Disclaimer: Stolen without permission from the www.opiods.com blog. Sorry.
"Re-engineering the Drug Business"
By MATTHEW BRZEZINSKI
The vial of heroin lands in my lap, and for a few uncomfortable seconds, as an undercover police officer and a very jittery drug dealer both grope my midriff, I worry someone will panic and go for his gun.
The dealer is shouting -- for his money, for us to hurry -- peppering his exhortations with unprintable expressions. He looks no more than 20, with baggy trousers, high-top sneakers and a Baltimore Orioles baseball cap perched at a rakish angle. His grasping fingers, I can't help noticing, are bejeweled, like those of the rap artists one sees on MTV videos.
Lost in the chaotic exchange, and now rolling on the littered floor of the unmarked police pickup truck, is the small vial of heroin. It contains a milligram of opiate in fine powder form and is sealed with a color-coded plastic cap. The top is pink in this instance, but it's also available in an assortment of other hues, each denoting a variation in purity and price, to tap the widest possible customer base. If that sounds incongruously like something out of an M.B.A. textbook, that's because it is: the strategy is called microbranding, and it is the reason so many different varieties of Coca-Cola sit on grocery shelves these days. The pink-top I have just clumsily purchased has its particular niche, or target market: the ''kids from the counties,'' as middle-class teenagers from the suburbs are known in Maryland. They are the same trendy audience that advertisers slaver over, and Baltimore's inner-city dealers have tailored the pink-top to their finicky needs. The product is just strong enough so that it can be snorted -- all the rage nowadays -- yet, at $20, cheap enough that it won't make too much of a dent in its average customer's weekly allowance.
Beneath its veneer of violence, narcotics trafficking is a surprisingly sophisticated industry, marketing-driven just like any consumer-products business. Only illegal drugs are a bigger business than most, generating global revenues in excess of $400 billion annually, according to a United Nations study. From source to street, pushing drugs shares many common elements with hawking soda pop or cigarettes. It requires lots of working capital, steady supplies of raw materials, sophisticated manufacturing facilities, reliable shipping contractors and wholesale distributors, the all-important marketing arms and access to retail franchises for maximum market penetration.
Just as in most sectors of the economy, innovation and technology are engines of growth. New uses of old products like heroin, or the introduction of synthetic drugs like methamphetamine and Ecstasy, keep pace with the changing demands of the marketplace, redistributing income from traditional profit centers like marijuana and cocaine. As in the automotive industry, different source nations compete in the global arena, with producers popping up in one country as quickly as they are pushed down in another. Occasionally, aggressive upstarts catch complacent giants unawares, as the Japanese did with Detroit carmakers in the 1980's.
The principal difference between the narcotics trade and legitimate commerce, of course, is that the drug business must operate in the shadow of the law. This throws the entire organizational chart out of whack. Transportation becomes paramount, consolidation and vertical integration -- those cherished buzzwords of merger-hungry multinationals -- impossible. As a result, the narcotics industry has adapted what might be called the Osama bin Laden approach to management: base your operation in remote safe havens, the more war-torn and chaotic the better; stay small and shifty; use specialized subcontractors or freelancers on a need-to-know basis; vary your routes and routines whenever possible; and most important, always insulate yourself with plenty of expendable intermediaries in case someone gets caught and talks.
Sept. 11 and its new world of heightened border controls has made decentralization doubly important for international smuggling networks, be they Chinese, Colombian, Turkish or Nigerian. Ever since the big Cali and Medellin cartels were wiped out nearly a decade ago, virtually the entire narcotics trade has radically slimmed down. With the added pressure of 9/11 security measures, drug kingpins have adopted the mantra of their more enlightened corporate cousins, that size does not necessarily create efficiency, and that to survive you have to stay nimble.
Heroin is the perfect drug for the new age of small-batch manufacturing and decentralization, a high-value-added commodity where a little goes a very long way. In fact, it's so well suited to the changing times that many cocaine traffickers are retooling their production lines to include heroin and joining the global trend toward leaner, meaner, terrorist-style operations.
The restructuring is helping the business survive what could otherwise be a difficult period. Despite the military and security measures taken to fight international terrorism and shore up America's borders, Heroin Inc. has had a remarkably good fiscal year. The industry has managed to sustain gains made during the boom of the late 1990's, largely shrug off 9/11 and make further inroads in cocaine markets in the United States. Supplies in America are at an all-time high.
European operations are thriving as well. The Taliban's 2000 ban on poppy cultivation in Afghanistan has had little effect on the bottom line, with existing stockpiles and rerouted deliveries from Southeast Asia more than making up for the temporary shortfall. And the European sector is looking forward to a strong year in 2002. Now that the Taliban has been routed, bumper harvests are projected for Afghanistan. Elsewhere, analysts predict that Colombian distributors will continue their ambitious expansion plans in the eastern United States. And China's entry into the World Trade Organization is expected to further open a vast new market for both domestic consumption of heroin and its transit to other countries.
