Yes, he was able to distribute the cartel's lower quality meth through Los Pollos Hermanos (I knew there was something about their batter that was sooooo good). But Gus wanted to produce his own and was likely giving a cut to the cartel, but Walt's meth was more expensive, so the cartel wanted more money but Gus was like "No, this is MY operation. My lab. My funding. My product, you'll get whatever you get" and the Cartel was probably somewhat okay with that, but if you remember, Gus was bringing in more than the Salamanca's and it was being presented in a much more organized fashion, so the Salamancas, who are all about vendettas and punishing people, weren't going to get sown up by some gay Chilean guy with a degree - and probably pushed Don Eladio and Bolsa into a war with Gus. If it's not for the Salamanca's there would have been no war between Eladio and Gus. Eladio and Gus don't like each other, but they made a lot of money together, so they tolerated things.