Coahuila´s red coal; Politicians, mining companies and Los Zetas

By ‘redlogarythm’ for Borderland Beat

The following is about the
Coahuilan coal mines and how public corruption and Los Zetas got involved in
the business. Contrary to previous reports it contains some history about
Mexico and the mining sector in Coahuila for a better understanding….. (‘redlogarythm’)

If you have read Germinal by
Emile Zola you would like to know that there´s a place in Mexico where the same
drama is taking place, only after nearly 150 since Zola wrote his novel.
There´s a place where thousands of men and children wake up each day at 3 am to
take a bus to reach the mouth of a narrow and dirty black coal mine. After
grabbing a shovel and a plastic hat they descend into the dark belly of the
mine and stay there for nearly 8 to 10 hours of continuous arduous physical
work. Then, at the afternoon they emerge from the scorched earth totally black,
covered with the mortal coal dust that will destroy their lungs in less than 20
years just in order to take the bus back home in order to take a brief sleep
before returning to the mine again the next day.

This horrible labor scenario has
been reflected by Emile Zola in his rebellious marginal, by John Ford in his
emotive How Green Was My Valley and by Miguel Littin in his sentimental Acts
From Marusia. But this ain´t no fiction, this is as real as life itself, and
it´s taking place in the area known as Region Carbonifera in the State of
Coahuila, in Mexico.

It´s in this area where between
100,000 and 200,000 people live either directly or indirectly from the dozens
of coal mines and open pits (legal and illegal) that have been opened through
the years either by State authorities, international mining conglomerates,
dubious local entrepreneurs as well as by shady individuals that are situated
in the porous and opaque border separating the unscrupulous businessman from
the organized crime boss.

It´s also in this area where tens
of thousands of impoverished workers work as animals each day of the year in
order just to survive and to achieve a brighter future for their sons and
daughters, in order not to sentence them to a life of suffering in the obscurity of the coal mines. It´s also in this area that a brutal system
has been configurated not only to drain Coahuila´s soil from its most valuable
resource, but to exploit this men and women with a rapacity worthy of the most
sadistic businessman from the XIX century. It´s also in this area that
organized crime (impersonated in the figure of Los Zetas cartel) has become
just another businessman who interacts in the coal market in order to obtain
money and at the same time deceive the Statal and National mining authorities.

As we will see this system is
composed and run by three main entities: politicians, businessmen and
criminals. These three forces interact between themselves buying land,
machinery and human flesh that can be sacrificed in the altars of coal for the
sake of a miserable mineral than although black can be seen sometimes red: the
Coahuilan blood coal.

It´s the analysis of this cynical
and brutal business network what this article aims for. What I will  try to do is
to explain how it has been originated, how it has evolved and how it actually
works. In doing so I´ll use data and information obtained both from official
documents published by Mexican authorities and from several studies and reports
published by human rights associations that have been in Coahuila and have
witnessed the brutal system that has been working uninterruptedly for nearly 40
years.

THE ORIGINS OF COAHUILAN COAL
ECONOMY:

In Coahuila there are two main
coal deposits: the Sabinas basin and the Fuente-Rio Escondido Basin. The
biggest one is by far the Sabinas basin. Of 6,900 square kilometers it is
situated in the central eastern part of the State it contains a considerable
amount of coking coal (at least 900 million tons by 2001) that can be later
used for melting purposes at the steel factories of the region.

Map of Coahuilan mining basins. The
Sabinas basin is number II

 

Although we can trace back some
coal mining activity to the XVIIIth century if want to situate the origins of
the intensive coal mining industry in the State of Coahuila we must think about
the political era know as the Porfiriato. Between 1876 and 1911 Mexico was
ruled by Porfirio Diaz, he himself a military leader of the times of Benito
Juarez and the fighting against the Conservative Party and the puppet French
Government of Napoleon III. By the 1880s Porfirio Diaz had managed to pacify
more or less Mexico either by the stick or the carrot. Once the country was
pacified Diaz´s administration started a campaign of national industrialization
that included the development of a Mexican mining sector. In an effort for
attracting foreign investment Diaz and his economic advisors started granting
cheap and irrevocable mining concessions that were granted for perpetuity.
Thus, several mining companies from the US and the UK started arriving at
Mexico and the opening of bug mining complexes started.

By the end of the XIXth century
the Coahuilan coal industry boomed for two main reasons. First of all, the
expansion and massive development of the US railroad network meant a constant
need of coal to feed the steam machines running all over the States. Secondly,
Porfirio Diaz tried to develop a national steel industry as well as a genuinely
Mexican railroad. In both cases coal was needed either to feed the locomotives
or the steel ovens. That´s why by 1884 a US mining company opened pits in San
Felipe el Hondo and in Santa Rosa. In a few years new bigger mining firms
arrived to Coahuila. Companies such as the American Smelting and Refining
Company (ASARCO), the Mexican Coal and Coke Co. the British New Sabinas Co. or
the Mexican Compañia Carbonifera de Sabinas which was owned by the Madero clan,
the family of the arch known revolutionary leader that brought Diaz down in
1911.