The only uncertainty clouding the business's outlook is the long-term effect of Sept. 11. In the post-9/11 era of linking drugs with terror, of beefed-up border security and improved communication between international law-enforcement agencies in both intelligence-gathering and interdiction, the industry is likely to grow even more diffuse. Power will continue shifting from remote producers to highly specialized smuggling subcontractors, and outsourcing in general will become the crucial factor to survival and success. The signs of the industry's new business model can already be seen at the very earliest stages of heroin production, in the distant and troubled lands where poppies grow.
The men with guns and gold watches live down in the valleys below. But it is high in the mist-shrouded mountains along the border between China and Myanmar, as Burma is now known, where the monsoon washes away roads linking lonely villages without electricity or running water, that heroin begins its long journey to America.
By the time it reaches the streets of Baltimore, the world's most powerful narcotic will have traveled through half a dozen countries, soared at least 5,000-fold in price and changed hands a hundred times. The first fingers to touch it, though, belong to a slender 36-year-old mother of seven.
Xiamin Dwan Swan and her husband, Ju -- like the other 40 families who live in this hilltop hamlet in Myanmar -- have been farming opium for generations, ever since the British introduced poppy cultivation to these parts more than a century ago. It's not a lucrative living, judging by the straw huts, mud floors and barefoot children, but it is the only one that the residents of Chaw Haw have ever known.
The ritual begins every September, when the steep fields are burned and the poppy seeds scattered. They thrive in these altitudes, just about the only crop that does, but it is not only a quirk of climate that allows them to do so. A key competitive advantage of this rugged landscape is that it lies beyond the reach of any law-enforcement agency. As is the case in the world's other opium-producing regions -- the guerrilla-controlled jungles of Colombia, the lawless fiefs of Afghanistan -- central authorities have no say here. Power is exercised by renegade insurgent groups with prickly notions of territorial sovereignty, not to mention private armies 15,000 to 20,000 strong.
By February, Xiamin Dwan Swan and her husband begin the harvest by scoring each poppy pod with a needle-like knife. A creamy gum oozes from the cuts, and once it turns black it is scraped off with a crescent-shaped tool that has been in her family ever since she can remember. It is painstaking work, and for their labor the Dwan Swans earn $600 annually, barely enough to feed their children, three pigs and two ornery dogs. Brokers come from the valley in early March to purchase the raw opium gum, which sells for about 1,500 yuan per vis -- the equivalent of about $135 a kilogram. (A vis is a unit of measure equal to 1.6 kilos, or about 3 pounds.)
''I don't know who buys our harvest,'' Xiamin says, which is the smart answer, but probably not true, given that she and her husband have most likely been dealing with the same broker for the past 20 years. Nor does she claim to know what happens to her harvest once the brokers collect it from Chaw Haw and other villages. This is probably true, since refineries buy their opium gum from the brokers rather than risking exposure by dealing directly with hundreds of separate suppliers.
That is just the first of many layers of insulation that characterize the heroin trade and must be factored into the cost of doing business. For their services, the brokers, usually tribal elders, charge a 20 percent markup, sometimes more if they have lent villagers money in anticipation of their crop. In Helmand Province in Afghanistan, for example, some farmers grew so indebted during Mullah Omar's fatwa banning poppy cultivation that for a time after being liberated by American forces, they were selling raw opium to creditors for as little as $35 per kilogram. (That short-lived ban temporarily toppled Afghanistan from its nearly decade-long dominance among global opium producers, allowing Myanmar to briefly claim the dubious title, with up to 60 percent of the world total. But once the final tallies are in for this year's harvest, Afghanistan is once again expected to regain the top spot, followed by Myanmar, Colombia and Mexico.)
Unlike poppy cultivation, refining is a complicated, capital-intensive process, limiting the number of players with the financial wherewithal to participate. This phase of the business is controlled mostly by the Wa, Kokang and Shan warlords, who run rebel states within Myanmar. ''They tax it, or receive money for protection,'' says Kyaw Thein, a Burmese brigadier general. Indeed, ask a Wa official about opium, and he'll rattle off his town's yields as if he's quoting from the municipal budget. ''Four thousand, six hundred vis,'' says Lu Kyar Shin, a Wa mayor who sports a Rolex and a sidearm. ''Down from 10,000 vis a few years ago.''
Like the cocaine labs of Colombia, Myanmar's heroin refineries are temporary facilities buried deep in the jungle. They are set up to fill specific orders and can be quickly struck down in case the heat is on. But that only happens occasionally, when central authorities stumble on a refinery that falls within their territorial jurisdiction.
