MEXICO CITY—The U.S. Department of Justice said Tuesday it would drop charges against Mexico’s former defense minister, arrested last month for allegedly taking bribes from drug gangs, and return him to Mexico to face possible prosecution.

In a surprise move, the U.S. said it has provided Mexico with all the evidence in the case against former defense minister Gen. Salvador Cienfuegos, who was arrested as he arrived in Los Angeles in mid October, according to a joint statement between U.S. Attorney General William Barr and…

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