In Mexico, extortion is a booming offshoot of drug war

Reporting from Mexico City —  No taco stand was too small for Juan Arturo Vargas, alias “The Rat.”

Every week, Vargas would shake down the businesses in Nicolas Romero, a working-class town an hour outside the Mexican capital. His take: anywhere from $25 to several hundred dollars. His leverage: Pay up, or your kids will get hurt.

The Rat, police and prosecutors say, worked at the low end of a vast spectrum of the fastest-growing nonlethal criminal enterprise in Mexico: extortion.

From mom-and-pop businesses to mid-size construction projects to some of Mexico’s wealthiest citizens, almost every segment of the economy and society has been subjected to extortion schemes, authorities and records indicate. Even priests aren’t safe.

Extortionists have shut entire school systems, crippled real estate developments, driven legions of entrepreneurs into hiding or out of the country.

And although it is not considered a violent crime, violence readily engulfs victims: When a casino in the industrial city of Monterrey failed to pay off extortionists last year, the place was firebombed, killing 52 people, primarily middle-aged women playing bingo.

Extortion has grown as the largest drug-trafficking cartels consolidate power, leaving many of the smaller groups searching for new sources of revenue.

And it is a crime that feeds on the climate of fear that the drug war has created across wide swaths of Mexico. Anyone can pretend to be a member of the notorious Zeta criminal gang, for example, and easily make money off the target’s panic. There is no overhead and little risk for the extortionist.

Mexico’s soaring drug-war violence (more than 50,000 people killed in a little more than five years) and incidents such as the casino arson “make the threats seem very credible; that’s its success,” said Edna Jaime, head of Mexico Evalua, a Mexico City think tank.

“This is a very pernicious crime,” she said. “It is underreported and does terrible damage” to society and the economy.

Genaro Garcia Luna, the nation’s public safety secretary and head of the federal police, said his officers have investigated 283,000 extortion complaints since the drug war was launched in December 2006. But that’s not the full extent of the problem. Experts say probably two-thirds of extortion cases aren’t reported to authorities.

Bribe-paying has always been a part of Mexican society. But it is only within the context of the drug war that outright extortion has exploded, in part because perpetrators could emulate ruthless traffickers. Security experts trace the sudden surge in extortion to 2008, when a crime until then largely limited to Mexico City spread across the nation.

“That’s when it grew brutally,” said Carlos Seoane, general director in Mexico of the private security firm Pinkerton. “Like a swine flu epidemic.”

Although complete figures are hard to come by because of the underreporting, the National Citizens’ Observatory, a group that compiles crime statistics, estimates that extortion has soared by 180% in the last decade.

The crime generally falls into two categories. The majority of shakedowns are by telephone — as many as 2 million a year — and many of those are made by inmates using throwaway cellphones. In a call or text message, the extortionist pretends to have kidnapped a relative, or threatens to do so, or claims to be outside a business or home, prepared to open fire.

“The bad guy controls the victim like a puppet,” said Seoane, who has handled hundreds of extortion cases. “You don’t know who’s talking, and it generates terror.”

In these scams, the extortionist actually has little or no real information about the target and could easily be calling from hundreds of miles away. He counts on fear and in fact poses little real danger. Still, people pay.

“We can do this the peaceful way, or we can go the way of the machine gun,” one extortionist told his victim, according to a call recorded by security personnel and made available to The Times.

The more ominous scheme involves gangs who have control over a territory and make their threats in person. They show up at a store, business, factory or construction site to demand “quotas,” or derecho de piso, a kind of protection money. You can’t operate if you don’t pay.

These territory-based extortionists enjoy the advantage of having done enough reconnaissance to know key details about the victims and thus can enhance the threat. The Rat, for example, who is awaiting sentencing, watched his targets long enough to know how many kids they had and where they went to school; he then allegedly used that information to terrorize his victims.

The owners of a very hot nightclub in Cancun decided it was worth the price when goons showed up expecting to be paid about $800 a week. That went on for a few months. Then the extortionists doubled their demand. And now, said a security consultant involved in the case, the price tag is nearly $4,000 a week.

“Now they realize it will never end,” the consultant said. “They feel like prisoners.”

(Government and private security experts discussed several cases with The Times on condition that the victims not be identified.)

At the Ciudad Juarez store of a big international hardware chain, extortionists called the manager and demanded $50,000. He quickly left the store, only to be intercepted by the callers and held in the trunk of their car for three hours before being released.

“Next time, we kill you,” they told him.

Instead of paying, he did what many entrepreneurs are doing: He closed the store and left the country.

The number of Mexican businessmen transplanting themselves, and often their businesses, to the United States has grown enormously in the last five years, as measured by so-called investment visas issued by the U.S. government to wealthy Mexicans, and by the millions of dollars those Mexicans are investing in new enterprises north of the border.

Businesses’ flight represents a serious blow to Mexico’s struggling economy, in terms of lost investment, lost tax revenue and lost jobs.

A study last year by the Bank of Mexico found that more than 60% of Mexican businesses said they had been hurt by the national climate of lawlessness, with extortion counting as one of the prime factors. Production losses totaled 1.2% of gross domestic product, the study found.

The construction industry is also suffering.

At a shopping mall under construction on the outskirts of Mexico City, the extortionists knew to hit their target on a Saturday: pay day.

With the masons, electricians and plumbers cowering at the back of the site, the extortionists, claiming to be members of the notorious La Familia cartel, said they would open fire on anyone who tried to leave unless they were paid. In that case, according to people involved, the police arrived and arrested the assailants, a rarity. More often, construction foremen routinely make payments to a bag man who arrives weekly or monthly.

Jose Eduardo Correa Abreu, president of the Mexican Chamber of Construction Industry, said the problem has become so bad that in some states, such as violent Guerrero, builders have stopped taking on certain projects.

It’s not just the business sector.

Last month, priests from 19 Roman Catholic parishes in the state of Mexico, which surrounds this capital, went to authorities to beg for protection from gunmen who appeared at their churches and demanded monthly payments.

“They were terrified,” said David Castañeda, mayor of Atizapan. Threatening priests “is a sensitive point for society.”

The priests, from the area where The Rat was working, had reason to be terrified: A couple of weeks earlier, Father Genaro Aviña was found beaten and shot to death in the sanctuary of his Immaculate Conception Church. The extortionists warned that Aviña was the example.

Local authorities installed “panic buttons” in the churches for the priests to call for help next time the gunmen showed up.

A year earlier, priests and evangelical preachers in Michoacan, President Felipe Calderon’s home state, reported that they were forced to pay extortionists in order to hold religious holiday festivals.

In Acapulco, thousands of schoolteachers refused to report to their classrooms last fall after extortionists demanded that they fork over part of their salaries. The threats came in letters delivered to the teachers, on signs hung outside the schools and, in a few cases, from men who burst into schools. Much of the school system was paralyzed for months, until the federal government sent troops into the region.

“As a crime, extortion has become totally indiscriminate,” Seoane, of Pinkerton, said. “In a country like Mexico, it’s easy to trade on fear.”

wilkinson@latimes.com