Power, Clans, and Crime: The Brokerage of Power in Mexico and the Grupo Atlacomulco
Recently, the US government has opened a string of subpoenas: the Department of Justice asked Citigroup Inc. to provide information regarding businesses tied to notorious kingpin, Carlos Hank Rhon. Indeed, Hank Rhon and his family amount to being the 10th richest in the country of Mexico. However, despite the fact that the DOJ does not wish to comment any further regarding their ongoing investigation - claiming that it is merely a matter of investigating ‘anti-money laundering practices’ at Banamex (Citigroup Mexico’s unit) -, two of Hank Rhon’s most significant assets have been brought to light: Grupo Financiero Interacciones SA and Grupo Hermes SA.
This is not the first time that Carlos Hank Rhon - or anyone else in the Hank Gonzalez/Hank Rohn family, in fact - have come under scrutiny. Throughout the 1990s and the 2000s, Carlos Hank Gonzalez (Carlos Hank Rhon’s father, a man that held a series of powerful political positions throughout the 1970s, 80s, and 90s), Carlos Hank Rhon, and Jorge Hank Rhon (the younger brother of Carlos) were subject to intense speculation, investigation, and criticism. In spite of this, however, the Hank-Gonzalez-Rhon family has amassed ever-greater fortunes, climbing the ranks of billionaires internationally, while holding onto political power at home, in Mexico.
The current DOJ investigation is only the latest of a long series that casts serious doubt on the Mexican political system as corruption and links to money laundering increasingly appear embedded into the fabric not only of Mexican political culture but of everyday life.
What lies behind the power of families such as the Hank-Gonzalez-Rhons, however, is actually far more disturbing when one considers both the long duration of such practices as well as the shadow networking that goes on behind the closed doors of the Mexican political system.
Whether or not he Hank-Gonzalez-Rhon family is connected to money laundering is yet to be seen. What is certain, though, is that the power network they belong to is part of systemic failures (or successes) rooted in historical processes that leave the country incredibly exposed to corruption.
Furthermore, their family is a crucial component of a political clique that has not only endured for decades, but has entrenched itself, generating incredible riches over specific stages. This club, known as Grupo Atlacomulco (named after a municipality in the state of Estado Mexico, just north of Mexico City), provides an exemplary case study in understanding the way power works in Mexico as well as the difficulties posed to international systems (especially banks) by operating in such contexts.
In order to properly understand the complexities of power-relations in Mexico, one must grasp the issue through a historical lens. Not only because current events do not occur in a vacuum (and are part of a historical continuity), but because in the particular case of the PRI (which was able to hold power for the better part of a century), political and economic structures endured despite what appeared to be serious transformations (such as the election of the center-right party - PAN).
Following the end of the Mexican revolution in the 1920s, the military victors seized the moment to establish a government that would perpetuate their own political and economic power by establishing a national structure that favored top-down relationships with little or no civilian oversight. As John Gledhill points out in his text “Official Masks and Shadow Powers: Towards An Anthropology of the Dark Side of the State” (1999), published in Urban Anthropology and Studies of Cultural Systems and World Economic Development, the 1940’s marked a particular moment wherein “backstage power networks overcame regional differences and created a remarkably solidary ruling elite” (p 211).
One of the immediate agendas of the “revolutionary” party was to modernize the country through a state-led industrialization plan (which was common through capitalist nations in Latin America). In Mexico, particular hubs were designated to become industrial sectors, and these revolved around Monterrey (in the north), Mexico City and Estado de Mexico (in the center), and Guadalajara (in the West).
However, to accomplish this, the newly minted State had to negotiate with localisms and regionalisms. A brief look at the revolution itself displays the fragmented landscape of Mexico wherein particular generals ruled over precise and particular regions. A central characteristic of the PRI was its ability to negotiate between inter-local, regional, and national disputes. Mexico had always been a fragmented landscape and remains so today: what is true in Tijuana is not necessarily true in Cheran, Michoacan, or San Cristobal, Chiapas; much less in Mexico City. Each one of these geographical spaces has a very particular history that separates it from national narratives. The extreme localism and the constant existence of caciques (local bosses) made the post-revolutionary period one that was primarily on the integration of localities into a national body that functioned for the distinct ends of the PRI.