The American Smelting and
Refining Company (ASARCO) soon became powerful enough to open steel foundries
in Monterrey and Aguascalientes which started receiving Coahuilan coke coal in
order to feed the smelting ovens.

It was also during this time that
thousands of humble peasants and unskilled workers started arriving at Coahuila
searching for a secure job working for the “gringo´´ companies. The mining
firms soon realized that this massive amount of workers, if correctly managed,
could constitute an almost endless reserve of workforce that would provide a
continuous chain of virtual slaves. And so they started a social engineering
project that at the same time was being tested in other mining regions of South
America such as in the saltpeter region of Chile. This mining companies created
what can be labelled as private cities where the firm provided the workers with
hospitals, electricity, water and schools for the miners´ children. The workers
lived inside these private towns owned entirely by the foreign companies. They
didn´t receive a liquid salary in pesos but was known as Vales or Cupones which
where exchangeable by food and basic goods at the local Tienda de Raya (the
grocery shops operated by the company) Thus the miners and their families
remained as virtual slaves of the companies because since they weren´t paid in
cash but in kind they weren´t able to gather enough money to leave the place.
At the same time this virtual slavery system was conjugated with inhumane
working conditions: working days of nearly 12 hours, shovels and metal bars
used as tools for extracting the coal with bear hands, etc. After all we can
say that things haven´t changed very much since it´s the descendants of these
XIXth century miners and their same methods the ones digging in the soil in
2020.

When the Porfirian socioeconomic
system was torn apart by the liberal Revolution of 1911 and the subsequent
civil conflicts that lasted until the late 1920s the Coahuilan coal industry
was virtually destroyed. To the destruction of the national industrial network
we must add the ruin of the railroad sector which became a military objective
itself.

During the post-revolutionary
era, when the victorious military establishment of the 1930s started developing
the basis of the modern Mexico the crisis of 1929 hit and hit hard. Most of the
little and medium coal mining companies filed for bankruptcy or directly
disappeared from one day to the other. This circumstance was exploited by big
mining companies such as ASARCO and American Metal Co. which started buying the
licenses for operating new pits and mines.

During the 1940s the Mexican coal
industry boomed again for two reasons. First of all, World War II provided
Mexico with a neighboring and powerful country in constant need of coal to feed
the never-ending armament race. Secondly, during these years the nationalist
Governments of Mexico started implementing am economic strategy known as Import
Substitution Program whose main objective was to develop a national industrial
infrastructure capable of providing the Mexican people with the products the
needed. And of course, this industry needed coal.

The Mexican economists of the
1940s/1950s (as many nationalistic economic planner of the post war period)
thought that the best way of achieving a national and almost autarchic
industrial complex was to ensure a totally national raw materials manufacturing
system. And so, they designed and implemented a vertical integration productive
process. This meant that the Mexican State would control the steel production
chain from the very beginning until the end. From the coal mine to the steel
plant.

Thus, they founded Altos Hornos
de Mexico SA (AHMSA) with its main plant in Monclova (the second main city of
Coahuila) and at the same time opened several mining complexes at Palau,
Muzquiz and Barroteran. During the 1970s all these companies would be
consolidated in the SIDERMEX group which concentrated mining companies
exploiting coal, iron and manganese, and the steelmakers AHMSA, FUMSA and
Siderurgica Lazaro Cardenas Las Truchas (SICARTSA)

This nationalistic economic
approach was accompanied during the 1960s by an offensive against foreign
interests in sectors that the PRI regime labelled as strategic. Of course, coal
was among them. In 1961 the Congress passed the Mining Mexicanization Law which
incorporated a Reglamento making mandatory that the Mexican Government held a
substantive part of the interests of any company dealing with these strategic
minerals. The private sector was allowed to intervene in the mining industry by
exploiting the mines, but only if they handed 66% of their
participations/stocks to the Government.

Several foreign mining companies
accepted the conditions and passed through the ring. The American Smelting and
Refining Company, for example, gave 66% of its participations to the PRI and
changed its name for Industrial Minera de Mexico SA de CV (IHMSA)

During the 1970s the PRI regime
had coopted the coal mining industry almost entirely and started modelling it
according to its almost mafioso conception of the national economy. It is
during this decade that the Coahuilan coal mining sector started developing the
clientelist structure that has evolved into the current perverted version of
criminal economy we´ll describe later.

It´s important to understand how
the National Mining, Steel and Similar Workers Union has fitted in the equation
since the 1970s. In order to get rid of the social unrest and the constant
headache that truly working associations constitute the first post-revolutionary
Mexican Governments (which constitute the roots of the PRI party) soon realized
that by creating a network of State-run working unions would help them to
channel social unrest towards spheres were labor militancy could be subverted
through clientelism, perks and corruption. Thus, they created a deep web of
working unions which supposedly fought for the rights of the workers but in
fact worked as a platform for “social peace´´ making sure that no labor
conflict went too far. Very soon what had been created as a mean of controlling
workers became a platform for massive corruption. One of the reasons was that
these unions were so big and so tightly controlled by the State that being
nominated as a Labor Leader would mean the opportunity of diverting some of the
money collected as membership quotas to the own pocket.