Burmese officials proudly display the precursor chemicals seized in one such recent raid. The materials stand stacked in neat rows of blue and white industrial drums, filling a courtyard lined with papaya trees and barbed wire: 900 gallons of calcium hydroxide needed to cook raw opium into morphine, the first stage of the refining process; liquid ether smuggled into Myanmar by Indian networks; and Chinese-made ammonium chloride, which transforms the morphine into the lower-grade No. 3 heroin, or ''brown sugar,'' as it is popularly known; and finally, out front in a place of honor, 150 gallons of hard-to-come-by acetic anhydride, the key ingredient to producing the 90-percent-pure No.4 heroin destined for American and European markets, the notorious China White.
Though China White is often packaged by refiners in 700-gram bricks, known as units, the universal measure in the global narcotics business is the 1,000-gram kilo. A kilo that will ultimately fetch in excess of $200,000 (wholesale) in New York City costs as little as $2,500 in Myanmar. That, at least, is what Saikyaw Myat, an unemployed stonemason, was expecting to get for it before being busted by an undercover agent. Ma Lwan Gyi and her two young friends, Ma Kaing Hland and Ma Ban Mong, were nabbed in a similar sting. They had each been promised $20 to deliver a kilo of the famed Double Lion brand into town. All four now sit in leg irons in a stifling corrugated-steel prison, a labyrinth of low wooden cages constructed from thick teak bars, forbidden to move from the lotus position, where they are to contemplate the error of their ways for the next 10 years.
The modest price of the China White they carried illustrates how in the overall cost structure of the heroin industry, refining is not a particularly large profit center. That's because the risks of interdiction within Myanmar are too low to factor significantly into the final price. The markup on the finished product is about 20 percent, in line with other forms of contract manufacturing in Asia like semiconductors or cellphones, where the real money goes to designers and distributors.
Once the sourcing and processing stages are complete, isolated countries like Myanmar or Afghanistan lose their competitive advantage. ''The Wa or the Kokang don't have the sophistication or international networks to get their product to market,'' explains Maj. Win Naing, who heads the narcotics task force in the bustling northern Myanmar border town of Muse. ''They leave that to foreigners.'' Much the same holds true with Afghan growers, who despite being the source of 80 percent of the heroin in the $12 billion European market, earned at most only a modest $56 million from opium sales last year, according to a United Nations survey.
The real profits in heroin, to borrow a term from the embattled accounting industry, are all downstream -- in transportation and distribution.
To reach global markets, heroin leaves Myanmar through two principal pipelines. With each route, a different set of players, with specific expertise, is involved. The first, and most used, is north through China's Yunnan Province to Hong Kong or the free-trade zones around Guangdong. Chinese smuggling syndicates ply this route, charging as little as $1,000 per kilo to sneak the contraband across the border from Muse to as much as $10,000 per kilo to get it all the way to Hong Kong. One such group operated until recently in Muse, where the border with China is a four-foot-high fence that runs right through the center of town. The syndicate was headed by a 39-year-old Chinese national by the name of Tan Xiaolin, who set up shop in a large pink-and-green villa a few hundred yards from the frontier. Until his arrest last year through the joint efforts of Chinese and Burmese authorities, he had smuggled more than three tons of pure heroin to Hong Kong, where different trafficking organizations with a more international orientation sent it on to Sydney, Vancouver and the United States. Tan has since been extradited to China and, according to Burmese officials, sentenced to death.
The harsh penalties handed out in Asia for trafficking do not seem to be a great deterrent. That, say American officials, is because you can often buy your way out of jams or simply purchase protection from underpaid local Communist authorities. United States drug-enforcement officials, however, concede that the inner workings of the balkanized China pipeline are somewhat of an intelligence black hole because of spotty relations with Beijing. Much more is known about the second major route out of Myanmar, which travels south and then east, through Thailand.
Much as he tries, Mike Carter finds it hard to blend in with the crowd at his posting in the northern Thai city of Chiang Mai. For one, Carter, a special agent for the Drug Enforcement Administration, is a very large individual; well over six feet tall, a close-cropped former marine who went to college in Texas on a football scholarship and used to maul opponents as a 250-pound linebacker. Then there is the 9-millimeter Glock tucked into the waistband of his jeans. And those dark, wraparound aviator sunglasses.
Even though he has picked up Thai and speaks it more or less grammatically, there's not much chance of passing himself off as a native. So he lurks in the shadows, behind the tinted windows of his silver Toyota, playing a supporting role, waiting for the drugs to come across the border.
Today he has brought some cash to entice traffickers, to expedite matters. It lies temptingly in a green satchel on top of my bag, five million baht, just over $116,000 at the current exchange rate. It's what's called ''flash money,'' and it will be shown to a Burmese broker by an undercover Thai policeman posing as a customer.
