BAD NEIGHBORS

By Kevin Fedarko

Last November a U.S. customs inspector in El Paso, Texas, had a funny feeling about a Honda Accord that was attempting to cross from Mexico into the U.S. He motioned the car over to take a closer look, and the driver leaped out and disappeared down the street. When the El Paso police opened the trunk, they discovered three bodies: those of Josa Munoz Rubalcava, a retired Mexican police official, and his two sons, Alberto, 24, and Casar, 21. Someone had stabbed all three men in the back, trussed them with rope and added a macabre finishing touch to the father's corpse. "[He] had yellow cord tied around the mouth with a bow," says Travis Kuykendall, the agent in charge of El Paso's Drug Enforcement Administration office. "It looked like they were wrapped up for somebody, like a present."

The murders remain unsolved. But Kuykendall, who has served more than 30 years and is considered the dean of the "border rats," as Texas DEA agents call themselves, thinks he knows who sent the present -- Amado Carillo Fuentes. As the purported head of the Chihuahua drug cartel, Carillo is reputed to have littered the streets of Juarez with the bodies of informants each time one of his drug shipments is seized by U.S. agents. Although DEA officials are not exactly sure where Carillo lives (somewhere in Chihuahua, they think), when he was born (perhaps 1955), or what he looks like (they have only one photograph), they do know that he is the smoothest, smartest and most powerful of Mexico's drug lords. He is allegedly the leading figure of the "Mexican federation," a loose amalgam of families that has turned Mexico's drug trade into one that rivals Colombia's in its pervasiveness and the danger it poses to the U.S.

Nearly 70% of the cocaine that reaches the U.S. each year passes through Mexico. In addition, Mexicans have begun to distribute and sell the drug on the streets of American cities. Meanwhile, cocaine has pushed corruption, violence and criminality in Mexico to a new level. Such facts raise embarrassing questions for the Clinton Administration, which fought so hard for NAFTA and has bailed out Mexico by issuing loan guarantees that will cost the U.S. $20 billion if Mexico defaults. "Mexico is not a stable country right now," says Indiana Republican Congressman Dan Burton, chairman of the House Foreign Affairs Western Hemisphere Subcommittee. "It's almost, although not quite, a narco-democracy."

Mexico has five identifiable cartels, and U.S. officials say that a power shift seems to be taking place in their ranks. The Garcia Abrego family, the purported leaders of the once dominant Gulf cartel that controls drug trade along Mexico's east coast, have recently received arrest warrants from the Mexican Attorney General's office for an alleged -- but as yet unproved -- connection to the murder of Josa Francisco Ruiz Massieu, the deputy attorney general of the country's ruling political party. The heads of the Tijuana cartel, the Arrellano Falix brothers, have also come under pressure for their suspected role in accidentally gunning down a bishop in Guadalajara. (The real target of the shooting is thought to have been Joaquin Guzman, another suspected drug lord, whose power base is in Sonora.) With the Garcia Abregos and the Arrellano Felixes lying low, the field has been left open to the low-key, efficient Carillo.

Carillo acts as a liaison between Mexican drug traffickers and the Cali cartel of Colombia, which in recent years has come to dominate the cocaine trade worldwide. Following a U.S. clampdown in the 1980s on their shipping routes through Panama and the Caribbean, the Cali bosses began contracting their transportation to Mexican contrabandista families, bootleggers who for generations have specialized in running goods -- whiskey, heroin, blue jeans -- into the U.S. In the system that eventually evolved, the Colombians flew planeloads of cocaine from Colombia into Mexico, then paid the Mexicans to move the goods across the border.

Carillo's cool competence appeals to the Cali traffickers. The Cali dons "don't want to deal with some jerk that's running around shooting everybody," says a veteran DEA agent specializing in the cartel. The Colombian bosses allegedly employ Carillo as a kind of nuncio for communicating information to the Mexican federation, keeping peace among rival Mafias along the border and subcontracting Cali business to them. "He has the ability to form alliances," says one U.S. analyst. "He's been the pacifier. If you're going to have power, you have to be able to make alliances."

Carillo and his colleagues may be partners with the Colombians, but when it comes to smuggling, the two groups operate in distinctly different styles. While the Colombians have used elaborate devices such as custom-made yachts, high-tech communication decoders and even submarines, the Mexicans prefer a cruder methodology: stuffing the drugs into the trunks of cars, then relying on a combination of speed, scattershot runs and sheer bravado. Sometimes they blitz the border posts, sending eight or 10 vehicles through at a time, betting that U.S. Customs will search at most one vehicle in the convoy. A group in El Paso has even taken to hiring "port runners"-young drivers who are instructed to floor the accelerator and take off into El Paso if agents try to stop them for inspection.