Founded in July 1934 the National
Mining, Steel and Similar Workers Union has been presided by only two
individuals: a father and a son. Napoleon Gomez Sada was the first Union
secretary and in 2002 his son Napoleon Gomez Urrutia was elected as his
successor at the presidency of the Union. It seems that Jimmy Hoffa would be
proud. It was public knowledge even at that time that the Union wasn´t there
for fighting for the workers´ rights. The Union delegates never rose complaints
for obtaining better working conditions, health security or social benefits.
All they wanted was the quota (duly paid each week) and the attendance to the
boring PRI party meetings.

By the 1970s the PRI regime
realized that in order to maximize profits little and medium mining firms
supposedly operated by the workers themselves (organized according to the
Cooperativa model) could be introduced in the coal industry by directly
operating the mines. In fact, these mining firms were run by the Union which
ensured that the miners obeyed the instructions dictated by the PRI oligarchy.
The product of the miners sweat (the coal obtained from the Coahuilan mines)
was redirected towards AHMSA and other big steel companies (either public or
private) Thus, the PRI regime created the perfect working system. A huge crowd
of miners organized in Cooperatives managed by the party through the official
Union which ensured that no controversy arose while at the same time the coal
obtained was re-directed at a very cheap price towards the big industry.

By the 1980s this corruption and
deficient system was almost exhausted and the old style PRI leaders with their
nationalistic approach were substituted by a new generation of technocrats that
had studied in western universities were they had fell in love with the new
neoliberal market theories. And so, when Carlos Salinas de Gortari and his pals
managed to reach the presidency in 1988 they soon started dismantling the old
and outdated Mexican industrial network. What followed is widely known, the
Mexican national economy was chopped, just like a pie, and sold out at
laughably low prices to the own PRI oligarchy and foreign companies that found
in Mexico a discount store.

In 1986 the Mexican Government
shut down Fundicion de Monterrey SA (FUMSA) labelling it as an obsolete
facility. During the 1990s the SIDERMEX group (the PRI´s experiment of a
totally Mexican steel manufacturing conglomerate) was surgically divided and
its firms sold. Thus, in 1991 AHMSA was sold to Grupo Acerero del Norte.

Nevertheless, the Salinas de
Gortari didn´t only destroyed completely the industrial network created by its
own party during the last 50 years. It also dismantled all the protective
measures that had deterred foreign interests from investing in Mexico´s raw
materials and natural resources. A huge list comprised by natural gas, oil and
minerals (among them coal, of course) comprised the wet dreams of international
energy conglomerates that saw in the almost unexplored Mexican deposits and
basins the promised land.

In 1992 the Salinas de Gortari
Administration liberalized completely the mining legislation and made it
possible for foreign companies to acquire mining concessions without
restrictions. The era of protectionism, political maneuvering and administrative
squandering had come to an end but as we´ll see this didn´t mean the end of the
story.

All this process of
liberalization and economic restructuring brought unemployment to the Coahuilan
coal mines. Tens of thousands of miners were suddenly fired or lost their jobs
when the companies for which they worked were parceled and sold by pieces to
foreign companies. In the case of the national firms that resisted the
privatization wave of the 1990s we can see very clearly how three main levels
resisted.

On the first level we have the
big heavy hitters of the coal mining sector. Grupo Acerero del Norte was by far
the most important company. It operated 6 mines, 2 open pits and 4 coal
cleaning plants through 2 subsidiaries (MIMOSA and MICARE) monopolizing nearly
73% of coal production. IMMSA (ASARCO´s successor) also resisted in Nueva
Rosita monopolizing at least 3% of the total production.

On the second level we have 3
medium size companies that controlled in total nearly 16% of the coal
production: MINSA, MEXATIM and Carbonifera San Patricio.

On the third and lowest level we
find several dozens of little and medium mining companies that obtained the
resting 8% of coal using very rudimentary and backward extracting methods. The
owners of these companies organized themselves into two lobbying groups: the
Mexican Union of Coal Producers (UMPC) with 57 members and the National Union
of Coal Producers (UNPC) with 67 members.

 It´s this group the one that we´ll analyze
because since the 1990s it has grown considerably and because the size of the
companies and the way they work have made possible the growing of a shady
network of criminal businessmen that have used their connections with the local
PRI Administrations to divert resources from the public administration
constituting what possibly is one of the biggest robberies of the modern
Mexican history. What follows is the story of how this robbery took place.

THE MOREIRA CLAN, THE PRODEMI AND
THE ARRIVAL OF LOS ZETAS:

BY the late 1990s the new
Coahuilan mining system was already functioning. A multitude of little and
medium mining companies had managed to stablish themselves as the main mining
firms of the region. Who was behind these companies? The answer is obvious: PRI
politicians. The old PRI regime had collapsed during the 1990s, but as it
happened in Eastern Europe the corrupted bureaucrats didn´t leave their thrones
without making sure that they would participate in the profits of the New
Order. And so it went; when Salinas de Gortari and his pals crushed the Mexican
industrial network selling multibillion enterprises for a few bucks it was the
high levels of the PRI the ones able to buy everything fixing the public
auctions.

