Workers at Tanque’s, an ­unlicensed e-waste shop in the heart of Renovación.
Photographer: Alejandro Cartagena for Bloomberg Businessweek

We Found Your Last Smartphone, Next to Your Old VCR

In the Mexico City neighborhood of Renovación, life and business revolve around electronic waste, much of it from the U.S.

Jesús Gómez—El Tanque to anyone who knows him—navigates around 60 tons of junked electronics to see what’s going on outside. Sweaty young men have just dumped two huge sacks of spent Motorola cable-TV boxes on the street here, in Colonia Renovación, a neighborhood in Mexico City. Gómez watches as eight men and a woman sit in a circle under an intense sun, breaking the boxes apart with ball-peen hammers and chisels. They work to the beat of banda, Mexico’s heartthrob country music, wrenching out bits of copper, metal, and circuitry. Gómez will find buyers for all of it. Shards of metal and plastic fly. Metallic-tasting dust hangs in the air.

Just inside his shop, Gómez’s 3-year-old grandson, Alexis, plays around a teetering pile of mangled steel computer casings. The boy’s mother, eight months pregnant, sits on a pile of junked PCs, untangling a mass of old phone chargers. She’s hemmed in by electronic waste, or e-waste, stacked two stories high inside a tin-roofed space the size of a three-car garage. Outside the workshop are more piles, and there are yet more in the street; the junk seems to pour in constantly, some of it from around Mexico City and a lot from much farther. Gómez’s younger brother and business partner, Genovevo, points to some Epson printers trapped in the heap, way above his head. They’re from Texas, he says; the shop has bought dozens of truckloads of e-waste from north of the border in the past two years. “The gringos throw it out,” Genovevo says. “We do the dirty work of breaking it apart.”

That’s the essence of Renovación, a neighborhood of 15,000 people spread across half a square kilometer of the world’s fourth-largest city. At one unlicensed workshop after another, adults and teenagers disassemble printers, monitors, and PCs. Battered flatbed trucks lumber in with more trashed electronics. Plumes of acrid smoke rise into the dirty sky from little fire pits in vacant lots, where through the night people burn the insulation off cords and cables to get at the copper.

Salvaged parts from electronics, ready to sell by weight to scrap dealers.
Photographer: Alejandro Cartagena for Bloomberg Businessweek

Jesús Gómez, born and raised here, earned his nickname many pounds ago: He was imposing, a tank. Seven years ago, he was diagnosed with diabetes. He quit his job at a tostada factory and went on a diet, and now his shirt and jeans hang loose over his 5-foot-5-inch frame. He looks older than his 39 years. Jesús, Genovevo, and their baby brother, Alfredo, went into e-waste because everyone seemed to be doing it in Renovación. “We started out buying 50 kilos of stuff,” Jesús says. “We weren’t even sure what it was.” The Gómezes’ shop is unlicensed and has no name, but everyone calls it Tanque’s. It’s one of the neighborhood’s largest businesses, breaking down 100 tons of e-waste a month.

It’s hazardous work: Smash an old TV, and you risk spewing lead into the air. Crack open an LCD flatscreen, and you can release mercury vapor. Mobile phones and computers can contain dangerous heavy metals such as cadmium and toxic flame retardants. Mexican workplace regulations, like those in the U.S., require e-waste shops to provide such safety equipment as goggles, hard hats, and masks. There’s little of that in Renovación. At Tanque’s, the workers’ hands and clothes are covered in an oily sheen. Some have nasty-looking cuts, encrusted in filth, on their arms and fingers.

Lupita Barajas, who’s been working for the Gómez brothers for five years, pauses from prizing some copper wiring from one of the cable boxes. She says she does it because the job pays well. She’s been sitting in the summer heat, in the street, for three hours, bringing her hammer down against steel and plastic. She’s visibly tired. In the beginning, the work makes your body ache, she says, and the fumes give you a headache. “But it’s cool. I like making my own money.” The Gómezes have 21 people working off the books, without any of the benefits required by Mexican labor law, including health insurance. Barajas earns 1,500 pesos ($79) a week on average, almost double the 800 pesos she’d make at a factory. “This can be beautiful—this is the beautiful thing about it,” Jesús says. “Why do people prefer to do this work, instead of work in a factory or somewhere safer perhaps? Because this pays better.”

