Professional Documents
Culture Documents
209 481 2 PB
209 481 2 PB
Menno Vellinga * .
I. INTRODUCTION
In this article we will analyze the way in which the coca-cocaine
industry has been organized recently, indicating how the changes in its
organization have affected the functioning of the industry at the various
phases of production and trafficking. Drug production and trafficking
present a powerful challenge to Latin American development and it is our
understanding that development in the last few decades cannot be well
understood without bringing the illegal drug industry into the picture.
The small-scale production of coca in the Andean countries did not
develop into the “cocaine business” until the mid-1970s. The industry
began to boom by the early 1980s, showing spectacular growth in a context
of increasing economic crisis and a state that had been losing legitimacy,
failing to meet many of its core responsibilities. The rise of cocaine
production and trafficking has been an intricate part of this development.
Coca growing and cocaine production appeared to be well adapted to the
conditions of the underdeveloped rural economy in the Andean countries.
Coca appeared to be an ideal crop, guaranteeing a steady flow of income,
softening the impact of the crisis for sizable numbers of the peasant
population. Soon, however, it also appeared that the industry’s illegality
was greatly affecting the market structure and the strategies of the partners
involved -producers, sellers and consumers- turning violence into a
resource whose real or potential use has become an almost “normal”
element of market competition. The enormous money interests at the
various phases of production and trade have led the entrepreneurs involved
to defend market positions at all costs.
Within two decades, coca growing has expanded from the relatively
small areas where it was cultivated for traditional consumption to regions
covering large parts of Bolivia, Peru and Colombia. Expansion in the near
*
I am grateful to an anonymous reviewer for his/her helpful comments and suggestions
doi:https://doi.org/10.16993/ibero.209
90 The Illegal Drug Industry in Latin America
household. This is coca’s basic advantage. At the same time, this advantage
gives an idea of the magnitude of the problems that accompany crop
substitution. A peasant household can expect to have some income within
twelve to fifteen months after having planted coca. The shrub is fully
grown after two to three years and will continue to produce for fifteen years
or more with three to four crops a year. Coca requires less investment and
attention than other crops once it has been planted and will require only
manual labor and no special skills. Most peasant families in Bolivia and
Peru are familiar with coca. The product is easy to harvest, pack and
transport and in most cases will have an assured market nearby. Under
“normal” circumstances, coca would be the ideal income-gathering crop to
alleviate poverty and rural underdevelopment. Also, the production of
cocaine is not a very elaborate or difficult process. The industry is, in fact,
perfectly adapted to the conditions of an underdeveloped rural economy:
the manufacturing process is not capital intensive, does not have large
economies of scale, does not require large amounts of skilled labor, and
uses production processes that are relatively easy to organize. These
characteristics explain the flexibility with which the industry has been able
to respond to the fluctuations in demand in consumer countries, to changes
in anti-drug policies, and to repressive operations by the military and law-
enforcement personnel. This adaptation also explains why it has been so
difficult to find an alternative to the industry.
What parties are involved in this production and trafficking of
cocaine, and why and how has this involvement come about? Among the
coca-producing countries major differences have developed as to the
organization of the sector and the market strategies of the entrepreneurs
concerned (Laserna, 1997). Before Bolivia embarked on its “option zero”
strategy under the previous government, a certain division of labor had
emerged among the three producer countries plus Brazil and Mexico.
Colombia had become more involved in cocaine production based on coca
paste production elsewhere, and in trafficking, although Brazil and Mexico
have been rapidly gaining terrain in this sector. Suppression of coca
cultivation in Bolivia and Peru has led to an explosive growth of coca
cultivation in Colombia. In Bolivia and Peru the clandestine drug economy
had become more interwoven with the formal economy. Many of those
involved in drug production and trafficking have been moving back and
forth between the two sectors. A small mafia-type drug elite still exists, but
it is hardly as prominent as the powerful, well-organized Colombian drug
lords of the 1990s. The intensification of repressive policies has
strengthened the tendency of these informal and the formal sectors to
interpenetrate. Generally, repression of the drug industry’s activities has
Menno Vellinga 93
Table 2 - Cocaine Industry Price Structure (in U.S. dollars per kilogram)
Total 6,600-8,700
Source: National Drug Intelligence Center (2004), Allen (2005), Zaitch (2002),
These are general numbers. There is considerable price variation over
place and time. The illegality of the industry has resulted in great market
segmentation. Price levels are not the result of agreements between the
major organizations controlling the market, but result from their strong
competition and the actions of small smugglers trying to enter the market.