Maybe Coahuila is the Mexican
State where the PRI has its firmest presence. Since the birth of the
post-revolutionary Mexican State Coahuila has been ruled by 23 Governors. All
of them belonged either to the PRI or to its preceding political parties, the
PNR and the PRM. This means that the Coahuilan State has been controlled for
nearly 100 years by the same political party, the PRI, and of course a century
of rule by Mexico´s most criminal and corrupted political institution must have
meant something in the field of the clientelist political and economic
relations that have been generated.

The best example of how
entrenched the PRI officials and the Coahuilan mining oligarchy have become
provided by what two brothers (as Governors) did between 2005 and 2017. Their
surname is Moreira and their actions, crimes and omissions will accompany the
State of Coahuila forever.

It all starts with Humberto
Moreira being elected as Governor of Coahuila in 2005. A former Normalista
teacher and educator, Humberto had joined the PRI when he was a young student
for the same reasons other PRI leaders of the 2000s did so, for the possibility
of thriving in the ranks of an organization where corruption, power and greed
meant everything. In fact Humberto´s career in the PRI ranks is nothing worthy
of mentioning. A long career through most education institutions controlled by
the party in the DF ended with the former Normalista teacher escalating ranks
until reaching the point where he could return to his home State of Coahuila in
pursuit of a local municipal presidency. And so it was, in 2003 Humberto
Moreira won the Municipal Presidency of Saltillo (its home town) and became its
Mayor until 2005.

By 2005 he had reached a
considerably high degree of reputation inside the PRI ranks and had joined the
Statal bureaucrats. This made it possible for him to postulate as the PRI´s
candidate for the State Governorship. Through the classical combination of
briberies, intimidations, scab hauling and patronage that have traditionally
constituted the PRI´s main source of votes Humberto Moreira became the 26th
Governor of the Independent, Free and Sovereign State of Coahuila de Zaragoza.

The two main coal lobbying unions
(the UNPC and the UMPC) were founded during the late 1990s as a way of
facilitating the contacts between the coal oligarchy and the ultimate buyers of
the mineral (who was the Mexican Government itself) By the 1990s the Mexican
coal was so outdated and presented so a bad quality (it contains approximately
a 30% of impurities made up of ash and sulfur) that the only client who bought
the coal being produced by the Coahuilan mines was the Federal Electricity
Commission (CFE) which used it for feeding two big thermoelectric plants in the
Nava electrical plant (centrals of Jose Lopez Portillo and Carbon II) which
produce nearly 10% of Mexico´s whole electric energy. It´s important to
understand that the ultimate and only buyer of the Coahuilan coal was and still
is the Mexican Government (although we must exclude the coal produced by the
biggest mining companies that use it for their own steel plants which have nothing
to do with the fraudulent scheme we are currently describing)

How did the UNPC and the UMPC
interacted with the State Government in order to sell the coal they obtained
from the mines? It is important to understand this mechanism of negotiation
because behind it hides one of the main reasons for Mexico´s public
administration systemic default as well as public corruption: the mismanagement
of public contracts.

 

A public contract is a framework
document enumerating the conditions, clauses and obligations that two parts
(one of which is the Administration) have created in the context of the
negotiation for the provision of a certain good and service. When an
Administrative authority (it doesn´t matter if Municipal, Statal or Federal)
wants to buy a product or a service it can do it by itself (which comprises a
lot of public resources as well as time and taxpayer´s money) or it can
deconcentrate the product/service delivery handling it to the private sector
which in exchange of a fixed price (settled in the contract) will manage to
provide the product/service needed by the Administration.

 

If managed properly a system of
Public Contracts can be extremely useful because it relieves Administrative
personnel for other tasks and provides field for economic growth when making it
possible the appearance of economic opportunities for the private sector. The
main problem of any public contract system is its pathologic tendency to
corruption and opacity which has transformed most public contract systems in
mechanisms used not only by corrupt public officials but also by criminal
businessmen and organized crime for earning incredible quantities of money.

 

In the case of Mexico (and almost
any other country in Latin America) the public contract legislation is so
confusing and opaque that it has allowed a lot of criminals to thrive thanks to
their contacts with local political oligarchies. It has happened in Colombia,
Guatemala, Brazil, Argentina and Peru and Mexico isn´t an exception. This is
exactly what happened with the Coahuilan mining companies.

 

According to the official logic
the functioning of the Coahuilan coal public contracts is very easy. On the one
hand we have the mining companies which obtain raw coal from the mines and ope
pits. On the other hand, we have the Mexican thermoelectric plants which need
this coal for producing electricity. What the mining companies do is to use
their two lobbying firms (the UNPC and the UMPC) for negotiating a price for
each coal ton with the Federal Electricity Commission (CFE) This price of the
coal ton is reflected in a public contract signed between the companies and the
Administration and thus, each party leaves the deal with what each one wants: a
fixed price for each coal ton for the mining companies and the coal necessary
to operate its thermoelectric plants in Nava for the CFE. Now, since the CFE
knows the exact amount of electricity that their two plants are going to
produce each year they already know the exact amount of coal they will be
buying from the Coahuilan mining companies. Thus, what rests is the negotiation
of not the quantity but of the price. It is around the negotiation of the coal
ton that all the misdemeanors happen.