The beauty isn’t apparent to everyone. Certainly not the family of Said Deive Martínez, who’s lived in Renovación since he was born, less than four years ago. Inside a small brick-and-concrete house, Said, who has large dark eyes and a shy demeanor, stares out the window. Across the street, men pick over a pile of computer monitors, preparing to break the screens. “They smash them right there!” says Valentín Deive Martínez, the boy’s father, pointing.

Said’s mother, Guadalupe Castillo, begins to cry when she talks about what happened to her son. In December 2013, Said seemed near death with high fever, vomiting, and violent convulsions. The baby, then 11 months old, spent eight days in intensive care at the Children’s Hospital of Iztapalapa, suffering from stomach and kidney infections, medical records show. Doctors thought Said had inhaled or swallowed something toxic from the e-waste around his home, but they didn’t know precisely what was wrong. When the baby was discharged, doctors urged his parents to take him to a neurologist for the convulsions, fearing heavy metals poisoning. The specialist scanned Said’s brain and found its growth had somehow been stunted, but they couldn’t be sure why. “I can’t describe how it felt,” the boy’s father says.

Deive is from Michoacán, a state in southwest Mexico, and works as an auto mechanic nearby. He moved here with his wife to live with her parents and has regretted it ever since. The couple want to go back to Michoacán, but they don’t have the money. They’ve asked the neighbors to clean up the waste or, if possible, move their business somewhere else. “We’ve tried to talk to them many times,” Castillo says. “But they just get upset. In fact, they’ve been aggressive.”

Next door, María de la Luz Hernández pauses from cracking open an old printer and stands in the doorway, angry that someone is questioning how she makes her living. Hernández’s son, a stocky man in his 20s, pushes by, carrying a load of printer cartridges. His arms are stained black with toner. “You don’t have to talk to anyone,” the man says to his mother. Said’s illness has nothing to do with e-waste, Hernández says—the boy’s mother is just looking for something to blame. “I know it’s not the trash, that’s ridiculous,” she says. “If that were the case, all the kids would be sick.”

Sorting through cords and cables; they'll be burned to remove the insulation and expose the copper.
Photographer: Alejandro Cartagena for Bloomberg Businessweek

In much of the world, a place like Renovación couldn’t exist, and not only because business owners wouldn’t be allowed to employ people in those conditions. Twenty-five U.S. states and Washington, D.C., home to 210 million Americans, have laws establishing what’s known as extended producer responsibility, or EPR. That means electronics makers must collect, recycle, and dispose of discarded equipment rather than allow it to enter the waste stream. Parts of Europe also have this system.

Manufacturers don’t do this work themselves. Typically, a state, county, or town establishes an e-waste collection program. Then recycling companies come to haul away the junk. The manufacturers pay some or all of the bill. The e-waste can be of any provenance. Apple, for example, isn’t responsible specifically for collecting iPhones and iMacs; its obligation is expressed in pounds of undifferentiated electronic trash. When commodity prices are high, recyclers have been willing to make pickups for a small fee or even to do it for free, because they can get good prices for the metals they harvest from computers and TVs. When commodity prices are low, as they have been the past few years, private recyclers demand to be paid more. A lot of local governments can’t come up with the money and are cutting back or even shutting down programs. Consequently, e-waste recycling rates are falling in about half the states with EPR laws, National Center for Electronics Recycling data show.

In Mexico, extended producer responsibility never really had a chance. Laws focus not on manufacturers, but on large corporate consumers, requiring them to file a waste management plan. This means only that they must contract with a licensed recycling company to take away their electronic trash. The recycling companies are required to process the waste safely, but in fact, plenty of it goes to Renovación. The cable boxes being smashed apart at Tanque’s originated with a big cable-TV provider. Gómez paid almost nothing for them. “They get rid of junk, and it comes to me,” he says.