The amounts listed in Table 2 represent the costs incurred by major
exporters. It shows that the costs of putting a kilogram of cocaine in the
American or West European market are by no means insignificant,
although they pale in comparison with the net profits. It becomes clear at
the same time why in recent years micro entrepreneur-exporters and body
packers have been so successful, saving substantial amounts in the
trafficking and laundering phases, although probably receiving smaller
amounts at the wholesale level in the destination points.
Changes in Business Practices
The drug industry has changed considerably since the demise of the
“cartels’ in the 1990s. Cocaine production and trafficking has become more
differentiated and the enterprises have become more heterogeneous. Those
producing cocaine may take many forms. These may vary from a one
person enterprise with a small laboratory, selling small volumes to the
exporters, to a big laboratory in which many producers and exporters at the
same time are involved. Export enterprises are often somewhat larger. This
has to do with the complexity of the logistics of an illegal business, the
need to deal with international law enforcement, the conclusion of deals
overseas, the neutralization of control and detection, and the development
96 The Illegal Drug Industry in Latin America
shipments, a great number of couriers are trying to get into the business,
smuggling a few pounds of cocaine. Many among them are bodypackers,
boleros, smugglers of the bolitos (cocaine put in condoms or fingers of
surgical gloves and swallowed). Since the end of the 1990s, these drug
couriers have been arriving at American and West European airports by the
ten thousands. This modality of drug smuggling is not new. It has been
reported in the beginning of the 1980s.6 What is new, however, are the
large numbers of people involved. Official estimates for Amsterdam
International Airport, one of the main gateways to Europe for drug
smugglers, mentioned numbers between 26,000 and 44,000 for the year
2002. Bodypackers will smuggle between 400 grams and one kilo per
person. With the maximum estimate of people involved (44,000), this
would have meant an effort to smuggle volumes between 17.6 tons (at 400
grams per person) and 44 tons (at one kilo each) into the country. The
minimum estimate (26,000) would produce smuggled volumes between
10.4 and 26 tons. The total volume of cocaine smuggled annually into the
European Union has been estimated at between 100 and 130 tons. The
present (2006) size of the world market may be estimated at between 500
and 600 metric tons. The bulk of exported cocaine will continue to be
smuggled through multi-hundred kilo operations by sea, using regular
containership connections, fishing vessels, and speed boats. However, it is
obvious that smuggling through individual couriers has become an activity
of increasing importance. Worldwide, this activity may involve more than
100.000 people.7 This mushroom like growth runs the danger of
overwhelming law enforcement authorities involved in drug control and
has been exhausting the resources needed to catch the major loads. Some
analysts even assume this to be a conscious strategy of the major cocaine
smuggling organizations.8 At Amsterdam Airport, the authorities have
reacted in mid 2004, intensifying the control of flights from Latin America
and the Caribbean. It is still not known to what extent the so-called
“balloon effect” (e.g. suppression here will lead inevitably to an expansion
in other places) will make itself felt.9
Most couriers are contracted for one or two trips. There appears to be
an unlimited number of candidate couriers who are willing to take the risk
of being caught in order to get access to fast cash. Proceeds may vary from
1500 to 10.000 U.S. dollars per trip, depending on nationality, type of
courier and quantity of drugs smuggled (Zaitch, 2002). The risks are being
absorbed by the courier. In most cases he will not even know the people
who send him on his flight, and those who will be waiting for him at his
destination. For the organizers of the trafficking operation the risks are
small. Their identities will remain concealed from the law enforcement
Menno Vellinga 99
now approximately half of the cocaine transports directed towards the U.S.,
operating brazenly and violently17The other half is smuggled through
Central America and the Caribbean (Guatemala, Panama, Dominican
Republic, Haiti, Jamaica and Puerto Rico). Only a few percent finds its way
directly from Colombia to U.S. destinations. Bulk shipments are
transported to these locations, to be warehoused, repackaged and smuggled
into the U.S. using an infinite variety of methods (Allen, 2004).
Mexico has become the most important route for cocaine shipments
destined for the U.S. Colombian trafficking organizations generally have
preferred to maintain ownership of the shipments but soon became
dependent on the local Mexican organizations (often traditional drug
smugglers) to channel the shipments to the Northern border states.
