Mexico sells drug lords' jewels and planes at auction

MEXICO CITY (Reuters) - Mexico is auctioning off luxury items seized in its war against powerful drug cartels, including drug lords' diamond rings and private planes, and funneling the profits to crime-fighting programs.

President Felipe Calderon's government has been trying to stem a tide of drugs being smuggled into the United States that makes cartels an estimated $40 billion a year.

After a string of high-profile arrests this year, officials are putting their belongings on the auction block, including a wristwatch valued at about $300,000, a 12.25-carat diamond and gold ring, and three executive jets.

The sale of cartel leaders' goods represent just a fraction of the 12 million items up for sale in next week's annual auction of confiscated merchandise in Mexico City.

The bulk of the goods, everything from containers of toys to heavy manufacturing equipment, were held at customs for failing to follow import rules, a finance ministry source said.

"Most of the jewels and watches are from organized criminals," the source said on condition of anonymity.

The diamond ring will start bidding at 1.4 million pesos (about $114,000). Some items are expected to go for 10 times their starting prices, the source said.

Many cartels launder money by buying extravagant goods like Rolex watches and expensive cars with cash, making the purchases hard to trace.

More than 31,000 people have been killed across Mexico since December 2006, when President Felipe Calderon deployed thousands of troops and federal police to take on the powerful traffickers.

Auction profits will be divided between the attorney general's office, the court system and the health ministry.

(Reporting by Mica Rosenberg; editing by Missy Ryan and Stacey Joyce)