Drug Control: Counternarcotics Efforts in Mexico (Letter Report,
06/12/96, GAO/NSIAD-96-163).

Pursuant to a congressional request, GAO reviewed counternarcotics
activities in Mexico, focusing on: (1) the nature of the
drug-trafficking threat from Mexico; (2) Mexican government efforts to
counter drug-trafficking activities; and (3) recent initiatives by the
United States and Mexico to increase counternarcotics activities.

GAO found that: (1) the drug threat from Mexico continues to be a major
problem; (2) U.S. and Mexican drug interdiction efforts have had little,
if any, impact on the flow of illegal drugs from Mexico to the United
States; (3) the amount of cocaine seized and the number of drug-related
arrests have declined since 1992; (4) widespread corruption, economic
difficulties, and inadequate equipment and personnel training have
hampered Mexico's capabilities to detect and interdict drug traffickers;
(5) a substantial amount of Mexico's resources have been focused on
economic concerns; (6) the devaluation of the peso, the rate of
unemployment, and high rates of inflation have continued to limit
Mexico's economic recovery; (7) Mexico lacks some important legislative
tools for curbing drug-related activities; (8) drug interdiction funding
declined from $1 billion in fiscal year (FY) 1992 to about $570 million
in FY 1995; and (9) although staffing cutbacks have limited U.S. ability
to monitor counternarcotics assistance to Mexico, the United States and
Mexico have created a framework for increased cooperation and are
developing a new binational drug control strategy.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-96-163
     TITLE:  Drug Control: Counternarcotics Efforts in Mexico
      DATE:  06/12/96
   SUBJECT:  Narcotics
             Law enforcement
             Foreign governments
             Interagency relations
             International cooperation
             Foreign policies
             Drug trafficking
             Political corruption
             Search and seizure
IDENTIFIER:  Mexico
             Colombia
             F-15 Aircraft
             UH-1H Helicopter
             National Drug Control Strategy
             

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Cover
================================================================ COVER

Report to Congressional Requesters

June 1996

DRUG CONTROL - COUNTERNARCOTICS
EFFORTS IN MEXICO

GAO/NSIAD-96-163

Drug Control in Mexico

(711181)

Abbreviations
=============================================================== ABBREV

  DEA - Drug Enforcement Administration
  DOD - Department of Defense
  ONDCP - Office of National Drug Control Policy

Letter
=============================================================== LETTER

B-271958

June 12, 1996

The Honorable Charles E.  Grassley
Chairman, Caucus on International
  Narcotics Control
United States Senate

The Honorable William H.  Zeliff, Jr.
Chairman, Subcommittee on National Security,
 International Affairs, and Criminal Justice
Committee on Government Reform and Oversight
House of Representatives

As you requested, we reviewed counternarcotics activities in Mexico.
This report discusses (1) the nature of the drug-trafficking threat
from Mexico, (2) Mexican efforts to counter drug-trafficking
activities, (3) the U.S.  strategy and programs intended to stem the
flow of illegal drugs through Mexico, and (4) recent initiatives by
the United States and Mexico to increase counternarcotics activities.
We did not review U.S.  efforts to interdict drugs at the border.

   BACKGROUND
------------------------------------------------------------ Letter :1

Mexico is the primary transit country for cocaine entering the United
States from South America as well as a major source country for
heroin, marijuana and, more recently, methamphetamine.  U.S.  law
enforcement efforts in the southeastern United States and the
Caribbean during the mid-1980s caused cocaine traffickers to expand
routes to the drug markets in the United States.  The traffickers'
preferred routes were through Mexico, a country with a 2,000-mile
border with the United States, a 30-year history of heroin and
marijuana smuggling, and the existence of cross-border family ties.
The Drug Enforcement Administration (DEA) estimates that up to 70
percent of the cocaine entering the United States currently transits
Mexico. 

Since 1977, we have issued four reports that examined various aspects
of U.S.  and Mexican efforts to control drug production and
trafficking.\1 Many of the problems discussed in those reports
continue to adversely affect current drug control efforts in Mexico.
In our June 1995 testimony\2 on U.S.  efforts to stop the flow of
drugs from cocaine producing and transit countries, we highlighted
problems in such areas as changes in the U.S.  drug interdiction
strategy; competing foreign policy objectives at some U.S.
embassies; coordination of U.S.  activities; management and oversight
of U.S.  assets; and willingness and ability of foreign governments
to combat the drug trade.  This report updates our prior work on drug
control efforts in Mexico.

--------------------
\1 Opium Eradication Efforts in Mexico:  Cautious Optimism Advised
(GAO/GGD-77-6, Feb.  18, 1977); Gains Made in Controlling Illegal
Drugs, Yet the Drug Trade Flourishes (GAO/GGD-80-4, Oct.  25, 1979);
Drug Control:  U.S.-Mexican Opium Poppy and Marijuana Aerial
Eradication Program (GAO/NSIAD-88-73, Jan.  11, 1988); and Drug
Control:  Revised Drug Interdiction Approach Is Needed in Mexico
(GAO/NSIAD-93-152, May 10, 1993). 

\2 Drug War:  Observations on the U.S.  International Drug Control
Strategy (GAO/T-NSIAD-95-182, June 27, 1995).

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :2

Mexico continues to be a major transit point for cocaine, heroin,
marijuana, and methamphetamine entering the United States.  In
addition, drug traffickers have changed their preferred mode of
transportation for moving cocaine into Mexico, decreasing the use of
aircraft and increasing the use of maritime vessels.  Currently,
maritime vessels are used to move an estimated two-thirds of the
cocaine entering Mexico. 

Mexico eradicated substantial amounts of marijuana and opium poppy
crops in 1995.  However, U.S.  and Mexican interdiction efforts have
had little, if any, impact on the overall flow of drugs through
Mexico to the United States.  The amount of cocaine seized and the
number of drug-related arrests in Mexico have declined.  The current
government of Mexico appears committed to fighting drug trafficking,
but, according to U.S.  officials, its efforts are hampered by
pervasive corruption of key institutions, economic and political
problems, and limited counternarcotics and law enforcement
capabilities. 

