The Stimulant Stimulus

Illustration by Dan Goldman

Texas is a jobs monster. Over the past two years, 37 percent of the net new jobs in the country were created in the state, a track record that governor and maybe GOP presidential candidate Rick Perry is quick to tout. He credits his conservative, pro-business policies; skeptics say it’s mainly owed to immigration and the high prices the state is getting for its oil. But there’s another possible contributor to Texas’s growth that no one is talking about: the drug trade.

Sixty percent of the U.S.’s southwestern border is part of Texas, and it’s the 60 percent that smugglers like best: long stretches of nothing, delineated by a river shallow enough for trucks to drive across, eventually leading to major cities that lie on highway routes to all points north, east, and west. Texas dominates drug entry into the U.S., which means it dominates the wholesale drug trade. It’s a big business: The DEA’s rough guess is that $27 billion in drug proceeds flow back out of the U.S. to Mexico, Colombia, and so on. And another pot of money stays here.

Jack Schumacher, a recently retired Texas-based DEA agent, says that at least half the drug shipments coming from Mexico stop and offload in Texas. The product is repackaged in small units and resold at a considerable markup, with a share of the gross staying in the state. Even some of the money that gets expatriated to Mexico winds up back in Texas, laundered through Mexican currency exchanges. The state’s relative security is the draw. “If you have a few million,” says Schumacher, “would you invest in a war zone or a bank in San Antonio?” The DEA warns that traffickers are cleaning up their proceeds by buying businesses in South Texas. They also spend on guns, warehouses, security guards—and on luxury cars and houses. “In San Antonio, a high-dollar trafficker can buy a $2 million or $3 million place and exist for a long time,” he adds.

Mexicans in Texas are hardly new, but in recent years it’s middle- and ­upper-class families in Mexico’s north who have also made the exodus, bringing their savings and businesses with them. While most seem to be fleeing the kidnapping and extortion back home, one observer has a different take: “Some people, including me, suspect that some of these people come with funds from the drug trade,” says Michael Lauderdale, a professor of criminal justice at the ­University of Texas. Whatever the explanation, the new arrivals are good for the real-estate trade.“While housing prices are declining in the rest of the country, El Paso has held its own because Mexican nationals are able to come over and buy homes in the $100,000 to $300,000 level,” says Tanny Berg, a commercial-real-­estate developer in the city. Restaurant owners in Ciudad Juárez have closed up and followed their old customers across the river. (It should be noted that over the past six months, the migration has slowed.) Meanwhile, in McAllen, the Chamber of Commerce says, about 95 percent of inquiries about starting a business now come from Mexicans, up from 30 percent in 2006.

How much does all of this add to Texas’s economy? It’s hard to come up with an exact number, especially when it’s so easy to look the other way. “Our politicians don’t want to acknowledge the pivotal and central role Texas plays in drug trafficking,” says Tony Payan, a ­political-science professor at the University of Texas at El Paso. “Those are not comfortable questions to ask.”

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The Stimulant Stimulus