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Université d'Ottawa - University of Omwa
THE POLITICAL ECONOMY OF DRUG TRAFFICKING:
CASE OF PERU
0 XAVIER CORDILLO
-4 thesis presented to the
Department of Economics of the University of Ottawa
in partial fuifÏiirnent of the requirements of the M A dwee
Supervisor: Professor .Michel Chossudovsh~
eco7999
Ottawa, Ontario
December 1997.
Acquisitions and Acquisitions et Bibliographie Setvices seMces bibtiographiques
The author has granted a non- L'auteur a accordé une Iicence non exclusive licence allowing the exchisive permettant à la National Lhuy of Canada to Bibliothèque nationale du Canada de reproduce, 10- distniute or sell reproduire, prêter, distn-buer ou copies of this thesis m microfonn, vendre des copies de cette thèse sous paper or electronic formats. la fornie de m i c r o f i c h d ~ de
reproduction sur papier ou sur format électronique.
The author retains ownership of the L'auteur conserve la propriété du copyright m this thesis. Neither the droit d'auteur qui protège cette thèse. thesis nor substantial extracts fkom it Ni la thèse ni des extraits substantieis may be printed or otherwÎse de celle-ci ne doivent ê e imprimés reproduced without the author's ou autrement reproduits sans son permission. i~~fonsation.
ABSTRACT
.+In importunr phenornenon of-the ptr-st titw decudes hus hem rhr rupid rive NI the prochic-rion und trudr in iilegul rhig.~ ut the inrrrnutionul lewl. .-tccording to oyicicrl sotrrccs. hcniwn 1983 und 2 994. prochrction of opitim und rnurihtrunu h m incrrused by more rhun ljO% und c*oc-cl leuf'prodtrcrion bus more rhun doribkd Horwver. since I Y 9j . mujor chunges o c ~ w - r d in the iliicit dnig trude. muny o f it-hich iwre hrought crhnrrt hy cr,~~e.v.sÏ~~e clnig I~nr enfbrcement. .Yo nurion hus hem irnrnrrne to rhe dei-usruring prohlems ccu~r.sed h~ dnrg ubtrse. .-Ir the sume tirne. o hroud sprctnrrn of rhr ii-ork/ cornmrmity hm- Jrmonsrru~etl inrensc cmncern owr rhe prohlttm: the imidiorrs /ong- lm c.ffi.cr.s of'dnrg trsr und it-s impucr on the tiser. the ./irm* rhr commirnin. trnd on socien: Dnrg uhuw is no! LI WH- phenornenon in Lutin .4meric-u. ulthuiigh il hus rwenro- ucy uirc. d new churue-trrisrks. T h proportion ofrhe poprrlurion rhut rrsrs iiiic-it drtr,y.v hr.s gro U R in s i z . Illegui pro& iction uncl Jistriht ition of dnigs u=Irct the c~.onr)rnic.v of . m u ~ v nutions. .-!.s.socicrtr d crimec. rioimw. und polithi riisrtrption hme n:) hisrorÏcul precrdrnts. T3e Ïllicit prrxiucrion. ciisfribtrtion und caon.nimplion of h r g s htrw Ïnt Ïmiduted und corrrrprrd ptMc .senWunts. crnJ lm-e ewn destuhiIize J pi*~~rnrnenri;. This chrg-spon.voreci riolrnce und confionrution with the stutr lcere tr.vso~i~rrc.tl principully rvith rhr Cetdi ttnJ .Clctlrllin m-fets busrd in CBiumhiu. a s ndZ crs oritrr gung.v sirch us the curtrIs ofJuurez und Tijticrnu in .Ilexicco und smullrr grvicps Ni P m r crml Boliriu. In order IO wtder.s~und the irnpuct (?f'rlnrgs throughotrt the .4ndeun cotcnrries of~C*oiomhiu. Boliriu und Pen[ thut hure dcreioped us cenrrrs of prodt~crion ~ritd ~lisrrihrrtion of chrgs und. in purti~dur Penr. idrich i.v considered the it-orId*s lrtrt l i e prodlrcer (fl'cocu 1euf und cocuinr buse. I i d 1 -fbc.tr.s rhh- thesis on Ihc Penn-iun ctr.s~~ În which .vociul. rconurnic ctrirtirui. und poiiticui convequencrs of the producrion und rnrffic*king qf illicit dmgs it-ill hc de-scribrd Hrnce. rhr purpuse of this .mr& i s to tint* =LJ fkvt the dirnension.~ of ' the prohkm und then u.s.sessing poliq- ulternutives of muking u liring- fbr impo~rrished poptriut wns rhut ctrrren@- strpport the cominr murkt LIS t r tncunnv of strpporting rhem.veli.tls.
This rhesis i d he .sirzrctrirecl in the fdIowing r r q . The f i s r section i M rxumine rhe poiiricui und econornic dimrn.sions oj'the nurcCotic-s econoqt- in Peni. Ir i d 1 unu[~=e rhe .sÎ,qnificunc~' of the cocu Iruf'und cocu pusre Ïn the m i n rconornic cispecrs. us wdl us rhc soci<)-ec*onornic impuct of'nurcwic-.Y in Penr. It i d dvo un&e ik dynarnics uj'ihe c - o c ~ r inrlristn: muking rrferenw ru the procCesSs uf'cocu IeuJ cocuinr. irs rise. zones of p t irrction. its clistrhution in the mrrket. rhe strzrcmre und ciÏvi~-ion of Iubozlr. und u i S . Furthermore. Ït ivill rie-scribe rhr e ff'eci of' nurco-clolkrrs. iheir
L-oncurnitunr social und ecoIogicuI impucrs. und the Jnrg-inrzrrgenq nemis. The efforfs t o L-ontrol producrion uf'cucu crnd dnrg [ r u f i hme hrorighr into the scene the direct purtiL'ipu~ion of rhe Lhired Stutrs. Thr polirics of-c-ontrul und erudic-ution trwitiate the rok of-fi)rei,gn uid und poliric*ui pressure r.isu-i.is the infernul rrsis~unce und group ittterrsts in the nurionul socie'~f. ï71erejore. the second section idi trxuminr the prohlrrns. srrutegies und soltrtions to tucklr the zinder[1fnp isnrrs. unultzing the role of g(~i-ernrnents und rhe rnilirc. und the responsihili~ of'supply und demund c-ouniries- If i d oirtlim Prnr's position fucing the dnrg rrufic-hg prohlem. the LIS. intemenrion. riw ci-ultiution und rnemztre of effrctii.rness. und op~ions regurding rimg conrrol und drrrnurÏw tineIopmenr poIicies. FinuI[li. this rhesis rdl conclzide it-irh some opinions r h r rnmt be considerrd in order to dewlop un eflectire economic und cotmfer- nur~-otics progrum with the goal of $king Pem ec.onornic- uternutii.es for its wgenr[t' ncecled nutionui rl'rwloprnm und motlrrnizurion
Contents
List of Tables
List of Charts
1. The Poiin'cai Economy of Drus in Peru 1.1 Economic Trends
I L Pari One Defining the Problem
Significance of the Coca Leaf and Coca Paste in the Main Economic Aspects 2.1. I Production of Coca and Coca Paste 3.1 2 Distribution in the iVarket 2.1 -3 Structure and Division ol' Labour 3.1.3 What Does Coca Offer'?
The Socio-Economic Impact of Xarcotics in Pçru 2.2.1 Money Laundering 2.2.2 Socio-Derno+graphic Impact 2.2.3 Violence and Inswgency 2.2.1 Externaiities of the Coca Industq-
1 1 Part Two Ass&ng Poiicy A i . . & N e s
3 . Problems. Strategis and Solutions to Attack Dmg Traficking 3.1.1 Role of Govermnents 3- 1.2 Role of the Military 3.1.3 Rqns ib i l i ty of Supply Countries 3- 1.4 Responsibility of Demand Coumies 3.1.5 Penitian Position Facing the Drug Trfickin; Roblem 3. 1.6 United States Intervention 3.1.7 United Stàtes Poliq and Strate= Goals 3.1 -8 Evduation and Meastues of Efféctiveness 3.1.9 Options
IV. Conciusion
h n e x : Maps
Table 1. l .a: GDP Growh by Ssctor Table 1.1.6: Coca by-product Export relatsd to Macroeconomic Variables
Table 2.1.1 .a: Worldwide Potential Net Production 1994- 199 1 (rnetric tones). Worldwide Cultivation Totais (Hectares)
Table 2.1. l .b: Basic Indicators on Coca and Dmg Traficking in Bolivia Colornbia and P e n 1975-95
Tabts 2.1.1 .c: Production of Coca Lemes. Coca Paste and Cocaine, Plus Prices and lncome Genented, For Bolivia. CoIombia and P e n 1985-95
Tabk 2.1.1 .d: Distribution of the Profit From h g Trafficking in the Andean Coutries. 1985-95
Table 2.1.1 .e: Economic Impact of IlIegal Drugs. .Andean Countries. 1994 Table 2.1.1 .fi Peru-Increasingly EfXcient Farmers Table 2.1.1 .g: Prices in U S S K g
Table 2.1 -4.a: Peru-Estimate Net .4nnd Income. 1994. Coca and Legal Crops
Table 2.2.2.a: Population and Population Gromth Rates in the L'pper Hualfaga Valley and Two Clusters Within [t
Table 22.4.a: Cocaine Procrissing
Chart 1.1 .a: Measures of Poverty . 1 991 Chart 1.1 .b: Distribution of P o v q Chart 1 - 1 .c: Macroeconomic Variables Chart 1.1 .d: Social Expendinire in red tems: 1990- 1995 (US$ MM) Chan 1.1 .r: Peru: Export of Coca Leaf. 1985- 1 994 (Kgs. )
Chart 3- 1.1 .a: Cultivation and Production of Coca L d Chart 3.1.1 .b: Cultivation and Production of Coca Leaf Chan 2.1.1 .c: Cuftivation and Production of Coca L d
Chart 5.1 ha: Coca Leaf. Coca Paste and Cocaine Seizures and Dmg Arrests
I am greatly indebted to my supervisor. Professor Michel Chossudovsky. for
his invaluable help. advice. guidance and k e n interest throughout the course of this
investigation and especially in the prepararion and criricd revision of this manuscript.
1 wou1d Iike to express my gratitude to Dr. Huso Cabieses. Coordinator for the
Grman Technical Coopention ( GTZ) Projrct: Consulmcy and Research for 1nte~p.l
hndemi.Arnazon Development ( .AI D IX 1. for providing me research facilitirs and
advice.
1 dso wish to t h d the Information Centre for the Prevention of the .Abuse of
Dmps (CEDRO). the United Nations Drvelopment Pro-gamme (LWDP) and the United
Nations Dmg ControI Programme (UXDCP) for thrir sincere fnçndship and help and
collabontion in one \va>- or mothrr in making possible the completion of this work.
1 wish <O express my immense ~a t i tudc to the most important persons in rny
life: to my father Jorge for his moral and materid support during my graduate sntdies.
to rn? morher. Norma and my brother and sisten whose moral support. inspiration
and encouragement brought me to conclude this study.
Finallu. 1 wish to tharik veF sincerely to Miss Vanessa ?vIazzucchelIi for her
çollabotation. unstinted support and attention dining the course of rny work in Pem.
The Political Economy of Drugs in Peru
The debate about h g control and dmg traficking worldwide is intense. Tensions
ribound. policies clash. human tngrdy and suffrnng continue on o massive scale. The
ohgins of some of these tensions cire clcar npid changes in political alignmrnt. reduced
family and community cohesivencss. incrrased unernployment and underemployment
sconomic and socid rnargindization and increased crime, .At a time dramatic
improvemrnts are raking place in somc srctors such as communications and technolog-.
improvrment of the q d i t y of lifr for man! people has fdlen f i short of the potential that
esists and the rising espectations of people who know life can be better.
.At a timc of rising social and political tensions in the developing countries. the
macro~conomic environment has iùndarnentally changed. In the beginning of the 1990s.
the directors of the International Monetq Fund and the WorId Bank observed that the
strong performance of many developing counuies- retlected in rnarkedly higher savings
rates. grrater int-estment in physical as wrll ris human capital. higher efficiency of
invesunent and stronger overall grottth in productivity. was due to fundamentai çconomic
de\-elopment that had led to more stable and sunainable rconomic conditions. This major
intluence of thinking about development was the phenomenon of globalization. More than
et-er. development inchdes the question of how to compete in global markets. The trend
touards globalization is continuing. helping to accelerate development for many countnes.
Hsnce. more n-idespread and sustainable pro-gms will now depend on building mong
capacities to achieve good govemance. reduce poverty, and protect the environment.