The current U.S.  strategy in Mexico, initially developed in 1991,
focuses on strengthening the political commitment and institutional
capability of the Mexican government, targeting major
drug-trafficking organizations, and developing operational
initiatives, including the interdiction of drugs.  In late 1993, the
United States revised its international cocaine strategy from one
that focused activities and resources on intercepting drugs as they
move through the transit region of Central America, Mexico, and the
Caribbean to one of stopping cocaine at its source of production in
South America. 

U.S.  counternarcotics activities in Mexico and the transit zone have
declined since 1992.  Multiple-agency drug interdiction funding for
the transit zone, including Mexico, declined from about $1 billion in
fiscal year 1992 to about $570 million in fiscal year 1995.  The U.S.
assistance program in Mexico has been negligible since Mexico
initiated its policy of refusing nearly all U.S.  counternarcotics
assistance in early 1993.  Staffing cutbacks in the Department of
State's Narcotics Affairs Section at the U.S.  Embassy in Mexico City
have limited U.S.  capabilities to monitor previously funded U.S.
assistance, primarily helicopters and spare parts. 

Since our June 1995 testimony, a number of events have occurred that
could greatly affect future drug control efforts by the United States
and Mexico.  First, drug control issues have been elevated in
importance at the U.S.  embassy and a drug control operating plan
with measurable goals has been developed for U.S.  agencies in
Mexico.  Second, the government of Mexico has recently signaled a
willingness to develop a mutual counternarcotics assistance program.
Third, the Mexican government has taken some action on important law
enforcement and money laundering legislation.  Fourth, the United
States and Mexico have created a framework for increased cooperation
and are currently developing a new binational strategy.  Following
through on all of these efforts is critical if the United States and
Mexico are to increase their ability to combat drug trafficking in
Mexico.

   THE DRUG THREAT FROM MEXICO
   CONTINUES TO BE A MAJOR PROBLEM
------------------------------------------------------------ Letter :3

The importance of Mexico to U.S.  drug control efforts is best
described by the Department of State, which reported in March 1996
that ".  .  .  no country in the world poses a more immediate
narcotics threat to the United States than Mexico." This view was
reiterated by the Administrator of DEA, who testified in August 1995
that Mexico was ".  .  .  pivotal to the success of any U.S.  drug
strategy." It is estimated that up to 70 percent of the more than 300
tons of cocaine that entered the United States in 1994 transited
Mexico.  DEA estimates that, at any one time, from 70 to 100 tons of
cocaine are stockpiled in Mexico for movement into the United States.
In its March 1996 International Narcotics Control Strategy Report,
the Department of State estimated that Mexico supplies 20 to 30
percent of the heroin, which is the predominate form of heroin
available in the western half of the United States, and up to 80
percent of the foreign-grown marijuana consumed in the United States.
Mexican drug-trafficking organizations also dominate the U.S.
methamphetamine trade and are major figures in the diversion of
precursor chemicals necessary for the manufacture of methamphetamine. 

Narcotics traffickers use a variety of air, land, and sea conveyances
and routes to move cocaine from Colombia (the world's largest
manufacturer) to Mexico.  Cocaine shipments are then moved overland
through Mexico and across the U.S.-Mexican border.  (See fig.  1.)
Since the early 1990s, some traffickers have begun to use jet cargo
aircraft that are larger and faster than the private aircraft used in
the late 1980s.  As we recently reported,\3 traffickers in the
Caribbean have changed their primary means of delivery and are
increasingly using commercial and noncommercial maritime vessels
(such as go-fast boats, sailing and fishing vessels, and
containerized cargo ships) to transport drugs through the transit
zone.  According to officials at the U.S.  Embassy in Mexico City,
about two-thirds of the cocaine currently entering Mexico is
transported by maritime means.  Department of Defense (DOD) records
show that the number of known drug-trafficking events involving
aircraft in the transit zone declined by about 65 percent from 1992
to 1995 and that known maritime drug-trafficking events increased by
about 40 percent from 1993 to 1995.  The U.S.  Embassy in Mexico City
reported that 15 known air-trafficking events were detected in Mexico
during 1995. 

   Figure 1:  Primary
   Drug-Trafficking Routes From
   Colombia to Mexico

   (See figure in printed
   edition.)

Source:  Drug Enforcement Administration. 

Drug traffickers respond quickly to interdiction operations by
adjusting their delivery routes and means of transport.  Some
traffickers have begun to use aircraft not ordinarily associated with
cocaine movement, such as commercial jets and air cargo aircraft, and
maritime vessels to move drugs into Mexico.  Traditionally,
traffickers have relied on twin-engine general aviation aircraft to
deliver cocaine shipments that ranged from 800 to
1,000 kilograms.  Beginning in 1994, however, some trafficking groups
began using larger Boeing 727-type jet aircraft that could fly faster
than U.S.  and Mexican detection and monitoring aircraft and deliver
up to
10 metric tons of cocaine per trip.  To date, there have been eight
known deliveries using this means of transport. 

During the past 3 years, Mexican trafficking organizations operating
on both sides of the border have replaced U.S.-based outlaw
motorcycle gangs as the predominant methamphetamine manufacturers and
traffickers in the United States.  DEA estimates that up to 80
percent of the methamphetamine available in the United States is
either produced in Mexico and transported to the United States or
manufactured in the United States by Mexican traffickers.
Methamphetamine seizures in Mexico have grown from a negligible
amount in 1992 to 495 kilograms in 1995.  Also, the amount of
methamphetamine seized along the border rose from 6.5 kilograms in
1992 to 665 kilograms in 1995.  Unlike cocaine, Mexican
drug-trafficking organizations control the production and
distribution of methamphetamine and, because they have complete
control, they retain 100 percent of the profits. 