How the public contract initially
worked

For example, the UNPC (which was
founded in 1995) started negotiating massive contracts with the CFE almost
immediately. Between 1995 and 2003 the UNPC managed to provide the CFE with 1,5
million coal tons each year for a price oscillating between 232 and 312 pesos
for each ton.

Nevertheless this system of
direct negotiation between the Coahuilan mining companies (organized into the
UNPC and UMPC lobbies) and the CFE excluded one variable from the equation
depriving it of the possibility of participating in the huge benefits the coal
economy could offer. This individual was the Coahuilan Statal Government
itself.

When we speak about the current
war going on in Mexico we usually tend to focus in two main agents: the drug
trafficking organizations and the Federal Government with its armed forces and
police corps. What we tend to forget is that there´s a third highly active
entity which mediates between these two main forces proposing deals and
solutions both to the Administration at the DF and to the regional chieftains
managing the criminal groups. The Statal Governments constitute a mafia in
their own right. According to an antique conception of Mexico they could be
compared to the colonial Viceroys; regional authorities which are supposed to
answer to a central authority which is too far away for knowing what happens in
their domains.

It is fair to declare that the
State Governments are responsible for most of the current Mexican tragedies
since the deconcentrating of powers and delegation of aptitudes in State
Administrations have created the perfect conditions for the expansion of
corruption and crime in this regional zones.

It is also fair that the most
corrupted State Administrations have behaved as predatory machines always in a
frantic search of available resources in order to steal it. Their strategy is
purely predatory and is deployed in several ways: by stealing federal funds
directly from bank accounts, by converting aid into currency in the black
market in order to dispose of the liquid funds, by creating false projects in
order to spend a few bucks while pocketing the rest of the money, etc. This
also happened in Coahuila, and it was the Moreira Administration the one
designing the whole system.

As any other mafia the State
Government couldn´t let any big economic undergo in its area of influence
without being properly “taxed´´ In other words, the Coahuilan mining sector
was a fruit too delicious to let it be enjoyed by other. And this why the
PRODEMI was born.

Under the old negotiating system,
the mining firms grouped around the UMPC and the UNPC negotiated the price of
the coal ton directly with the CFE. Under the new logic of the Moreira
administration the State Government would fit in the middle of the negotiation
by mediating between the mining lobbies and the CFE. The entity that would do
such a thing would be the Promotora de Desarrollo Minero (Mining Development
Promoter or PRODEMI) According to it´s own founding document the PRODEMI would
“carry on the processes that are necessary for the homogenization of coal in
order to raise the quality of the mining products´´ The PRODEMI would also be
in charge of “acquiring and selling coal and other minerals and natural resources
in benefit of the mining activities of the State of Coahuila´´

In other words, the PRODEMI would
be the entity negotiating the public contracts for coal purchases with the CFE.
Thus, Humberto Moreira and his colleagues at the State Government would negotiate
the quantity of coal production as well as the price of the coal ton. And for
doing so they would retain a certain quantity of money of each ton of coal in
order to invest it in the modernization of the mining industry (in better
equipment for the miners, health facilities, better infrastructure, etc) Of
course, it is obvious that Moreira´s intentions when creating the PRODEMI was
not to improve the miner´s daily life but to divert hundreds of million of
pesos into the magnificent scheme that would ended up with a Coahuilan public
debt of nearly 1,900 million US dollars.

PRODEMI coal scheme designed by
Humberto Moreira and his colleagues

It is not very clear what role
did the mining companies played in the creation of the PRODEMI. On the one hand
it´s true that the PRODEMI taxed them not only for each ton of coal they
produced but also for any kind of arbitrary reason: withholding tax for the
creation of “security programs´´, Middle and Small mining Escrow Fund,
Ecological Restoration withholding, Coal Chemical Analysis fee, Road
Infrastructure fee, etc. Each of these fees, taxes and escrow funds provided
the PRODEMI with a reason for taxing the mining companies and thus pocketing an
incredible amount of money that could be managed in total opacity. But it´s
also true that the creation of the PRODEMI lead to the production of mass
quantities of coal. In fact the mining companies managed to get contracts for
producing so much coal that they couldn´t attend the CFE contract requirements
due to their deficient infrastructure and workforce. And this is where Los
Zetas fit into the equation.

THE  COAHUILA ARRIVAL OF LOS ZETAS:

As we all know Los Zetas were
born as an armed wing of the Gulf Cartel during the 1990s. It was during this
time that several enforcement cells were founded by the leaders of the CDG: Los
Metros, los Lobos or Los Rojos some of which still operate today. The idea
behind the creation of Los Zetas was the conception of a spear head that would
go into disputed zones in order to bend local resistance, crush foreign rivals
and create new business fronts for CDG bosses. As we know Los Zetas soon
evolved into a national criminal network that reached almost every corner in
Mexico. They expanded through the Gulf reaching the Yucatan peninsula. They
managed to get to Chiapas and the Guatemalan border. They even invaded the
Tierra Caliente and Guerrero unchaining a brutal conflict that would end with
the birth of the Familia Michoacana and the Knights Templar. And in their
effort for controlling vital smuggling points Los Zetas arrived to Coahuila,
which share more than 500 kms. of border with the US and has in the town of
Piedras Negras the border pass of Eagle Pass (a vital smuggling cross point)

The problem with Los Zetas
arrival to Coahuila was that the State already had a heavy density of organized
crime presence. During the Prohibition Coahuila was a center for bootlegging,
and in fact there was at least one big whisky moonshining facility working at
full capacity in Piedras Negras. During the 1980s the Gulf Cartel expanded to
Coahuila through a local cell known as Los Texas commanded by Guillermo
Martinez Herrera aka El Borrado and Omar Rubio Pardo.