But what were the ends of the PRI? At a primary level, the PRI was a particular party that came to be the same thing as the government yet largely served the specific ends of elites that themselves were subdivided into different interest groups. Though these interests were never fundamentally opposed to one another, different subgroups of elites came to power at different movements, each one moving their own agenda. These elites were drawn from particular sectors of society - namely the purely political sector, the business sector, and the labor sector. The period following the revolution, like elsewhere around the globe, was marked by a compromise between the interests of capital on one end, and the interests of labor on another. The state’s primary role was to operate as arbiter between these two interests.
However, just as the accumulation of capital is a historical product (meaning that capital accumulates and concentrates over people and generations) so too is the accumulation of political power. As Gledhill (1999) points out, the expansion of the state sector of the economy in the 1970s allowed for a certain ‘political accumulation’ as purely political elites increasingly expanded their domain into the economic sector (p. 212). As neoliberalization came around (along with the dominant notion that what is good for the individual is indeed good for all of society) those political elites, already involved in various economic sectors, were best poised to expand their personal domains.
Grupo Atlacomulco Phase One
Grupo Atlacomulco, as it came to be known by outsiders, was born in the 1940s when Mexico initiated its industrialization process. Estado de Mexico (the state just north of Mexico City) was marked to be, alongside the Federal District, an industrial hub that would operate alongside agricultural production. However, this meant disciplining labor under the parameters set by the federal government.
Local representative and president of the Grand Commission of the Chamber of Local Representatives, Fernando Ortiz Rubio, nephew of ex-president Pascual Ortiz Rubio, carried out the murder of Alfredo Zarate Albarran in 1941. The assassination let loose a tide of killings because it upset local power relations.
Isidro Fabela Alfaro, a diplomat at the time that hailed from the municipality of Atlacomulco, was designated as the replacement governor, from 1942-1945. Fabela Alfaro not only had the distinct opportunity to direct union formation under CTM (Confederation of Mexican Workers - Mexico’s most powerful to date) but was allowed to develop local bases of power by the COCEM (Confederation of Workers. Farmers, and Employees of Mexico). Acting as intermediary between the Executive Office and local bases, Fabela Alfaro was able to establish his own power network.
It must be noted however the vast majority of unions themselves are part of the PRI. They function as the industrial arm of the party and are mostly vertical and authoritarian. Fabela Alfaro, by being the one to have established the nexus between the local and the national, thus served as a regional boss. He established the unions as blocks of economic and political power. Given the political weight, Fabela Alfaro managed to directly install Alfredo del Mazo Velez (1945-1951) and Salvador Sanchez Colin (1951-1957) as governors, both actually coming from Group Atlacomulco.
Following three successions, the Executive office of the federal government temporarily restored direct power in Estado de Mexico, until the election of Carlos Hank Gonzalez in 1969. Though in ‘57, Manuel Avila Camacho was able to create an opening, the amount of political pull that the Fabela generation of the Grupo Atlacomulco was able to accomplish was enough to establish key relationships and create spheres of influence within local structures.
The Transformation of Feudal Relations
Caciquismo (the creation of networks of local bosses), though often relegated some “pre-modern” social formation, something that no longer fits into the general schema of capitalism, survived through the post-revolutionary period and became an important link within the local, regional, and national chains of power, especially as the federal government needed to establish its supremacy.
Given the historical nature of caciquismo (which was created under the Spanish system of colonialism, and remained to be politically and socially embedded), the newly formed Mexican State seized such pre-existing structures to instill its own programs. As Maldonado Aranda points out, between 1942 and 1991, this system is integral in explaining not only power groups that gained access to national power, but how the use of caciquismo is a ‘historical product’ that was itself the product of “localist ‘ideology’” based on the protection of Estado de Mexico “against continuous ‘interventions’ of the political center” (p. 84). We must keep in mind that in the immediate post-revolutionary period, up until its solidification in the 1950s the Mexican government was marked by a deep purging, wherein those that played the game were allowed to stay in power, and those that did not were effectively cleansed from the system (Maldonado Aranda 2003).