The deal is set to go down in Chiang Saen, at the confluence of the Mekong and Ruak Rivers, where Myanmar, Thailand and Laos meet: the heart of the Golden Triangle.
''This all used to be poppy country, and 10 years ago there were refineries everywhere on the Thai side,'' Carter explains as we drive on broad, freshly paved roads. With all the tour buses and golf resorts around, it's difficult to imagine Thailand as a major heroin producer. But it once was a world leader, until the economy picked up and pressure from the international community forced traffickers to relocate across the border in Myanmar. Much the same happened in Pakistan, Turkey, Bolivia and Peru in the 1980's, as successful eradication efforts and increased standards of living forced production to shift to the more lawless and impoverished corners of Afghanistan and Colombia. That fluidity is another key feature of the rapid-reaction narcotics business: push it down in one place, and it simply pops up somewhere else. In that sense, heroin is truly a global commodity.
Carter's cellphone rings. It's Col. Dussadee Arajavuth, the head of the Narcotics Suppression Bureau, or N.S.B., in northern Thailand. The Burmese broker, he informs Carter, has taken the bait. Now it's only a matter of time and patience. While we wait, Colonel Arajavuth arranges for me to meet with one of his prized sources, a foot soldier in one of the warlord armies that smuggle heroin across the Thai border. We meet in a hotel room in Chiang Rai, not too far from where the N.S.B. keeps a safe house.
''The heroin leaves the refineries in caravans,'' the informant begins. ''There are usually 50 to 100 people in each caravan. Half are porters carrying up to 500 units of heroin, the other half are soldiers.'' The soldiers, he continues, are heavily armed with rocket-propelled grenade launchers and are provided -- for a fee -- by either the United Wa State Army or the Shan State Army, insurgent groups that operate close to the Thai frontier. The final destination is either Thailand proper or Tachileik, a rough Burmese border town that apparently inspires such dread that the superstitious residents of Mae Sai, on the Thai side, have erected a black steel scorpion the size of a tank to ward away their neighbors' evil spirits.
In Tachileik, brokers like the one Agent Carter is currently trying to set up take delivery of the heroin, which, because of high transportation costs, rises in price to $4,500 per kilo. There are approximately 20 such brokers representing the Wa and the Shan in Tachileik, says the informer. ''Everyone knows who they are.''
Delivering heroin directly into Thailand is a bit trickier, and the added risk is reflected in the slight price hike to $5,500. The drug caravans move over the dense mountain frontier, under cover of night, when Thai border patrols are in their barracks. To see how porous the frontier can be, Carter drives me to the Ban Phai border post atop Mount Doi Tung. We barely make it up the steep road, since Carter's Toyota is loaded down with M-4 assault rifles discreetly tucked into golf bags in the trunk. The firepower is a precaution.
Tensions at the Ban Phai outpost -- a collection of bamboo huts reinforced with black sandbags, trenches and M-60 heavy-caliber machine guns -- are running high. Just a few days before, two advance scouts from a Wa caravan were caught by a nearby border-patrol unit. The Wa took exception to the arrest and unleashed a mortar barrage. The Thais responded with 105-millimeter Howitzers. Miraculously, only one person was injured.
Once the shipment has arrived in Thailand or Tachileik, a whole new set of players enters the fray. These are Thais from Bangkok, who converge on the border area to pick up heroin. They, too, have their specific niche: moving the product to buyers in Bangkok. One such transportation subcontractor, who had 37 kilos of China White in his black Land Rover, was recently wounded by Burmese border guards in Tachileik. The bust clearly showed just how decentralization keeps the narcotics trade in business. The load was a mix of the Double Lion brand favored by Wa refineries and the 999 brand popular with labs in the Shan region. Under interrogation, the driver could not name his sources and could only provide police with a disconnected contact number to a broker in Tachileik. The chain to the producers was already broken. The transport subcontractors themselves add another layer of protection for both the brokers in the border area and outside buyers, because no one here will do business with a farang, as foreigners are known. They are ''too conspicuous,'' says Colonel Arajavuth. ''We'd pick them up right away.''
In fact, most of the foreign buyers are West Africans -- Nigerians, to be precise -- who tend to stick out in the Thai provinces even more than Agent Carter does. They prefer the more cosmopolitan anonymity of Bangkok and are prepared to pay for the added security. In the Thai capital, the local middlemen charge between $7,500 and $9,500 to deliver each kilo of heroin, depending on the quantity ordered. West Africans are not the only foreign customers; there are smugglers from Taiwan and Europe. But the Nigerians are by far the most organized and entrenched group. Their job in heroin's ever-lengthening supply chain is also among the riskiest: to get the heroin into the United States.