But soon other bigger entities
arrived and by the 1990s the Juarez Cartel of the Carrillo Fuentes clan, the
Sinaloa organization of Mayo Zambada and Joaquin Guzman and a group known as
Los Michoacanos linked to the Milenio cartel of the Valencias were operating in
the region smuggling tons of cocaine and marihuana from the town of Piedras
Negras and Ciudad Acuña. During this time, it was the Juarez Cartel the one
managing the big plazas of the region and it is impossible to describe the
level of criminality that the continuous frictions between the different groups
brought to the region.

During the early 2000s and under
the Vicente Fox presidency the DTOs started the scalation of violence that led
to the declaration of the war on cartels by Felipe Calderon in 2006. Coahuila
was among the main States involved in the scalation of the drug wars all along
with Michoacan and Baja California. There the Sinaloa Federation launched a
massive offensive for the cities of Acuña and Piedras Negras which were also
coveted by the Gulf Cartel. In the ensuing brawl the Zetas won the battle by
far maybe because of their social strategy of creating huge and tight halconeo
networks among the youngsters of local working suburbs. Anyway, by 2005 Los
Zetas had gained control of most of Coahuila for their CDG masters. This tight
control would turn into total ownership when the secession between CDG and Los
Zetas happened between 2010 and 2011. From then on, Coahuila would be labelled
as the Zeta State and it was there were some of the most gruesome and terrible
episodes of violence of the current Mexican conflict have happened (the Piedras
Negras CERESO affair, the Allende massacre, etc)

In other words, by 2005 Los Zetas
was the criminal organization with the firmest presence in Coahuila. And because
of the predatory economic strategy, they developed which meant the control of
almost any illicit activity as well as the taxation of most licit businesses
conducted in the region their relationship with the coal mining industry was
just a matter of time.

Interestingly enough the culmination of the conflicts between the Sinaloa Federation and Los Zetas ended
with the victory of the latter and with the installment of Humberto Moreira in
the State Government, and although during his last time as Governor and when he
returned to the “civilian´´ life Moreira held a very critical position against
Los Zetas it is undeniable that his Government collaborated at some point or at
least did nothing to prevent the installation of the group in Coahuila.

It is not very clear when Los
Zetas got involved in the mining business, but what can be said is that
undoubtedly the reform of the mining public contracts under the PRODEMI scheme
helped them a lot because it made it possible for organized crime local bosses
to operate their own illegal open-pit mines. How did this happen?

Under the PRODEMI contract form
the CFE granted a single big contract stating the coal production and the
prices for the ton coal. For example, in 2009 Humberto Moreira and his PRODEMI
signed a contract with the CFE. This contract stated that the PRODEMI would
provide the CFE with 3,3 million coal tons for 927 pesos per ton. This big
contract was then handed over to the lobbying groups UNPC and UMPC which
parceled it into smaller producing contracts assigning each one of them to
their respective affiliated mining firms. Nevertheless, if we investigate these
mining companies we will discover that dozens of them were nothing more than a
corporative name with just a pair of administrative employees. In other cases
the firms had just a few workers in payroll and operated mines of a capacity
much smaller than the one assigned by the contracts. For example, a certain
mining firm would operate a mine with a capacity of 50,000 tons of coal but
according to the contract granted by the PRODEMI this firm would contribute
with 150,000 tons. And although the company didn´t have the infrastructure for
providing 150,000 tons but only 50,000 in the end they would give the CFE
150,000 tons.

So where did these extra 100,000
tons come from?

There are two possible answers to
this question. The first one is that the mining companies under contract with
the PRODEMI and the CFE subcontracted a significant part of the production by
hiring the services of other mining companies which were the ones obtaining the
coal by exploiting miserably their own workforce. Thus, the census of the two
lobbying groups (the UNPC and UMPC) reveal that they had 127 inscribed members.
From all of them, only 72 obtained a contract from the PRODEMI. It´s obvious
that the remaining 55 companies were subcontracted by the 72 which had a
contract in order to provide the portion of coal they weren´t able to collect.
Now the question is how these subcontracted companies operated. They did so
with extremely poor infrastructures and by exploiting coal mines located in
inhabited areas were mining activities are strictly forbidden. Of course this
kind of mining allowed these companies to obtain coal for very little money
which at the same time makes it possible to sell it to the PRODEMI contracted
companies for a price under the one paid by the CFE.