The creation of such networks thus created a multitude of spheres of influence within Mexico. Though the cacique is historically seen as a figure that is tied to agrarian production modes, in the modernizing Mexico, union bosses became just as important and functioned in a similar fashion, as well as any leader of civil society. Those that moved up the ranks of the PRI (and thus the government) were those that were able to get things done due to the connections that they forged in their political career. As Gledhill points out: “clientelistic relationships and social ‘connectedness’ have remained essential” to political life in Mexico (p. 209).
Hence, the entire PRI political justice rested on the assumption that it is the political elites that know what is best in Mexico. Power operated backstage and depended on the political ability of individuals to make things move, this resting on the social networks they had created.
However, by the 1980s, drug production and distribution in Mexico began to explode. Drug production (especially marihuana) had always been a feature in Mexican society, but by the 1960s, it was receiving increased scrutiny until the 1970s when US President Nixon declared a “war on drugs” and Ronald Reagan militarized the war.
The prevalence of drug production, distribution, and consumption in Mexico must be historicized and contextualized. There is both economic and political reasoning as to why the phenomena is not merely extinguished, but is rather further embedded.
If one were to merely create a chart that factors the amounts of death, the amount of drugs, the amount of seizures, and the amount of revenues due to drug protection and overlay this chart atop a chart that counted the years and levels of privatizations Mexico had accomplished, the message would be incredibly simple: as Mexico neoliberalizes more, drugs are more profitable and more people die.
Quite like neoliberalism, drug production could not be what it is today had not certain revolutions in terms of social organization, communication, and transformation occurred first. Prior to globalization, economies were national and there were national interests in caring for the population (before it was considered to encourage ‘dependency’ or ‘anti-business’ and hence anti-job-making). However, given the economic crisis of the 1970s, the only alternative, if one was to coin Margaret Thatcher, was to promote competition and offshore labor. In previous economic modes, one simply could not do this because the infrastructure wasn’t there. But due to revolutions in the way things were transported (by land, sea, and air), in the speed things could be communicated (by telephone and then the Internet), and the way people lived (increasingly in cities), this was suddenly possible.
Mexico changed overnight: from the 1980s onward, Mexico underwent rapid transformations. As Free Trade agreements (like NAFTA) were signed into law, agricultural workers were suddenly out of work because American products were cheaper. Roads were built up and down Mexico as maquiladoras sprang everywhere and semi-trucks transported export-only goods to the north. And people moved where the money was, so they went to cities that simply couldn’t handle them. This is why cities like Tijuana, Ciudad Juarez, and Mexico have grown at exponential rates, along the similar exponential curves of capital accumulation.
Everything that helped transnational business grow also helped transnational drug flows grow. Beginning with the disenfranchisement of rural workers, a new workforce was created that could increase production - so long as wages were competitive. Meanwhile, the roads that were created for the exportation of legitimate products, obviously, were used for the exportation of illegal products. Meanwhile, production could be streamlined and coordinated remotely and centrally due to advance in communication. Those that could not find work in the cities (or wanted to supplement meager wages) were then hired by cartels.
The question of corruption is always one of scale. As Leonardo Curzio (2000) states in his work “Organized Crime and Political Campaign Finance in Mexico”, in the book Organized Crime and Democratic Governability, criminal organizations need some basic resources in order to operate:
“First, they need police protection. They also need financial mobility and protection to launder their earnings and bring them into the legal economic system. Political protection is harder to see, but it is also important in creating a powerful buffer against law enforcement and judicial authorities if they decide to move against a criminal organization. These minimal necessities are what prompt criminal organizations to infiltrate government and corrupt public officials to win the complicity or tolerance needed to continue or expand criminal activities” (p.84).
When a criminal organization first operates, it cannot bribe police authorities because it simply has not generated enough revenue to do so. To bribe police, a criminal organization has to be able to pay more money than the police officer is already making, otherwise, it is not enticing. In Mexico, that enticement level is quite low due to the low-wages police earns. From here on up the institutional latter, the levels of bribes that function require more money. However, there comes a moment when a politician is more worthwhile than a cop. The politician can order the police chief to act according to the necessities of the criminal organization and thus the cost is effectively driven down.