Few C.E.O.'s of major American corporations lie awake nights agonizing over logistics. That's what companies like DHL or U.P.S. are for. The drug trade, too, has its courier services, outfits such as ''Nigeria Express'' or Mexico's notorious A.F.O.
The drug runners breach every United States frontier, but one of their main targets is San Ysidro, Calif., America's busiest border crossing, the fragile demarcation line that separates San Diego from the smuggler's paradise of Tijuana. Between a quarter and a third of the heroin, cocaine and marijuana entering the country passes through here and four smaller checkpoints in Southern California, and on a good day the Customs Service can hope to make at least a dozen decent-size seizures.
Up to now, it has been relatively easy going for China White traffickers. Nigerians, having taken delivery of the heroin in Bangkok, have either shipped it via couriers to transit countries like Mexico or Canada or, more commonly, have sent it home to Lagos. Given Nigeria's perennial position near the top of the global-corruption rankings, forwarding through Lagos international airport does not pose much of a barrier. In Nigeria, the drugs are repacked into smaller parcels, often into condoms that couriers swallow and transit through nonsource countries like Britain or France to throw Customs officials off the trail. If the heroin is sent directly from Thailand to the United States, Caucasian couriers are usually employed to foil racial profiling. They are often female, in their 20's and 30's.
It is also at this stage that another complication arises for Southeast Asian heroin. As it approaches its target market, it brushes up against the competition, including Mexican-produced Black Tar, known derisively as Mexican Mud because of its poor quality; the more superior Mexican Brown in powder form; and especially high-grade Colombian White, its biggest rival. (Afghan heroin is conspicuously absent at San Ysidro and only occasionally shows up in the United States, in places like Detroit. Its principal market is Europe, where it arrives from Turkey, Russia and the Balkans.)
Colombia is a relative upstart in the international heroin trade, with cocaine traffickers there deciding to get into the business only around 1990. It was a decision based purely on demographics. The cocaine craze of the 80's was waning as the drug fell out of fashion with urban professionals. Moreover, dealers were discovering that unlike heroin addicts, many habitual coke users tended to burn out after five years. Faced with a dwindling customer base in America, cocaine traffickers tried to expand into Europe. But they had only limited success, in places like Spain, England and, most recently, the Netherlands. The hard drug of choice in the European Union was heroin, and Pakistani and Turkish groups had the market sewn up there. So Colombian cocaine traffickers decided to diversify and launched a poppy-cultivation drive, importing seeds, equipment and expertise from Southwest Asia.
''It took them three or four years to get it right,'' recalls Felix J. Jimenez, the D.E.A.'s New York bureau chief, ''to procure the proper refining know-how and precursor chemicals like acetic anhydride.''
But by the mid-90's, he says, the Colombians were producing heroin with purity levels exceeding 90 percent. Suddenly Colombian smugglers had a product that was equal to, if not better than, China White. All they had to do was get the new product to the market, past points of entry like San Ysidro.
One sure sign of the high regard in which traffickers hold San Ysidro's defenses is the risk premium attached to making it across. If getting heroin into China or Thailand bears a markup of $1,000 per kilo, here it's a different story altogether. After it makes the 100-yard journey across the border, a kilo of Black Tar will soar in value to $54,000 once safely on the San Diego side. Colombian heroin will rise by as much as 20 times once it gets to Los Angeles. And China White will command well into the six figures once it reaches American soil.
With the stakes so high, smuggling syndicates go to great lengths to keep tabs on what is going on at San Ysidro; when, for instance, shifts are ending, how many rovers are deployed on a given day, which canine units are on patrol. But mostly they just play the numbers game, the law of averages. More than 40 million people enter the United States through San Ysidro annually, and Customs can't check them all.
''We get up to 60,000 cars a day, and you have to keep in mind that 99 percent of the passengers are honest travelers,'' says Robert Hood, a supervisory Customs inspector. ''So the bad guys come straight at us. And if we intercept a few loads, that's just a tax they factor into the cost of doing business.''
Most of the China White passing through San Ysidro is spirited through the pedestrian crossing, a long concrete corridor lined with metal detectors, airport-style X-ray scanners and D.E.A. posters offering $2 million for information leading to the arrest of Benjamin Arellano Felix and his brother, Ramon.
The Arellano Felix Organization, A.F.O. for short, is a testament to just how important transportation subcontractors have become in the drug industry. The Tijuana-based outfit started out humbly, smuggling duty-free cigarettes and alcohol in the late 70's. Over time, they moved up to marijuana and were well placed to reap a bonanza from the cocaine craze of the 80's. By the 90's, they were moving tens of billions of dollars in contraband, controlled an estimated three-quarters of everything that passed through San Ysidro and even built complex tunnels into Texas. ''They took over,'' says Jayson Ahern, director of field operations for United States Customs in Southern California. ''They effectively supplanted their old bosses in Colombia and became a cartel of their own.'' The A.F.O.'s competitive edge was location: right on the Mexican-American border. However, the critical error that would lead to their downfall, as with the Colombian cartels before them, was getting too big and flouting the laws of decentralization.
