Shopkeepers in this pine-covered mountain region easily recite the list of "protection" fees they pay to La Familia drug cartel to stay in business: 100 pesos a month for a stall in a street market, 30,000 pesos for an auto dealership or construction-supply firm.
First offense for nonpayment: a severe beating. Those who keep ignoring the fees — or try to charge their own — may pay with their lives.
"Every day you can see the people they have beaten up being taken to the IMSS," said auto mechanic Jesus Hernandez, motioning to the government-run hospital a few doors from his repair shop.
Mexican drug cartels have morphed into full-scale mafias, running extortion and protection rackets and trafficking everything from people to pirated DVDs. As once-lucrative cocaine profits have fallen and U.S. and Mexican authorities crack down on all drug trafficking to the U.S., gangs are branching into new ventures — some easier and more profitable than drugs.
Organized crime is seeping into Mexican society in ways not seen before, making it ever more difficult to combat. Besides controlling businesses, cartels provide jobs and social services where government has failed.
"Today, the traffickers have big companies, education, careers," said Congresswoman Yudit del Rincon of Sinaloa state, which has long been controlled by the cartel of the same name. "They're businessman of the year, they even head up social causes and charitable foundations."
Local officials say they do not have the manpower to investigate cartel rackets and refer such cases to the state, which hands them over to overloaded federal agents because organized crime is a federal offense. A federal police report released in April notes that often no one confronts the cartels, "not the police, because in many cases there is probably corruption, and not the public, because they live in terror."
"It's almost like Chicago, when Al Capone ruled everything," said a senior U.S. law enforcement official who was not authorized to be quoted by name. "They control everything from the shoeshine boy to the taxi driver."
Mexican cartels gained their dominance in drug trafficking in the mid-1980s, when U.S. drug agents and the Colombian government cracked down on Colombian cartels and drug routes through the Caribbean. The vast majority of cocaine headed to the U.S. started going through Mexico.
In the meantime, trade in pirated and other smuggled goods in Mexico traditionally was carried out by small gangs centered around extended families or neighborhood rings.
In the last five to 10 years, Mexican cartels created domestic drug markets and carved out local territories, using a quasi-corporate structure, firepower and gangs of hit men to control other illicit trades as well. Federal prosecutors now call them "organized crime syndicates" and say their tactics — such as charging a "turf tax" to do business in their territory — mirror the Italian mafia.
Still, the gangs have created elaborate systems to avoid property seizures and to move money quickly through store-front check-cashing and wire-transfer services, according to federal police. And they have become so omnipresent that they take a cut of almost every transaction in some areas.
Javier, the owner of a small video store in Ciudad Hidalgo, got so fed up with La Familia controlling his town, he decided to sell his house and sent his two daughters to live in another state. His business had withered from the competition of street vendors selling pirated DVDs for La Familia.
But when he put his two-story, 1930s-era home up for sale, he got a phone call from the cartel.
"Putting up a 'for sale' sign is like sending them an invitation," said Javier, who asked that his last name not be used for fear of retaliation. "They call and say, 'How much are you selling for? Give me 20 percent.' "