Costly US-Mexico drugs crackdown could fall short

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MONTERREY, Mexico, Oct 23 (Reuters) - Mexico and the United States plan to spend $8.4 billion on a three-year assault against Mexico's drug gangs but experts warn it could fail without a crackdown on cartel finances and better police intelligence.

Washington has pledged $1.4 billion to fund Mexico's war on the gangs that smuggle South American cocaine and other drugs north to the U.S. market, and Mexico said on Tuesday it will put up $7 billion.

The plan will improve Mexico's range of anti-drug tools with new helicopters, aerial surveillance equipment and detection gear. Yet, experts say the approach is superficial.

"More helicopters won't make a difference because you are only dealing with the armed side of the cartels. You've got to go after their finances and find out where their banks accounts are. That is the way to weaken them," said Ernesto Mendieta, a security advisor and former Mexican anti-drugs prosecutor.

Mendieta said Mexico had only investigated eight cases of mid-level drug financing this year and has one of the world's worst records in probing illicit money flows.

Mexico's powerful traffickers move billions of dollars a year between Mexico, South America, the United States, Europe and Asia through banks, hotels, remittance companies, brokerage houses and by physically carrying cash.

"Tracking that money is time consuming and doesn't make headline news, but it has to be done," Mendieta told Reuters.

Alarmed by a surge in drug killings last year, Mexican President Felipe Calderon's first move on taking office last December was to deploy 25,000 soldiers and federal police to hot spots in northern and western states.

While the operations have led to a string of high-profile drug busts and pushed up cocaine prices on U.S. streets, drug violence has killed more than 2,100 people this year. Police and experts bemoan the lack of intelligence, especially in the city of Tijuana on the U.S.-Mexico border.

"The U.S.-Mexican drug plan is not the magic solution. It will help, but you need intelligence, people on the inside, and money alone can't buy that," said Jorge Chabat at Mexico's CIDE think-tank.

Mexican officials also warn that catching traffickers will have a limited impact without a wider plan to clean up corrupt police forces and alleviate the poverty that pushes many into drug smuggling.

"When a trafficker is captured, unfortunately someone else steps up to fill that gap," said one anti-drug official who declined to be named.

Mexico's government has not said how much it has spent so far on this year's crackdown.

After months of talks on drawing up the plan, President George W. Bush asked the U.S. Congress on Monday for $500 million, the first chunk of $1.4 billion earmarked for Mexico.

Both countries are calling it the "Merida Initiative" after the Mexican city where Bush and Calderon discussed the issue in March. (Additional reporting by Miguel Angel Gutierrez)