Smashing, disassembling, and stripping junked electronics at Tanque’s.
Photographer: Alejandro Cartagena for Bloomberg Businessweek
Salvaged parts from old personal computers and other junked electronics.
Photographer: Alejandro Cartagena for Bloomberg Businessweek

A couple of miles across town, at the environmental ministry, Cuauhtémoc Ochoa says he has no comment about the corporate e-waste piling up in Renovación. As the ministry’s deputy secretary for environmental development and regulation, he’s responsible for ensuring that companies file their plans. But he has nothing to do with whether companies actually engage recyclers, or whether those recyclers do their work in the prescribed manner. That’s the job of another area of the ministry, or maybe it’s the city’s. “Whatever happens there is not my responsibility,” he says of Renovación, raising his voice in anger. “Even if I had knowledge, I wouldn’t be able to act.”

No one, in or outside government, is acting to deal with e-waste anywhere in Mexico, says Dione Anguiano, the mayor of Iztapalapa, the huge Mexico City borough that includes Renovación. She says she’s failed to get the city, state, or federal government to clean up Renovación and make it safe for the people who live there. “I’ve tried to do something to help people, to find a way to change this awful situation,” she says. “No one wants to do anything.”

Lourdes López, who won an Ecologist Green Party seat in Mexico’s Congress in 2012, spent her three-year term trying to get international electronics makers to help pay the costs of dealing with Mexico’s mountain of e-waste. “The industry,” she says, rolling her eyes. “Well, we faced a lot of resistance.” Lobbyists met more than 60 times with lawmakers and worked on regulations. The finance ministry refused to endorse and vet the legislation López proposed, citing electronics manufacturers’ assertions that it would cost too much. The bill died, and López left Congress. (At that time, Mexican lawmakers couldn’t run for reelection.)

The lack of a formal, regulated recycling industry is one of many reasons Mexico has become a magnet for spent electronics. E-waste is an opaque, poorly tracked trade, but the U.S. International Trade Commission concluded in a 2013 study that Mexico is the No. 1 importer of used and junked electronics from the U.S., taking in almost 129,000 tons a year.

Texas has one of the most liberal producer ­responsibility laws in America—largely written by the computer maker Dell, which is based in the state

E-waste follows many paths into Mexico. If the Gómez brothers can count on a steady flow of junk from Texas, it may be because that state has one of the most liberal EPR laws in America. It was written largely by the Texas-based computer company Dell.

Dell began recycling in 2000, making it a pioneer in the industry, and in 2004 it set up a national e-waste recycling program with Goodwill Industries that’s collected 464 million pounds of spent electronics. Despite that history, Dell executives helped Texas lawmakers write a law that doesn’t oblige other manufacturers to follow Dell’s example. The bill, passed in 2007, merely requires electronics makers to offer a means of recycling their products—which could be as little as publishing an address to which a consumer can mail a used device. Dell collected 4.34 million pounds of goods last year, state records show. (Only HP collected more.) But Panasonic collected zero pounds; Toshiba, 20 pounds; Lenovo, 11. So the waste stream in Texas is deep and wide, and inevitably the stuff moves south. Dell has since helped eight other states write Texas-style e-waste legislation, known informally as Dell Laws.

The company has also worked to stop more stringent bills. In 2015, Fran Valluzzo, Dell’s former manager of state and local government affairs, traveled to New Jersey to testify against a bill being considered by the state Legislature, an update of the 2007 Electronic Waste Management Act. The original law established an annual quota system for TV and electronics manufacturers, based on market share. The quotas haven’t kept up with the growth of the market. New Jersey Democratic State Senator Bob Smith, who wrote the 2007 law, attempted to address that with the 2015 bill. It would set up a state-managed program to recycle whatever manufacturers didn’t collect and bill the tech companies.

