The Grey was a project that was initiated by the PIM Military in Just Cause: Paradiso Islands. It focused on adding something "new" to Raven City, Lorensville and the area surrounding.
In 2009, the PIM created a substance similar in appearance to fog, known as "The Grey". When sprayed, it caused the humans affected by it to become almost zombie like, increasing some brain cells and completely eradicating others, putting them in "kill mode". After Codename:Morgue was completed, they sprayed it over the whole area of Raven City, Lorensville, Fork and the area nearby. 10 years later, when Rico arrives, the fog is still present but it no longer has effect.