Colombia's Medellin and Cali cartels were the first drug-trafficking organizations to vertically integrate. Like the big oil companies with gasoline, the cartels tried to hang on to their product through its entire chain of manufacturing, distribution and sale to consumers. For a while it worked, but the downside of any vertically integrated structure is that one broken link can bring down the whole organization. By using freelance subcontractors who don't know one another or even the identity of their employers, traffickers of China White assiduously avoid this peril.
The Nigerian buyers in Bangkok, for instance, don't even move the heroin themselves. Instead they hire American, European or Canadian couriers that they send on circuitous journeys to finally enter the United States in places where they hope Customs will have its guard down.
Inspector Hood is familiar with this type of ruse. ''I had this one lady pull up to the pedestrian crossing in a cab,'' he recalls. ''I took a look at her passport and it had an exit stamp from Thailand dated three days before. She said her vacation had been cut short because her goddaughter got sick and she had to get back to Baltimore quickly. I didn't buy it. There are definitely more direct routes to Maryland than driving through Mexico.''
It turns out that the woman had nearly three kilos of heroin in her luggage and was a courier for Nigerian traffickers. They had hoped that a white waitress would not fit the profile of the Latin American smugglers usually seen at San Ysidro. ''They probe for weaknesses,'' adds Hood, ''figuring we are not looking for Southeast Asian heroin here, the way they do on flights arriving from Bangkok to J.F.K.''
Many couriers -- mules, or body-packers, as they are known in the trade -- are swallowers who ingest honey-coated condoms filled with heroin. This makes them perilously hard to detect. Usually, it's only when something goes badly wrong that they get caught. One of Hood's colleagues, for instance, recently stumbled on a jittery gentleman claiming to be a pharmacist from Colombia.
''The guy was too jumpy,'' recalls the colleague, Chief Inspector Mark Wilkerson. ''And he didn't look like a professional type.'' In other words, he fit the mule profile. Wilkerson asked him to remove his tie and put it back on. ''He couldn't do it, couldn't tie a knot,'' Wilkerson laughs. The faux pharmacist was a mule who had been promised several thousand dollars to make the delivery.
To the uninitiated, all this may seem like a great deal of trouble to go through to move a mere kilo. China White is unusual that way. Of all the branches of the narcotics trafficking trade, it is by far the least efficient on a cost-per-kilo basis. According to a study by an economist, Peter Reuter, Latin American-produced cocaine is as much as 10 times cheaper to transport because it is usually shipped in bigger batches, 250 kilos and up. This allows traffickers economies of scale to spread out the, say, $500,000 fee pilots of small aircraft or go-fast boats often charge.
The discrepancy has its roots in the heritage of Colombian cocaine traffickers, many of whom came to the trade from the marijuana rackets, where bigger payloads were always the norm. But it also reflects the nature of heroin and demonstrates why it is increasingly the drug of choice for the savviest smugglers. With its high market value, heroin is ideally suited to traveling tens of thousands of miles, crossing countless borders. It requires far smaller networks to smuggle than the big organizations needed for cocaine or marijuana. And spreading loads over dozens of individual couriers minimizes risk.
''If I had to make any analogies,'' says Mike Chapman, a senior special agent with the D.E.A. in Washington, ''it would be to Al Qaeda.''
Heroin traffickers tend to operate more like highly compartmentalized terrorist cells than multinational corporations or the sprawling Colombian cartels of the Pablo Escobar era. But that's also the case, increasingly, across the entire narcotics industry. ''This type of activity does not allow concentration of power like legitimate commerce,'' says Ethan Nadelmann, an economist and drug-policy expert. ''If smugglers get too big, they develop security and personnel problems and get targeted by law enforcement.''
Indeed, Pablo Escobar -- El Patron, as he was known in his heyday -- would be living proof of this, had he not been killed in 1993 after one of the most intense international manhunts in history. It's the same story with the high-flying Tan Xiaolin from Muse, who is currently on death row in China along with 18 of his associates. Even those D.E.A. posters of the Arellano Felix Organization, the closest thing to a cartel since the leaders of the Cali and Medellin gangs were locked up almost a decade ago, are already dated. Ramon is dead, shot in February by Mexican authorities, and his brother Benjamin was arrested in March.
Drug traffickers are also vulnerable to shifting international winds. Smugglers have had a rough time since Sept. 11 changed the way most nations view border security. In late 2001, heroin seizures rose sixteenfold along the California-Mexico border, largely at San Ysidro, which, like every port of entry in America, has been on Level 1 alert since the attacks on the twin towers.