In recent years, drug-trafficking organizations in Mexico have become
more powerful as they have expanded their operations to include not
only the manufacture and distribution of methamphetamine but also the
trafficking and distribution of cocaine in the United States.
Initially, Mexican drug-trafficking organizations acted as
transportation agents for Colombian organizations and only smuggled
cocaine across the U.S.  border.  As they became the key transporters
for the Colombians, the Mexicans began to demand and receive a
portion of the drug shipment for their services.  According to DEA,
Mexican drug-trafficking groups often receive up to half of a cocaine
shipment for their services.  This has resulted in Mexican
drug-trafficking groups substantially increasing their profits and
gaining a foothold in the lucrative cocaine wholesale business in the
United States.  According to DEA, Mexican drug traffickers have used
their vast wealth to corrupt police and judicial officials as well as
project their influence into the political sector.  The Administrator
of DEA recently testified that some of Mexico's major
drug-trafficking organizations have the potential of becoming as
powerful as their Colombian counterparts. 

Proximity to the United States, endemic corruption, and little or no
regulation have combined to make Mexico a money-laundering haven for
the initial placement of drug profits into the world's financial
system.  Once placed in the Mexican financial system, funds can be
transferred by wire to virtually anywhere in the world.  Mexico is
also the most important transit point for bulk money shipments from
the United States to the drug-trafficking organizations in Mexico and
Colombia.  Mexican officials estimated that billions of dollars in
drug proceeds were repatriated by Mexican drug-trafficking
organizations in 1994, and the total amount moved into Mexico for
eventual repatriation to Colombia was much higher.

--------------------
\3 Drug Control:  U.S.  Interdiction Efforts in the Caribbean Decline
(GAO/NSIAD-96-119, Apr.  16, 1996).

   PROBLEMS IN MEXICO IMPEDE
   EFFORTS TO CURB THE FLOW OF
   DRUGS
------------------------------------------------------------ Letter :4

Mexico eradicated substantial amounts of marijuana and opium poppy
crops in 1995 but other counternarcotics activities, including
cocaine seizures and arrests of traffickers, have declined since
1992.  Mexico's efforts to stop the flow of drugs have been limited
by numerous problems.  These problems include widespread, endemic
corruption; economic and political difficulties encountered by the
government of Mexico; the absence of some legislation necessary to
provide a complete foundation for a meaningful counternarcotics
effort; and inadequate equipment and training that limit Mexico's
capabilities to detect and interdict drugs and arrest drug
traffickers. 

In January 1993, the government of Mexico initiated a policy to
conduct its own counternarcotics activities, assumed most of the
costs of the counternarcotics effort and refused most forms of U.S.
drug-control assistance.  This policy, commonly known as the
"Mexicanization" of the drug effort, has resulted in major reductions
in the U.S.  counternarcotics assistance program in Mexico.  During
this period, Mexico has seized only about half as much cocaine and
made only about a third as many drug-related arrests.

      ILLEGAL DRUGS CONTINUE TO
      ENTER THE UNITED STATES
      DESPITE MEXICAN EFFORTS
---------------------------------------------------------- Letter :4.1

Despite Mexico's counternarcotics efforts, the amount of cocaine
seized and the number of drug-related arrests in Mexico have declined
from 1993 to 1995 compared to those before U.S.  assistance was
curtailed.  The average annual amount of cocaine seized in Mexico
from 1990 to 1992 was more than 45 metric tons, including more than
50 metric tons in 1991.  In contrast, from 1993 to 1995, average
cocaine seizures declined to about
30 metric tons annually, including about 22 metric tons in both 1994
and 1995.  The number of drug-related arrests in Mexico in 1992 was
about 27,600 persons whereas, by 1995, the number had fallen to about
9,900--a decline of nearly two-thirds.  In commenting on this report,
the Department of State attributed the decline in the number of
arrests to a change in emphasis that focused on arresting major drug
traffickers.  For example, in January 1996, Mexico arrested Juan
Garcia-Abrego, reputed leader of one of Mexico's drug cartels, and
expelled him to the United States for prosecution. 

Mexico has made some efforts in counternarcotics.  For example,
Mexican military personnel have increased their participation in
combating illicit drugs and destroying illegal airfields.  The
Mexican Army has traditionally been involved in the manual
eradication of illicit drug crops.  During 1995, the Mexican
government reported that more than 7,000 soldiers worked full time on
drug eradication programs and, during peak growing seasons, the
number of soldiers working on these programs grew to 11,000.  Army
personnel are assigned to remote growing areas for short-term
(90-day) tours during which they manually cut down, uproot, and burn
opium poppy and marijuana plants and patrol rural areas to halt the
transportation of these and other illicit drugs.  According to the
Department of State, Mexican personnel effectively eradicated 29,000
acres of marijuana and almost 21,000 acres of opium poppy during
1995. 

As a further indication of increasing the role of the military,
President Zedillo directed the Mexican Air Force to use its F-5
fighter aircraft to assist the Attorney General's Office in air
interdiction efforts in 1995.  However, assigning the aircraft to an
interdiction mission may not have an immediate impact because,
according to U.S.  officials, deficiencies in the capabilities and
maintenance of the F-5s, as well as poorly trained pilots and
mechanics, limit the effectiveness and possibilities of success of
the Mexican Air Force in this new mission.

