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DAVID GREENE, HOST:

This is MORNING EDITION from NPR News. With Renee Montagne, I'm David Greene.

STEVE INSKEEP, HOST:

And I'm Steve Inskeep.

For all of its fortifications, the walls and cameras, the U.S.-Mexico border on which we're standing is easy to cross. We've been learning as we travel the border the stories of what crosses here - people, goods, drugs, and one more thing we're going to talk about with NPR's John Burnett, who's joined us here in the border city of Laredo, Texas.

John, would you just describe Laredo for people?

JOHN BURNETT, BYLINE: Hey, Steve.

We're standing here at one of the international bridges that leads from Laredo into Nuevo Laredo, Mexico. This is a historic border city with these lovely 19th century buildings and churches downtown. But what's important about Laredo is it's the busiest land port on the U.S.-Mexico border. And the international drug trade goes two ways. Drugs go north but money goes south.

All those drug profits made on the streets of Chicago and Atlanta and Dallas are funneled down to crossings like this, where they're smuggled back into Mexico.

INSKEEP: So we're talking about bags or virtually pallets of cash that may be in some of the vehicles crossing this bridge right in front of us, according to the authorities.

BURNETT: One federal agency, Immigration and Customs Enforcement, in 2012 seized $411 million in cold cash from different vehicles heading south.

INSKEEP: That's just what they caught, or course, we should mention. Now what about the rest of it? You wanted to find out where that goes.

BURNETT: So I did what reporters do, I followed the money. And in this case, I went to Culiacan, Sinaloa, the headquarters of the Sinaloa cartel, the richest drug cartel in the world.

If you head west-southwest from Laredo, across the Sierra Madres, you reach Sinaloa on the northern Pacific Coast. This state is known as Mexico's Sicily because it's the homeland of so many storied drug lords. That includes the big fish, Joaquin Chapo Guzman, who was arrested last month after 13 years on the lam.

(SOUNDBITE OF MEN SINGING)

BURNETT: In front of a gas station in the capital of Culiacan, street musicians sing nightly of the narcos' exploits.

(SOUNDBITE OF MEN SINGING)

BURNETT: The U.S. State Department reports that Mexican drug mafias annually send between $19 and $29 billion in proceeds from marijuana, cocaine, heroin and meth from the United States to Mexico. It's dirty money. This is the story of how it's laundered.

The easiest way to convert drug dollars to pesos has traditionally been casas de cambio, currency exchange houses. The money changers we approach on the street are cautious.

UNIDENTIFIED WOMAN: (Foreign language spoken)

BURNETT: A local journalist, Miguel Angel Vega, who is showing me around town, handles the negotiation.

So she said that we can change up to $5,000 a day.

MIGUEL ANGEL VEGA: If you know them, they can even go to your house and tell them, you know what? I have like $50,000 - let's do the exchange here in my house. And they'll do it because the more they change the more they make.

BURNETT: Money laundering is pure trickle-down economics. Traffickers put a lot of cash into circulation, building palatial homes, buying dresses and jewelry for their wives and looking for new toys.

(SOUNDBITE OF VEHICLES)

BURNETT: I'm standing in front of the new Jaguar dealership that opened last month. Inside, you can spend $213,000 on an XKR-S convertible. And the receptionist says they'll take cash.

Narcos also invest in legitimate businesses as another way to convert dollars to pesos. They become partners in shopping centers, residential developments, hotels, restaurants, farms; really, any type of money-making enterprise.

Former Governor Juan Millan once stated that 62 percent of the Sinaloan economy is permeated with drug money. Here in Culiacan, the underground economy and the normal economy are indistinguishable.

MARISA: (Foreign language spoken) They are the same thing. It's in everywhere.

BURNETT: A 19-year-old university student named Marisa, who only gave her first name, says there's a dark side and a good side to the drug trade for Culichis, as natives call themselves. Violence between cartel rivals leads to fearsome shootouts in the streets. But on the other hand...

MARISA: You can see a lot of nightclubs. The nightclubs are excellent, really.