Originally, the Mexican gangs involved in this venture were paid in cash
(1500 - 2000 US dollars per kilo), but soon they renegotiated and had
themselves paid in cocaine for services rendered. Subsequently, they
started moving the trade through their own distribution channels. The
presence of sizable populations of Mexican origins in all big U.S. cities,
enabled them to control trafficking downstream to the street level. The drug
trade has become Mexico’s largest foreign exchange earner with an amount
estimated at between 30 and 40 billion U.S. dollars annually. Mexico’s
presence is strongest in the Western part of the U.S. The Colombian
traffickers have maintained their hold in the Eastern part with help of
traffickers from Puerto Rico, the Dominican Republic, Haiti and Jamaica
(Andreas, 2004).
The Caribbean is for Colombian traffickers their natural “bridge” to
the United States. At the same time it is the most controlled area by the
U.S. coast guard and other forces of law enforcement. However, the high
surcharge for moving shipments through Mexico (fifty per cent!) has led to
a shift to the traditional Caribbean routes, which calculate a surcharge of
less than half the cost of the Mexican route.
Also, the Caribbean is home to an off-shore banking system that
serves the laundering of drug money. Many Caribbean nations are
economically and politically weak, are sucked into the drug trade and are at
risk of losing their sovereignty (Griffith, 2004).
The distribution of profits at the various levels of the value chain is
quite uneven. The greatest jumps in earnings occur at the levels of transport
and distribution and not at those where the actual commodity is being
produced. High percentages of the profits realized in the countries of
demand will remain there. Obviously, this whole money making structure
remains a function of the industry’s illegality.
102 The Illegal Drug Industry in Latin America
III. CONCLUSION
The drug industry is a very dynamic one, expanding its operations
and exploring new markets, while constantly changing the organization of
the trade, its business practices, the participating personnel, their social
practices and relations, the linkages with other sectors of civil society and
the state, and the relationship towards networks of organized crime. The
industry is forced to be flexible when developing answers to continually
changing conjunctures involving changes in demand, actions of law
enforcement and drug control or developments in international trade. The
well-established drug trade organizations are disappearing. They have
proven to be vulnerable against the forces of drug control and law
enforcement. Most new drug businesses are informal, small, mutating and
decentralized. The trade has ‘informalized’ with a change in smuggling
patterns that reflect these developments. A new generation of traffickers
has been organizing the trade in a low profile and informal way. They have
avoided those features that have led to the demise of the cartels, such as:
large scale operations, a visible presence, conspicuous consumption and
widespread use of violence. The changing trade patterns have been
integrating increasing numbers of people into the drug trade as courier,
‘mule’ or bolero, contracted to carry limited-size loads overseas, using
scheduled flights through international airports. This phenomenon reflects
the atomization of the drug business after the disintegration of the cartels.
Scores of small and micro-entrepreneurs have entered the sector. They
often work independently, integrating various phases in the value chain
under their own control, while at the same time reaping a major part of the
total value mark up. This expansion of the small-scale organization of the
trade has presented new challenges to the forces of law enforcement and
drug control. The international couriers account for the majority of people
detained and charged for cocaine smuggling. However, they will not lead
law enforcement to the drug entrepreneur who organized the trade. In most
cases, the courier will not know who sent him on his trip and who will
receive the load upon arrival. For the organizing entrepreneur the couriers
are expendable, personnel that can be replaced easily. ‘Mules’ may be
ruthlessly sacrificed as part of smuggling strategies and tactics defined
without their knowledge and control. The continuing economic crisis in
Latin America has created a huge reservoir of middle and lower-middle
class people who are willing to take the risk in search of means to improve
their socio-economic situation.18
The drug industry has always fascinated outsiders and onlookers. In
the news we read about spectacular smuggling operations. The huge profits
may entice certain traffickers to “science fiction” type scenarios in order to
Menno Vellinga 103
get their cargo at its destination and there are few limits to the imagination.
In September 2000, a Bogotá-based group of traffickers were apprehended
in connection with the construction in secret of a submarine for the
transport of cocaine to U.S. shores.19 At the same time, however, the
cocaine trade is also a business in which many small low-profile traders
quietly go their ways, refraining from any activity that may call the
attention of law enforcement. It is this sector that has grown in importance
and one may expect it to be setting the trend for changes in business
practices within the industry for years to come. The organization of the
coca-cocaine industry and the value mark ups that are realized at every
phase of production and trafficking are totally conditioned by its illegality.
A change in the prohibition regime towards decriminalization would
radically change this picture, erase the mega profits of the trade in one
stroke, eliminate its criminal connection and create a situation not very
different from the one we have with alcohol and tobacco.