      CORRUPTION CONTINUES TO
      LIMIT THE SUCCESS OF
      COUNTERNARCOTICS EFFORTS
---------------------------------------------------------- Letter :4.2

The Department of State reports that pervasive corruption continues
to seriously undermine counternarcotics efforts in Mexico.  In
addition, the Administrator of DEA testified in March 1996 that
Mexican drug-trafficking organizations have become so wealthy and
powerful that they can rival legitimate governments for influence and
control.  While drug-related corruption exists on both sides of the
border, the Department of Justice believes that it is more prevalent
in Mexico than in the United States.  After taking office in late
1994, Mexican President Zedillo directed the Mexican military--widely
perceived to be the least corrupt government institution--to expand
its involvement in attempting to stop narcotics-related corruption.
Following an investigation that revealed extensive corruption within
the Mexican federal judicial police forces in the state of Chihuahua,
a contingent of Mexican Army officers and a number of civilian
personnel employed by the Mexican military were reassigned to replace
60 judicial police personnel in December 1995.  According to Mexican
officials, the deployment of Army personnel is not a short-term quick
fix but, rather, a commitment to remain in Chihuahua until rampant
police corruption is brought under control. 

Despite the efforts that President Zedillo has undertaken since late
1994, U.S.  and Mexican officials told us that corruption in Mexico
is still widespread within the government and the private sector.
They added that corruption can be found within many government
agencies, but it is especially prevalent within law enforcement
organizations, including the Mexican federal judicial police and
other police forces.  Mexican federal and state police personnel have
reportedly participated in the movement of drugs, including one
instance in November 1995 in which federal and state personnel
off-loaded a cargo jet laden with from 6 to 10 metric tons of
cocaine.  In another instance, 34 federal judicial police personnel
were arrested by the Mexican Army in June 1995 when they were found
to be protecting a major drug trafficker.  Another example occurred
in March 1995 when 16 officers of the National Institute for
Combatting Drugs (the Mexican equivalent of DEA) were arrested for
accepting cocaine and cash to allow a 1.2-metric ton shipment of
cocaine to proceed. 

Drug-related corruption is not limited to federal police personnel.
As we indicated in our June 1995 testimony, many local police
officers are susceptible to corruption because they earn very low
salaries.  Sometimes, their salaries are equivalent to only about $3
per day, which is not enough to provide many of their families' basic
needs.  More recent reports indicate that the take-home pay of a foot
patrolman in Mexico City is about $6 per day--an increase since June
1995, but still much too low to reduce susceptibility to corruption. 

President Zedillo has openly acknowledged the problems created by
corruption, publicly stated his commitment to stopping it, and taken
some actions to reduce it.  Within the Office of the Attorney
General, these actions include restructuring the Office to facilitate
counternarcotics efforts, increasing the amounts of staff and
equipment, and undertaking extensive training programs.  Within the
Ministry of Finance, a separate Money Laundering Directorate was
created to enhance the government's investigative capabilities and
improve its auditing procedures to identify drug-generated cash. 

Despite these efforts, counternarcotics efforts continue to face
major obstacles in Mexico because, according to one U.S.  law
enforcement official, corruption has been part of the social and
cultural fabric of Mexico for generations.  In addition, the
Department of State reported in March 1996 that endemic corruption
continued to undermine both policy initiatives and law enforcement
operations.  Moreover, the Mexican Attorney General stated that
addressing the deep-rooted problems of corruption would take all 6
years of President Zedillo's term in office.

      ECONOMIC AND POLITICAL
      PROBLEMS LIMIT MEXICO'S
      COUNTERNARCOTICS EFFORTS
---------------------------------------------------------- Letter :4.3

Since 1992, the Mexican government has confronted several major
crises that have competed with drug control activities for government
resources.  U.S.  officials have stated that these crises, both
economic and political, have adversely affected the overall
counternarcotics efforts.  According to one U.S.  official, the
Mexican government neither publicly announces nor shares the actual
funding levels for its counternarcotics programs with the United
States.  However, it is evident that a substantial amount of the
Mexican government's attention and resources have been focused on
concerns other than counternarcotics. 

In December 1994, Mexico experienced a major economic crisis--a
devaluation of the peso that eventually resulted in a $20-billion
U.S.  financial assistance package.  Further erosion in the peso's
value resulted in a decline to approximately one-half of its
pre-crisis value.  In addition, the rate of unemployment was 17
percent in October 1995, and it is projected to be 13 percent for
1996.  Furthermore, high rates of inflation--projected to range from
27 to 29 percent in 1996--have continued to limit Mexico's economic
recovery. 

In addition to economic concerns, Mexico had to focus funds and
resources in the southern state of Chiapas on its effort to suppress
an insurgency movement.  In doing so, the government required the use
of Mexican military, police, other personnel, equipment, and
resources that might otherwise have been used for counternarcotics
purposes.

      MEXICO HAS LACKED SOME
      IMPORTANT LEGISLATIVE TOOLS
      FOR CURBING DRUG-RELATED
      ACTIVITIES
---------------------------------------------------------- Letter :4.4

Mexico has lacked some of the basic legislative tools necessary to
combat drug-trafficking organizations at the law enforcement level.
According to the Department of State, the use of wiretaps,
confidential informants, and a witness protection program was
included in legislation recently passed by the Mexican Congress.
These essential tools, according to DEA, have been used by U.S.  law
enforcement agencies to successfully combat organized crime within
the United States.  Also, until May 1996, the laundering of drug
profits was not a criminal offense in Mexico. 

U.S.  officials in Mexico City told us that enacting strong
legislation that criminalizes money laundering and requires the
reporting of large currency transactions will not, in and of itself,
ensure success in reducing or eliminating money laundering.  They
estimated that, at best, it will take at least 5 years before
substantial reductions in money laundering can occur.  They also said
that banks and other financial institutions continue to strongly
resist the reporting requirements because of the additional costs and
administrative burdens of handling and processing the reports.  In
addition, according to U.S.  officials, large numbers of personnel
from both the government and the private sector would have to be
trained to prepare the currency transaction reports, and the
government would need to train qualified financial investigators to
monitor and enforce the transaction requirements.  Despite the
additional costs, administrative burden, and training that would be
required, most U.S.  and Mexican officials we contacted believe that
a reduction in money laundering cannot be accomplished without
enacting, implementing, and enforcing such reporting requirements. 

