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Wiktionary
narco-state

n. A state whose economy depends heavily on narcotics and other drugs.

WordNet
narco-state

n. an area that has been taken over and is controlled and corrupted by drug cartels and where law enforcement is effectively nonexistent; "this Mexican town has become a narco-state that ships 100 pounds of cocaine to the United States every day"

Wikipedia
Narco-state

Narco-state (derivatives: narco-capitalism, narco-economy) is a pejorative neologism meant to express criticism of a state's policies and practices surrounding the international illegal drug trade. The terms are standard words with the prefix "narco-", defined by the Oxford English Dictionary as "associated with the trade in illegal drugs". It is a pejorative term meant to criticize and express disfavor about a government's drug policies; no state calls itself a narco-state as a neutral descriptor — thus, who uses the term, and in what context, is significant to understanding its intended meaning. For example, Guinea-Bissau has been called a "narco-state" due to government officials often being bribed by traffickers to ignore the illegal trade.