Mexico Opposes U.S. Push for Drug Penalties

The Mexican government is opposing a push by the U.S. Congress to levy major penalties against businesses with ties to drug traffickers, saying the sanctions could smear innocent firms and damage U.S.-Mexican relations.

The legislation, approved by the Senate in July, would require the Clinton administration to publish an annual list of major international drug traffickers, their front companies and other business associates. It would bar the listed firms and individuals from doing business in the United States, cut off their access to American banks and freeze their U.S. assets. It would also subject U.S. firms that work with the listed companies to civil and criminal penalties.

Administration officials say that, after initially opposing the legislation, they are working with members of Congress to fashion a version that the House and President Clinton can support.

Some of Mexico’s biggest companies are leading a fierce lobbying effort to defeat the proposal. And the Mexican government fears that it is just the sort of unilateral action that, like the annual U.S. certification of other nations’ cooperation in the drug war, could roil tensions between the two countries.

“It can become a nightmare for innocent people and for the spirit of cooperation itself,” Mexico’s ambassador to the United States, Jesus Reyes Heroles, said in an interview. “It’s a whole process that can undermine the spirit of cooperation that we have, and that is still developing. That relationship needs to be nurtured. It’s not solid as a rock.”

Although the sanctions would be global in scope, only the Mexican government has aggressively opposed them. Reyes Heroles has met with Sen. Paul Coverdell (R-Ga.), who introduced the legislation, and administration officials to lobby for detailed amendments. In a July letter to the White House drug policy director, Gen. Barry R. McCaffrey, he requested the administration’s help in blocking passage.

The legislation, offered as an amendment to an intelligence funding bill, would expand to other countries sanctions first imposed on Colombian businesses and narcotics traffickers in 1995. The original sanctions focused on businesses with links to the four main leaders of Colombia’s Cali drug cartel on grounds that they presented an “unusual and extraordinary threat to national security.” (The same legal authority was used to stop Americans from doing business with the Panamanian leadership of Gen. Manuel A. Noriega and to freeze Iranian assets after Americans were taken hostage in Tehran.)

Since 1995, the Treasury Department has compiled a list of more than 400 companies, relatives and associates linked to the Colombian traffickers. After public disclosure, a number of the firms have gone out of business, administration officials say. Others have been forced to reorganize their holdings or change their names. A few have successfully challenged their inclusion on the list.

Proponents of the legislation say the expanded list would be a valuable law enforcement tool.

“Drug trafficking flourishes because it is anonymous,” said Sen. Dianne Feinstein (D-Calif.), who coauthored the legislation with Coverdell. “This is an effort to take some of the anonymity away.”

But the administration has worried all along that the legislation will offend Mexico.

“The political concern is that it would be bad for legitimate businesses in the country and that it would be yet another contentious issue in the bilateral relationship between Mexico and the U.S.,” a senior State Department official said. “Anything where the U.S. is sitting in judgment is very problematic for any country, and for Mexico in particular.”

As a practical matter, Mexican drug traffickers are far harder to isolate than those operating in Colombia, because they are deeply enmeshed in the larger, multilayered Mexican economy.

The holdings of Cali cartel members became easier to track about five years ago, when police teams backed by the Drug Enforcement Administration and the CIA seized business records in a series of successful raids. The U.S. intelligence community has not had similar success in penetrating Mexican drug trafficking organizations. Even if it does, U.S. officials are not eager to produce a list that could hinder their ability to investigate further.

The Treasury Department has been vocal in expressing concerns that such sanctions could affect legitimate U.S. businesses with ties to Mexico, the largest U.S. trading partner after Canada.

Transportacion Maritima Mexicana, a Mexican firm that is one of Latin America’s largest shipping companies, has been particularly incensed about the legislation. The company--which, along with U.S. and Canadian firms, runs a railroad venture stretching from Mexico to Canada--has complained that American intelligence has unfairly linked it to drug trafficking in the past. It has retained a major Washington lobbying firm in its effort to defeat the legislation or, failing that, to amend it.

Business groups, including the U.S. Chamber of Commerce and the American Bankers Assn., also have expressed concern about how the sanctions would be implemented.

“If you institute sanctions and restrictions, if you say that companies in the U.S. are prohibited from doing business with these companies, well, that sounds easy, but it could very well have a negative economic effect on those businesses,” said John Byrne, senior counsel to the American Bankers Assn.

If approved, the legislation would globalize the sanctions the administration has levied on Colombia. But it differs from the existing law in one key respect: It would require that the president submit the list to Congress.

The measure would require the Treasury secretary to compile a list of major international drug traffickers and their associates by Jan. 1, and by the same date in subsequent years.

The list would then be vetted by the White House drug policy director and sent to the president. By March 1, the president would be required to produce a winnowed list of traffickers to be sanctioned, as well as a report to Congress explaining any changes made.

The Treasury Department’s Office of Foreign Assets Control would implement the sanctions.

“What’s happened here is Congress has gone into the vacuum and said, ‘Look, we’re losing this war on drugs, and we’re going to do some things,’ ” said Rep. Porter J. Goss (R-Fla.), who has introduced similar legislation in the House. “This idea that somehow you have to tiptoe around the subject of honest dealing with Mexico because somehow you might offend someone who’s not honest strikes me as absurd. The real truth is, we need more cooperation with Mexico in the war on drugs, not less.”