Mexico Oil: The Union and Cartel Threat

Veracruz is the state with the second highest level of oil theft, indicating insider collusion involving individual workers or the unions tipping off cartels. Here the Pemex Tower in Veracruz. (Photo: Gengiskanhg)

Mexican oil investors face union, cartel extortion.

Tenacitas International

MEXICO CITY, MEXICO – In May 2013, Adolfo Sastre Palacios, a powerful union boss in the southeast of the Mexican state of Veracruz, survived an attempted stabbing by a rival. Five months later, Sastre Palacios’ tortured and strangled body was discovered in a mass grave. The grisly episode was a brutal settling of scores between leaders embroiled in a turf war for lucrative contracts to an oil industry poised for major growth: Mexico’s newly-approved oil reform, scrapping the state’s 75-year monopoly on the sector, is expected to lure billions of dollars of private and foreign investment in coming years.

But it also starkly illustrates the organized crime techniques that corruption-tainted union bosses have adopted as their own in a state that is the fifth largest contributor to Mexico’s GDP and where drug cartel battles are resurfacing after a recent lull. Union bosses are widely perceived not only to have copied the methods of organized crime, but also to have established direct ties with criminal groups like the Zetas. Sastre Palacios’ death was the culmination of months of mounting union tension. In April 2012, the rival leader, Samuel Calderón, had accused a faction led by Sastre Palacios and another union figurehead, Marjorie Oropeza, of hiring two Honduran hit-men to kill him, for 20,000 pesos ($1,550).

The May 2013 incident happened shortly after Calderón’s release from jail, where he had been serving time on extortion charges. According to one former Veracruz state official, cartel extortion used to run to 20 to 30 per cent of salaries of workers earning over 15,000 pesos a month, and union bosses were suspected of lining their own pockets at the same time.

Extortion was widely seen as a hallmark of the Zeta cartel, which had faded from the state after a brutal turf war with the Jalisco New Generation (JNG) cartel, dubbed the “Zeta-killers”. But since last year, the Zetas have quietly been returning, fuelling uncertainty and fears of a return to previous levels of extortion and violence.

Sastre Palacios’ Authentic Federation of Workers of the State of Veracruz, Oropeza’s Workers’ Union Alliance, and the National Confederation of Popular Organizations led by Ignacio Martínez Acosta, all supply workers to subcontracting firms in the oil industry, which is currently dominated by state monopoly Pemex. Under the oil reforms, Pemex’s own famously corruption-tainted union is being kicked off the company board.

Although the security situation in Veracruz had stabilized after the cartel turf war had made it one of the most dangerous places in Mexico, crime is now on the rise again as rival drugs bosses vie for supremacy. Mexico’s state statistics office reports in its National Poll on Victimization and Public Security Perception that the feeling of insecurity in the state rose to 75.4 per cent this year from 70.1 per cent in 2012.

Meanwhile, a new study by the Citizen’s Council for Public Security and Penal Justice, an NGO, found that four municipalities in Veracruz (Coatzacoalcos, Pánuco, Poza Rica, and Tierra Blanca) qualify as “failed” – a definition describing places where criminal groups operate with impunity, extortion is generalised or homicide or kidnappings and disappearances are routine.

Naval police have succeeded in beefing up security and Veracruz also has a revamped state police force, although state authorities are considered among Mexico’s laggards in bringing state and municipal forces under a single command. Unscrupulous officers are still rife at the local police level, contributing to rising levels of insecurity in rural areas.

While direct links between unions and the cartels operating in Veracruz are hard to prove, state leaders have long displayed a cozy connivance with organized crime groups, indicating a power structure at the state level into which unions fit snugly. Such “narcopolitics”, as the former official dubs it, in which officials are on the criminals’ payroll, means it is “inevitable that unions are associated.”

Furthermore, the high incidence of oil theft from Pemex installations – Veracruz is the state with the second highest level of oil theft, according to Pemex – indicates insider collusion involving either individual workers or the unions themselves tipping off cartels and providing the technical know-how to steal the oil. Indeed, a captured leader of the Zeta cartel was quoted last year as saying that Pemex workers were expressly recruited by the drug bosses in order to facilitate oil theft.

As well as the oil industry, the Federal Electricity Commission, or CFE, and Tamsa, the steel pipeline company, provide the state’s biggest union base, but according to security experts the construction unions also have a reputation for proximity to criminal groups.

Other unions and industrial sectors also appear affected. Official news agency Notimex earlier this year reproduced a letter purporting to be from unionized workers at telephone company Telmex, the railway company, as well as Pemex, CFE and the Veracruz port, complaining of extortion by cartel bosses. An alleged Zeta go-between on the payroll of the CFE, who was allegedly in charge of extortion there, has also been identified in media reports.

The message typically was “it doesn’t matter what you do, if you’re making money in Veracruz you’ll have to pay the derecho de piso,” says the former state official, referring to extortion payments which he said were worse in rural areas. Typically, cartel leaders tell unions to instruct their staff to pay up or face problems. When the Zeta presence waned, some unions continued to try to extort workers, he added.

The Zetas are usually easy to distinguish from the JNG cartel because they tend to be Central American in appearance and sport tattoos, while the JNG are white, taller and not tattooed, and are suspected by some of links to the army, not least because of the quality of their weapons, the former official said.

However, local gangs that are not full-blown cartels, have also proliferated while security forces have focused on the bigger groups. Such gangs are suspected of targeting shops, hotels and restaurants for extortion. In addition, some experts say the Knights Templar cartel, which has become a serious threat in the Pacific state of Michoacán, where it has seized control of the port and attacked electricity installations, is now boosting its presence in the state of Tabasco, bordering Veracruz in the southeast.

While the JNG was dominant, extortion decreased, but there are still between three and four killings a week, says the former official, who fears the Zetas are now baying for revenge. That turf war could herald another spike in crime levels. With the oil sector reform, the stakes will soar and the tried and tested economic links between the cartels, unions and workers look certain to fuel an ever-higher social – and business – cost.

Republished with permission from Tenacitas International.