Moreover, until May 1996, Mexico's laws lacked sufficient penalties
to effectively control precursor chemicals that are used to
manufacture methamphetamine.  According to U.S.  officials, the
ineffective penalties encouraged potential traffickers to use Mexico
to transship ephedrine, pseudoephedrine, and other chemicals from
their manufacturers, many located in Europe, to U.S.  and Mexican
methamphetamine laboratories.  To counter the growing threat posed by
these chemicals, the United States encouraged Mexico to adopt strict
chemical control laws.

      EQUIPMENT SHORTCOMINGS AND
      INADEQUATELY TRAINED
      PERSONNEL LIMIT MEXICO'S
      CAPABILITIES
---------------------------------------------------------- Letter :4.5

The counternarcotics capabilities of the Mexican government to detect
and interdict drugs and drug traffickers, as well as to aerially
eradicate drug crops, are hampered by aircraft that are sometimes
inadequately equipped and by aircraft and equipment that are poorly
maintained because of spare parts' shortages.  The Office of the
Attorney General and the Mexican Air Force have over 150 aircraft,
including F-5 fighter aircraft and UH-1H helicopters, and a variety
of equipment for interdiction and eradication operations.  According
to U.S.  officials, many of the F-5 jets have only a small chance of
successfully interdicting drug-trafficking aircraft because they do
not have operational radar units and are not configured for
night-vision operations.  Equipment, such as global positioning
systems and radios that are used in eradication operations, is
frequently inoperable and poorly maintained. 

In addition to equipment problems, some Mexican pilots, mechanics,
and technicians are not adequately trained, thus limiting Mexico's
effectiveness in performing counternarcotics activities.  Department
of State officials view the Office of the Attorney General's UH-1H
pilots as well-trained and disciplined.  However, many F-5 pilots
receive only a few hours of proficiency training every month, which
is considered not nearly enough to maintain flying skills needed for
interdiction.  In addition, the officials told us that many mechanics
and technicians lack the necessary skills to keep equipment operable
because of insufficient training.

   U.S.  COUNTERNARCOTICS PROGRAMS
   IN MEXICO HAVE DECLINED SINCE
   1992
------------------------------------------------------------ Letter :5

Relative to the threat posed by narcotics produced in and transported
through Mexico and the pivotal role Mexico plays in the success of
any U.S.  drug control strategy, the size of the U.S.
counternarcotics effort in Mexico is extremely small.  Before 1992,
Mexico was the largest recipient of U.S.  counternarcotics
assistance, as it received about $237 million between fiscal years
1975 and 1992.  In fiscal year 1992, the United States provided about
$45 million in assistance that included the provision of excess
helicopters, military aviation training, funding of the maintenance
of Mexico's antinarcotics air fleet, construction of a new
maintenance facility, support for the manual and aerial eradication
of marijuana and opium poppy, demand reduction and education
programs.  In early 1993, the Mexican government assumed nearly all
the costs associated with the counternarcotics effort in Mexico.
Since then, U.S.  assistance has sharply declined and, in fiscal year
1995, amounted to only $2.6 million, most of which was for spare
helicopter parts.

      U.S.  POLICY DECISIONS
      AFFECT DRUG CONTROL EFFORTS
      IN THE TRANSIT ZONE AND
      MEXICO
---------------------------------------------------------- Letter :5.1

With the November 1993 issuance of Presidential Decision Directive
Number 14, the United States changed the focus of its international
drug control strategy from interdicting cocaine as it moved through
the transit zone of Mexico and the Caribbean to stopping cocaine in
the source countries of Bolivia, Colombia, and Peru, before the drug
could reach the transit zone.  To accomplish this, drug interdiction
resources were to be reduced in the transit zone while, at the same
time, increased in the source countries. 

As discussed in our April 1996 report, DOD and other agencies
involved in drug interdiction activities in the transit zone began to
see major reductions in their drug interdiction resources and
capabilities in fiscal year 1993.  Table 1 shows the funding levels
for those agencies and the reductions that have occurred since
issuance of the presidential directive.

                                Table 1
                

                Counternarcotics Funding in the Transit
                      Zone (fiscal years 1992-95)

                         (Dollars in millions)

Agency                              1992      1993      1994      1995
------------------------------  --------  --------  --------  --------
DOD                               $504.5    $426.0    $220.4    $214.7
Coast Guard                        443.9     310.5     314.4     301.2
Customs                               \a      16.2      12.5      12.8
DEA                                 28.8      29.1      28.7      29.6
State                               36.2      14.0       7.9      10.6
======================================================================
Total                           $1,013.4    $795.8    $583.9    $568.9
----------------------------------------------------------------------
\a Customs data for 1992 was unavailable. 

Source:  Indicated federal agencies. 

According to the Department of State, U.S.  efforts in Mexico are
guided by an interagency strategy developed in 1991.  The strategy
focused on strengthening the political commitment and institutional
capability of the Mexican government, targeting major
drug-trafficking organizations, and developing operational
initiatives, including the interdiction of drugs.  Key components of
the strategy were dependent upon Department of State funding, which
was reduced in January 1993 when the Mexican government assumed most
counternarcotics costs.  Since then, the Department of State's
counternarcotics programs and staff in Mexico have experienced major
reductions.  For example, the Narcotics Affairs Section\4 has
received no new program funding since fiscal year 1992, and the size
of its staff has been reduced from 17 to 7.  According to U.S.
officials, the Narcotics Affairs Section has been operating on
unexpended prior-year and pipeline funds.  In contrast, U.S.  Customs
Service and DEA operations in Mexico have not been reduced because
their programs consist primarily of the costs of (1) salaries for
U.S.  employees, (2) equipment used by U.S.  personnel, and (3) the
development of drug-related information and intelligence. 