Let´s make it clearer with an
example. Imagine that the CFE grants a contract for 100,000 tons of coal to the
PRODEMI for a price of 900 pesos/ton. The PRODEMI then contracts mining company
A for producing these 100,000 tons but company A is only able to produce 50,000
tons. What company A does is to subcontract the production of these 50,000 tons
to company B which operates with poor infrastructure and uses cheap and
unregistered workers. Thus, company A buys these 50,000 tons for 300 pesos/ton
(in total, 15 million pesos) Then company A goes to the CFE and hands both
cargoes the one it obtained and the one bought to B and receives the money
stipulated in the PRODEMI contract (90 millions) In the end company A has
earned 75 million (90 million from CFE minus 15 million paid to company B) But
this scheme works because company B belongs to the owners of company A or because
by doing so company A doesn´t have to hire more workers or infrastructure which
would result in higher fixed costs.

The second possible answer to the
question about where do the extra tons of coal come from offers an explanation
of how and why Los Zetas got involved in the coal business in Coahuila.

An even cheaper why for obtaining
coal in Coahuila is to buy it from the groups operating illegal mines. As in
any country when a Mexican mining company wants to exploit a certain mining
deposit it must ask the Government in order to obtain a mining concession. But
under Mexican law mining concession grant only the extraction of resources
located underground, so if the company wants to do anything, they have to
negotiate with the owners of the surface under which the mine will be located.
This usually leads to a complicate negotiation with the communities or
ejidatarios who own the land and is a current source of social conflict with
the mining companies because they usually break the agreements and refuse to pay
the communities.

The dream of any mining firm
in Latin America is to get rid of the troublesome communities who want to
perceive some money for handling their lands. And this can be done very easily
by any armed group which makes from the use of force their main negotiation
strategy. In Colombia the ELN, the ex-FARC mafia and the paramilitaries have
gained control of the gold mines by exterminating social leaders and native
communities, in Venezuela it´s the same but with the Pranes, in Brazil with the
Comando Vermelho or the Primero Comando da Capital. And in Mexico, the Coahuilan
mines attracted the attention of various Zeta leaders.

It´s obvious that there was some
sort of previous relationship between local mining businessmen and certain Zeta
cells. It isn´t clear how this relationship started or when it surpassed the
mere coexistence for becoming and indistinguishable merger. But the truth is
that by 2011 high-ranking Zeta leaders (among them Heriberto Lazcano Lazcano
aka Z3 himself) were operating their own coal mines in the Sabinas basin zone.

These became public when Humberto
Moreira declared it publicly in a radio interview after a Zeta cell kidnapped
and murdered his son in what apparently was a transversal vendetta provoked by
the killing of Alejandro Treviño Morales (nephew of Miguel Angel an Omar
Treviño Morales) by the Mexican Armed Force in October 3, 2012. It was only
then that Moreira (who had left office a year before, in 2011) said to a local
journalist that that the presence of Zeta leaders in the coal mining zone was
“an open secret´´ and that Heriberto Lazcano (killed on October 7) was living
in the town of El Progreso, in the middle of the coal mining region, and
operated two mines by his own. Humberto Moreira said that the Zeta maximum
leader sold the coal he obtained from his mines to Coahuila mining businessmen
which then resold it to the CFE for a higher price.

It´s the same strategy used by
licit subcontracted companies, but in this case the mines where the coal comes
from are completely illegal and most of the times are operated in highly
populated zones where local communities are either threatened or attacked in
order to hinder protests and generate an atmosphere of silence where illicit
mining operations can thrive.

It is hardly probable that
Humberto Moreira didn´t know this fact when he was Governor of Coahuila. Of
course he did, and thus we can conclude that he was the direct responsible of
buying coal indirectly from the Zetas because in 2009 Humberto Moreira and his
pals modified the State legislation in order to make the Governor the maximum
head of the PRODEMI placing himself as the PRODEMI´s highest authority as well
as the top responsible for the entity´s decisions and strategies.

A better idea of how entrenched
the Coahuilan mining oligarchy and Los Zetas were during the early 2010s is
given by what happened in the town of Cloete which is located 70 kms from
Progreso (El Lazca´s last refuge) Here a local PRI politician and businessman
called Alvaro Jaime Arellano started harassing local families in order to get them
out of their houses for exploiting the coal deposits that laid underneath in
the name of his mining company: Integracion Minera SA de CV.

Jaime Arellano started by
offering basic goods and furniture (such as cradles) to obtain the families´
permission for extracting coal from areas adjacent to their houses. When this
scam didn´t work he would turn into threats and when threats didn´t cause the
intended results armed cells would appear, kidnap the resident who refused to
grant permission to the coal mafia for digging into his garden and give him a
generous beating.

Jaime Arellano apparently worked
closely with and individual called Servando Guerra Rodriguez who ran his own
mining company: Servando Guerra SA de CV. It seems that this individual and
Jaime Arellano both ran the previous scheme of subcontracting the PRODEMI
contracts. According to available data Jaime Arellano´s firm Integracion Minera
SA perceived 10% of the coal extracted by Servando Guerra SA from to illegal
open pit mines in the town of Cloete: 26,500 coal tons from a total of 265,000
tons which represented 19,875,000 only for Jaime Arellano alone.

According to local residents
Servando Guerra always wandered around the town surrounded by heavily armed men
and since his mines were close to inhabited areas some people gave testimony
declaring that they had seen pickups loaded with tied people heading for
Guerra´s mines. Maybe a further exploration of Mr. Guerra´s coal illegal coal
mines would reveal some corpses.

