What were the Mexican gangsters going to say

Didn't bother me at the time, though you're right that it's an open question.

Way I figure it, Smiley was taking a calculated risk. He knows Alonzo was already marked for death. The Russians might kill him even if they get paid, and they'll for sure kill him if Hoyt gets to him and takes the money.

Also, Smiley knows Hoyt HAS to go after Alonzo (A) to save himself, AND (B) now, and only now, Hoyt will have the advantage.

Worst case, Alonzo survives Hoyt and the Russians, Smiley would just give him back the money and tell him about Letty. Alonzo himself chose Letty's cousins (on purpose, according to Fuqua), so he bears some blame.

However it goes down, Smiley's got a whole gang behind him, and plenty of dirt on Alonzo.

But I think the whole film portrays Alonzo as a cornered animal, with everyone (Smiley, wise men, Roger) treating him like a walking dead man. Hoyt was on the upswing, and a better horse to bet on. Hence the deleted scene where Smiley tells Hoyt he's in the game now, play it right and he might make chief.

The movie implied that Smiley had some power / connections. Besides being the leader of the gang, he also knew a lot about Alonzo’s situation with the Russians, and how Alonzo jacked Roger, etc. Even Hoyt asked, “How do you know all of this?” because it wasn’t information that some low-level gangbanger would have. Perhaps Smiley had ties to someone big in the LAPD, for example.

Overall, there’s a sense that Smiley simply wasn’t afraid of Alonzo, and whatever “repercussions” Alonzo would effect from their letting Hoyt walk. Just as the Russians had no issue killing Alonzo, Smiley and his gang probably had no issue killing Alonzo if necessary. They were about to kill Hoyt, so killing policemen weren’t off-limits to them.

I never even questioned it.
I imagined Smiley, would tell Alonzo what are you going to do about it.

Perhaps Smiley would say ‘get someone else to do it, here’s your money back - I’m not going to kill the guy that saved my niece from rape”

Because Smiley knew Alonzo was fucked. The Russians were probably going to take his $1 million dollars and kill him anyway. Alonzo was a marked man..and he knew it himself. Despite all the swagger and self confidence he portrayed outwardly...inside he was scared and desperate...and a guy like Smiley with all his years of experience on the street...he could sense Alonzo’s fear and desperation so he calculated that Alonzo wasn’t going to be around after that night, wether Jake could get the drop on Alonzo or not(he managed to), the Russians were most definitely going to.

You can tell that Smiley, all those gangbangers at the end...they weren’t afraid of Alonzo anymore. Smiley had this...”I can’t wait until they clip this rude mofo” look on his face when talking with Alonzo. You can tell when he’s telling Jake the story of how Alonzo got in trouble with the Russians...there’s like a look of delicious anticipation on his face. Like he can’t wait to see Alonzo get his comeuppance. They were all chafing at his “reign” so to speak.

So smiley wasn’t really sweating it. Alonzo was a dead man walking, Smiley literally got paid and didn’t even have to do the dirty deed through a stroke of luck on Hoyt’s part.

They were going to say we didn't kill him. He saved my little cousin when he didn't have to and we owed him one. Here's your money back.

I'm sure Smiley knew he was burning a bridge with Alonzo by not killing Jake and I'm sure that was factored into his decision. However, after thinking about it burning Alonzo was less important than his moral principle of killing a good man and cop.

You could say Smiley was a murderer and part of a criminal gang. Why would he care if Jake helped his cousin. That goes into play the interesting grey areas of moral principals.

You could also argue the possible repercussions of burning Alonzo. Could Alonzo officially bust Smiley and his gang later? Maybe, depends on what Smiley had on Alonzo and what their relationship was like. We'd need more info to determine that. Appartnely Smiley wasn't too worried else he wouldn't have let Jake live.

We're left some blank spaces to fill in our own interpretation obviously, so the feeling I get is that some things transcend mere business transactions -- i.e., family. The fact that Hoyt saved his cousin was the bottom line and Alonzo's wishes be damned. But complimentary to that idea is that the gang was so well connected that Alonzo would have had limited pull to retaliate.