Cables stripped for their copper wire.
Photographer: Alejandro Cartagena for Bloomberg Businessweek

The electronics industry threw an army of lobbyists at Smith. The Consumer Technology Association, or CTA, which represents 2,200 electronics makers, retailers, and installers argued in e-mails and testimony that the law would be too costly. “It would have made manufacturers retain the financial responsibility for the system,” says Walter Alcorn, CTA’s vice president for environmental affairs and industry sustainability. “We definitely oppose that.” In addition to Dell, Panasonic, Vizio, Samsung, and HP opposed the bill. It passed anyway—but Governor Chris Christie pocket-vetoed it, and the legislation has since been in limbo. “It’s a nightmare,” Smith says. “Everything was working until the manufacturers started to balk at their responsibilities. Major corporations, in America and outside of America, are throwing up all kinds of barriers.”

In Camden County, across from Philadelphia in the southern part of New Jersey, recycling director Brian Costantino says e-waste collection services have been cut back because they got too expensive. Increasingly, Camden crews are finding junked electronics by highways and in vacant lots, abandoned buildings, and wooded state parks. Costantino’s guess is that scavengers troll neighborhoods for old electronics left on the street, break them apart to get at the metal inside, and dump what’s left over. It’s not Renovación by any means, but it’s troubling for a place that until recently had a high-functioning e-waste program. “It doesn’t seem right that this should fall on the taxpayers when the lawmakers decided it should be on the manufacturers,” Costantino says.

California still has a working system, financed by fees collected at the point of purchase for every computer and TV sold in the state. Nonetheless, Californians produce more e-waste than the system collects and processes, and the excess often goes to Mexico. It does so by truck and by ship and also by the most humble means: a steady stream of merchants and scavengers known as hormigas contrabandistas—contraband ants. Waves of these men and women cross into the U.S. daily to find electronics to fix and resell or to cull for copper, aluminum, and gold.

These bags of salvaged parts are the end game for the people who work in Renovación, smashing apart mountains of e-waste for anything of value.
Photographer: Alejandro Cartagena for Bloomberg Businessweek

On a warm summer morning they’re drawn to a huge Goodwill Industries warehouse a quarter-mile north of the border, in Otay. Inside, 18 people gather around an auctioneer speaking in rapid Spanish. Today he’s taking bids for TVs; they’re lined up on shelves and stacked inside big hampers. The auctioneer has plugged some in to show they work. Others look damaged. “OK, we have a nice Sony TV here, a little beaten up, but we’re selling as is,” says the auctioneer. He looks around the room, and one man bids $10. Another raises to $13, before a third man quietly offers $16. “Sold. You pay, and you can take it away,” the auctioneer says. Behind him is a warehouse the size of a city block, packed with more used electronics. Shelves 40 feet high reach to the ceiling, neatly organized with old TVs, VCRs, and computers. (There are also donated furniture, toys, and other goods.) In half an hour, the auction is over.

People haul their take to a parking lot filled with vans, pickups, and cars with Mexican plates. Amado and Victoria Mendoza are small players in this world; today they’ve bought six TVs, which they’re loading into their minivan for the trip back to Tijuana. Their best find is a seemingly perfect Sharp 42-inch flatscreen that cost $112. They also have an old glass-screened TV, for which they paid $20, and four TVs that are scratched and battered and almost certainly don’t work. The couple come once a week to stock up on electronics to sell at their stand in a huge flea market on the other side of the border.

On Sundays, the market snakes for miles up and down Tijuana’s hilly La Villa neighborhood. Hundreds of people set up stands on the street. Much of it’s junk, good for parts at best. This is one of at least four used and junked electronics bazaars in Tijuana, selling goods primarily from the U.S. “We’ll sell what works, and the rest goes to the junkman,” Amado says.