But why would a politician be interested in accepting bribes? Aside from financial gains, there must be political gains as well.
First, due to the massive reconfiguration of the Mexican economy that followed neoliberalization (or, globalization) traditional political and industrial bodies became less relevant. However, in any poor neighborhood in Mexico, everyone knows that the local drug boss rules, especially in areas where the state has divested interests.
As the amount of revenues generated from drug sales increase, so must the workforce, if the criminal organization wants to move and sell its product. Sophisticated networks are created with an obvious ruler (the one who brings in the drugs and thus the employment). Due to the way drugs are sold (through scattered and small markets as centralizing consumption centers would be too obvious), this means that the reach of the drug lord is wider as well. Hence, at a primary level, drug cartels, given their level of sophistication, are more than capable of delivering votes to the booth.
Second, given the massive amount of revenue from drugs, drug barons are capable of donating money that is increasingly required to win elections. Again, as Curzio (2000) posits, “It seems reasonable to suppose that if $300-500 billion, according to varying estimates, is laundered worldwide each year, some part of that is going to disappear into the political systems of organized crime” and hence depositing that money and laundering it through a political campaign is a perfectly reasonable (if not sophisticated) manner of doing so (p. 84).
There have been attempts however, since the 1980s, to make transparent campaign financing. But here we must remember a critical lesson previously mentioned: the PRI and the government were essentially one and the same thing for decades. In 1987, for the first time in Mexican history, rules were established for direct party financing (Peschard 2006). Then in 1993, under pressure from the public, President Salinas de Gotari passed an “electoral reform that political parties must submit income and expense reports to the electoral authority at the end of each year and after every year”, even though the Federal Electoral Institute (IFE) did not have any auditing capacities, and hence could not know if whatever was turned in was in fact actual (Peschard 2006). In 1996, constitutional reform was approved wherein “the constitutional reform introduced important changes that became the strongest pillars of the electoral system: autonomous electoral authorities; equality in the distribution of party resources and prerogatives as the basis for competitiveness; and a specialized judicial body responsible for resolving electoral controversies” (Peschard, 2006, p. 88). However, there was a major limitation:
“IFE can audit political parties; however, it cannot investigate private individuals or companies that become party contractors and who may eventually handle party accounts, or who may help to convey illegal resources to secretly finance certain party activities. That is, parties may have parallel bank accounts, under private names, that a regular auditing exercise cannot detect. Banking regulations protect people from government interference, except in the case of judicial or prosecutorial investigations, in which such information must be disclosed if the investigations” (Peschard 2006, p. 95).
Furthermore, IFE has no reach any time before or after the campaign. So even though there was some moderate level of transformation, loopholes still existed for criminal infiltration.
The last reason that a politician might look for backing should already be plainly evident: given the clientelism and corporatism of the political body of Mexico, backing from a local crime enterprise may be the good start to a political career.
Grupo Altacomulco and the Hank Family
Though lacking familial relations to Isidro Fabela Alfaro, Carlos Hank Gonzalez had Fabela Alfaro’s backing when he assumed the throne of the governorship of Estado de México in 1969. Hank Gonzalez had assisted in the gubernatorial campaigns of Isidro Fabela and Alfredo del mazo Velez in the 1940s. Carlos Hank Gonzalez had been a professor at a university in Estado de Mexico, where Isidro Fabela Alfaro ended up (this is why he was given the nickname ‘the professor’). Throughout the late 1950s and early 1960s, Hank Gonzalez worked his way through the political circuit before returning to run as the PRI candidate for governor of Estado de Mexico in 1969.
What makes Hank Gonzalez’s governorship over the entity so important is due to the massive urbanization and industrial projects that the state underwent during his administration. In the late 1960s and throughout the 1970s, as elsewhere in the nation, Estado de Mexico underwent a series of urbanization and industrial projects. Though not as expansive as Mexico City, the number of factories that opened during this time period surpassed Jalisco and even Nuevo Leon. Industrial parks grew at rapid rates during Hank Gonzalez’s time as governor. Manufacturing made up 40 percent of the state’s product by 1975, when Hank Gonzalez left office (Rozga Luter 1994).