Despite the virtual absence of a U.S.  counternarcotics assistance
program in Mexico during the past 3 years, the United States has
provided some limited training and equipment to the Mexican
government.  For example, DOD recently provided $1.8 million in
emergency spare parts to support helicopters that had been provided
previously by the United States. 

In addition to the U.S.  programs discussed above, the United States
provides indirect support for counternarcotics efforts in Mexico.
This support includes sharing with Mexican officials the results of
some DOD and Customs detection and monitoring activities in South
America and Central America, and some data developed by the
counternarcotics intelligence community.

--------------------
\4 Overall responsibility for U.S.  international narcotics control
efforts rests with the Secretary of State.  The Department's
responsibilities, carried out by its Bureau of International
Narcotics and Law Enforcement Affairs, include policy development and
program management, diplomatic initiatives, and assistance for crop
control, interdiction and related enforcement activities.  The Bureau
is represented in Mexico City by the Narcotics Affairs Section.

      U.S.  ABILITY TO MONITOR ITS
      ASSISTANCE HAS DECLINED
---------------------------------------------------------- Letter :5.2

According to officials at the U.S.  Embassy in Mexico City,
reductions in the size of the U.S.  counternarcotics program have
resulted in corresponding decreases in the number of staff available
to monitor how U.S.-provided helicopters and other types of U.S.
assistance are being used.  To ensure that U.S.-provided military
assistance is properly maintained and not misused, section 505 of the
Foreign Assistance Act of 1961, as amended, sets forth certain
assurances that recipient governments must make before the United
States can transfer defense-related commodities and services.  Among
other things, these assurances permit continued U.S.  access to the
asset, provide for the security of the asset, and prevent the sale of
the asset without U.S.  approval.  The Mexican government, however,
has objected to direct U.S.  oversight requirements.  In some
instances, the Mexican government has refused to accept assistance
that was contingent on its signing such an agreement.  In other
instances, this position resulted in lengthy negotiations between the
two countries to develop agreements that satisfied the requirements
of section 505 and were sensitive to Mexican concerns about national
sovereignty.  As we reported in 1993, these delays resulted in Mexico
receiving only about 60 percent of the $43 million in emergency U.S.
counternarcotics assistance authorized in 1990 and 1992. 

Before the Mexicanization policy, the Department of State employed
several advisers who were stationed at the aviation maintenance
center in Guadalajara and the pilot training facility in Acapulco.
One of their duties was to monitor the use of the numerous
U.S.-provided helicopters, which are dispersed throughout Mexico, and
the inventory of aviation spare parts.  The advisers would
periodically report their end-use monitoring observations to the
Narcotics Affairs Section at the U.S.  Embassy in Mexico City.  The
advisers and embassy personnel also discussed their observations with
representatives from Bell Helicopter, which the Department of State
had contracted to maintain the Mexican counternarcotics air fleet. 

With the advent of the Mexicanization policy, the number of State
Department Foreign Service and contract personnel was greatly reduced
and the aviation maintenance contract was awarded by the Mexican
government.  As a result, the State Department currently has fewer
personnel in the field to review operational records and monitor how
the 30 U.S.-provided helicopters are being used.  According to U.S.
officials, the embassy relies heavily on biweekly reports submitted
by the Mexican government that typically consist of a map of Mexico
with the state to which a helicopter is deployed highlighted and a
listing of helicopters that are inoperative at the time of the
report.  Unless they request specific operational records, U.S.
personnel have little way of knowing if the helicopters are being
properly used for counternarcotics purposes or are being misused.\5
Embassy officials told us that helicopter operational records have
been requested and received on only one occasion in the past 8 months
to provide information to visiting U.S.  officials.

--------------------
\5 In the past, the Mexican government has misused some U.S.-provided
counternarcotics helicopters.  For example, during the 1994 uprising
in the Mexican state of Chiapas, several U.S.-provided helicopters
were used to transport Mexican military personnel to the conflict,
which was a violation of the transfer agreement.

      LIMITATIONS IN U.S.
      INTERDICTION EFFORTS
---------------------------------------------------------- Letter :5.3

Drug traffickers have traditionally used aircraft to move drug
shipments from Colombia to the staging areas of Mexico.  To respond
to aircraft movements, DOD has devoted extensive resources to
detecting and monitoring suspicious aircraft as they fly from South
America to staging areas outside of the United States.  The 1993
change in the U.S.  drug interdiction strategy reduced the detection
and monitoring assets in the transit zone.  According to officials at
the U.S.  Embassy in Mexico City, this reduction creates a void in
the radar coverage, and some drug-trafficking aircraft are not being
detected as they move through the eastern Pacific Ocean.  As an
example, the embassy cited the November 1995 flight of a Caravelle
cargo jet to Baja California.  The jet reportedly contained 6 to
10 tons of cocaine and U.S.  officials did not know that it was a
drug-related flight until 2 days after it landed. 

DOD officials acknowledge that radar voids have always existed
throughout the transit zone and the eastern Pacific area.  These
voids are attributable to the vastness of the Pacific Ocean and the
limited range of ground- and sea-based radars.  As a result, DOD
officials believe that existing assets must be used in a "smarter"
manner rather than flooding the area with expensive vessels and
ground-based radars, which are not currently available. 

In Mexico, U.S.  assistance and DEA activities have focused primarily
on interdicting trafficking aircraft as they deliver their drug
cargoes.  However, as discussed previously, traffickers are
increasingly using commercial and noncommercial maritime conveyances
to move drugs into Mexico.  Commercial maritime smuggling primarily
involves moving drugs by containerized cargo ships.  Noncommercial
maritime smuggling involves either "mother ships" that depart
Colombia and rendezvous with either fishing vessels or smaller craft
that, in turn, smuggle cocaine into a Mexican port, or "go-fast"
boats that depart from Colombia and make a direct run to Mexico's
Yucatan Peninsula.  According to officials at the U.S.  Embassy in
Mexico City, about two-thirds of the cocaine currently entering
Mexico is transported by maritime means. 