Civil contlict cerrorism, population and miCmtion pressures. epidemic disease.
envimnmental degradation. and international crime and corruption hinder the efforts of
dr\.eloping countries and concem LE alI.
.-\ n w . more open intcmational tnde regimc has been sstablished with the entry
into force of the Lniguay Round and the inauguration of the World Trade Organiwtion.
Li'orld tndr and invcstment have cspanded and hrought to somc areas of the developed and
drveloping world substmtial economic benetits. Capital and goods move much more
frtquentl?. and freely across nation borders than \vas the c î x previously. In many
industries. multinational enterprises opente on a world scale by allocating production
riccording to the comparative advantagr of individual countries or regions. by selling in
rliwrse peognphicai markets and by undenaking tinancial operations where it is most
ndvantageous. Developing countries have been among the most active in shaping these
ncw noms for espanding tnde. Their participation in global negotiations and the market
opening reforms that man- of them are adopting have given developing countrîes new
international intluence. and a ncw st&e in a functioning u-orid cconomic systcm.
Grouth in world trade is continuing to outpacc overall economic g r o w h and
developing counuies are kcominp increasinply active participants in global markets. The
\l*orld Bank projects that world merchandise m d e wiI1 expand by more than 6 percent a
)-ex over the n e a ten vars and that trade in senices wiii expand even faner. Both
economic growh and trade groowrth by the devrloping counüis are espected to esceed the
corresponding g o t h rates in the indusniaiized countrïes ' The globai changes which have allowed goods and money to move from one
country to another cheaply and easily have aiso had other consequrnces. GIobalization
c1r;irly prexnts risks as well as oppomuiities for developing counuies. including the risk
that not only individds. but entire countncrs and regions. may be lefi behind. .A number
of developing countries. sspecially those in .-Ifiica and sèlected counuies in Latin America
and .-\sia. have largely missed out on the bensfits of increases in world tnde and
invatment and consequent economic gro~tth. In some cases. this has been the resuIt of
political instability. cthnic contlict. massive impovcnshment or misrnanagement of the
economy. which are compoundsd by the Iinks of terrorist activities. blatever the reason
in a $en country. the lack of sconomic progress has put such countries in a financiai bind
and tiequently placed severe restrictions on government sen-ices available to the most
t-u1ncrabIe segments of the population. For ssampIe. with the freer and larger movement of
coods and the increaxd volume of mdr. it has becomc easicr for dmg dealers and weapon Z
srnugglers to movr their wares across countries.
ho ther potential cost of globalization is that it has aiso provided the opportunin.
kir drug producers and traffickers to organize themselves on a global scde. to produce in
developing counnirs. to distribute and sel1 in al1 parts of the world. to move drug cartel
membsrs sasily tiom country to countq- and to place and invm their drug profits in
financial centres ofTering secrecy and attractive investment returns. The same dsreguIation
that has allow-ed legitimate businesses to move money around the world elrctronicaIIy with
Isw national controls has dso permitted dmg naffickers to Iaunder illicit drug profits so
that thex h d s appear to br Iegitimate. Thmefore. to malyze the impact of these
probkms becornes especidly relevant
From its o r i ~ h in the A n d a region of Peru. Bolivia and Colombia coca fields to
its final desination primariiy North .heric;i and European urban centres. the coca and
cocaine enterprises form a long chain involving a nide diversi- of links: persons.
* % -
occupations. equipmrn~ transactions. resources and consequences. Wliie in industrial
socirtirs cocaine is a social wil. in the .Andes of Pen. coca production is part of the
tnditional ecological exchange but cocaine prepantion and tTâf'fic has become an important
source of cash integrating f m e r s into the nesus of global uade.
The cultivation of the coca plant in Andean countnes is an indian tradition of
uncertain origin. The chewing of coca lraves cm rrlease an estremely small amount of
cocaine hydrochloridr. and tnditionaily coca I d chewing has b e n popular in Indian
communities to combat hunger and altitude sickness. In addition. coca Ieavrs are used as
part of tnditional herbai cures. to m A e tea. to predict the %turc. and othrr activities. In
tact traditioncil uses of coca leavss for chewing and other purposes remains a Iegal activity
in Bolivia and Peru. However. according to the Institut0 Nacional de Estadistica e
Informatica ( WEI). 95?& of coca Ieaf output in recent years has sened as a base for the
production of retined cocaine for expon2.
Thus. the infiltration of rui underground econorny into the indigenous people's
lifestylr has brought about a new type of economic dependence which is known as die
narcoeconomy.
It was only in the Iast twenty yçars. as cocaine becme the drug of choice amonp
the Young and cornfortable of Western Europe and the United States. that coca farmïng
went trom a cultural artifact to the kt-paying industry in Peru. Distribution -stems vary
according to the drug. Lxgely because production has been concentrated within the
A n d m region, the processing and distribution of cocaine has tàllen under the control of
centraiized organizations, cspeciaIIy the Colombian cartels based in Cali and Medellin.
This international organized crime came to the jungle. adopting the traditional culture of
coca to its own purposes. collapsing the agriculn<ral industry. and creating an underground
cconomy of uncmployed mi_mts. peasants. officiais that now reaches from the jungle
throughout the rest of the country. contributin, to a cuIture of shakedowms. payoffs and
crime.
Crime and dmgs may bc related in sevrnl ways. none of them simple. Illicit
production. manufacture. distribution or possession of drues ma? constitute a crime.
Drugs ma? incrrase the fikelihood of othrr. nondrug crimes occurring. The! may be used
to malit. money. with subsequent money-laundering- and ma: be closely linked IO other
major probkms- such as the illegai use of guns. various forms of violence and terrorism.
.-1 number of terrorists and organized criminal gangs are involved in or have close ties to
the iilicit drug trade. The link betwen the two is otien money and power. One example is
Colornbia. which has cmergcd as 3 ccntre of tnfticking in cocaine. blending h i ~ d y
organized social and economic interests with an underground specializing in drug crime.
Political changes m e affect srnuggling patterns. organized crime and drup abuse.
Yowdays. the sffect of opening the borders tkithin Latin America has raised the issue of
dru, traficking and terrorisn. In the past close links e'risted benveen terrons groups in
several Latin countrîes. Fever control points benveen these countries may make it more
difficult to maintain adequate secun-. Moreover. srveral points desmed mention at the
outset.
F i m mo~ing against the cocaïne uaffc entails serious and politicai cons. This
i n d q has represented a relatively important source of foreip exchange for Andean
countnes. it is an important source of jobs and income in regions characterized by
dsspsraté poverty and widespread unm.plo>ment. People are employed directly in the
5
upstream and do~~nstream phases of the industry-cultivation. initial processing. refininp
and smuggling. 1\11 dong the cocaine production chah people receive subnruitially
higher wages thm they would in the Iicit econorny.
Second. the success of international drug traffickm cm be seen in the sophisticated
nrnvorks of distribution whhich have often adopted the techniques of large. legitirnate.
multinational corporations. Tnttickers keep abrem of p d demand areas and the drug of
choictl in 3 specific geographic location. whiIs maintaining the tlow of narcotics around
the worid. The cocaine indusu' as a whole has accumulated significant political clout.
Cocaine traffickers play the role of power brokers and are a major source of funding for
political ç m p a i ~ i s and terrorist groups. Tmftickm such as Pablo Escobar and Carlos
Lshder of Colombia Luis &ce Gomez of Bolivia, Carlos Demetrio Chiivez Pefiahenera
"El Vaticanog-. the Cachique Rivera brodicrs. and Reynaldo Kodriguez Lopez --El
Padrino- of Peru have also penrtrated and compted nearly e\-m. important national
institution'. The corrupting influence of vast sums of h g money is patently clear at ev-
Ievel. from the local community upward. both in poliûcd and administrative terms. It
hepins with a payoff to a local authorie or police ofticen to ovdook an iltegd crop or
laboratoc. The b n b e ~ is cmied out at various Ievels. stops at no border and recobpizes
the authority of no country. Since the major drug uaffickers have almon unlimited fun& at
thcir disposai. the thousands spent in bribing oficials may be viewed as a good odvestment
to ward otT the threat of being shm down or arrested- Traff?ckers can and do use miIlions
of narcodoI1ars to infiuence horv strict&- an international trac is complied ~ 5 t h and to
sssrciss po\ver throughout entire regions of the rvorld,
Third the war on cocaine is not especially popular in South Americar it is
6
perceived as a pro-- imposed on South America by the United States. In the 1970s. the
Drug Enforcement Administration (DEA) initiated new efforts to address the illicit profits
of drug tnffickin$. -4s an example in the past trn years. they have carried out p r o z m s
such as Opention Bahamas and Turks and Caicos (OPBAT)- Operation SNOWCAP, the
Sonhcrn Border Response Force (NBRF) and Opmtion C.ADE\ICE which have provided
~ h s hrickbont. of the US. Andean Stntsgy for cocaine suppression. Asset removd has
hem a difîïcult objective. but toda) the DEA alone is seizing about US$ 1 billion in
tnffickrr assets each year. These U S . initiated masures include estradition. the s p y i n g
of illicit crops. U S . miIitq- intervention against cocaine Iabontories. and economic
sanctions against cocaine-esporting coun<ries. Alro jether. the Latin Amencan drug tnde
has complicated relations betwern the United States and man? of its southem neighburs
over a variet? of issues. ranying from offshore banking privacy rights related to the
laundering of d i q money. narcotics enforcernent corruption. and the search for
alternative crops4.
Estimating and analyzing the econornic impact of the narcotics indumy on producer
countries are important tasks. Thus. this thesis \vil1 focus on &mates of the econornic
impact on the narcotics economy in Pau. It will examine availabie estimates and pertinent
methodoIogical issues, indicating why resuiting &mates are uncertain and why it is not
possible to determine in a dear m m e r why whether the narcotics indumy has been good
or bad for Peru,
For these reasons, the impact of the narco-industn; on producer countries has
itequentiy been obscured. One thus shodd focus on the moa important dimensions of the
problem and try to quanti. relevant variables. Wnh regard to Peru ir would be desirable
7
to know: ( i ) how much money do Pemvims malce a year in the narco-indus-?. (ii) how
much of that income do the narco-trafickrrs bring back and spend in Peru. and how much
JO t h q keep abroad?. ( iii) what is the net worth of the narco-mffickers. and how much of
it is insidç and outside of Peru*?. (iv) what hris bern the impact of narco-capital flows on
the Prnn-ian sconomy and on the govenunent's policis?. (Y) how does policies impact on
the narco-cconomy'.'. (vi) what is the impact on the balance of payrnent and payrnent of
dçbt sçnices?. and (vii) what are the long-trrm implications Tor Prruvian economic policy
ot' the large rimount of capital accumuIatcd by narco-trattickers'?
C'nfonunately. the information available is not offtcial and proçldes onnly imperfect
incompletr. and indirect responses to thesr: questions. AI1 caiculations about size of the
nrirco-industry begin with estimates by the US. National Narcotics Intelligence Consumers
Cornmincc (an intcr-agency committec rhat coikcts data on drug production and
traficking) whose satellite pictures are used to estimate the area cultivated ~ i t k . . coca.
marijuana and other illicit crops. Howver. these appraids are Iikely to be quite
inaccurate becaux of technicd dificultirs in determining the nature of an agrÏcu1tura.i
enterprise and because marijuana and coca plants are frrqurntfy grown dongside other
crops that hide them from vien-'.
Tl~c environment socio-economic. culnual. and po Iitical impact of illicit
cultivation. manufacture. and trafic of narcorics has reached criticai Irvels. The impact of
these actil-ities has altered economic actiii~-. deteriorated the long-term reai exchange rate.
ciistorted the job market and spauned violence and social instability in those areas directly
and indirectly atTscted.
These econornic etTects of the drug tnde have b e n widely debated by economists
in Latin .Amcrica. the United States and elsewhere. Some sharp di fferences in opinion cm
k noted. For instance. Francisco Thoumi argues that the drug industry depressed the
grouth of the forma1 sector of the economy and that the Andean cconomies would do better
without dnrgs. than with thern".
Xnother reIated problem is that the cocaine indus. imlf produces t'ew backward or
ibnvard linkages to the legai rconomy: that is. the induse gsnentes relativdy linle
demand for local products and cocaine cannot be used to feed into other indusuies,
According to schoIars Mario de Franco and Ricardo Godoy. =ch dollar of cocaine
esported requires the purchase of on1y USS 0.03 of goods and senices from the non-
cocainr economy: in contrast. commercial agriculture. mining. energ? manufacninng.
construction and semices rcquirc the purchase. on average. of CS$ 0.27 from the r a t of
the economy. .At the same time. the intlux of hard currency associated with narcotics
esports made possible more imports and Iess extemai debt. Coca and cocaine substituted
for the failure of past formal economy in Peni and Boliria. providing altemate
" t.mployment maintaining income IeveIs and stabiliiring the nationd currency '.