Similar to Fabela Alfaro, Hank Gonzalez had a great deal of influence during the following two gubernatorial administrations. As previously noted, as Hank Gonzalez brokered both political and economic deals, he had established himself as an effective business and political leader, as he himself amassed more wealth and as he amassed power for the PRI. Hank Gonzalez had established himself as head of the Grupo Atlacomulco.
His ability to do both one him the favor of then-President Lopez Portillo and he became regent of Mexico City in 1977, where he again had the unique opportunity to be in charge of massive urbanization and infrastructural projects.
Following his regency in Mexico City, Hank Gonzalez fell out favor during the presidency of Miguel de la Madrid, but had made very strategic investments. Aside from having amassed both financial and construction enterprises, his youngest son Jorge Hank Rohn, had purchased a lucrative and famous casino, Agua Caliente Racetrack (Hipodromo de Agua Caliente SA de CV), while his oldest son, Carlos Hank Rhon, established himself as a financial magnate.
During the late 1980s, under the presidency of Salinas de Gortari, Carlos Hank Gonzalez was put in charge of the Secretary of Agriculture which saw the privatization of many communal land-holdings, again putting him in a historical position to broker special deals.
Carlos Hank Gonzalez private ventures were wide ranging. He had come to own the distributor of Mercedes Benz in Mexico, as well as transportation companies, electrical companies, real estate companies, and financial and communication companies, all of which acquired alongside an extensive and influential political career.
The political and economic legacy his children inherited was vast and far equally influential as their own enterprises (themselves built upon the legacy of their father), creating a political continuity. Furthermore, Carlos Hank Rohn (the smarter of the two brothers) positioned himself as a financial magnate while Jorge Hank Rohn (certainly the more flamboyant and the least sharp of the two) positioned himself as a gambling king. It goes without saying that both children have fallen under scrutiny, while both their empires have only expanded.
Carlos Hank Rohn established Grupo Hermes in the 1980s, following the devaluation wave that hit Mexico in 1982. This was a lucrative time period for Hank Rohn as he established his eye for speculation as he made fortunes in an economically transitional moment for Mexico. As the country underwent neoliberalization, Grupo Hermes set itself as a foundation for a new style financialization.
However Carlos Hank Rohn came under scrutinty when it was discovered he was Raul Salinas's reference at Citibank. Following such, it was leaked that Carlos Hank Rohn had come under intense scrutiny by the US federal government in the 1980s and 1990s. However, as Thomas Constantine, former head of the DEA, admitted, it was impossible to move further on collected intelligence, due to the incredibly “weakened and compromised” state of Mexican law enforcement institutions and public institutions. More recently however, Carlos Hank Rohn was one of the many individuals whose name appeared in an investigation carried out by the International Consortium of Investigative Journalists who got a hold of leaked documents from HSBC's holdings in a Swiss Bank Account.
Jorge Hank Rohn was included in the allegation. He began his lucrative career in the earliy 1980s when he purchased the Tijuana horseracing track, Hipodromo Agua Caliente. According to Mario Maldonado of El financiero, since then the growth of his empire has made Tijuana the second city with the most casinos, and his portfolio has expanded intensively: Grupo Caliente (his company) owns hotels (Pueblo Amigo), travel agencies (Viajes Petra), an internatoinal zoo, a school (Colegio Aleman Cuahtemoc Hank), and of course, Tijuana's own soccer team, los Xolos. This is aside from his company, Operadora de Apuestas Caliente, which reported revenues of 45,490,000 pesos and more than 9 million clients in 2014.More interestingly is Maldonado reports that Jorge Hank Rohn was able to double his revenue between 2007 and 2014. These are precisely the years of an economic crisis and a drug war that has hurt tourism greatly in Mexico and caused waves of unemployment.
Carlos Hank Gonzalez (not to be confused with his grandfather, Carlos Hank Gonzalez) is born into the greatest social network. The son of banker Carlos Hank Rohn, and grandson of Roberto Gonzalez Barrera, founder Gruma and Grupo Financiero Banorte, Carlos Hank Gonzalez grew up around an established fabric of power.