NOTES
1
“Narcotráfico: La Generación ‘$’, Revista Semana (Bogotá)), May 4, 2003; “Burriers”, El
Comercio (Lima), February 13, 2005; “Los Narcos Usan de Mulas a Niños y a Gente
Pobre,” La Razón (La Paz), September 22, 2005; “Bebés y Ancianos en el Narcotráfico,”
El Diario (La Paz), January 16, 2005;”Mulas al por mayor,” Clarin (Buenos Aires),
November 25, 2006
2
El Tiempo (Bogotá), January 4, 2004; “La Coca de los Divinos Niños,” Revista Caretas
(Lima), June 13, 2002; “Mexicanos financian a las micromafias Colombianas,” El
Universal (Mexico), July 10, 2006; also Astorga (2004) 85-102.
3
“La Nueva Generación de la Mafia,” El Tiempo (Bogotá), September, 2001; “Mafia: El Nuevo
Estilo que Opera Desde Hace Varios Años in Colombia,” El Tiempo (Bogotá), January
18, 2004; “Veinte Años Después,” Revista Cambio (Bogotá), January 18, 2004; this
change in business practices is generally present, see for the Mexican case: “El Doctor
dio al Cartel de Juárez una Visión Empresarial,” El Universal (México), November 22,
2005; “El Narco busca consolidar Mercado Interno,” El Universal (Mexico), May 1,
2006.
4
El Tiempo (Bogotá), January 18, 2004; Folha de São Paulo (São Paulo), April 5, 2003; El País
(Madrid), September 6, 2006
5
“Drogas,” Folha de São Paulo), May 4, 2002;El Tiempo( Bogotá), January 18, 2004;
Involvement in trafficking among the urban poor has mushroomed ; faced with stagnating
income situations, many apparently have taken matters into their own hands, entering the
drug trade. This move has been behind much of the upsurge in violence in the big cities
of Latin America; “Policia Nacional: Diez porciento esta implicado en el Tráfico de
Drogas,” La Republica (Lima), August 31, 2004; Moser and Mcllwaine(2006).
6
Volkskrant (Netherlands), October 4, 2003; communication Netherlands Ministry of Justice,
OM Haarlem, April 15, 2003; the numbers of drug smugglers arriving at Amsterdam
Airport were mentioned by the airport police and the local judicial authorities and at the
time represented serious estimates, although at first sight they seemed like an other case
104 The Illegal Drug Industry in Latin America
of the statistical sensationalism that we often find in estimates of the impact of the drug
trade.
7
NRC-Handelsblad, (Netherlands), June 26,2003 and October 4, 2003; cf. the calculations by
Zaitch, (2002) 81 , on the basis of data from the former Observatoire Geopolitique des
Drogues in Paris and from various Colombian sources.
8
Volkskrant (Netherlands), July 28 2004; NRC-Handelsblad (Netherlands), July 24, 2004.
9
NRC-Handelsblad (Netherlands), September 29, 2002; “Por un Puñado de Dolares,” El
Espectador (Bogotá), August 19, 2003; also Zaitch (2002) 151
10
“Lavado de Dinero: Mal que Recorre el Mundo,” La Hora (Quito), October 27, 2003; also
Reuter and Truman (2005), 25-45.
11
“Colombians and the U.S. break up World’s biggest Money Laundering Ring,” Colombian
Office of the President, April 22, 2002; the massive influx of dollars had severe macro-
economic consequences; in 2004/2005 the Colombian peso rose 17 percent against the
dollar, The money laundering ring discovered in April 2002 operated through a
Panamenian company where regular deposits were made of 150.000 U.S. dollars; El
Tiempo (Bogotá), September 11, 2005.
12
“Alerta por Lavado de Dinero,” El Tiempo (Bogotá), April 11, 2002; “La Mafia Diversifica
las Formas de Lavado,” El Comercio (Lima), September 19, 2005; “Inteligencia
Financiera Descubre 55 millones de Dolares en Lavado de Activos,” El Comercio
(Lima), January 8, 2006; a spectacular exmple presented itself in Aprl 2002 when a
courier was apprehended at Cali Airport with1.3 million U.S. dollars strapped to his body,
13
“Por un Puñado de Dolares,” El Espectador (Bogotá), August 8, 2003, the courier was
apprehended with 25.900 U.S. dollars in his stomach!