The official lists published by
the PRODEMI reveal that at least until 2016 both companies Integracion Minera
SA and Servando Guerra SA profited from the system designed by Humberto Moreira
and received hundreds of millions of public money for providing coal which had
been extracted by organized crime from illegal mines.

Alvaro Jaime Arellano and some of
the machinery used by Servando Guerra SA in their illegal open pit mines
(photos are obtained from Guerra´s own webpage)

The 2016 accounts of the PRODEMI
reveal even a darker result because they contain evidence of payments received
and done to three firm which in 2012 were publicly identified as Zeta front
businesses operating “narcomines´´ in the State of Coahuila. In 2012 the news
agency Reforma published that the SEIDO was investigating Impulsora JBN,
Perforaciones Tecnicas Industriales and Minera La Mision for being involved in
the operation of several coal mines for a drug trafficking organization in the
State of Coahuila. This organization must have been the Zetas because in 2012
they were the absolute masters of the State. But that was all this news
appeared 8 years ago and were published by every important Mexican newspaper
and agency, but anything leaked after that. No one knows whether the PGR opened
a formal investigation or not (although declarations made by the State
prosecutor Homero Ramos Gloria at the moment revealed that the PGR was involved
in the investigations)

Well, according to a document
called Cuenta Publica 2016 published by the PRODEMI on the same year Impulsora
JBN (the one pointed in 2012 as a Zeta money laundering front) received
620,096,826.91 MXP, Minera La Mision received 68,753,364.43 MXP and a third
company called Perforaciones Tecnicas Integrales (a very similar name to the
one pointed in 2012 as a Zeta front) received 20,558,874.38 MXP. One quick
fact, the owner of Minera La Mision Basilio Niño Ramos was executed with a
bullet to the head on December 2012 (his corpse presented signs of torture)

Payments done by the PRODEMI in
2016 to two companies which were publicly denounced in 2012 as Zeta front money
laundering businesses

I haven´t heard anyone
complaining about this incredible thing. In fact, it was during the
investigation I undertook for writing this article that I discovered that at
least two of the only three companies publicly exposed as Zeta “narcomines´´
in the State of Coahuila have received money from the PRODEMI and thus from the
Government itself at least until 2016.

THE END OF THE STORY?

By 2012 (1 year after Moreira
left office) the PRODEMI contracts had become so dark that massive rumors about
widespread corruption started leaking out. Moreira´s allegations about the
indirect concerts between Los Zetas top bosses and the CFE through the PRODEMI
subcontracting system was the straw that broke the camel´s back. And although
after a period of 11 months of Interim Government courtesy of Jorge Torres
Lopez (who got captured in 2019 and extradited to Texas were he faces money
laundering charges) Humberto´s brother Ruben won the Governorship and continued
with the PRODEMI hoax scheme for 6 more years no one would buy the scheme after
the Moreira clan left the presidency. In fact destiny as brought some karma for
Humberto Moreira, after leaving office in 2011 and losing his son at the hands
of the police which had been under his orders for nearly hald a decade during
which Los Zetas took control of virtually every sphere in Coahuila a massive
debt of 1,900 million USD provoked by Moreira´s Administration was discovered.
The guy left and Mexico and tried to hide in Spain, was caught there and
extradited to the US were he´s currently facing charges of fraud.

It has been reported that during
Humberto Moreira´s Governorship some mining companies started handling over to
the CFE not coal but a mix of coal, mining waste and soil in an attempt of
tricking the Government authorities. At the same time at least 354,000 tons of
coal weren´t obtained by the PRODEMI from the mining companies, but the PRODEMI
gave them to the CFE. Where did the PRODEMI obtain these 354,000 tons from? No
one knows, although there are several possibilities ranging from the PRODEMI
operating its own illegal mines to the fact the stole it directly from the
mining companies in order to pocket the money paid by the CFE.

By 2014 the CFE started granting
contracts outside the PRODEMI system. In this case what the CFE started doing
were public bids which were a total failure because none of the candidates met
the criteria demanded for participating in the bid (to have their miners
affiliated to social security and to demonstrate that they owned legal mining
concession were the main causes for leaving the first public bid by the CFE
without candidates) After this the CFE started granting the contracts directly
without asking for any kind of paper, so in the end the Coahuilan mining mafia
managed to retain the production of coal (either legal or illegal) and we can
by no means demonstrate that organized crime, although under new names and brands,
is not profiting from the coal mining business once more.

Through this Report it has been
my purpose to demonstrate or at least schematize how the merger between three
entities (organized crime, the private sector and the Coahuilan Government) has
transformed one of Mexico´s richest resources into a region scorched by
disappearances, extrajudicial executions, tortures, corruption and horror. But
I want to make a final consideration about the main injured parties here. They
are the miners, men and children, all of whom descend into the mines in order
to obtain a mineral that although black as obscurity could easily be seen as
red, because the coal of Coahuila is soaked with blood.

 

UPDATE: In June 2019 (just last
year) the CFE announced that an agreement had been reached with the PRODEMI for
acquiring 300,000 tons of coal from the Sabinas basin area. It seems that the
scheme is running again.