Xalisco Business Model

Thursday, February 18th, 2010

The Xalisco business model has changed heroin distribution dramatically:

Immigrants from Xalisco in the Pacific Coast state of Nayarit, Mexico, they have brought an audacious entrepreneurial spirit to the heroin trade. Their success stems from both their product, which is cheaper and more potent than Colombian heroin, and their business model, which places a premium on customer convenience and satisfaction.

Users need not venture into dangerous neighborhoods for their fix. Instead, they phone in their orders and drivers take the drug to them. Crew bosses sometimes call users after a delivery to check on the quality of service. They encourage users to bring in new customers, rewarding them with free heroin if they do.

In contrast to Mexico’s big cartels — violent, top-down organizations that mainly enrich a small group — the Xalisco networks are small, decentralized businesses. Each is run by an entrepreneur whose workers may soon strike out on their own and become his competitors. They have no all-powerful leader and rarely use guns, according to narcotics investigators and imprisoned former dealers.

Leaving the wholesale business to the cartels, they have mined outsize profits from the retail trade, selling heroin a tenth of a gram at a time. Competition among the networks has reduced prices, further spreading heroin addiction.

Competition among Xalisco (pronounced ha-LEES-ko) dealers has cut prices from $25 to $12.50 per dose of black-tar heroin:

The dealers have been especially successful in parts of Appalachia and the Rust Belt with high rates of addiction to OxyContin, Percocet and other prescription painkillers. They market their heroin as a cheap, potent alternative to pills.

There are no official estimates of how much money Xalisco networks make, but narcotics agents who have busted and interrogated dealers say that a cell with six to eight drivers working seven days a week can gross up to $80,000 a week.

Among the idiosyncrasies of Xalisco dealers is that they generally do not sell to African Americans or Latinos. Instead, they have focused on middle- and working-class whites, believing them to be a safer and more profitable clientele, according to narcotics investigators and former dealers. “They’re going to move to a city with many young white people,” Chavez said. “That’s who uses their drug and that’s who they’re not afraid of.”

Again, heroin is a cheap, potent alternative to pills:

OxyContin pills cost $80 apiece and addicts needed five or six a day. Black-tar heroin was stronger and cost less than $50 for a day’s fix.

Xalisco is now among the top 5% of Mexican counties in terms of wealth, according to a government report.

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