Effects

The globalization and trans-nationalization of organized criminal activities generates a dual downstream effect at regional and state level. Transnational criminal activities feed back into the regional level and create additional illicit opportunities that criminal actors can exploit. This results in the exacerbation of violent crime and corruption across the states in the region, and it is likely to bring additional tension in the diplomatic and economic interactions among the states affected.

For example, the Hong Kong Triads supply the Mexican drug cartels with the precursor chemicals needed in the manufacturing of methamphetamine. Sinaloa cartel members have been arrested in raids in Manila, Philippines[5], and in the eastern Guangdong region of China,[6] late last year, and respectively, earlier this year. This trans-nationalization in the activities of Hong Kong Triads and Mexican cartels allows both organizations to prosper. Moreover, the traffic in methamphetamine and its distribution into the U.S. as well as in Mexico, fuels addiction rates on both sides of the border, and feeds into the violence in Mexico and its southern neighbors who are also affected by the traffic. The increase in drug addiction rates and violence allowed the “blame-game” between Mexico and the U.S. to continue, and for the relations between the two countries to become more distant under the current administration of Enrique Peña Nieto.

At the same time, in Southeast Asia, China and the Philippines are already engulfed into a legal conflict in South China Sea.[7] In this already volatile environment, additional tensions arising from the busting of Chinese criminal organizations operating together with Mexican drug cartels on Filipino territory can only add fuel to the fire and obfuscate an already complicated diplomatic relationship.

Besides the damage at the regional level, the trans-nationalization of criminal activities may also translate into direct effects at the state level. On one side, it adds additional stress on State sovereignty by weakening various branches of the State at the domestic level in addition to what local criminal groups could do directly through their activities. For example, due to its proximity to the U.S. - Mexico border, the state of California has significantly endured the spillover effects of transnational crime organizations.  California’s Attorney General released a report in March 2014, Gangs Beyond Borders: California and the Fight Against Transnational Crime[8], in which the rise of Mexico-based criminal organizations is emphasized as well as the proliferation of transnational gangs that help to conduct criminal activities across countries. 

The report specifies that California is a hub for transnational criminal activity and that criminal organizations launder their money in the state, thereby corrupting the state’s economy.  Moreover, the Attorney General’s report specifies that transnational criminal organizations and California gangs have formed close alliances and consequently yield spillover effects that compromise public safety, and indirectly place additional pressure on U.S. – Mexico relations.

On the other hand, by pushing States towards greater cooperation on security matters to combat organized criminal activities, criminal groups place the States that agree to such cooperation into a position that may result in the medium to long term in a “window of vulnerability”, potentially leading to a legal weakening of their own sovereignty if such security cooperation is mishandled at the conception and implementation stages.

Additionally, when rival criminal organizations become entrenched at the regional level with a presence and operations across several countries, they are very likely to carry their rivalries into the new countries where they become established. Often, they recruit from the local population and use local criminal groups to fight their rivals on their behalf. In this way they increase the levels of violence at the national level and by extending their criminal operations regionally, they also have an impact on the rise in corruption at the national level in the states where they start their operations.

The Mexican cartels have long established regional operational control over Central America, and the rivalries between the Sinaloa and Zetas cartels over the trans-shipment routes in the area mirror the rivalries from back home. Most of the time, these rivalries are fought out between the transportistas – local groups who ship drugs on behalf of one cartel or another and who are paid in product. This leads to even higher levels of internal violence as the transportistas also end up competing for the distribution in the domestic market.[9]

Similarly, when criminal groups are active at the national level, their rivalries often translate in pressure and increasing violence at the local level through the use of local proxies. The rivalry between the two main Bacrim groups in Colombia, the Rastrojos and the Urabeños,[10] is revealing. Both groups have a national presence, and when one group extends its presence into the territory dominated by its rivals, – for instance when the Urabeños started to make inroads into Cali and the Cauca Valley in 2001, and challenged the dominance of the Rastrojos[11] –  the battle between them is often fought through local gangs that act as their proxies. Such rivalries among criminal groups with a national presence for control of local territory and trafficking routes have a negative impact on the social fabric of local communities as well as on the corruption of local law enforcement and political actors.

