Mexican President Felipe Calderon says cartels are making money outside of the drug trade and are seeking greater power in towns where they exert control.
Mr. Calderon told an anti-crime conference in Mexico City that the cartels are using force to levy taxes and intimidate citizens.
He said the business of the cartels is to "dominate" other people.
The Mexican president said he would continue the military-led battle against the drug gangs. Some opponents have said drug-related violence would lessen if the government ended the fight.
More than 28,000 people have been killed in drug-related violence since Mr. Calderon took office in 2006 and began cracking down on the cartels.
Mr. Calderon said Tuesday that he would consider a debate on legalizing drugs.
Last year, three former Latin American presidents: Fernando Henrique Cardoso of Brazil, Cesar Gaviria of Colombia and Ernesto Zedillo of Mexico said the U.S.-led war on drugs is a failure and that it is time to replace what they called an ineffective strategy with more humane and efficient policies.
Some information for this report was provided by AP.
