@Wargames
Ok peep game.
The flash back scene was never explained, but if you take clues, quotes, etc. from the series it's pretty easy to figure out why the cartel didn't kill Gus in the flash back:
When Hank is interrogating Gus in season 4, he mentions that Gus came to America from Chile in '89. He was obviously someone important and well-connected which is why Don Eladio didn't kill him in that flash back sequence in "Hermanos".
Augusto Pinochet was the President (dictator) of Chile until 1990. I won't go into much detail about him, but he was a scary individual that had thousands of his rivals murdered for political reasons. The guy was a monster.
One key thing about him though, was his fondness of chemistry.
He had hidden labs built all over the country side, ran by chemists that would create chemically altered versions of common drugs. For example, they made a "black" variant of cocaine, the color variation was due to the chemical process used to create it.
Pinochet 'sold cocaine to Europe and US' | World news | The Guardian
Does this sound familiar? Gus didn't pull that lab idea out of his ass, he took the idea from his OG back in Chile. This was also hinted at in the season 3 episode "One Minute" when you see a younger Tio, and the cousins. He jokingly refers to Gus as "The Grand Generalissimo".
So they didn't kill him back then because he had connections.
Fast forward to modern times, and the sniper. Directly after that scene Jesse and Mike have this conversation:
Jesse: What was the deal with Gus?
Mike: The deal?
Jesse: That "Terminator" shyt, walking right into the bullets? What the hell was he doing?
Mike: The cartel needs Gus. His distribution network. They're not looking to kill him.
Fred.