Efforts to address the maritime movement of drugs into Mexico are
minimal, when compared to the increasing prevalence of this mode of
trafficking.  According to officials at the U.S.  Embassy, the
Mexican government is developing a port inspection unit and the
Mexican Navy is involved in patrolling the Mexican coast and
navigable rivers, boarding suspect vessels, and eradicating illicit
crops in coastal regions.  The U.S.  program for addressing this
problem is also small and consists mainly of monitoring some ship
movements and providing training to Mexican naval personnel.  The
U.S.  program is based on prior explicit intelligence on the movement
of drug carrying vessels.  DOD officials told us that without prior
intelligence, the detection and monitoring of ships is impossible
since thousands of fishing, commercial, and other vessels are found
in sea lanes between Colombia and Mexico daily. 

Department of State officials believe that Mexican maritime
interdiction efforts would benefit from training offered by the
Customs Service and the Coast Guard in port inspections and vessel
boarding practices.  However, according to DOD, Mexican law and
custom have limited the amount of interaction between the Mexican
Navy and these two U.S.  agencies in the past.  Department of State
officials note that the degree to which the Mexican Navy becomes
involved in drug control efforts will be an indicator of the
political will of the country to address the drug-trafficking
problem.

   RECENT EFFORTS TO ADDRESS
   BILATERAL DRUG CONTROL ISSUES
------------------------------------------------------------ Letter :6

Since our June 1995 testimony, a number of events have occurred that
could affect future drug control efforts by the United States and
Mexico.  First, the importance of drug control issues at the U.S.
Embassy in Mexico City has been elevated, and the embassy has
developed a drug control plan that focuses the efforts of all U.S.
agencies in Mexico on specific goals and objectives.  Second, the
Mexican government has enacted legislation that strengthens fiscal
regulations governing financial institutions and other legislation
aimed at reducing money laundering.  Third, according to U.S.
officials, the Mexican government has signed a mutually acceptable
section 505 transfer agreement that will cover future military
equipment transfers.  Fourth, the United States and Mexico have
created a framework for increased cooperation and the development of
a joint counternarcotics strategy. 

The U.S.  Embassy in Mexico City elevated counternarcotics from the
fourth highest priority--its 1995 ranking--in its Mission Program
Plan for Mexico to a top priority, which is shared with the promotion
of U.S.  business and trade.  The U.S.  Ambassador to Mexico told us
that, because the immediacy of the North American Free Trade
Agreement and the U.S.  involvement in the financial support program
for the Mexican economy have subsided, he has been able to focus a
substantial amount of his attention on counternarcotics issues since
mid-1995. 

In July 1995, the U.S.  Embassy in Mexico City developed a detailed
embassywide counternarcotics plan for U.S.  efforts in Mexico.  The
plan involves the activities of all agencies involved in
counternarcotics activities at the embassy and focuses on (1)
disrupting and dismantling Mexican drug cartels and their political
allies, (2) reducing money laundering, (3) strengthening Mexican
institutions, and (4) interdicting drug shipments and eradicating
illicit crops.  The plan also identifies several programs that the
embassy believes will lead to attaining these goals, as well as
specific program milestones and measurable objectives, and sets forth
funding levels and milestones for measuring progress.  The embassy
estimated that it will require $5 million in Department of State
funds to implement this plan during fiscal year 1996.  However,
according to State Department officials, only $1.2 million in
counternarcotics funds will be available for efforts in Mexico during
fiscal year 1996.  Of this amount, about $800,000 is expected to be
used to support the Narcotics Affairs Section and $400,000 is to fund
a program to assist Mexico's judicial system.  According to State
Department officials, the fiscal year 1997 budget request includes $5
million for the Department of State's narcotics control efforts in
Mexico. 

Senior Department of State officials do not believe there is a
conflict between the policy of reducing the level of resources in the
transit zone outlined in the presidential directive and current
efforts to increase drug interdiction assistance and resources to
Mexico.  These officials told us that the United States needs to pay
special attention to drug control efforts in Mexico because (1)
Mexico is the staging area for drugs entering the United States, (2)
the influence of drug-trafficking organizations in Mexico has
increased, and (3) the borders are relatively easy to cross. 

After taking office in December 1994, President Zedillo declared drug
trafficking "Mexico's number one security threat." As such, President
Zedillo advocated legislative changes that could improve Mexico's
ability to combat drugs and drug-related crimes.  During the session
that ended on April 30, 1996, the Mexican Congress enacted
legislation that could improve some of Mexico's counternarcotics
capabilities.  Some of the newly enacted legislation is effective
immediately and includes provisions that make money laundering a
criminal offense within Mexico's penal code.  However, other
legislation to provide Mexican law enforcement agencies with some
essential tools needed to arrest and prosecute drug traffickers and
money launderers requires amending the Mexican constitution.  These
tools include the use of electronic surveillance and other modern
investigative techniques that, according to U.S.  officials, are very
helpful in attacking sophisticated criminal organizations.
Department of State officials told us that it appears likely that the
amendments will be ratified in the near future--maybe as soon as the
end of June 1996. 

To date, the Mexican Congress has not addressed several other key
issues that would support its counternarcotics efforts.  These issues
include a requirement that all financial institutions report large
cash transactions through currency transaction reports.  Although
some U.S.  officials disagree on the value of such reports, none
dispute the point that currency transaction reports are useful tools
that could deter and reduce money laundering.  According to U.S.
officials, various U.S.  government agencies are working closely with
Mexican officials to address the issue of currency transaction
reports.  However, the officials acknowledged that, even if
legislation requiring the use of currency transaction reports is
enacted, it will take the Mexican government up to 5 years or longer
before the laws can be fully implemented because of the extensive
administrative procedures and training that would be required. 