The hormigas are a productive part of the used electronics ecosystem, extending the life of things Americans throw away. Eventually, though, everything wears out, and then men like Genaro Hernández step in. He plies the streets of Tijuana in his trucks and brings the junk he finds or buys to his home at the top of the highest slum in the city. His yard is piled chest-high with it. Two pickup trucks are loaded with the day’s catch: battered LG monitors and HP PCs. Hernández sits on the flat roof of his home with a rusty machete, hacking into a monitor cover he’s grabbed from a teetering pile twice his height. He smashes apart 100 PCs and about 25 screens a day to sell whatever has value: bits of aluminum, steel, copper, or the real prize—circuit boards, which contain small amounts of gold. “The stuff never stops coming,” he says. Hernández has a man he goes to when he has circuit boards. That man, in turn, brings his take to Mexico City to sell in Renovación. “I don’t know why, but it all seems to go back there,” Hernández says.

An unlicensed shop in what was once a house.
Photographer: Alejandro Cartagena for Bloomberg Businessweek

In Renovación, the Gómez brothers are similarly focused on circuit boards. To extract the gold, you need a special smelter, and there are none in Mexico. Every month, shipments of salvaged circuit boards are sent from Mexico to smelters in Japan, Hong Kong, Sweden, and Belgium, Mexican trade records show. More head to the U.S. via truck.

The e-waste entrepreneurs of Renovación often sell to a Texas company called Techemet, which operates a smelter in Pasadena, near Houston. A South African family started Techemet in the late 1980s, melting down spent automobile catalytic converters to extract palladium. Three years ago, Techemet expanded into e-waste and sent Lázaro Rodríguez, who runs a Techemet warehouse in Monterrey, about 550 miles north of Mexico City, on the hunt for circuit boards. He established a purchasing depot in Renovación.

Rodríguez calls his clients deshuesaderos, or de-boners. “They are all informal,” he says, using the Mexican term for unlicensed businesses. This year he’s sending 80 tons of circuit boards a month from Mexico, mostly by truck, to be dumped into Techemet’s oven. The company sells the recovered gold to the jewelry, dentistry, and—there’s a reason it’s called recycling—electronics industries. A ton of mobile phone circuit boards can produce 30 ounces of gold, worth about $39,000 at current prices.

E-waste didn’t take hold of Renovación until seven or eight years ago, but the neighborhood was literally founded on trash. In the 1960s garbage pickers, called pepenadores, started squatting atop a huge city dump. More built shacks around it. They had a charismatic leader, Rafael Gutiérrez, who organized them into a powerful union. The Institutional Revolutionary Party, or PRI, which has ruled the country for most of the past century—it’s President Enrique Peña Nieto’s party—allowed Gutiérrez to control Mexico City’s garbage collection. His men and women manned the city’s garbage trucks and worked the dumps. They got paid in garbage—anything they found in the refuse was theirs to keep or sell.

In exchange, Gutiérrez delivered the trash-worker vote, which numbered 15,000 at its peak in the 1970s. He also deployed his people for pro-government rallies and to break strikes. That gave him tremendous political clout, says María de Los Angeles Moreno, a former president of the PRI in Mexico City. Whenever the government balked at Gutiérrez’s demands, he ordered his pickers to stand down, and the trash piled up across Mexico City. “He would fill up buses with his trash collectors and take them to Acapulco,” says Moreno, who knew Gutiérrez. “By the second day, the government was desperate for him to come back and collect the trash. And he would charge accordingly, in political favors or money.”

Chava is paying 250 pesos per kilo for circuit boards, 77 pesos for copper, and 15 pesos for ­aluminum, as a man with an AR-15 assault rifle stands guard

Héctor Castillo, a sociologist who teaches at the National Autonomous University of Mexico, has been studying the pepenador culture for four decades. He did field research for his doctoral dissertation by working four months as a picker in Mexico City in the 1970s. When Gutiérrez won a congressional seat representing the PRI, he briefly hired Castillo as a communications adviser. Today, Castillo sits in his office, flanked by photos of garbage dumps, telling tales.

