Mexico’s $2.2B Car Smuggling Scheme

Mexico — The customs facilities of Reynosa and Matamoros, routes for fiscal contraband, have also been the entry point for 40,000 cars that enter the country each year with cloned license plates and reused temporary permits, according to an investigation by MCCI.

The problem is so severe that a single permit accumulated up to 728 crossings by distinct vehicles. Many of these cars benefited from a regularization decree issued by former President Andrés Manuel López Obrador, valid until 2026, which turned contraband into a business estimated at over $2.2 billion dollars.

A Duplicated License Plate, Two Border Crossings

The metal barrier of the customs office lifted that Friday at 11:21 in the morning, and a white Ford Fusion slowly advanced into Mexican territory, with a Texas license plate visible on the rear. Two minutes later, at 11:23, a luxury BMW 535i model crossed the border with the same license plate. In the monitoring room of Customs, the duplication triggered the first alarm.

What was singular about this event was that it occurred at two different customs facilities. One vehicle passed through the Matamoros border crossing and the other through Reynosa, 90 kilometers apart from each other.

The tracking revealed something even more disturbing. One day earlier, a Volkswagen GTI Hatchback model had entered Mexico with those same plates, the originals. And it was not the only one. Days later, a silver Chevrolet Equinox, a black Jetta, and another white one repeated the maneuver: all crossed the border displaying the Texas license plate number HDY9677.

What seemed like an isolated irregularity ended up showing a much larger operation: a network of cars crossing the Matamoros and Reynosa checkpoints with cloned plates. The crossing of the BMW and the Ford, with a difference of just two minutes, occurred on Friday, April 30, 2021, and was the starting point of an investigation that led to the discovery of a pattern that has been replicated for the introduction of tens of thousands of contraband vehicles, taking advantage of the regularization facilities offered by the federal government since the previous administration.

Regarding this incident, Mexico’s National Customs Agency (ANAM) issued the following alert, warning that the cars could be being used to introduce illicit products, such as weapons or prohibited substances: “The drivers of the two vehicles (BMW and Ford) are presumed to be using overlaid license plates to introduce them illegally into the country, thereby incurring the infractions of not accrediting legal stay in the country and probably also illegal possession, besides the possibility that these same vehicles are the means for transporting illicit goods.”

The System of Reused Permits

Beyond the license plates, temporary cardboard permits for introducing illegal cars were also duplicated. One case: temporary permit 91635R5 registered 728 crossings in four months, meaning 728 different vehicles entered Mexican territory using the same provisional permit to circulate without plates.

Permit 70601N3 registered 220 crossings in 10 months, and temporary permit 96447X5 recorded 253 crossings in just one month.

Internal ANAM reports indicated that license plates and permits were reused again and again, turning the fraud into a system. In an eight-month monitoring period, records from the Electronic Data Processing Center detected that 3,896 different license plates were used repeatedly to introduce 27,239 illegal vehicles into the country through the Reynosa and Matamoros border posts.

Based on the previous monitoring, an average of 3,400 contraband units crossed through those Tamaulipas customs facilities each month, representing the entry of 40,000 illegal cars each year through the cloning of license plates.

Legalization of Contraband by Decree

While inspectors documented suspicious crossings, leaders of peasant organizations in the north announced that the so-called “chocolate cars” would soon be legalized. And the prophecy was fulfilled, because on October 18, 2021, then-President Andrés Manuel López Obrador issued a decree that opened the door to the mass regularization of vehicles of foreign origin.

This meant that the same vehicles that had entered with duplicated plates and that customs had cataloged as possible means for transporting illicit goods were now protected under that decree. The units that had entered as contraband suddenly found a legal safe-conduct.

While customs authorities detected the pattern of duplicated license plates and permits, the political machinery was moving in the opposite direction, towards legalization. The decree did not stop at that first impulse. With successive extensions, it extended its validity until September 2026.

The most recent reform to the decree was signed by López Obrador four days before leaving the presidency, valid for two more years.

Million-Dollar Profits from Regularization

For established car distributors in Mexico, each extension promoted the indiscriminate entry of used vehicles, weakened the formal economy, and strengthened those who profited from contraband.

“The massive entry of used vehicles only benefits the mafias that profit from their introduction and commercialization,” declared the leader of the Mexican Association of Automotive Distributors (AMDA) following the extension of the decree.

In one of his communications, Guillermo Rosales, executive president of the AMDA, estimated that between October 2021—when the decree was issued—and until mid-2023—when a new extension was granted—1.6 million vehicles had been regularized.

“It is not possible that after almost 1.6 million regularized vehicles, contraband vehicles continue to enter daily, with a waiting list and no clear penalty for owners who do not legalize their units, which is why this phenomenon will continue as a never-ending regularization.”

The updated figure at the close of 2024 is 2.2 million legalized units. According to his calculations, this would have generated a profit of over $2.2 billion dollars for organized crime, since for each regularized vehicle the smugglers earn about one thousand dollars.

In different interviews, such as the one he gave in March 2024 to Aristegui Noticias following the penultimate extension of the deadline, the president of the AMDA described it as “a terrible blow to legality and the formal economy.” He calculated that the legalization of these vehicles has meant a 30% decrease in the sale of used vehicles in the northern states of the country.

“Contraband vehicles continue to enter every day. It is a very strong business that is being controlled by organized crime, freely circulating these vehicles through the border bridges and thereby strengthening a network of corruption and additional enrichment for organized crime.”

Six months after that interview, on September 26, 2024, Andrés Manuel López Obrador issued another reform to the decree to extend the legalization of the so-called “chocolate cars” until September 30, 2026.

MCCI spoke with Guillermo Rosales, who stated that the extensions to the decree are unjustified since the vehicles being regularized do not meet the requirements specified in the law.

“The only explanation I find (…) is on one hand that there is a lot of money involved flowing between officials and, well this is my speculation, that it was also reflected in money for political campaigns. It is very striking that with the Army’s own reports regarding the involvement of organized crime groups in this business (sale of chocolate cars) the president blinded himself to all this information and decided to maintain it. There is no explanation that serves healthy government purposes.”

The president of the AMDA said that the legalization of vehicles that enter as contraband directly affects the approximately 175,000 jobs generated by the network of more than 3,000 automobile distributors throughout the country.

“There is a transgression of the law and a worrying action by the mafias that are increasing their profits and their economic benefits under the protection of this decree.”

Corruption in Customs

In the monitoring carried out by ANAM at the Matamoros and Reynosa border crossings, signs of corruption were detected. Of the more than 27,000 vehicles that entered in eight months with duplicated license plates, the red light system activated only 787 alerts. And of those, only two ended in a formal seizure.

The failure was not only technical, but also human. The reviewed videos showed that the majority of the red alerts were not followed according to the inspection protocol, and in one case even evidence of complicity by customs personnel appeared. An officer who usually operated at the crossing allegedly facilitated the passage, and when another official took his place, the vehicle ended up being seized.

A report from ANAM, prepared based on the monitoring, says verbatim: “There is apparent evidence of the involvement of a person in charge of the customs office in the trafficking of these cars, the audio is relatively inaudible, so the dialogues between the offender and someone with whom he was communicating via telephone at that time are still being determined, and he apparently tells him that they are seizing it because there is a different person in charge than the usual one.”

Mexican authorities shared information about the duplicated license plates and the network of those involved in the smuggling ring with United States agencies. This led to the arrest of counterfeiters in Laredo, Texas, and leads to accomplices in Brownsville.