To follow up on mutual concerns discussed during the U.S.  Secretary
of Defense's October 1995 visit to Mexico, military and diplomatic
representatives of the two countries met in San Antonio, Texas, in
December 1995.  According to a U.S.  participant at this meeting,
representatives of the Mexican government proposed that an agreement
be developed for future transfers of military equipment.  With such
an agreement, equipment could be quickly transferred to the Mexican
government and the lengthy delays encountered in the past avoided.
U.S.  officials view this as an indication that the Mexican
government and its military components are committed to stopping the
flow of drugs through Mexico.  According to U.S.  officials, a formal
agreement was signed in mid-April 1996, and the United States
announced shortly thereafter its intention to transfer a number of
helicopters and spare parts to the Mexican Air Force to enhance its
role in interdiction and support for law enforcement activities.
Twenty UH-1H helicopters are scheduled to be transferred in fiscal
year 1996 and up to 53 in fiscal year 1997.  According to the
Department of State, details about how the pilots will be trained, as
well as how the helicopters will be operated, used, and maintained,
are being worked out. 

In March 1996, Presidents Clinton and Zedillo established a
high-level contact group to better address the threat narcotics poses
to both countries.  The Director of the Office of National Drug
Control Policy (ONDCP) co-chaired the first contact group meeting in
Mexico City in late March, which met to review drug control policies,
enhance cooperation, develop new strategies, and begin to develop a
new plan of action.  At the conclusion of this meeting, the contact
group issued a 10-point joint communique that called for action, such
as developing a joint antinarcotics strategy, increasing
counternarcotics cooperation, and implementing laws to criminalize
the laundering of drug profits.  Binational working groups have been
formed to plan and coordinate implementation of the contact group's
initiatives.  A follow-up meeting is scheduled during the summer of
1996 in Washington, D.C.  According to ONDCP officials, the joint
antinarcotics strategy is expected to be completed in late 1996.

   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

ONDCP and DEA provided comments on a draft of this report (see apps.
I and II); the Departments of State and Defense provided oral
comments; and the Department of Justice provided informal comments.
ONDCP and the Departments of State and Defense generally agreed with
the report's content and major conclusions.  ONDCP, in commenting on
reduction in interdiction resources available for activities in the
transit zone and source countries, stated that these reductions were
largely the result of congressional action.  DEA, however, raised
concerns that the draft report did not accurately reflect the many
positive counternarcotics initiatives undertaken by the governments
of Mexico and the United States.  We, consequently, updated the
report to reflect Mexican legislative initiatives and bilateral
efforts.  We also made changes to reflect additional information
provided by the Department of Justice, as well as other agencies.

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :8

To obtain information for this report, we spoke with appropriate
officials and reviewed planning documents, studies, cables, and
correspondence at DOD and the Department of State, the U.S.  Customs
Service, DEA, the Federal Bureau of Investigation, and ONDCP in
Washington, D.C.  In addition, at the U.S.  Embassy in Mexico City,
Mexico, we interviewed the Ambassador and the Deputy Chief of
Mission.  We also interviewed responsible officials from the
Narcotics Affairs, Political, and Economic Sections; the Defense
Attach‚ Office; the Military Liaison Office; the Information Analysis
Center; DEA; the Federal Bureau of Investigation; the U.S.  Customs
Service; and the Department of the Treasury.  We also attended
various drug-related meetings and reviewed documents prepared by U.S.
Embassy personnel. 

To obtain the views of the Mexican government, we met with
representatives of the Mexican Embassy in Washington, D.C.  In Mexico
City, Mexico, we met with the Mexican Secretary of Foreign Relations;
the Deputy Foreign Minister for North American Affairs; the
Coordinator for Counternarcotics Programs (Secretaria de Relaciones
Exteriores); the Deputy Attorney General (Procuraduria General de la
Republic Sub-Procurador Juridico); the Deputy Finance Minister
(Secretaria de Hacienda y Credito Publico); and representatives of
the Ministry of Defense.  We also visited the Mexican Attorney
General's aircraft maintenance facility in Mexico City, Mexico, where
we met with Mexican government officials responsible for maintaining
the 30 U.S.-provided UH-1H helicopters and the Mexican air
interdiction fleet.  At the maintenance facility, we also met with
U.S.  officials responsible for developing a spare parts inventory
system for the Office of the Attorney General.  Information on
Mexican law in this report does not reflect our independent legal
analysis but is based on interviews and secondary sources. 

We conducted our review from January through June 1996 in accordance
with generally accepted government auditing standards.

---------------------------------------------------------- Letter :8.1

We are sending copies of this report to other congressional
committees; the Secretaries of State and Defense; the Attorney
General; the Administrator, Drug Enforcement Administration; and the
Directors of the Office of National Drug Control Policy and Federal
Bureau of Investigation.  Copies will also be made available to other
interested parties upon request. 

If you or your staff have any questions concerning this report, I can
be reached on (202) 512-4268.  The major contributors to this report
were Allen Fleener and George Taylor. 

Jess T.  Ford, Associate Director
International Relations and Trade Issues

(See figure in printed edition.)Appendix I
COMMENTS FROM THE OFFICE OF
NATIONAL DRUG CONTROL POLICY
============================================================== Letter

(See figure in printed edition.)Appendix II
COMMENTS FROM THE DRUG ENFORCEMENT
ADMINISTRATION
============================================================== Letter

(See figure in printed edition.)

(See figure in printed edition.)

(See figure in printed edition.)

The following are GAO's comments on the Drug Enforcement
Administration's (DEA) memorandum dated June 3, 1996. 

GAO'S COMMENTS

1.  The report text has been modified to reflect this information. 

2.  We believe that the report presents an accurate portrayal of
actions taken by the Mexican government. 

3.  This discussion has been deleted from the final report. 

4.  We presented information from 1992 to illustrate changes that
have taken place since the institution of Mexican efforts to
implement their own counternarcotics policy. 

5.  We have discussed this issue with DEA and the situation is
currently under review.

*** End of document. ***