14
“Drug Money seized in Colombia,” Associated Press, August 25, 2001; a total of 35 million
U.S. dollars was found stashed away in the walls of two Bogotá apartments;
“Narcotráfico,” Revista Semana (Bogota), January 21, 2007 reports the seizure of over
60 million U.S. dollars in cash stashed away in a number of trunks kept in a Cali
apartment; see Thoumi (2003) 162-168 on the difficulties involved in laundering
substantial amounts of foreign exchange;
15
“Golpe a Red que Empleaba Polizas de Seguro para Lavar Dolares,” El Tiempo (Bogotá),
December 7, 2002; “NoTodo que Brille es Oro,” Revista Semana (Bogotá), February 12,
2006.
16
“La nueva Geografia del Narco,” La Jornada (Mexico), July 24, 2005.
17
“El Narcotrafico esta fuera de Control” El Universal (Mexico), July 26, 2006
18
A good picture of this phenomenon is presented in the Oscar-nominated movie Maria Full of
Grace; in Colombia, the movie struck a cord in the press it was renamed: Maria Llena de
Coca (Maria Filled with Coca); see El País (Cali), February 5, 2005.
19
“Mafias de Rusia, Holanda y Carteles Colombianos Detras del Submarino Encontrado en
Bogotá,” El Espectador (Bogotá), April 17, 2002; also: “A Profundidad,” Revista
Semana (Bogotá), April 21, 2002.
Menno Vellinga 105
References
Allen, C.M. (2005), An Industrial Geography of Cocaine. New York, Routledge.
Andreas,P. (1999), “When Policies Collide:Market Refor, Market Prohibition and the
Narcotization of the Mexican Economy,” in R.H. Friman and P. Andreas (eds.) The
Illicit Global Economy and State Power. Lanham, Md.: Rowman and Littlefield.
Astorga, L. (2004), “Drugs and Politics in Mexico,” in M.Vellinga The Political Economy of
the Drug Industry, Latin America and the International System. Gainesville, Fla.:
University Press of Florida.
Griffith, I. L. (2004), “The Political Economy of Drugs in the Caribbean: Problems without
Passports,” in M. Vellinga The Political Economy of the Drug Industry, Latin America
and the International System. Gainesville, Fla.: University Presss of Florida.
Laserna, R. (1997), “La Economía de la Coca en Bolivia: Cinco Preguntas y Una Duda,” in M.
Hopenhayn La Grieta de las Drogas: Desintegración Social yPoliticas Públicas en
América Latina. Santiago: Comision Económica para América Latina y el Caribe.
Moser, C.O.N and C. Mcllwaine (2006), “American Urban Violence as a Development
Concern;Towards a Framework for Violence Reduction”, World Development
34(1):89-112.
Naranjo, A. (2007) Drugonomics: Industrial Organization of Illegal Drug Markets. PhD
dissertation. Stockholm University
Painter, M. (1991), Upland-Lowland Production Linkages and Land Degradation in Bolivia.
Binghamton, NY.: Institute for Development Anthropology.
Painter, J. (1994), Bolivia and Coca: A Study in Dependency. Boulder, Co.: Lynne Rienner.
Poret, S. and C. Tejedo (2006), “Law Enforcement and Concentration in Illicit Drug Markets”,
European Journal of Political Economy 22:99-114.
Reuter P. and E. M. Truman (2005), Chasing Dirty Money:The Fight against Money
Laundering. Washington D.C., Instititute for International Economics.
Thoumi, F. E. (1995), Political Economy and Illegal Drug in Colombia. Boulder, Co.: Lynne
Rienner.
Thoumi, F.E. (2003), Illegal Drugs, Economy and Society in the Andes. Baltimore, Md.: Johns
Hopkins University Press.
United Nations Office for Drug Control and Crime Prevention (2001), Global Illicit Drug
Trends. New York: United Nations.
United Nations Office of Drugs and Crime (2006), 2006 World Drug Report. New York, United
Nations.
Vellinga, M. (1998), “Alternative Development and Supply Side Control in the Drug Industry:
The Bolivian Experience”, European Review of Latin American and Caribbean Studies
64(7-26).
Vellinga M. (2004), “Violence as Market Strategy in Drug Trafficking: The Andean
Experience,” in K. Koonings and D. Kruijt (eds.) Armed Actors: Organize Violence and
State Failure in Latin America. London: Zed Press.
Zaitch, D. (2002), Trafficking Cocaine: Colombian Drug Entrepreneurs in The Netherlands.
The Hague: Kluwer .