The increased organized criminality at the local level feeds back into the individual level by means of the high impact it has on individual security, health and overall wellbeing. In the Mexican states most affected by the drug-related violence and extortion, many businesses have closed, overall productivity has decreased, and economic growth has stagnated, leaving many individuals with virtually no other choices and pushed them into the arms of the drug cartels. To work as street paddlers, enforcers, cross-border or informants for the cartels, represented the only available opportunity left to many low income and young Mexicans. Unfortunately, for many of them these so-called “opportunities” ended up endangering their own physical security and that of their families.


Criminal organizations yield direct and indirect threats as well as upstream and downstream spillover effects at the individual, domestic, regional, and international levels that in turn amplify their overall influence.  In this essay, we have provided a detailed discussion of an analytical framework that encompasses and reconciles the different levels of threats and their corresponding spillover effects.

Criminal organizations are dynamic, complex, and adaptive in nature.  Accordingly, policies and countermeasures designed to thwart criminal organizations’ activities must embody a robust, dynamic, and adaptive approach.  Additionally, policies must account for both the upstream and downstream impacts of the threats that we have highlighted.  It is suggested that policymakers consider and assess the linkages across the different levels of threats discussed in this essay and in response develop appropriate measures and policies that address the interactions between these levels. Our third essay in this series analyzes the responses and reactions these criminal threats generate at the community, state, regional and international level, setting the foundation to future policy measures in combating the illicit activities of organized criminal groups.

End Notes

[1] “Heroin’s Small-Town Toll, and a Mother’s Grief,” by Deborah Sontag, The New York Times, February 11, 2014, article available at

[2] “Special Series: The Zetas in Guatemala,” Insight Crime, May 2011,

[3] Although the FARC has long been considered an insurgent group, since the end of the Cold War and the demise of Marxism, the group has mostly lost its ideological bent. Moreover, as the group has become increasingly involved in drug trafficking and other illicit activities, it may be de facto considered a criminal group or a hybrid group

[4] “Thirty Years of America’s Drug War – A Chronology,” Frontline, PBS, link available at and last accessed on March 6, 2014.

[5] “Philippines raid reveals Mexican drug cartel presence in Asia,” by Peter Shadbolt, CNN News, February 25, 2014,

[6] “Hong Kong triads supply meth ingredients to Mexican drug cartels,” by Bryan Harris, South China Morning Post, January 12, 2014,

[7] “Philippines stares down China in South China Sea dispute,” by Peter Ford, The Christian Science Monitor, March 31, 2014,

[8] Gangs Beyond Borders: California and the Fight Against Transnational Crime

[9] “Los Zetas’ Southward Expansion,” by Daniel Sachs, Forbes Magazine, August 23, 2013,

[10] “Armed Groups Make Valle del Cauca Colombia's Violence Capital,” by James Bargent, Insight Crime, February 11, 2014,

[11] “Mafia War Feared in Cali, as Rastrojos Face New Competition,” by Elyssa Pachico, Insight Crime, March 28, 2011,


Categories: El Centro

About the Author(s)

Dr. Byron Ramirez is a researcher and analyst who specializes in international political and economic affairs.  He completed his PhD in Economics and Political Science at Claremont Graduate University and holds an MA in Economics, a MS in Management, and an MBA.  His areas of research include geopolitics, international affairs, globalization, economic and social development, and illicit economies. His most recent publication is the co-edited work Narco-Submarines Specially Fabricated Vessels Used For Drug Smuggling Purposes. Fort Leavenworth, KS: U.S. Army Foreign Military Studies Office.

Dr. Irina A. Chindea is a Political Scientist with the Washington D.C. office of the RAND Corporation. Irina's research interests focus on transnational illicit networks, irregular warfare, asymmetric threats, the nexus between finance and the activities of non-state armed groups, with a regional focus on Latin America and the Middle East. Irina has conducted extensive field research in Mexico,Colombia, El Salvador, and Canada for her doctoral dissertation on patterns of cooperation and conflict among criminal organizations. She holds a PhD in International Relations and an M.A. in Law and Diplomacy from The Fletcher School at Tufts University, and a B.Sc. in Business Administration from the Academy of Economics in Bucharest, Romania. Prior to joining RAND, she was a post-doctoral research fellow in the International Security Program at the Belfer Center at Harvard’s Kennedy School, and a Visiting Assistant Professor with University at Albany (SUNY), where she taught classes on International Relations Theory, Comparative Foreign Policies, Homeland Security, and Research Methods.  Dr. Chindea is a Small Wars Journal-El Centro Fellow.