Historically. coca growing has been an important if not a predominant economic
activic in Peru. RegardIess of the Iegd s t a ~ or social eEects of coca growing. it is a way
of sun-ivinp to which hundreds of thousands of poor. landless. and unemployed people
have turned to. For them. it is simply the indus- with the most opportunities.
Participaring in the cocaine economy is the god of the great majority of people in the
Andes.
The case study of Peru shed Iight on these important sconomic issues while
providing interesting lessons about the prospects for alternative devslopment as a suategy
for ~wîning prasants h e n away from producing the coca Iraf. It cm comprise a range
of activities dcjigned to Iirnit or reduce cultivation of illicit drug crops: crop replacement
prognrns. improvsments in physical infiastructure, and introduction of facilities or
semices daipned to improve the quality of Iife of Iocd rtsidents and improve goovemance.
This means to inducc farmers to grow crops otha than coca by providing howledge.
materials and hcilities than rncike other crops more attractive. It cm also mean providing
coca gro~ving areas with roads. schools and other mcnities as a means of inte~ption \\ith
the rest of the sconomy. so as to sncounge non-agricultunI substitute activities. It c m
dso includr: activities that build local governrnent management capacity and other nation-
building acti1.i ties thrit inmesr the govrnunent's access and contrd ovcr zones dominatcd
hy yuerrilla goups and drue producea. In a more broader sense. it means improving the
attnctivrncjs of other areas of the country. u, as to inducc mizgation of people out of areas
u hich have comparative advantage in few crops othsr than coca or opium. In this contea.
the concept requires an alternative rnacroeconomic tiamework that promote diversified
rconomic g r o ~ t h and job creation thoug.hout the national temtory. including empioyment
opportunitics in nuai areas.
It is therefore important to consider solutions which address the imrnediate problem
presented by cultivation whiie employing a Ionper term strate= to address the causative
factors. The response rnust theetore include ekments of sunainable economic reform.
This second component is more complex and long-term in nature both in term of the effort
required and the time for results to be redized. It tviIl deal tvith the broader socid and
10
sconomic issues which contribute to the reasons to participate in illicit cultivation and
explore alternatives in crops or other means to generate income.
I 1 Emnornic Trends
It is clear that coca has alwp-s been prexnt in the Peruvian econorny. However.
today its presencr in the rconomy has been magnitisd to the estent that the cou- found
itself in a situation of p v e socio-econornicd and political crisis. Therefore. an
assasment of the rvolution of the coca economy can be described in the following way:
tiom the 1970s to the rarly 1980s. coca growing concrntrated basically in three valleys:
Muaiion. Hudlaga and La Convention. .kcording to the oficial registry. there were
riround 16.000 ha. pianted with coca in the mid-1970s- In 1978. around 18,000 ha. were
registcred. coca cdtiution had spread to about founeen depments. The rnilitary
zovernrnsnt of Morales Bermudez issued in Frbruary of 1978 the Ley de Drogas ( Decree - Law 12095 ). It became obvious then that illicit coca culüvation had spread to many
remore areas in the country. Conuolling operatives such as -Green S a - wrre started thens.
In these ?cars. given that the activity ivas relativsly unknotvn in the country. systerns of
production and marketing were oriented towrd what one mi& consider mid-size
enterprises. This was possible because an espon orientrd activity had developed in remote
areas of the country without risks of any n-pe of Iau- snforcemrnt It \vas the beginning
of the large mibmtion to the jungle. sspecidly from the h d e a n areas. Coca growers
produced coca leait wholesalers processed the I d into coca paste and cocaine base. It
\vas an econorny where a few rvholesalers marketed the production of rnany agiculturai
producers. In this stage, coca growers used to be ven; close to the cities who where able to
I I
conduct their business very successtùIly nithout governmental interkrence. Firms
esponed coca paste to Colombia. Cocaine w a s also produccd for local consumption for
cities. such as Tmpoto and Tingo Maria (in the Amûzon region).
Within this new structure. the upper jungle became a key gathering point in whose
surrounding coca \vas gathcred and coca base \vas producsd. The illicit by-product w r e
trrinsported by roads or rivers eo get to the esporting points to tindize the transactions.
From sxiy 1980s to IO89 \vas characterizsd by the multiplicity of srnail coca
farming groning units. The Iaw enforcement applied to the coca groning areas triggered
dispersion of the activity to man? ditTerent areas. Andean rnizpnts from Huanuco. San
Manin. Ln Libertad and jungle producers participated in this process. The key city during
this phase uas Tingo Maria. but the producing areas were around Uchiza and Tocache. At
this stagc. thcrc were still man? coca grouers but thsy were already learning how to make
coca paste. it kvas the begiming of their agroindustrial inteption. It \vas stiIl profitable to
seit coca katq.
This second stage \vas fostered by the "Green S a - and -Condoi' operatives
Govrrnrncnt controt forcrd producers to shrïnk the s i x of rhrir operations. Mi_grants
\vorkers came from the upper jungle to the lowr jungle. Production sites multiplied.
Espons to Colombia and B e l were consolidated using dif3erent routes. Marketing
s y s t m with the who tesalers and finns becamç consolidated. This is the coca boom perÎod
n-hm subvmion increased and dmg-smug$ers penenated the valleyt0.
During these two stages. from 1970s to 1989. Peru \vas in the throes of economic
turmoil and near collapse. The inadquate policies applied during those years not ody
prcvented the efficient drvelopment of the plentiful naniml and human resources of Peru.
but Ied the country into a process of stagnation and downright decadence.
Durinp this period. and especially as a nsult of the measured adopted by president
Velasco between 1968 and 1975 of an economic devclopment mode1 of impon substitution.
Peru becme a protected economy. with inward-oriented growth. and a regime of heavy
state inten-rntion. The state controllrd man: of the basic services. mainly through sme
ou-nenhip and management of the productive sectors through statt. monopolies in severd
kcy areas of the econorny. Some rsarnples are large mining concems. chernical.
fenilizen. oit and the petrochemica1 indusuies. snergy and \vater supply. fisheries.
çcment. paper. ce1IuIose manufacturing. iron and stee1 production. and the expon of raw
materirials. This nationdized and co-operativitiscd regime restricted Foreign investment
and took mm) other measures th31 hindered the cconomic and social development of Pcru.
During the 1980s. under the govcmmrnts of president Fernando Belaunde and .qan
Garcia. the Pemvian economy contionted hypenntiation, serious distortions in the
structure of relative prices. recession. unemployment and the reduction of worker's real
incornes. decreased a u revenues and a persistent fiscd imbaiance. increasins financiai
disintermediation. and the increased flow ofdrug traficking. In addition. the decay of the
state's i nsti tutiond apparatus. the deterioration of living standards- and increase in poli tical
\-iolsncr were social correlates of the economic crisis. The state apparatus displayed
crowing inçfficiency. and the govemment as a whole \vas progressively weakened Î n i<s - capacit). to respond to the economic decay.
From the analpsis of the management and performance of the Pennian economy
the Iast nvo decades specitic conclusions can be derived- F i m in the eady 1980s.
13
the Peruvian economy was advrnely affected by several externat shocks. including a sharp
drclinc in the terms of trade and rising internationai interest rates. which si_enificantly
increxd the nation's foreign drbt burden. Peru's problsms were compounded by the
ineffsctivri policies of the government of Fernando Belaunde ( who \vas rlected president in
1980 aRrr 12 y a r s of military mie) and by a series of naturat diustea. including Woods.
droughts. and changes in the x a currents which affected severai hectares of crops
nationnide (Phenornenon of El Siiio). A 1981 Standbu agreement nith the [MF failed ro
stem the tidc of cconomic declinci. 90r did a Iast-ditch orthodox economic program by the
Belaunde govenunent succeed in rcsroring stabitity. The political result of this vas a
wssping victory by the APRIST.4 social democnt .Alan Garcia in the 1985 etection.
Second. .Alan Garcia's decision to resvict its foreign debt payments to 10% of the
country's exports was not cost fier. Relations uith its creditoos especially with the
rnultilaterat organizations. detcrionted and isolated it fiorn the international financial
çommunity. Therefore. as part of a drastic change in the economic policy. Peru had to
negotiate with its foreign crediton a susixainable way of rejoining the international financial
community .
By 1988. the government \ a s banknipt and it began to pay its expenses by
printing more money. For a while. Pem WZK virtuaily blackiisted by public and private
international lenders. Exports and national rexrves declined 1%-hile average income
plummeted. In sum. the Garcia administration adopted a policy it thought wouid
encourage npid economic growth and more quitable distribution of income. But by
avoiding tiscai stabitization, it threw the country into deeper crisis and made it more
d iEcdt for the poor to live berter lives.
Final lu. Perds successive stabilization attempts faiIed because they did not
consistentk confront the causes of the rnacroeconornic irnbalances. These failures in the
Belnundc and Garcia's administrations incrrased the inflationq efTect and prevented
nominal devaluations and nominal adjustments in conmlled pnces tiom eliminating the
inisalignment in relative pricrs. In fact the stabilization attempts at the end of the 1980s
had an unnçct.ssariIy hi$ inflationary and recessionaq cost.
In fact according to the INEI. estirnates of unrmployment and underemploynent
nent tiom a 50% lcvel in 1980 to alrnoa 80% in 1990. On the other hand. Pem's gross
domestic product declined by ovsr 30 percent during that rime. Lhprecendented triple-digit
intlation trrly in the decade was followed by staggenng four-digit Ievels. which rose to a
peak of 7.650% in 1990~ l . Dunng this period. the acceleration of inflation abruptly
rtduced the total Iiquidip of the banking systrrn and the red Ievels of credit îvailable to the
public and the pnvate secton. The formal banking system began to Iack funds to loan.
forcing businesses dso to reson ro curbside credit markets for working capitai. This
reduction in red credit and increax in its cost had a suong recessionary impact. At the
samc timr. the tluctuations in the pardiel eschange rate impeded a complete dollxization
of the tinancid system". Lrnder these circurnnances. îÏms codd not make financial plans
and the invenment and financing options were limited. The banking -stem's reduced
interrnediation and the nse of informal financial institutions limited the Central Bank's
contrd on aggregate money supply. The loss of conno1 was accompanied bu the
detenoration in the ability of the Superintendence of Banks to supercise the bchaviour of
tinanciai institutions and by an increased risk of bank insolvency.
It \vas evident that when the govenunent of president jLIberto Fujimori was
inaugurated on Julp 18. 1990. Pem was suffrring the worst cnsis in its modem history.
Hencc. Peru urgently nctedsd a consistent rconomic stabilization pro-gmt that
riddresscs a11 causes of its economic crisis. In addition. the exmerne deterioration of social
u.elfxt' and the esplosive increax of terrons violence that killed more than 25.000 people
and was responsiblr for well over USS20 billion in propmy damage has demanded that the
rcstontion of rnacroeconomic order be accompanisd oy a social assistance pro, "ram to
ensure an squitable distribution of the swbilintion effort. The design of the program must
implrrnent policies requiring comples -stems of controlling and monitoring economic and
social conditions in order to undertake the structurai reforms required to pull the country
out of its Isthargy.
Lk1t.n Fujimori assurned the presidency- he inkrited an rconomy in its third y w r
of four-digit hypennflation. dong with a prolonged recession that had plunged Perutians'
per capita incomç back to the Ievels of the late 1 950s. In response. he imposed a package
of neolikral reforms with three principal components. Tht- first step was a stabilîzation
program adopted in August 1990 to control inflation and capture revenues needed to renew
pqrnrnts of the debt senice. Price subsidies. social spendinp and public sector
ernployment were slashed. intera rates and taxes on govermnent senices were increased.
and rschmge rates were unified producing a de facto devaluation of the currencp. .4
second set of institutional reforms. bqm in Frbruq- 199 1. \vas designrd to move beyond
stabilintion toward a market-based remucninng of the Pemian ecooomy. These refonns
included the deregdation OF financial and labor markets. a reducUon and unification of
mritTs. the pnvatization of public enterprises. and efforts to broaden the ta.-.- base and
16
rrduce t a s rvasion. FinaIIy. these market refonns. improving i'îscd hralth. and the
resumption of debt-service paymcnts aIIowed Penis reintegration into intmationd
tinancial circuits".
Lnda president Albeno Fujimori. Peru has begun to address thesr major stmcnval
problems. .-\ package of reform msasures. known collectivcly as the "Fujishock" program.
h a anemptrd to ease the heavily regulated econornic environment as well as open the
cconorn?. to more foreign tmde and investmrnt. Fujimori also espanded the property
rcgistntion program begun by his former advisor Hcmando de Soto to legitimize peasant
landholden in the rurai areas. xeking to confer incentives for growing alternative crops.
