Well, you can't really be a small cartel. Even if the other businesses are profitable, a cartel needs a certain size to pay for constant expenses like bribes, armed forces etc. Politicians and the police don't give you a discount because you're small and people still need to be just as intimidated even though you're doing less shit.
Just removing one illegal activity might knock the sum value of dangerous, illegal activities below the threshold where cartels can work.
As long as the right cartels are able to skim value, I could see this being successful regardless. Cartels are businesses at the end of the day- and they won't totally destroy an industry as long as it's making them money long term. The problems occur when smaller groups start fighting over access to the resources.
Cartels would continue to exist though. Because there are always other illegal services that need to be provided. Prostitution, gambling, murder-for-hire, mercenaries, unlicensed surgeons, as well as a still-extant illegal drugs market because they are merely cheaper, or sold to those who cannot buy the otherwise state-approved drugs(underage, banned for some reason).
These cartels sound like super agile organizations that can execute any possible business plan, in any industry, legal or illegal.
In reality, of course, no such super-organizations exist. If and when the industry they have a comparative advantage in disappear, so will the organizations.
If securing the border differentially cuts off small-time operations more than it cuts off the cartels (even if it partly cuts off some cartel routes), it will raise the cartel's profits by causing prices to rise over and above the decline in sales. That's the basis of the argument that if you really wanted to get rid of cartels, you'd legalize drugs and let small operations make all of them.
That's an over simplification. Imagine that drugs, gambling and prostitution were legalized (with restrictions), the cartels would fork off that business into their "legitimate" businesses. Pay taxes and work through there.
Eventually, these would become two separate businesses as enforcement would focus on the connection between the businesses and levy sanctions. History is full of such stories where bootleggers became respected business owners.
The cartel won't disappear, but it will shrink as its big sources of income would become irrelevant. That would mean law enforcement can be more focused and follow a smaller target. Violence will decrease and everybody wins. Additional taxes from these industry fund more policing of the remainder of the cartels.
To be a cartel, you simply need to agree to limit supply to keep prices higher. So it sounds more like a cartel of survival rather than to make obscene profits.
Seriously? Giving monopolies to cartels drives massive profits. Cartels maintain actual military troops. It's hard to believe they'd have any source of crime remotely as lucrative without artificial monopolies making huge margins. Sure, they would do kidnapping, extortion, and so on, but that's not anywhere nearly the amount of easy money.
If the government granted Monsanto a license for weed, cocaine and poppy, the cartels would be cleared out in a month.
Just removing one illegal activity might knock the sum value of dangerous, illegal activities below the threshold where cartels can work.
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