Legalized Marijuana for Recreational Use
An interesting result from the recent elections is that, of the 18 states that have legalized the use of pot for certain medical conditions, Washington and Colorado have legalized it for recreational use. If marijuana grown in these states is 'exported' to surrounding states, increasing supply, this could result in the Mexican drug cartel's loss of monopoly, resulting in a serious reduction of sales and revenues.
IMCO (The Mexican Institute for Competitiveness in Mexico City) estimates that, of the $2 billion in current sales, $1.4 billion would be lost to the new competition. This loss would severely hamper their ability to conduct business, (i.e., wages for drug mules, bribes to police and government officials, purchase of US-issue full-auto assault rifles, disposal of the bodies, etc, ad nauseum) so much so that they may not be able to stay in business due to the high fixed and variable costs incurred under bloated monopolistic pricing where one cartel or gang controls the drug traffic in any given area.
An article in The Economist estimates that variable costs of 'homegrown bud' will be $4,000 per kilo, with THC levels 4 times that of the Mexican variety. The price of this high quality product would be in effect, half of the Mexican price for equivalent amounts of the active ingredient, THC. With the loss of monopolistic pricing from a supply infusion of less expensive and higher quality goods, the demand curve shifts hard left and the price of dope falls to competitive pricing levels. According to IMCO, 70% of their market share would be lost. The drug cartels may not be able to react quickly enough to reduce long term variable costs to stay viable; officials and police would be sensitive to reductions in fees. It is unlikely that the drug lords would disappear because of the current high margins and piles of cash, but maybe in time their control, influence and strangle hold on Mexican border towns would be substantially reduced.
(It is not the intent of this post to condone or advocate the use of any illegal substances)