This initiative represented a signi ticant breakthrough in attrmpting to intez-rte the inforrnal
sector into the formal econorny. Progress has been achieved. but major problems remain.
This structural adjusunent was harsh mrdicinr for an econorny that had already
suiEred through a prolonged cnsis. with devastath2 ctTects upon popular living standards.
A f cr Iosing 800.000 jobs in the 1988-89 economic cr isk employment declined by another
13.9 percent in industry. 13.7 percent in semices- and 21.8 percent in commerce in the
tirst riphteen months under ~ujimori '~. Inflation. which had b e n m i n g at about 40
percent psr month. shot up to 398 percent in August 1990. before declining sharply to 3-5
percent per month in Iate 1992 and 1-1 percent per month in 1993. The number of
Prruvians IivÏng in poverty rose to 55 percent of the population in the afiermath of the
"Fujishock" ( s e Charts 1.1 .a and 1. l .b: poverty is falling since 1 991): the percentage of
the w-orkforce consîdered underemp Ioyd or unemployed rose fiom 8 1.4 percent in 1990 to
87.3 percent in 1993: the informal sector grew fiom 45.7 percent of the workforce in 1990
to 57 percent in 1992: and red wqes fell by 30 percent betm-een 1990 and 1993 to 33
17
percent of the 1980 Irvel in the private wctor and 9 percent in the public sector. A decade-
long trend toward increasing inequality also continued: the share of the national income
representrd bp w g e s declined from 46.7 percent in 1980 to 19.9 percent in 1990 and 13
percent in 1992. whereas the share represented by protirs rose from 25.9 percent in 1980 to
49.3 percent in 1990 and 54.5 percent in 1992"
Chart I . 1 .a: 'vlsasures of Poverty. 1 994
Yot Poor Poor Estrems Son-Estrems Source: Institut0 Naciona
1985 199 1 1993 62% 45% 52% 38% 35% 48% 15% 24% 1 8% 23% 3 1% 30%
de Estadistica e Informatica. Peni. Reporte rlnual, 1996.
.-\s such. the only signiticant economic gain for popular sectors in the ex ly years of
structml adjustmrnt was the sharp decline in the inflation ntr. which fel: from 7.650
percent in 1990 to under 20 percent in 1994. This sain k v a s significant as popular sectors
nrre especially vulnemble to hyperinflation. givcn the inefficacy of wage indesation and
the inability of the poor IO protect income Ievels by holding foreign currency or sending
çapitd abroad. But if stabilization reduced rconomic uncerwinty. it was achieved at the
con of signi ficant economic contraction and reduced conmption.
Despite an enhanced government socio-crconomic cornmimient in 1990. the
government's political %+II into action in narcotics producing areas \vas slow and uneven.
Its rtbiiity to controt coca cultivation processing. and export was limited by temot-ism-
lack of resources. economic depression, the got-ernment's implementation of the drastic
economic reforrn and stabiIization pro,"-- the debilitatioii of official institutions,
especiallp. the judiciq-. and widespread corruption that irnpedes his reform p r o C m and
narcotics law enforcernent in order to disrupt Pem's ilkgal drug industn; and the e s ~ d a ~ g
18
threat of the terrorist movement.
Therefore. on A p d 5. 1992. president Fujimori. with the support from the
milit-. pulkd off a sclf-coup. The coup \vas a direct response to the institutional
paralysis of Penivian democracy and retlected the absence of institution building in the
Chart 1 . 1 . b: Distribution of Poverty : 1 994
Nationwids 48% Metrop. Lima 37.6%
38a/o murban Jungh
a Rural 62% Jungle
Source: Instituto Nacionai de Estadistica e Informatica. Perii. Reporre .&nual, 1996.
He at once announced the dissolution of the national parliament and regional govemments
and a reorganization of the judiciq -stem. threw several opposition leaders and senaton
in jail or put them under house arrest. and nispended the Constitution As head of an
Emergency and National ReconmuctÏon Government. he ruied by decree tmtil the élection
19
of ri Constituent Democratic Congres (CCD). which would framc a new constitution.
Eventually. he said. the country would retum to democncy. but that in a contes of a
tvorsrning sconomic situation and growïng temorist violence. diis w a s a necessary evil
rquirtid to put the country back on <rack? Democncy. according to Fujimori. as well as
to ovrr 65 percent of the population that supported the coup. had proven inadequate in
handling the problems of corruption. drugs. terrorism. the economy. and ineffective
govcrnrnrnt. Furthsrmore. his neolibenl program ws supported bu a coalition of interens.
incl uding the militap. civilian technocnts. international tinanciai agrncies. and domestic
business yroups. The underlying consensus arnong these intrresrs \\;as that neoliberd
policies had to bc adopted and that such an action required a strengthened me apparatus to
be effecrive'".
Strong support continued in Peru. especially in Srptember 1992 when the founder
and leader of the Shining Path. Abimael G m h . !vas captured dong \cith other Sendero
leaders. Fujimori also shored up additionai suppon by advocating a more hard-line
npproach to terrons and dmg vafficking crirninds. Fujimori's solution of imposing the
death pendty and Iife sentences to criminals aiter trials that c m be as short as three hours is
hailed as a direct reason for the decline in terrorin violence by man! Peruvkns.
.As promised Fujimori called a Constituent D e m o d c Congres in 1993 to drafi a
nex Constitution. which \vas approved on October 31. 1993. The new constitution
suen-ghened Fujimori's authonty and alIows him to run for re-slection in 2 995. The vote
\vas seen by ma? to be a retèrendurn on Mr, Fujimon's three-year ruie as well a3 a vote of
confidence for his actions of April 1993'!
LVas the coup a netessary s e p as Fujimori has insisted? Francisco Sqasti, a
30
respected commentritor. argues that Fujimori's self coup was unjustified because the Iaws
nerdsd to tïght terrorism and inflation were already in place. h o t h s r observer commented
that the Congress. in order to demonstrate i u confidence in the Fujimori's new govemment
in 1990. had already granred him esujordinary Iqislative powers which enabled him to
lnunch his Fujishock. or stabilization pro_enm'9.
Fujimori h d found democntic institutions. such as the Congress. a hindrance. and
showrd obvious disdain for democntic procedures: !et. due to international pressure.
di\-isions within his oun coalition. and the failure to solve pressing sociai and economic
problrms. hr has also discovered that developing formai authonmian b-tnictures are
i m i d Pressured into creatinr a ncw constitution. Fujimoti nonetheless oriented the new
constitution to funher solidie his powr. The new constitution strengthened the powers of
the esecutivc created a unicarnerd legislature rhat c m be dismissed by the president.
increased necutive connol over the judiciary. included a clause ailowing presidentid
reelection. and dso. implemented al1 of Fujimori's decrees that had not been passed by the
former Congress. In other words. Fujimori created an institutional void by destroyins
drmocratic institutions -et built nothinj in its place. Ieaving the underlying causes for
poverty. u n e q d distribution of income. and other social problems unaddressed. In fact
some scholars argue that even rvaluated in strictly economic temis. Fujimori's p r o - m has
largsly tàiIed to achieve its mtzd goals: povem; and inequdity had worsened. MeanwhÎle
politicai institutions were rendered incapable of hdping the situation2*.
In general terms. growth in GDP. which had been negative by the end of the 1980s
in the order of -8.4%. - 1 1 -8% and 4 . 1 %. was positive in 199 1 and re@aered and increase
of 2.6% and then feI1 to -1 -8% in 1992. By 1993. however. Fujirnori's srrategies began to
2 1
change slowly. as a resumption of sconomic growth and ta. reform. which has
encouraged an increaxd in the activity lrvels through higher corporate and consumer
confidence. the attraction of more foreign invernent and the srart of the privatintion
program. as well as a restontion of ties to international lending institutions. alleviateci
tiscal constraints. .As a result Pçni's econorny grsw 13.0% in 1994. 6.9% in 1993 and
2.S06 in 1996:'. The sectoral hrecikdom of the sconorny shows the cireas in which the
tumaround from recession has ben most notable (sec Table 1.1 .a).
Taking a duec years virw. P m has had the h i f h m GDP growh in the region.
Althouph this represents a signiticant recovery tiom current levels of growth. the
covernmrnt is confident about the future because of the high level of invament ( over +
23?6 of GDP) and the Iikelihood of a recupirration of some secton rhat did relatively poorly
in his tirsr three years in po~er".
Chart 1.1 .c: Macroeconomic Variables
1 I I 1 1
Exports (USS m) 3.323 3.391 3.534 3.515 4,555 5.580 5,785 lmports (USS m) 2.930 3.530 4,090 4.085 5.575 7.690 7.890 Trade Balance (USS m) 1 393 1-139 -556 -570 -1,020 -2.110 -2,105
I I I 1
Social €xwnditure-(% O~GDP) i 3.2 i 4.5 i 4.5 i 5.0 i 6.0 i 7.5 i 7.8 1
13.0 15.4
Real GDP Growth (%) Infi ation ( O h )
1 1 1 t I t I 1 Source: Institut0 Nacional de Esmdistica e Informatica. Peni- Reporte Anual, 1996.
Balance of Payment (USS b) Net Foreign Reserves ( U S b) External Debt (USS b) Foreign Investment ( U S b) Devaluation (%) Unemployment (%) Real Minimum Wages(USS)
Just as in 1994. construction \vas the leading setor of the sconomy in 1995. uith
6.9 10.3
-2.3 7.650
I
-1.52 -143m 22.85 1.3
3.748.50 8.3 48.1
an expansion of 17.6%. There has. hoviever. been a siLpÏficant slowhg down and growth
- - -
2.8 11.8
- - -
41m 8.8
33.51 9.9 10.8 9-2 53.9
t I 1 1
2.4 139.2
33rn 1.93
25.44 1.4
86.7 8.7
31.80
-1.8 56.7
6.5 39.5
-310m 2.4
26.61 1.5
62-3 9.4
97.25
647m 2.9
27.48 2.4 32-6 9.9
45.12
1.9 1 528m 6.0
30.22 6.1 -0.7 8.8 59.5
6.7 33.51 7.6 8.5 7.4 56.4
in 1996 [vas negative. Semices have also had a good year. qa in uith a notable
deceleration at the b e g i ~ i n g of this ?ex. .-\ simihr scenario has occurred in
manufactunng and a~giculture. but they have been accenntuatrd by the poor performance of
tisheria and cheap food policitis. respectively. With the îïshing xctor contracting by
14.6% the main Peruvian esporting producr fishmeal has seen a 7% drop in GDP.
Zloreo\-er. mining has had a disappointing years in 1995 and 1996 because the decline of
oïl producrion but meral output has risen slightly. Detinitivrly as it cm be seen in Table
1 . 1 .a- the rate of expansion of GDP has slowed both because of the deliberate efforts to
restmin demand. but also beccause of specitic sectoral trends that are unrelatrd to the
Table I -1 .a: GDP Growth by Sector
The favourable economic trend wil1 be reinhrced by a drop in inîlation from 1 1.9%
in 1996 to an approximately 10.0?6 in 1997. Projections for this year's grow-th is
npprosirnately 5%. Iead by higher mining output and increase construction and @culture
Due to this growth trend the goovement began to spend on social emqency
prograns (ser Chart 1.1 .d). The govemment had initiated ten thousand mail-scale projects
agriculture. health care. education d t a t i o n nutrition transportation and
microenterprise promotion in an cffon both to provide public services and to geneate new
rmployment. A new residential infksuucture program \vas dso expanded to begin housing
construction. and Fujirnori sharply increased the pace of his visits to poor communities to
inaugurate public works projects'".
The question here is also to determine how the impact of the stabilization pro, oram
and the structural reforms have ai-fected the narcoeconorny in Peru.
Chart 1.1 .ci: Social Expenditure in r d terms: 1990- 1995 (USS MM) Social Expenditure' i GDP "s of GDP 1 ",O of Total Expenditure* '
I
a i 1990 ' 980 i 50319 3 1 1 20.9 1991 , 1877 i 41995 ! 4.5 I 23 -4
I
1992 1902 1 O 1-5 1 27.3 1993 2036 ; 10953 j 5 .O I 32.0 1 994 2899 i 50083 i 6.0 I 1 35.3 - - 1 1995 4264 i 56532 ; 1-3 I 40.9 j
* It includes IPSS Source: hl inistry of Finance. Budset OtTice. 1996.