''For the first few weeks,'' recalls Hood, ''we didn't see any drugs whatsoever. It was eerily quiet, as if the traffickers were hanging back, waiting to see what we would do.''
But smugglers, like anyone else, have bills to pay and can't afford to sit on inventory for too long. ''Eventually they have to move,'' says Vincent E. Bond, a public affairs officer with United States Customs in San Diego. ''And this isn't a very good time to be trying to fly in a Cessna under radar,'' he adds. ''You're liable to have an F-16 up your tail.''
So syndicates are shifting away from air routes and big ports of entry, trying to hide their tracks better, bury their loads deeper and use more marine cargo and speedboat deliveries. (The Coast Guard reports making seizures at a pace more than twice last year's.) And for once, the law of averages is now tilting toward interdiction efforts. ''Regular passenger traffic has been way down since 9/11,'' says Bond. ''That gives us more time to scrutinize each entrant.''
Once in the territorial United States, heroin typically makes its way to three major collection centers. On the West Coast it travels up Interstate 5 to Los Angeles. There, the wholesale price of a kilo of high-quality heroin jumps to between $86,000 and $100,000, from the $40,000-to-$54,000 range in San Diego.
Along the way, importers jack up the bottom line by cutting the product -- ''stepping on'' it, in street parlance. This is usually the first of many adulterations to follow, all intended to increase profits by decreasing purity, and a variety of agents are used for this purpose: quinine, talcum, even lactose.
In America, as in Europe, immigrants are the major importers and distributors of heroin. This is simply because the smuggling networks prefer to deal with their own and don't trust outsiders. Nigerians will sell to fellow West Africans, Chinese to immigrants from back home and so on.
The American market for heroin, worth about $10 billion annually, is thus roughly divided into ethnic spheres of influence. Los Angeles-based Mexican groups control wholesale markets west of the Mississippi. Nigerians operating out of Chicago have the northern parts of the Midwest. And New York-based Dominican syndicates fronting for Colombians dominate the East Coast. Smaller Chinese gangs operate on the fringes, moving mostly in areas like San Francisco or New York that have large Asian communities.
The divisions, notes Jimenez, the D.E.A.'s top man in New York City and a leading expert on heroin in America, are fluid. Mexican groups, for instance, regularly impinge on the West Africans in Chicago, who in turn intrude on Dominican turf in places like Baltimore. The competition can be fierce and at times violent, but more often than not it tends to be fought along straight marketing lines.
One such battle changed the face of the heroin trade on the Eastern Seaboard. It occurred in New York in the mid-1990's. Up to then, Jimenez explains, the wholesale heroin business on the East Coast belonged to Chinese triads. (They themselves had supplanted Italian crime families the decade before.) But with the entry of the Colombians, the established Chinese rings found themselves with a serious fight on their hands. Astonishingly, what broke out was almost entirely a price war.
China White, which was often smuggled a kilo at a time in people's stomachs, sold for between $160,000 and $180,000 per 700-gram unit, explains Jimenez. But the Colombians would include heroin in their large cocaine shipments, benefiting from drastically lower transportation costs. ''They could charge $80,000 a kilo and undercut the Chinese by half.''
The Colombians, of course, enjoyed the geographic advantage of closer proximity to the United States. But they had another, equally important, competitive advantage: established distribution centers. ''They would force their Dominican cells to take, say, two kilos of heroin for every hundred kilos of coke they ordered and give out free samples to their customers.''
The move turned out to be a marketing coup, creating an entirely new clientele for heroin, much the same way that the introduction of crack cocaine in the previous decade had exposed a yuppie drug to the mass market. Because the Colombians insisted that their distributors keep the heroin at high purities, upscale coke users could now snort or smoke it, ridding the product of the stigma of dirty needles and H.I.V. ''I put a hidden camera on a street corner where I knew they sold heroin,'' Jimenez says. ''You wouldn't believe the customers we got on film: lawyers, doctors, teachers.''
The net result of the innovative strategies, says Jimenez, is that by the new millennium, Colombian heroin dominated markets in New York and throughout the Eastern Seaboard.
From collection centers like New York City, heroin travels down the I-95 corridor to secondary markets like Philadelphia, Baltimore and Washington. Dealers from those satellite towns will usually make the trip to New York once every few weeks, picking up anywhere from one to five kilos at a time, explains Detective Lieutenant Michael Tabor of the Baltimore police department.
While New York can boast of hundreds of ''cells,'' as Jimenez labels major distribution rings, a city the size of Baltimore will have no more than two dozen dealers capable of buying in kilo quantities. ''We know who they are,'' Tabor says, rattling off names. ''We've got phone taps on all of them,'' he adds. ''But they're damn slick.''