Gutiérrez, he says, lorded over his trash empire from a gaudy white neo-Colonial mansion with dozens of rooms, built atop a dump called Santa Catarina on the outskirts of Mexico City. The man didn’t take kindly to criticism or publicity. In 1984, Castillo published a book about Gutiérrez and the trash pickers: The Trash Dump: An Anthropology of Misery. A few days later, thugs beat him and warned him never to write about trash again. They left him, bloodied and dazed, outside the city. Castillo pulls out a faded paperback copy of the book and points to something he scrawled inside, with his own blood. “It’s their license plate number,” he says. “I told the police, but they never did anything.” Gutiérrez’s reign ended violently in 1987 when he was murdered in the dump-side mansion, allegedly by a spurned lover. His widow, Guillermina de la Torre, took over the business and eventually parceled it out to her son, daughter, and nephews, Castillo says.

Spilling into the street, e-waste is at the center of the neighborhood’s identity and economy.
Photographer: Alejandro Cartagena for Bloomberg Businessweek

In Renovación, the dump closed, but the pepenadores stayed. Those who worked city garbage trucks swung through Renovación at the end of their runs, dumping their loads. The people of Renovación got to work, sorting through the trash for anything of value. Eight years or so ago, the scavengers started shifting to TVs and computers. Today it’s impossible to tell exactly how many e-waste shops are scattered across Renovación—they’re wedged between homes, squatters’ camps, and shops. Most businesses pay a fee to Gutiérrez’s descendants, says Rosalío Nava, who runs Mexico City’s waste management division. The Gómez brothers say they pay 6,000 pesos a month. None of the shops are legal, Nava says. None, he acknowledges, has ever been closed by any city agency.

When the Gómez brothers don’t sell to Techemet, they often go to a big depot run by a man called El Chava, short for Salvador, who’s said to sell to bigger buyers from China and the U.S. (Chava, who wouldn’t give his full name, declined to comment.) Chava’s place, the size of a basketball court, is stacked 40 feet high with filthy industrial-size sacks of copper, aluminum, and circuit boards. (You’ll sometimes see men in Renovación bending under the weight of these square-bottomed bags in the streets.) On this day in June, Chava is paying 250 pesos per kilo for circuit boards, 77 pesos for copper, 15 pesos for aluminum, 6 pesos for plastic. A man with an AR-15 assault rifle stands guard as forklifts load 6-foot-high bags onto a flatbed truck.

Across the street, Dr. Valentín García pulls his little sedan over, worried about what he’s seeing. For 22 years, García, a stocky, balding man with a permanently furrowed brow, has run a family practice in Renovación. He puts his car in gear and drives, pointing out e-waste shops among the storefronts and little homes. “You have kids growing up here, old people trying to breathe in this toxic environment,” he says, shaking his head. “This is just no place for people to live.”

García isn’t a medical researcher. But he’s convinced e-waste is making people sick, and the medical literature is on his side. In 2012 the U.S. Centers for Disease Control and Prevention found two children got lead poisoning from dust their father tracked home from work at an e-waste recycling plant near Cincinnati. In Vietnam, female workers in e-waste workshops had high levels in their breast milk of flame retardants known as PBDEs, used in plastic housings for electronics, according to a 2010 study in the journal Science of the Total Environment. In Renovación, García says, there’s been a spike in emphysema, bronchitis, and pulmonary fibrosis since e-waste processing began ramping up. At least 25 children have come into his office with the types of pain and learning disabilities that can be symptoms of lead poisoning. Two-thirds of them were children of e-waste workers. (The CDC says no level of lead in children’s blood is safe.) “Their mothers usually say their child has trouble learning and ask me for vitamins to help them,” he says. “All I can do is send them to hospitals to be diagnosed and treated.”

The Gómez brothers acknowledge there are hazards in their business. They speak of workers getting sick, but they say it doesn’t last long. “It’s like we have developed antiviruses from working with this stuff for so long,” says Genovevo, pointing to ugly little scars up and down his arms.

Someone has to do it, Jesús says, and here, no one gets in the way. Americans alone throw out 700 million electronic devices a year. “It’s like the best restaurant in town, which has a back part where things happen that customers don’t want to see,” he says. “We’re that back part. We’re the ones that do the dirty work.” —With Elma Gonzalez

Subscribe to Businessweek