.-Iccordin j to Humbeno Campodonico. membsr of the Csntro de Eaudios y Promocion del
Drsannllo ( DESCO). the libdization process accompanied by the suppression of credit
to the a~giculture smor. a lack of land refom. budget austerity. and unconsolidated
tinancid reform process occurred since the çarly 1990s have had direct effects on the coca-
h? product espon (see Chan 1.1 .t). whrn the dollars obtained From the higher illicit
esports are now easily cashed \vîthout an' control and used by drue-mffïckers to bu?
coods and senices. such as trucks and automobiles. clectronic and clectricai appliances. - red estate and companies. or else the illicir coca proceeds can be monetized into other
tinanciai assets or securïties (see rnoney laundering)?
Chan 1.1 .e: Peru: Esport of Coca Lsaf. 1985- 1 994 (kgs. )
i b k n the esports of the coca by-product are cashed into dollars, incrme the
money supply. and these dollars are channcled into the real productive and financial
sectors of the crconomy. it becornes more dificult to rneasure the full impact of exports of
illicit dmgs in the capital accounts. This is so because it is not easy to determine the
perccntagr of the money suppl? that cornes from cashing dollars related to coca exports.
The mesurement of the impact is made more diticult because those dollars that corne into
the productive xctor of the economy are multiplied into other demands for other poods and
senkes that are supplied in different markets. Furthemore. the rest of the drugdollars
that are cashed into the financial senor are also multiplied through the money multiplier
proccss into larger money supplies that atvhçn monstizcd feed q i n the multiplia process
through new demands of goods and services.
How fàr has the impact of the macroeconomic changes aKect the illicit production
and tratticking of coca by-product industry? This is an important question which is not
rasy to answer. However. it stresses an aspect of the illicit sector that needs to be fdly
maiyzed. There is not much inthnation convqed in the approach based on the ratio coca
by-product value added and GDP. Information is poor because of measurement errors. and
becaux it only gives a very rough indication of direct effects. Consider the followkg
scenario in Table 1.1 .b.
- Year 1985 1986 1987 1988 1989 1 1990 1991 1992 1993 1994 CO= Leaf . Source: ENACO S.A., Mçmoria 1993 (Lima 1993 ). and Budget and Operative Plan 1993.
23.700 45,400 46,400 2.000 - - 46.000 46.000 63.000 69.000
Table 1. l .b: Coca by-product exports related to rnacroeconomic variables
Drug En forcement Administration. L'NDCP Office in Pcm. E S : Espons of coca by-product in million of dollars. C' Y : Ratio ("01 of coca bv-product rsports over GDP. A : intlation nte in P m B : Inflation rate in the CS. C : Diffrrrnce benvern rates of intlation in Pem and C S . D : Prrcentage change of the nominal exchange nte=ntr of devaluation E : Diffirince benveen the rate of devaluation and the rate of inflation in Pen, F : Srlling procceds fiom privatintion of enterprises (million of US dollars) G : Direct foreign invament (million of US dollars)
Table 1.1 .b shows that coca rsports and its share ( C R ) to GDP fell sipificantly
tiom 1987 to 1990 while there was substantial inflation (A) and a large difference (C) with
regards to US. intlation that heled devaluation (D) in the Penrtian economy. The
increasing difference of inflation \vas partly due to monetintion of coca exports proceeds
On the other hanci. the rate of devaluation lacged weIl behind that of the Peruvian
intlation during the years 1988-1991 of higher coca exports inducing the so-called
appreciation of the real eschange rate as shown bu the negative d u e of the variable (E).
This happened again in 19941 995 notuithstanding the relatively large capiral intlow from
privatintion (F) and direct foreign invesunent (G)?
Foreign direct investment never reached a value higher thau that o f foreign
eschange corning from coca experts, except for the y m 19944995, However. the 26
impact of foreign invernent was not strong enough to dominate the alleged real
appreciation of the Penivian unit currency that appears associated to coca exports proceeds.
The importance of the illicit sector can neither be detcrmined nor assessed bp
simply looking at a declining coca by-product sector ratio (CiY). There are indirect effects
of coca esports tratrtcking realizrd through the derivcd demands of trafickers. Traffickers
dsmand other goods and senices uïth cleaned dolIars. These indirect etFects unfotd and
multiply ovrr time but are not openly revealed in the market nor duly registered as demands
of good and semices induced by coca esport impact.
There is a debarr in Prru that the capital intlows from direct foreign invatment and
privarization are the main factors causing the real appreciation of the eschange ratr in the
1 s t two years. There is howevcr not enough dam to prove such claim. Real appreciation
st.xms to be decreasing ;~s show in Table I .I .b cornpared to the levcls obtaincd in 2 989-
1 990. There is an estirnate of USS 3.670 million of proceeds Iiom privatization versus USS
1-20 million of cocainc exports for 1994. Howvevrr. that does not mean that privariration
proctirds are a main determinant of the eschange rate since these tlows are channeled to
public work povem prozpms and the construction sector. In contrast. and dthough a
smaller amount as compared to previous years. cocaine exports are transformed through
the process described above into clean liquid monemry espansion and securitized assets
that are cvennialIy dso monetized and injected to the ?stem-
;\pan fiom capital infiows due to privatization that reached US$ 2.619 million in
1994. thtrre were other important capitai i d o w in the wme year. Direct foreign
invrstment accounted for USS 3.084 miIIion: portfOIic investment reached USS 465
million and long-term capital via baiance of payments. USS 5 - 6 2 million These flows
27
yivr 3 total of LES 9.830 million. Obviously. such tlows had an impact on the
accumulation of foreign exchange and thus on the exchange me. However. total
international resemes in 1991 onlu reached CS$ 6.025 million. Where did the remaining
I 'SS 3.795 million go? Ob~iously. thrre \vas important capital tlight which offset the
intlow of forsign investmsnt which supports the argument that the impact of the coca
txport is not negIigib1e in Pcm.
According to an official source". the cumnt account deticit- a masure of its mde
in goods. senices and investments - u.as nearly 6.0% of gross domestic product last year.
and the country is one of the most indebted in Latin .America. The projçctrd current
account deficit of 5.6% of GDP in 1997 ma: nor be sunainable and wi1l require havy
reliance on rstmai capital. rspecially as the procerds from the highly successfùl
pri vatization p r o b m shrink. The govemrnent has recentl y imp lemented the so-cal Ied
Foreign I n v m r n t Status. which. amonp other things. secure equd treatment for
Penn-ian and non-Penitian investors and dloa. Foreign investment in any tom as well as
the repau-iation of profits. The government also announced an accelsration of its
prkatimion efforts. principdIy in the mining sector. Thus. P m should continue to
sspericnce abundant inflows of forrign capitûl expected to reach between US$ 1 and US$
1 -5 billion throughout 1997 and 1998".
in this conte= since Apd the tit'th to the present nith the new anti-narcotics and
mti-tmorist IegisIation different lawvs. decrees and other Iajs1atit.e instruments have b e n
approved aimed at controllhg money laundering. diversion of chernical substances. s m d -
scde h g pushing. poppy cultivation. and other relatai acti~iti&~. The Fujimon
covernment approved several dames and resollmons r e c o g g g aitemative development as - 38
the appropriate mechanism for the conuol of coca cultivation and export. specifi-ing that coca
t 'men are the valid interlocuton in die rurai rehabilitation process. In this sense. the
National Plan for h g Prevention and Control. 19942000. \vas officially approved in
Octolxr 1991. and envisages. inter dia a new institutional fiametvork and a central
~ovcimmental cornterpart for the coordinarion of drug control. The sening up of the new b
institutionai f i e w o r k is the tim step the sovernmrnt is currently taking to implement the
I'ationai Plm. A woking commission conformed by the Ministries of the Presidency.
Defence. Economy and Finance. Interior. Justice. H d t h .ACculture and Education, was
instdled through a Supreme Resolution in July 1993 for that purpose. The countq+'s strate9
as rrtlected in the Plan focuses on the follouing tive key priorities areas: (i) effective legal and
institutional I'rame\vork. (ii) prioritization of aiternative development to d u c e coca
production, ( iii) law enforcement activitiss in coca producing mas. (iv) community
mobilization for cimg demand reduction and ( v ) provide a proper national institutional setting
t'or drug control'".
This section has focusçd on economic development and its relationship with drug
traftickine issues in Peru. Itî strategic txonnrnic roles in the illega! industry have made the
nation a principal focus for anti-dmg policies in the Western Hemisphere. Discussion of
t h subjrct should not be limited to an ethno~gaphic account of the processes. thus. this
research niIl critically explore in the ne17 two sections the sih@ficance of the coca leaf and
coca paste in the main economic aspects and the problerns. strategies and solutions to
attack cimg trafftcking in Pem.
' -tilohul Economic Prmpects and the Dseiloping Countries ", The World Bank ( 1995). S e aiso Inrernutionuf Trudc- Trend und Sraristics. World Trads Organ kat ion ( 1 995). ' WEI. - - P m : SturLFIics of Proch<ction. Tr@ckutg d Cc~mumprion of Dmgs. 1994-96.- Lima. F e b w 1 997. ' Carlos E. Percovich. "Monq Lourdering '*. Lima 1 996.
Oficr: of Nationaï h g Conuol PoIiq, -.Vutionul Druq Conrrol SrrateLgv. 1990 ". U.S. Deparmient of State. Washingon D.C. . See Ethan A. Nadelmann, ~Latinocrmt+ica: Economia Poiirica ciel Comercio cler Cocaina- . Septanber- December 1956. p. 27-49. " Francisco Thoumi: -&conamia. Politica y [email protected] Bogota: TM Editorrs. 1994.
Mario de Franco and Ricardo Godoy. -The Economic Cimmequmces of Cocuine Production: Hisrorical. LKUI und .tluc-rueconornic Perspeic.~iw.- Harvard Universi-.. 1 99 1. ". Osnayo. "El Culrivo de la Cocu tm e'/ Pmi. " Lima 199 1. " J. Nufiez and Reitegui. "La Ecnnornia Cocaiera en el -4lto Hurilfclga: Impucto Econ8mico. " liniversidad del Pacifico. Lima 1990. Il, R. Osna'o. p. 55. ' ' Instituto Nacional de Estridisticri e Informatica. "Peni. Reporte . - i 4 ". 1996. " Carlos E. Paredes md Je- D. Sachs. - P m ' s Puth to Rrc0r.t- .-i Plun for Econornic Stabilcu~ion and Grotr.th " (Washington. D.C.: The Brooklings Institution. 199 1 ). p. 83. '' Ovemiçws of Fujimori's economic reforms can lx found in Efrain G o ~ l e s de Olartc "Pm's Economic Prugrum un&r Fujirnori." Journal of Interam&can Studies and Worid Affairs (Summer 1993): and Carol Wise. 7 h r Politics of Pemian Econornic Refonn: Overcorning the Legacies of State-Led Developmeni, " Journal of Intmerican Studies and World Affain (Spring 1994). I4 Prru C'mntn Profile. 1992-93 (London: Economist Intelligence Unit 1992). f Data are tahm from the C o m p d i o Eaadistico de1 Banco Central de Reserva 1993. "' Hobart A. Spalding. "Pem T*: SIill on the Brink " Monthly Review. Vol. U (March 1993). 1- Philip Mauceri, Ttartr Reform. C'oulitions. und the Scrdiheral .-Iutogolpe in Pem " Latin American Rrsearch Review. Vol. 30, No. 2 (1995). 1 X James Brooke. " t hte for Conscirution in Pem Buttresses fts Lciuder. " New York Times. November 1. 1993. 1 '1 E. Gonales. " Econornic Stabi/i=urion und S~mcturul Acljusfment C'nder Fujirnori. " Jomal of Interamencan Studies and World Affairs. Vol, 35, '103 (Summer 1993). '" Ibid. p. 75. " Instituto Nacional de Estadistica e Informatin " P h . hporre .CIemul ". Abd, 1997. .. - Banco Centra1 de Reserva ".Wernoriu 1996 ". Lima-Pd, L;
Modcrst -owh was seen in al1 sectors. in the tkst quarter of 1997. except tishing and sovenunent which MI 1 1.03Oh and 0.7% respectively. The volatile fishing sector posted this decline due ro the yearfy indefinite tishing ban. Economic activip in this p e r d tvas led by growth in a_&cuIture (20.696). construction (9.856) and commerce (4396)- Althou$ growth wiII accrlerate relative to the recent trou$ p-istered Iast year. the expansion wiI1 hl1 well short of the double disit pace recordeci rarlier m the 1990s with the consolidation of the stabilization and privatization program. " Min isteno de la Presidencia "f'uldad de Oporrunidades para un Desarrollo Sosteniclo. htraiegia Fuculkada de Luchu conrra la Pobrca "' Lima 1996. *< - Humbeno Campodonico, "lmportancia EconOmica del .Vurcotr@co y su relacîôn con Ias Rt$orrnas .Veo- liberales del gobierno de Fujimori ". Lima t 994. " ".Clemoria / 996 ". Lima-Teru .- - tnninrto Nacional de Esmdistica e Informatica. "Peni. Reporte .-id'*. 1 996. Y " n e Pemiun Enterprise Project. " CONFIEP, Januaq 1996. -1 - Compared to the Ley General de Drosas law No. 22095 of 21 February 1975 which is the main le@ instrument for cirue control m Pem aimed at the tepression of ilIicit drug traffidcins rehabiIitation of drug- addicts, and reduction of coca cukivation. Since its appmval, modifications have ken afkcted. especiaiIy
duc: to the approval of a new pend code in 1991 that stipulates harshrir psnal rntlasures for coca cultivation and tnfticking. '" National Anti-Narcotics Bureau. DINANDRO-Report of the Technical Suppon Office. Peru. 1996.