According to a biography written by Excelsor, at an early age he worked along side Roberto Gonzalez Barrera in Grupo Financiero Banorte, and upon completeing his bachelor studies in Business Administration, worked in the Mexican stock exchange, before being named director general of Grupo Financiero Interacciones. By 2008, the young Hank Gonzalez became director general of Grupo Hermes and by 2012 became vicepresident of Gruma, the biggest producer of tortillas, where he worked alongside his uncle Juan Gonzalez Moreno.
As stated earlier, Alfredo del Mazo Velez took the governorship of Estado de Mexico from 1945-1961, as a political partner of Isidro Fabela Alfaro. According to journalist Elizabeth Gutierrez Zaragoza, del Mazo Velez was Treasurer of the State as well as Secretary General of Government. After winning the governorship, he became close friends with Miguel Aleman Valdes, and was hoping to be nominated for the presidency, but the title went instead to Adolfo Ruiz Cortines.
Alfredo Hilario Isidro del Mazo González, son of Alfredo del Mazo, would later become not only governor of Estado de Mexico (1981-1986), but Secretary of Energy under Miguel de la Madrid from 1986-1988. His candidacy for the governorship was personally sponsored by then president Jose Lopez Portillo. He was almost nominated to candidate for the presidency in 1987, but the candidacy was given instead to Salinas de Gortari.
Alfredo del Mazo Gonzalez however had strong roots in Mexico's banking world. As journalist Mayela Sanchez points out, in the Banco Comercial Mexicano he was sub director of the international division and sub director of the Banca Internacional from 1966-1973; director general of Banco Minero y Mercantil (1973-1976); vicepresident of the Comision Nacional Bancaria y de seguros (1976); director of Public Debt (1977) and director of Instituciones Nacionales de Credito en la Secretaria de Hacienda y Credito Publico (1978) as well as director general of Banco Obrero (1979-1981).
The grandson of Alfredo del Mazo Velez (and son of Alfredo del Mazo González), Alfredo del Mazo Maza, was mayor of Huixquilucan, Estado de México, and when Enrique Pena Nieto took office, was made director of the National Bank of Public Works and Services (Banobras) in 2012. In January of 2015, he resigned from the position to make a run for a seat as a federal representative. He won the position in June.
The Nieto family legacy begins with Salvador Sanchez Colin, mentioned earlier as the second governor of Estado de Mexico following Isidro Fabela Alfaro from 1951-1957. His sister, Ofelia Sanchez Colin, married Constantino Enrique Nieto and gave birth to Maria del Perpetuo Socorro Ofelia Nieto Sanchez. Socorro (more commonly known as) Nieto Sanchez was married to Gilberto Enrique Pena del Mazo. This should sound familiar. Gilberto Enrique Pena del Mazo is the cousin of Alfredo del Mazo Gonzalez.
Enrique Pena Nieto first accomplished a political foothold under the governorship (1999-2005) of Arturo Montiel Rojas. Arturo Montiel has been accused of rampant corruption and was investigated by the Mexican government (which ogf course found nothing wrong). Roberto Madrazo, another PRI career politician, claimed that Montiel Rojas had embezzled millions of dollars and had them in investments in France and Spain. This seems likely as even Maude Versini, Montiel Rojas' ex-wife notified the French authorities that she has knowledge of these events.
What makes matters interesting is that Martiza Diaz Hernandez, a former girlfriend of Enrique Pena Nieto, claimed that Pena Nieto worked within the closest circles of Arturo Montiel Rojas. And this makes sense as Pena Nieto served as Arturo Montiel's Secretary of Finances, as well as serving other positions under the governorship within the departments of Economic Development and Governance.
The trajectories of these families should thus show that power in Mexico is not only historical, but that it is so concentrated that it is impossible that no one in power is simply obvious to their holdings and their interactions with illicit funds. Not a single one of the families here have fallen lost political influence over time (though that is not to say they have been able to always avoid scandal). Rather their power and influences merely accumulates over time and is inherited from family member to family member.
What stands strong, surely, is a feudal set of social productions, wherein power remains in families that use the political party (the PRI) and the political organism (the country) to better themselves. And while these families have grown more powerful, the rest of the country has only worsened. Giving the lack of social forms of organization that have remained since neoliberalization, it is more than likely then that drug cartels are used for political and economic gain.
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