As you go progressively down the food chain, though, things get a little easier from a law-enforcement perspective. I find myself setting out once again to cruise the streets of Baltimore with narcotics officers.
Special Operations Unit One meets daily at 11 a.m. in a newly renovated conference room that appears industriously messy, like the marketing department in a successful midsize company. But no one in Sgt. Mark Janicki's eight-man unit looks remotely corporate: beards, braids, ponytails and skull-and-bones ear studs form part of the dress code, which leans heavily toward leather and jeans.
Sergeant Janicki goes over the game plan. I am to accompany one undercover officer on a heroin buy, while the rest of the unit is divided into surveillance and enforcement squads. The officer I'm accompanying, a 34-year-old Long Island native who uses the street name Mike, goes off to change into his disguise. We're posing as construction workers -- strung-out construction workers by the look of it when Mike returns wearing filthy, tar-splattered jeans, heroin-chic dark eyeliner and a backward baseball cap that pins down his stringy, shoulder-length hair. I'm suddenly glad that I didn't shave this morning.
Janicki gives us a lift to a nearby parking garage, where the department keeps a white Dodge pickup with scaffolding sections scattered in its flatbed for added effect. Kentucky Fried Chicken wrappers and crumpled 7-Eleven coffee cups litter the floor of the cab, more props.
As we head southeast to one of Baltimore's rougher neighborhoods, Mike explains how the lower rungs of the distribution chain are organized. Baltimore's dozen or so big dealers reparcel the newly purchased kilos into more affordable ounce-size lots. Shops or midsize dealers then break down ounces into grams that are resold to crews in ''packages'' of 100 vials or gelcaps, each containing one milligram. Gelcaps, as opposed to the pink-, blue- or green-tops, cater to the low end of the market, the addicts who inject heroin.
''That's when they're really stepping on the product,'' says Mike. ''The rule is generally six to one,'' Jimenez elaborates, meaning that from the one kilo purchased from wholesalers, up to seven kilos will be produced by adding sundry adulterants by the time it hits the street. ''This is where the biggest markups occur,'' he adds. ''From wholesale to retail, because that's where you face the biggest risks. You have to protect yourself not only from the police but from rivals and people in your own organization who know you are carrying large amounts of cash.''
As we drive deeper into the drug zone, the violence and poverty that accompany the lowest echelons of the heroin trade become more visible. Mike spots a street corner that is not too busy. He doesn't want to risk leaving me alone with a crowd. He radios Sergeant Janicki to coordinate surveillance. ''Corner of East Monument and Belnord,'' he says, stowing the walkie-talkie. ''All right, put away your notebook,'' he says. ''And whatever happens, don't get out of the truck.''
We slow down and pull up to the curb. ''Yo, man, dope's out?'' he calls. Dope is street slang for heroin, which is also sometimes called boy. ''I got shirleys,'' responds the dealer, a tough-looking youth in shiny white sneakers with a stick of red licorice clenched between a solid row of gold teeth. Shirley means crack cocaine, which is also called girl. ''He waitin' on a fresh pack,'' says the youth, nodding across the street to a man with no teeth. A pack is 100 heroin gelcaps, each filled with heavily adulterated heroin -- scramble'' in the local dialect -- which means he is expecting a delivery from his crew boss.
Mike doesn't like it. To make the buy, he has to get out of the truck and leave me alone. He hesitates for a moment. ''Be cool,'' he finally tells me, and much as I try, I find it hard to follow his instruction, what with the licorice guy eyeballing me menacingly. Mike returns a few nerve-racking minutes later and hands me a clear capsule that looks like cold medicine. It is filled with a chunky white substance. ''Scramble,'' he says, putting the pickup in gear.
Mike paid $10 for the milligram, the purity of which usually ranges from 4 to 7 percent, but recently has been testing as high as 12 percent -- a sure sign that heroin is in plentiful supply in Baltimore. ''What's that come out to per kilo?'' I ask.
''Math was never my strong suit,'' Mike says. ''But a lot.'' I crunch a few numbers while we drive away, giving Sergeant Janicki and his enforcement unit time to swoop in on the unsuspecting mark. Moments later Janicki radios in to inform us that he has picked up the dealer, a 31-year-old black male with 21 prior arrests for heroin and cocaine distribution. ''Guy's a junkie,'' Mike says sadly, shaking his head. ''Probably gets 50 bucks and a free fix to sit out there all day.''
There are thousands of others like him in Baltimore -- and throughout inner cities across the United States -- working, much like the stranded peasants of Myanmar, for next to nothing, for a lack perhaps of economic alternatives. And as for the heroin that unites them in their poverty, a lone kilo, which began its economic life cycle so humbly at the hands of a Burmese mother of seven, will have generated sales just shy of a million dollars by the time it ends its deadly journey and enters the American bloodstream.
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