II. PurîOne Defning the P robIem
2 . Si@z~ficance of the Coca Leaf and Coca Paste in the Main Econornic
.-l spects
The purpose of this section is to esamine the main features of the production-chain
lôr cocnine. from the cultivattion of coca Iraves to the e?<pon of the finished d m p (cocaine
hydrochtoride) from the Andem region. tt wiII also d d with its distribution and
marketing. including statistics and comparative data and. finally. what it otTers for man?;
tàrmers in the .Andean region.
,'. 1. / Pro~/tictÏon ofC*ocu c m / Ci,ccr Pc~sre
Long before the world economy Mt the impact of globdization of money. markets
and products- illicit dmgs moved international- from producer countries in less developed
areas of the world to consumer counuies that wsre usudIy more devdoped. Production in
m l areas was transported to and sold in other continents after large pnce increases dong
the ~vay- proïiding hi$ profit and risk incentive to traffickers (See Map 1).
Many esperts think that the tim stage. when plants are grown in the fields or
consumable dmgs are produced in the laboratory. is rhe most wulnerable point in the chain
of illicit production distribution and consumption. The second major stage. the
disuibution phase. is dso considered b - some as an rqually good intexvention point for
drug controi purposes. However. the potential for a s y movement disguise and diversion
32
of dnig s h i p m r n ~ and the vast numbers of shipments of small quantities of drugs decrease
the yisld of enforcement for rach unit of intewention etTon. The third stage of possible
intrnxntion and otien taqet of law enforcement is m the time of consurnption. Here. a
particuIarly vulnenble point is whsn dnigs pass from deders to consumers.
Esti mates of il k i t drug production corne from sevenl sources. Systernatic anempts
t» provide information about the amount of dnig produced may ernploy high technolog-
satellite mapping. ground s m e y . agronomie chanctetistics or consumption figures.
Srw regions have enter into the production of opium. coca and marijuana as a
rcsult of the displacemmt of othrr qricultural crops. Table 2.1 -1 .a provides g o s s
cstimates of the major supp1ic.r of these ilIicit drugs since the 1 990s.
Since some dmgs are more availablrr and used more ohen than others. the questions
that arise are the following: whiit properties of specific drugs. whît personal
characteristics of the users and what social or cuItud factors in a $en country influence
the anractiveness of a h g ' ? . Or. in another w q . why do users want certain b g s as
opposed to others and how does this inîluence thcir wiIIingness to pay for them? Studies
suggest that production and distribution of ÏIIicit dnigs fo1Iow supply-demand p ~ c i p l e s
with some allowance For the illegai nature of the product. In terms of its impact on global
drug problems and its l q e scale financial implications. coca-cocaïne is the p r i m q dntg
of current interest.
Eq-throp-Ion coca is a variety of s h b native to the tropical dopes of South
&nerica but is now found in other parts of the worId tvïth chmates similar to the Amazon
tropics3.
I and T b 2 . 1 a : WorIdwïde Potentiai Net Production t 994-1 99 1 (metric tones CVorIdwide Cultivation Totals ( Hectares) Country
Opium
There are 250 species and tour major varieties gram on the eastern slopes of the
.-Indes in Peru and Boli~ia in conditions ranging from poor to fertile soils. tropical or dry
1 994 Cultmed
'~olombia Peru Ewador Total Coca Marijuana
Mexico Colombia Jamaica
cIimates. tlat lands or steep dopes and at dtitudes ranging tiom 200 meters to ZOO0 meters
40.600 155.500
40
239.900
7.T75 1.500 641
Afghanistan Iran Pakistan
Total Buma Laos Thailand
Belize
51.620 108.600
120 201.340
28.690 2.457 650
Produdion
27.860 21.530
1 65 49.555 2.587 285 40
48.038 129.200
1 30 221.252
25.650
1 993 Cultmted
600 300 125
1.025 2.250 250 32
Produnion
110
40.800 163.300
100 248.300
7.000 1.500 600
27,420 19.310 12.540 59.270 18.501 33.624 7,589
570 300 180
1 .O50 2.350 265 35
50.000 108.800
112 198.912
26.854 2.156 1.875
39.100 223.900
1 70 315.970
19.715
59.714 2.576 3.812 1.875 11.329 19.592 138.576
40,000
2.650 27 46
17 41 131
3.831
I
Total Colombia Lebanon Guatemala
50
1.870 11.MO 1.650 1 825
Others ' ~o ta l Marijuana
1992 Cuhated
Source: INCB, Report of the International Drug Control Board. 1972-95: CNCSR International Narcotics Controt Stnteg? Report, 1988-96. DEA, Illegal Drug Pnce'Puri~ Report 1994. Several of these figures are rou- mimates which ma? be disputai.
3,840 12.990
43.472 132.500
120 230.478
28.710
3.890 35.797
1991 Culmated Produmon
21 1.553 2.454 3.63 1 1.820 10,980 18.885
283.041
23.515 17.428
2.912 18 64
15
1
35.900 121 ,500
270 21 8.270
30.200 2.0001 2.800
Production
17.190 12.740
415 385
43.800 1 43.884
2,532 15 5 1 10
1.783 86
585 300
2.565 22 40 13 62 137
3.667
55 131
3.688
44.100
Mexico 1
190 49
3.680 34.651
130 1.015
11.660 52.603
52.800
Total Total Opium Coca Leaf Bolivia
3.658 13.623
275
194.927 2.316 3.400 1 .721 10.310
182 52.649
41,000
320 60 3,550 32.995
172.910 31.550 7,093
165 965
2.855 19 34
12 66
54.386
65 3.700 36.513
3.320 25.420
8.645 38.575
60.600
3.500 36.755
b
2.250 275 40
17.747 251.249
131 4.001
161.102 29.625 4.200
' 2.430 375 50
Psm has oRen been cited as a classic example of an expon-led economy. The
celrhrated guano age in the mid-nineteenth century made Peru a monoproduct expon
econorny that failed to achievrd self-sustaining growh. The rubber boom in the 1890s and
1900s had its impact in the jungle region. with linle rtTect on the remainder of the
country-". Rather. coca has alwys conditioned the culture and sconomy. Man- local
~conomi~s that generated revenues for the national govemrnent functioned around coca
tndr. Bsfore the advent of modem communications. it was the Andean montanero's roIe
w bring coca up to the highlands. .-\lthough this ecologicai movement of coca still
continues. new types and methods of mde have svolved with the rush of cocaine
production to satise international demand.
Pnor to the cocains boom. there w r e nvo kinds of rnontaiïeros in the hizdhlands: the
comm<rrcial voyagers who went to the forest to bring coca coffce grains. and fruits to xll
to local merchants in srnall to\ms and citicj: and p e u t s who w n t occasionally to the
ciosest coca tields to buy one or two arrobas ( 1 arroba= 1 1.5 kgs) of coca. mody for their
oun use. The former took food from the highlands to the jungles in order to trade for coca
Becausr of government control. the number of commsrciai traders h a diminished
trrrrnendously. Hoivever. peasants from remote ntral areas have increased the fiequency of
their trading trips to the foothills of the Andes so much bat the)- are bscoming dependent
- - on the new coca economy".
Change tirst carne to this ancient social -stem in the 1950s. when the Peruvian
(Tovemment initiated a pro-grain to encourage mi~ation from the overcrowded coastal cities 2
to the scarcely peopled foresu dong the eastern dopes of the Andes. .Most of this
coIonintion took place in the province of Leoncio Prado. of which Tigo Maria. located
35
in the heart of the coca belt is the capital. me govenunent sponsored plantations of tea
coffee. and tobacco did not yield anything close to the re tms that the new colonist
sspected. so thsy turned their lands to the traditionai and ras' crop. the coca, It was a
food timc to cultivate the plant. The boom in cocaine use had begun in industnalized
countries. so growing numben of cocaine procesing hideouts in the forest stood ready to
absorb the increased production of coca".
I h i 1 the sisties. coca was mostly produced for traditional chewing. The Peruvian
yovemmcnt cstablished an ofticid bureau to control coca agriculture and to cokc t t a
revenues tiom coca uade. This rigency. Estanco de Ia Coca \vas a subdivision of the
Department of Treasuy. Tay collccton were posted in t oms and strcitrgic locations where
the movrmrnt of montaiïeros could be controlled more rffectively. Seved old-time
trawlers risssrted that. in addition to paying their t;l.es. the pesants were forced to work
h r the t a s colIectors. kIany govemment emplo_vecs themselves were coca planters and
Iegal cocainç manufacturers. Up in the highIands. the collectoa made the travelers labor
in the fields or do private construction work. Once the travelers sold their coca to the
stores. retailers paid another escise UK. By 1972. the Estanco de la Coca disappeared and
the National Bank took over coca-tax collection. Later- the National Coca Enterprise
( ENACO) u-as organizeb and it tvris announced that disuibution and sale of coca \vas fiee
of tases, .As local farmers m e d their land to coca cuItivation, production of the coca Ieaf
increased npidl y shce then".
It is essenriai to understand the reasons for iIl& coca expansion because man): of
these factors still p m i a and could Iead to the resurgence of this activÎty. Aside From
strong esemal demand and Pem's comparative advanme for coca production there are
36
interna1 reasons for the expansion of coca. One concerns a pattern of agicultural
development that has yield very Iow Icvels of income in the Andean region where the
majority of the farms are of less thm 5 hectares. .As a result P e n has levels of poveq
comparable to those in the Ieast developed areas of .\si3 and sven .Afnca. Studitis estimate
per-capita income for Andean peasants at around US$ 50imonth3". In addition. food
consumption patterns in Prru have undergone drastic change. The tnditiond emphasis on
.Andean goods (sweet potato. barley. sofi maize. sofi wheat) has gradually been replaced
by a more wstemized dict in the urban a r e s ( ricr. white potato. chicken. daip products.
bread. noodIes. and other processed foods). Thus. in the last decades Andean Famers
havc facrd a declining market for the type of foodrtuffs the? cm producc nithin the
ccological zones the- inhabit as well as the impon of food staples initiated in the mili tq-
covsmment of president Velasco. increasing drarnaticdly in rhe early 1980s and continued +
under president Fujimon. As a result protitability for mon of the agriculturai sector
. - sharply declined and coca production eaminp rox' .
Castro Pozo argues that during the lm two decadcs- transformation of the .Andean
society and culture at Iarge is more evident md its western direction is inevitable. These
changes may be the result of conscious and unconscious policia of land distribution and
population control in the country at [arge. Howeever. the land refom that \vas designed to
create equal distribution of land Further impoverished the peasantq- due to topo-gaphic
variations. Iow temperature. drought. sspeciaily on the western Andes. lack of capital
im-auncnt and technicd suppor~ and marketing obstacles'! n e highlmd agriculture
frontier did not work causing lndian and petsant popuIations to search for other sources of
subsistence as it \vas mentioned above.
Pem. Bolivia and Colombia account for 95 percent or more of the world's
production ~ l c o c a ~ ~ . One of the most widely quorsd estimata has corne from Rensselaer
Lee I I I :
"ln the mid-1980s. SouthArnericm cocaine mtf?ckers probably m e d behveen USS 5 and USS 6
billion dollars mnuaily f?om international sales in the Lr.S. market. Perhaps USS 1.5 to USS Z biiIion flowd
to the cocaine-producing counttirs. Viewed in terms of repatriatcd dollars. cocaine esports are equivalent to
an estimated 10 to 2090 for Colombia's le@ esporcs. 25 to ;OOo of Pent's. and 50 to 100°& of Bolivia's.
Cocaine is almost certainly the most important ssport in Prru and Bolivia. although in Colombia it probably
crirns ltkjs than cotTee and petroleurn""'.
As it cm be seen in Table 2.1 . I .b diverse information is s h o w for the years 1975,
1980. 1985. 1990 and 1993, t'or P s r u BoIivia and Colombia.