Colombian cocaine shipped via Mexico is typically put back into Colombian hands on the other side of the border, and the Mexicans' effectiveness as a delivery service has won them plenty of business. But the real profits only started rolling in during the past year, when, U.S. agents have discovered, the Cali cartel began paying the Mexican families partly in cocaine and granted them territory in the U.S. where they could distribute and sell drugs themselves. That's a business with much higher profit margins. DEA and FBI agents say they are stymied by the ability of the Mexican operatives in San Diego and Los Angeles to fade into invisibility among these cities' vast populations of illegal Mexican immigrants. Colombian drug dealers may own cars and property and even have bank accounts, but the Mexican operatives leave no financial trail, and they drive cars whose license plates are registered to someone three owners earlier. "There is simply a lot we don't know about how they're operating," confesses one agent.

The Mexicans' growing success at both transportation and distribution has given them immense reserves of cash, which they are using to penetrate into the heart of the institutions that run the country. Testimony to the drug barons' pervasive influence is offered by Eduardo Valle, a former assistant to the Attorney General who resigned in frustration last spring and now lives in self-imposed exile in Alexandria, Virginia. Valle says many of the country's federal police commissioners and assistant attorneys general receive payoffs from drug lords. "It's a frigging disaster of enormous proportions," says a senior DEA agent, commenting on the burgeoning culture of corruption. "The rot is nothing like we've ever seen before."

That is a powerful statement, given the maligned reputations of previous Mexican administrations, including that of former President Carlos Salinas de Gortari, whose Education Minister and one of whose Attorneys General were implicated, but never charged, in the scandal surrounding the kidnapping, torture and murder of U.S. DEA special agent Kiki Camarena in 1985. Other Mexican government officials accused of complicity with drug organizations include a former special prosecutor against drugs, two former police commanders, a former Interior Minister, a former Defense Minister, the son of the former Governor of the state of Jalisco and the brother-in-law of former President Luis Echeverria.

An incident that occurred last August and was described in intelligence reports typifies Mexican corruption. U.S. officials alerted Mexican government authorities that a Caravelle cargo jet packed with 8.5 tons of cocaine was heading into Zacatacas, in north-central Mexico, from Colombia. "By the time the local police got through with it, there were only 2.5 tons left," says a U.S. State Department official. Days later, packages of cocaine with the same markings as those in the Caravelle turned up in seizures at the U.S. border.

Corruption in politics, the police and the judiciary has been common in Mexico for decades, but the cartels' influence is spreading to the country's economy as well. Drug barons have built up a financial empire using the country's booming tourism industry as a kind of giant dry-cleaning service for narcotics profits. Traffickers and the politicians who protect them launder billions of dollars every year by investing vast sums in beach resorts, financial markets, shopping centers and other enterprises, such as Punta Diamante, a resort in the state of Guerrero that many investigators believe is financed with drug money. It is also widely assumed that drug traffickers who fiddled with Mexico's financial markets were responsible for some of the capital flight last year that hastened the collapse of the peso. By channeling huge sums into legitimate investments that are integral to the nation's economic health, the drug lords have woven themselves into the fabric of the country.

The drug trade and its attendant corruption have given U.S. opponents of NAFTA and the peso bailout a powerful concern to exploit. "When you have a government aiding and abetting cartels in the movement of drugs into the U.S.," charges Senate Banking chairman Alfonse D'Amato of New York, "it undercuts the contention that the Administration is responsible." The Clinton Administration counters that President Ernesto Zedillo is serious about fighting the cartels and that he needs all the help he can get. In an unprecedented move, Zedillo chose a member of the opposition party as Attorney General. Antonio Lozano has said publicly that cleaning up corruption would involve removing 75% of the current justice personnel. Zedillo's determination has even impressed U.S. law-enforcement veterans. "We're a little surprised at how far the Mexican government has gone and is going," says a top fbi official. "We've had rhetoric before. Now we're seeing some real, concrete efforts."

However concrete the efforts, they are worrisomely late. Five years ago, the Mexican drug cartels might have been contained as the relatively small and unsophisticated smuggling operations they then were. The reality is different today. Richer and more violent than ever, the Mexican traffickers have become a junior version of the Cali cartel. Now they have the money, they have the ruthlessness, and they have the momentum.

--Reported by Laura Lopez/Mexico City, J.F.O. McAllister and Elaine Shannon/Washington

With reporting by LAURA LOPEZ/MEXICO CITY, J.F.O. MCALLISTER AND ELAINE SHANNON/WASHINGTON