(LAUGHTER)

BURNETT: The U.S. Office of Foreign Assets Control, or OFAC, has identified 35 businesses in Culiacan as being part of financial networks connected to Sinaloa kingpins. There are certainly many more than this, but Mexico maintains no public database of suspected cartel companies. As the OFAC charts indicate, money laundering networks are usually family-based.

(SOUNDBITE OF VEHICLES)

BURNETT: So we just pulled up to a gas station here in Culiacan that the U.S. Treasury Dept says is owned by a Sinaloa Cartel leader by the nickname of El Azul - Blue.

OFAC says this is one of seven gas stations reportedly controlled by a group that includes a wife of trafficker Juan Jose Esparragoza.

Hello. (Foreign language spoken)

After a couple of minutes, a heavy-set man in a Pemex uniform walks up, warily, and says he's the manager.

FABIAN GUZMAN: (Spanish spoken)

BURNETT: Fabian Guzman says he's only been there for a couple of months; he saw this accusation in the newspaper, but he doesn't know anything about drug money bankrolling this filling station.

Managers at a shopping center and a children's daycare facility - that are also on OFAC charts - expressed similar bewilderment when accosted by a reporter.

Of course, public officials in Sinaloa have an entirely different explanation of their economic mainstay. Gomer Monarrez is a state legislator.

GOMER MONARREZ: The thing about laundering money, I can't deny that it doesn't exist, but I can tell you that en el Valle de Culiacan, we have four out of the 10 biggest companies that produce and export vegetables to the United States.

BURNETT: It's true. Sinaloa is known as the granary of Mexico. And the state symbol is the tomato. But then you have to wonder, how many tomato farmers drive $200,000 Jag convertibles?

JAVIER VALDEZ: (Foreign language spoken)

BURNETT: Agriculture is very important, but it's not as big as they say, says Culichi author and journalist Javier Valdez, who's written five books about narco trafficking.

What drives the economy is organized crime, he says. Without the narcos, there would be more un-employment, fewer companies, less income, and not as much money in circulation.

VALDEZ: (Foreign language spoken)

BURNETT: Last summer, the Finance Ministry, which regulates banks in Mexico, began enforcing stringent new anti-money laundering rules. They're supposed to limit such things as bulk cash purchases and currency exchanges at casas de cambio.

A ministry lawyer in Mexico City said in an interview that money laundering complaints have jumped 140 percent since the new law went into effect. The Mexican federal attorney general's office did not respond to an email asking how many of those complaints resulted in criminal cases.

I asked Alejandro Hope, a former federal intelligence agent in Mexico City, if the government had any interest in disrupting the narcotized economy in Culiacan, or anywhere else.

ALEJANDRO HOPE: It's very difficult to close down these financial networks because of insufficient evidence that will stand in a court of law and probably because there is some officials at many levels might be complicit with those networks.

BURNETT: My final stop on the trail of American drug dollars at work in Mexico, ends - appropriately - at the graveyard. Cartel lieutenants tend to die young in this business. When they do, their families spend lavishly to construct mausoleums that look like small condos.

Here, in the Jardines de Humayo cemetery, you find row upon row of fabulous funerary temples, with marble steps, smoky glass walls, air conditioning, and even bathrooms for the family members who come to mop, polish and remember their lost loved one.

(SOUNDBITE OF CONSTRUCTION)

BURNETT: A mason named Carlos, who's building a new tomb, is asked about the young men who are memorialized in this city of the dead.

CARLOS: (Spanish spoken)

(LAUGHTER)

BURNETT: They died of natural causes, he says with a chuckle. In Culiacan, that means by bullets.

(SOUNDBITE OF MUSIC)

GREENE: That's NPR's John Burnett, reporting from Culiacon, Mexico.

Later today on ALL THINGS CONSIDERED, John reports on how the Sinaloa Cartel used a major international bank to launder drug dollars in the United States.

(SOUNDBITE OF MUSIC)

GREENE: You're listening to MORNING EDITION from NPR News.

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