The information covers the area under cultivation: production of coca leaf. coca
pastc. and cocaine: the price paid to the producen for the le& the number of people
directly and indiredu empIoyee: and the nurnber of drugs users. The main concIusions
are: (a ) cultivation rose constantly. (b) the tendency is ter the price to the producer to fall.
and (c ) there is an increase in traditional consumption but dso by drugs users.
Tables 2.1. I .c and 2. I -1 .d show that only 3.8 per cent of the value produced by the
coca-cocaine complex in Colombia P m and Bolivia stayed in those countnes. The rest
remained in the countnes of the North. crssentially the United States. but aIso in Europe. It
coes wïthout saying that the proportion remaining in the producer counnies. benveen 5 and C
S percent betwen 1985-88. is very similar to that for le@ ptimmy products such as
c o t k . cacao, cotton, or bananas-
Table 2.1 .l .b: Basic Indicarors on Coca and Dmgs TmtEcking in Bolivia Colombia and Pem, 1975-95. Country Ha. ! Prod. o f ' Rod. o f Prod.of Price ; Direct 1 Indirect J Consumer Consumer and Ycrr undrr Lcaf Coca Cucainc of lnvolv Involvon 1 of Inf ' of dru- 1
* a Tons Paste Tons coca cmmt cm (000s) (000s) (006s) (000s) 1 (000s) i Tons 1 Iraf ; (000s) j i
1 i (Stkg) / 1 t ! Bolivia I 1 i 1 ! I I 1 ! I 1 t 1975 11.3 1 9.6 / I I j 6 i 2.00 15.0 50.0 1 2000.0 / 50.0
I 1 1 t
1980 22.5 : 19.3 i 22 12 2.00 ] 35.0 1 100.0 1 300.0 j 80.0
i I
1995 -I
1 . 6 ; 5.3 &I : E 1.05 168.0 i 195.0 : 3700.0 1 165.0 1 1 1 I I
Colom bia i l 1 I 1 ! ! ! I i !
Total I 1 1 ! 1
l !
r 1 I l i I
!
1971 ! 31-3 1 312 i 91 i 32 2 7 i 56.0 ! 155.0 i 5050.0 1 440.0 / 1 l 1 I
1
Source: fSCB, Report o f the International Drus Control Board 1975-951 WCSR tnternationai Narcotics Control Stntegy Report 198s-96, DEA, IHe@ Dnig Price'Punp Report 1994. Sevent. of these tigres are rou- estirnates which mry be disputed The heading of consumer d q s does not indude socid dm- like tobacco and aIcoho1.
Colombia (
Table 2.1.1 .c: Production of Coca Leaves. Coca Paste and Cocaine, Plus Prices and Incorne Generated. For Bolivia CoIombia and P e n 1985-95.
Pem 1
*country and
Year
Bolwia
Control S t r a t q Report. 1988-96. DEA, III@ Drup PriceiPurip Report 1993.
Incorne to Intemal market (Sm) Incorne to Intemed.
Pon 1 Street 1 Total Leaf Paste
Coca Cocaine ITotal
Pnœ per Kg (S million)
(000s)
Leaf
(000s) Paste
Producbon (tonnes)
(000s)
Leaf Coca Paste Cocan Coca Cocaine
However. the situation is even worse in the case of the coca Ieaf since. of the gross value
Table 2.1.1 .d: Distribution of the Profit From Drug Trafficking in the Puidean Couneies.
of the production of the coca~ocaine compIe't ody 0.4 per cent w e d in the hands of the
1985-95 Year
1985
1 986
1 987
1988
1989
1990
1 993
1 994
1995
Total
Year
1 985
1986
1987
1988
1989
1990
1993
1 994
199s
Total
'Source: INCB.
peasant producers.
In P e n coca is grown principally in the depamnents (regionai divisions of Pm):
Control Strates Repon, 1988-96. DEA, 1 I I e p I Drug PricelPurip Report 1993. Figures are derived fiom Table 2.1. t .c
Cuzco. .-\yacucho. San Martin. Huanuco and La Libertad. The moa Unponant growing
Intemal Market (SrniIlion)
ara are the Upper Huailaga V a k y and the Upper Urubamba Valley (See Map 2).
Leaf
278
323
337
376
1 99
1 38
331
The town of Tmgo Maria mon became a mecca of unrefined cocaine naflic. and
- Total Profit
52.888
55.419
54.014
5 7 . m
89.182
86.078
85,228
85.318
85.573
651 .286
Extemal Market (Srnillion)
Percentage Value Perœntage Value
nearby t o ~ m emerged a strategic location for cocaine production .%n ancient sociaI
Coca Paste
1.601
1.690
1.436
922
923
364
568
Port
10.590
9.108
0.5
0.6
0.6
0.7
O. 3
0.2
0.4
0.4
0.4
0.4
?stem t'or the exchange of Iabour and food. based on the trade of coca has been 41
Cocane 3.354
2.898
1.756
1,663
1.700
1.126
946
Street
37.065
41.400
340
368
2.690
Repon of the International Dmg Conml Board 1973-95: INCSR International Narcotics
3.0
3.0
2.7
1.6
1 .O
0.4
0.7
0.7
0.8
1.3
Total
5.233
4.91 1
3.529
2,961
2.822
1.628
1.845
925
91 0
1 5,278
Total
47.655
50.508
578
640
8.722
1.843
1.918
26.690
50.485
54.625
86.360
84.450
83.383
83.475
83.655
624.596
6.585
7.125
12.920
12.949
12.063
12.023
12.005
9 5 3 8
6.4
5.3
3.2
2.8
1.9
1.3
1.1
1.1
1.0
2.2
43.900
47.500
73.440
71501
71.320
71.452
71.650
529.228
9.9
8.9
6.5
5.1
3.2
1.9
20.0
16.4
12.2
124
70.1
74. T
81.3
82.5
97.8
97.8
97.8
78.0
83.7
83.7
83.8
65.9
2.2
2.2
2-2
3.8
100.0
100.0
r 00.0
81.8
90.1
91.1
93.5
94.9
14.5
f 5.0
14.1
14.1
14.0
121
100.0
100.0
100.0
100.0
96.8
98.1
823
83.1
100.0
100.0
infiltrated and aitered by the international undenvorid. who now use the peasants' traditions
of coca raising as agents of production and trdficking. An unskilled labourer in the capital
sarns about three Urnes Iess than a peasant carting a bale of dried coca Ieaves. the Iowest
paid worker in the underground indusny It is hardly surprising that mibmts began
making the trek to the jungle fiom the highlands of the Andes and fiom the coastal cities.
7hr prosperity of the region creates cspectations that cannot be met by an- other more
modes source of incorne. Likr cocaine itself. the mon- of the jungle is addictive. The
Penivian govemment has anempted in vain to limit the cocaine production by controlling
the huge chcmicd i n d q linked with it4'.
The importance of production of illicit drugs to an rconomy wi11 vary ~i~gnifican*
from country to counep. Speaking of Pcru and according to the non-~ovemmentai research
organization Macroconsult ~td." . it has rnimated rhat in 1993. 1 15300 hectares o f coca
have becn planted. of which 33.700 hectares are in the ljpper HuaIIaga region aione. In
the .\mazon region 30 percent of the land is cultivable and one-fifth of this land is used for
coca plantations.
Chart 2.1-1 .a Cultivation and Production of Coca Leaf
Valleys 1 C u l t i ~ t e d Prod. 1 Cultivated Prod. 1 Cultivated P d , 1 Cultivated Prod.
The voIume of dry coca leaves hmested from 1 15.300 hectares amounts to about
207,540 tons ( 1 .S tons per hectare) and was estimated to be worth 540 million U.S. dollars
1 ( H a ) (nnr)
l
in 1995 (2.600 U S dollars per ton). -4 total of 1,885 tons of cocaine base is rstirnated to
Source: ~IacroconsuIt 1995. " For illustntive description set: Map 3.
have been produced From this hanest with an approsimate market value of 700 U S dollars
223.900
138.200
13.800
2.300
23.200 3.000 14.200 13.200
16.000
( H W (MT)
Total f 129.200
pcr kilo or a gross inflow of 1.320 million C.S. dollars into Peru's narco-trafXc indu-.
108.600
33.600
9.400
8.600
17.800 2.300
Upper Huallaga Central
Huallaga
Between 1988 and 1995. coca leaf accounted for 5 percent of Peruvian @culturai
155.500
73.400
13.800
2.300
23.200 2.600
(HW (Mf)
61.100
8.500
production. The value of cocaine traficking \vas the equivdent of 25 percent of the
14.300 9.400 13.400
108.600
28.-
8.500
7.500
21.400 2.000
(Has) (MT)
c0unt.q-'s legal ~ S ~ O N - ' ' ..\ccording to other research organization Cuanto S.A.. in the
163.300
64.400
15.500
2.300
38.200 2.300
115.300
33.700
7.500
6.500
19.600
7.1 O0 21.000
10,000 9.900
LOwer I 2.000 Huallaga
1970s- coca leaf cultivation was 16.400 ha and grew up to 57.000 ha between 1980 and
207.540
67.550
12.720
--
t 1.200
23.975 13.780 37.800 18.000 22.5 15
' Aguayha Ucayali
"Apunmac Cusco Other
1 986. The same source mention that between 1 987 and 1 995, the area cultivated increased
14.600 10.700
15,300
16.600
2.600 12.800 11,600 14.000
14.200 10.700 15.300
to 133.000 hau. In other sources. such as the National Development Instïnite (INADE)
17,000
9.900 13.400
has rstirnated for 1995 an extension of 125,000 ha, Similady. according to the AgricuIture
Inîômation Office of the M i n i e of -4-gricuituree coca I d cuitivation tvas 39-86 1 ha in
1980. however. in 1995 this amount - a w to 120.000 ha, which meant an inmease of 43
20 1 O h (sse Chan 2 1.1 .b)? Further klow arc the figures endorsed by US govemment
qenciss. Thus. masses of peasant famers in dmg producing regions have moved
upstream into the valus-addrd processing of coca priste to further intsgnte themselves into
the intrirnationd cocaine economy.
The totd number of cultivated hectares and potentiaily hanestable coca Ieaf only
inciuds coca plantations in fuI1 production which cm be fuIIy detected via satellite and
other mcthods. Accordingly. absolute figures of the above tables and chans are subject of
dsbats. ruid coca led production in Pen ma? bs higher.
Illicit drugs are a commodity. and a particularly lucrative one reIative to others
esported by devetoping countries. Coca is an attractive crop to h d e a n f m e r s because it
produces a secure profit. In most cases the rate of r e m on coca is two to five times higher
t h m most rnditiond crops. or higher. In man- m o t e coca zones. nansport problems and
soi1 constraints and other factors add up to an inhospitabis environmitnt for lepl cash crop.
Chart 2.1.1 .b: CuItivation and Production of Coca Leaf
1 I L I 1 Total 1 129200 1 223.900 1 108.800 1 155,500 1 108.600 1 163.300 1 115.300 1 207.540 (
' Valleys Cultivated P m d Cultivated Pmd Cultivateci Pmd Cultivated Pmd. J
(Has) (Mf)
" Lower 1 2.000 1 2300 1 8.600 1 2300 1 7.500 1 2300 1 6.500 1 11.200 1
(Has) (Mi)
H&I1aga [
l Other [ 14.WO 1 16.0ûO 1 13.400 1 15.300 [ 13,400 1 15.300 1 9.900 1 22.515 Source: hlinistry of A_&culture-A_&culture Information Office. Annual Smtinics. 1995.
* Pachitea \vas formed in 1995 by combining areas m A,->-tia with areas in the other category.
13.800 Central Huallaaa
HuaIIaga Aguaytta
(Ha4 (MT)
8.500
( H m (W
9.400
16.600
Ucayali 1 2.600 Apurimac ] 12.800
13.800
23.200 3.000
14,200
8.500
17.800 2.300
15.500
23200 2.600
7.500
14,300 1 14200
21.400
12.720
2.000 17.000
38.200 2.300 14.600
19.600 23.975 7.100 13,780 21.000 37.800
Table 2.1 . l .e attempts to makr a reasonable estirnate of its gross revenue. value
added. esports and rmployrnent for the drug indus-. in the three Andean counuies. These
estimates indicate gross revenues tiom illepl drugs of about USS 8-1 1 billion. or about
7096 of Iegd comrnodity expons. Howver- this esaimare includes fun& which may be
retained by cimg trades abroad. In trrms of value added the drug indu= is roub@ip
equi\-alent to about 5-6 percent of GDP of these three countnes? There are marked
di tTerencs betwveen counuies. however. w i t h drugs having a significandy larger economic
impact in Colombia than in Pem and Bolivia. For Colombia value added From cocaine
rtrpressnts about 7-8% of Iegd GDP- compared to oniy about 3-941 for Bolivia and 2-3%
for Psru. In rems of e'cports. -irnated gross amïngs from dmgs equ l 91% of
Cotombia's officiai exports but 28% in the case of Boliria and 25% for Pen. This
disparie retlects Colornbia's overdl dominance of refining and esporthg Colombia
supplies an estirnated 70 to 80 percent of the cocaïne soId in world markets, and about 15%
Chart 2-1.1 .c: Coca Cultivation Estimates. 199 1 - 19% 1 1991 1 11992 1 1 1 993 I 13994 1 1
Valleys i Cultivated 1 % Change I Cultivated I % Change ( Cuiüvated 1 % Change 1 Cultivated i (Has) I 1 (Has) i 1 (b) i i (HW 1 I I 1 I 1 l
Total i 120.800 l +11.0 i 134.087 i -23.46 1 108.600 1 6-16 115,300
'
I I I I l I Upper 1 60.100 1 e.46 1 63.987 ! -121.40 / 28.900 +16.60 1 Huallaga 1 1 i ! Central 7.000 1 +21.42 8.500 1 O 8.500 i -30.76 1 6.500 Huailaga i I , I 1 l I
Lower 1.500 1 +lOO.O 3.000 i cl50 7.500 -15.38 HuaIlaga ! 1 I I l
6.500 i 1
Aguaytia i 10.100 1 e.35 1 16.600 i +28.9 i 21.400 1 -9.18 1 19.600 1 Ucayali : 2.600 1 O : 2.600 -30.0 I 2,000 1 ~255.0 1 7.100 ! Apurimac i 12.400 1 +11.3 1 13,800 +23.2 t 17.000 i +23.52 21.000 1 Cusm 13.100 1 -12.93 1 11.600 ' -17.17 ! 9.900 I +1.01 ! 10.000 Other 1 14.000 1 O ! 14.000 4.4 i 13.400 1 -35.35 1 9.900 f
Source: Unitcd States Deparment International Narcotics Control Straqy R-n 1995.
to the US. heroin market and earns huge value-added in smugpling dmgs to the United
States and Europe.
The rmployment impact of the dmg trade is relatively small: on1y about 2-3% of
the total labor force are rmployed by this indunn;. but man? of these are concentrated in
rural areas. whcre they constitute a more significant part of the ruraI labor force. The
r.mployrnent impact of cocaine in Colombia is smaller than in the other source counuies.
and is also qualimively different. .-\ masimum of 160.000 people or 1.3 percent of the
labor force works in the cocaine indusry. Employmsnt in the indumy abovr the fàrm level
comprises perhaps 20.000 to 23.000 people. Of these a critical level of 6.000 to 7.000
kader entrepreneurs and specialized operators coordinate principal tMf'ficking functions. In
Peru and Bolivia cocaine provides proportionally about nvîcicr as mluo; jobs as in
CoIrrmbia -et only a midl percentzge of the cocainr work force. las than 5 percent in
Bolivia and lrss &an 5 percent in P m engqes in cocaine retïning and export operations
\vhereas in Colornbia the proportion reaches 1 5 percent4'.
f I 1 I 1 Source: US. Deparunent of State. International Narcotics Control Stratez~ Rrport (March 1995) and United Nations. Economics and Social Consequences of cimg Abuse and Illich TraftÏcking. Nov. 1994. Bolivia and Peru are based on cocaine esports only. Coiombia's s imates assume USS i biIfion for exports of heroin and marijuana
Table 2.1 - 1 .t.: Economic Impact of IllicrgaI Dnigs. Andean Countrirs. 1 994
Coca farming is not a natic activity. Farmers can esploit various oppomuiities to
Grass Revenues (USS) Value AddWGDP (%) G r o s Revenues to Legal Experts(%) Drug areaftotal cfoppeû area (%) Cocaine work force (inc. Farm Iabor) Percent of National Work Force
incrase yields and income by applying more sophisticated techniques. There is evidence
Colombia 7 to 9 billion
7 to 8 94
1 -9-2-3 160,000 1.3
Bolivia 200 to 300 m
3 to 5 28 2.5
74.000 2.8
Peni 1 to 1.5 billion
2 to 3 25
2.9-5.5 230,000 2-9
Total 8-10 billion
5 to 6 71
2.4-3.7 4ô4.000
2
that coca h e r s are implementing agronomie improvemrnts that make their fields more
productive (se<: Table 2.1.1 .O. In addition. coca farmrrs seem to be adding to their income
hy divsrsifyinp downstrem of priste or base. In so doing thry have rmlized higher profits.
cspecially from base production. In the case of Peru. according <O USAID data a farmer
could realize profits of USS 3.300 per hectare by converting coca Ieaves to base. about ?O
percent more than what he could earn by selling Ieaf alone.
Table 2.1.1 .f: Pem - Increasingly Efficient Famers 1989 1990 1991 1992 1993 1994
Coca Yield Per Hectare (MT) 1.48 1.53 1.63 1.47 1.35 1.50 Source: Depanment of State, Bureau of International Narcotics Maners. Strate3 Report 1995, p. 24.
U'ith respect to their revenues. these estimates depend on the arnount of coca leaves
that are used for domestic consumptioa the mount wasted rit sach mgr of production.
the amount of cocainr and by products consumed in the producing counuies. and the
mount ssized by authorities.
Despitr declining coca cultivation in the Upper Huallaga in 1993 and 1994. the
country's main coca producing ma production is n i I I espanding in other areas
particularly in the Apurimac and Aguaytia vallq-. However. according to the Mini- of
Agriculture yields per hectare and profit mxgins have decreased considerably as a
consequrnce of the fùngus Fusarium Oxysporum, a newIy detected disease. in the
Apurimnc vallq. increased production c o s (fertilizers. etc.) and Iower coca prices.
P r i c s of most primary cornmodities have not only remained low since the 1990s.
many have acruaily declined in nominal t e m . owing to abundant supply or ovemock.
Ho\vsver. in 1993. the prices of cocoa and coffee have begm to recover. but whether this
47
upward trend is sustainable remains in doubt. The comparison shown in Table 2.1 -1.g
hetween the pnces of cocoa coffee and coca leaf reflect a strong economic incentive to
cultivate the latter. however. coca I d prices have begun to experience a drastic decline in
1995. This faIl in the price of coca Ieaf is basicaily a consequence of increased interdiction
efforts in Cotombia and Peru in 1994 and the disrnantiement of the leading Colombian
cartels of Medellin in the late 1980s and later on the cartei of Cali ( 1995) as vie11 as the
capture of important heads of provider firms in Pem. Eventhough pnces have fallen to
1989 levels (USS 0.4 to LES 0.8) production cos% are noow on avcrase 5 times higher than
the pncr obtained by the coca growers. The situation is economically wonying with
respect to the subsistence alternatives or thousands of coca growers. At the same time. of
course. the pnce for cocaine base has aiso suffered a substantial decline in 1995.
The recent dnstic price fdl h a caused despair among thousands of f m e r families
\\-ho depend cconomicaily on coca cultivation and has strengthened their w i l l to return to
lsgal crops.
The fact that the country und now has not had an estended history of a broad-based
rigriculturai de\-elopment strategy benefiting its peasant producers p d y explains the
massive mi~ptions to coca producing areas and suggens the cntrenched inter- and
political inhence of upper incorne social groups. Hizghiand migration in search of
employment and income becornes a rational response within a context of severe economic
~ n s m on top of decades of d i s c r i ~ t i o n by nate policies. In shon whereas the mibgration
to the coca growinp areas. the Upper Huailaga region for coca leaf cuitivation has been
aimulated by the relative hi& prices for coca fiom the 1 970s unhl 1 995. the push factor of
estrems poverty in hi~aand comrnunities is dm part of the problem.
18
Table 2.1.1 .g: Prices in US$& Year Coca Leaf Cocoa 1990 0.66 0.83 199 1 1.45 0.9 1 1992 2.46 0.72 1993 1.23 0.8 1 1993 2-48 1-04 1995 1.20 1 20 1 996 0.7 1 1.14
Source: CSDCP-Country Programme Fmework . Peru. 1997
Coffee 0.5 1 1.76 0.59 0.6 1 1.85 1.91 1.50
A n d m public policies have Ied to decrides of rsploitation and rnarginality creating the
necessary pre-conditions for rspanded coca growing. The national interest in fighting
drugs bbecomes n highlp ambiguous concept when the current govenunent faces massive
unrimployment and increasing potrrty among its citizens.
The current conjunction favon the implementation of a widespread alternative
da-rlopmrnt programme. The only option leîl for the praunts is to rehabihate abandoned
xt';1~ traditionally cuItivated uith cacao, cofkc. etc. and to commence the
implementation of other agriculturai or livestock activities promoted by national projrcts
and othrr entities being cncouraged to initiate and support alternative development
activities in different areas. This is reflected in increased levels of collection and marketing
of coffee and cacao through the coopentives and producers* associations which are target
croups of ongoing nationai projects. , C
National experts' opinions c l a h that the current pnce tendency might only be
tcmporaq- until narcotraffxclrers reorganize themeIves to tind alternative routes to nanspon
cocaine base. It has already been specdared that the border -5th Brazil mifht be
considered a practical alternative to transport semi-procesxd cocaine instead of using
traditionai direct flights between Pem and CoIombia 49
Finally. since cocaine and various other illicit drugs are africulninl-bascd products.
policy maksrs must anaiyze the impact of nationai n(lricuItura1 policies on the peasants
producer sector. Policy mAen m u t take into account what is happening to peasants
economicj locally. the growing areas and plantations. the labour market in the Huallaga
d I e y and mi:-t workers, in response to broader regional and national socio-economic
changes.
2. I . 2 Di.srrihttrion in rhc. .I.kzrkc'r
Results frorn the relationship between the national economic needs and the
international undenc-orId econorny are maniksted in socid and economic behaviour of the
groups that participate in production. distribution. and marketing of coca pane and 0th-
oond relatsd to the indusry. - Border controIs are a major focus of interception efforts. However- wîth the
increasrd tIow of commercial trafic benveen counuies and the tiee movement of goods in
large regional tndc blocks. the success nte of interdiction at national borders. low to
begin with may decrease m e r . Vigorous action by authorities in one area ofien leads to
shifts in the pattern of iIlicit actidty or to movement of the ilkgal actiiity to another area.
Hhik interception efforts rn- result in Iengthrning or altering the chah of illicit
movement and increase the sxposure of the illicit operation to seizure in a given area.
unlss the interdiction and seizure success rates are hich illicit shipments of drugs wil1
Iikely continue. Those who get caught mug$ing drugs are often lotv level persons who
can sasily be replaced with new recruïts.
Bsfore Ieaving the production zone for the national or international markets. the
white coca paste circulates in comrnunities and tou-ns. Thrn the? take diverse routes. Coca
paste producen try to sel1 it few hours afier manufacninng. for if it is kept for many days.
the substance's weight is reduced. In a c h taritory dominated by one boss there are tu-O
kinds of buyers: independent and conttacted. Independent buyers operate their own
business: contracted collccton w r k for commissions. avrnging about 100 dollars per
w c k . Coca paste manufacturers rrsist doing business with i ndependent buyers. because
they demand more money. Furthemore. if independent buyers pay bsner prices than
official buyen. conmcted collrctors cornphin to their bosses. Their bosses get rid of the
unfair competition. Independent buyers can continue their operations only by paying the
same prices stipulated by the Iocd organized group.
Fluctuations in pnces are functions of international demand. prexnce of organized
crime. p o k s conuol. and distances to shippinp points (airports). PrÎmarily. Peru supplies
semiprocesseci cocaine to the Colornbians for refining and subsequent export to the United
States and Europe. W e n the bosses in Colombia send the more cash requesting greater
mounts of coca pane. the local boss authorizes raising prices. ?rrgumrnts for stipulahg
ne\v prices c m be attrîbuted to the saturation of international market or heat~ competition.
Organized crime stipulates pnces based on seniorïv in the territop. Like other Iegal
consumer commodities. coca paste market vaiues add expenses such as human labour
required for trampormion the use of secret routes to mislead police. and other
unespected espenditures. Besides being heat'iiy concenmed in drug terminai towm and
using regdar transit roads. coca paste dso moves through villages and communîties in the
hi~ghlands as it proceeds on its way to national and Ïntemationd markets.
51
Two kinds of people are involved in the local aaffcking of cocaine. The smail
trader rither buys coca paste at the first stage or goes to the jungle to bring paste to tovms
kir r ~ ~ a l e to wholrsale dealers. The second rype of dmg dealer is the locd middleclass
public employer.. T o m wholesalm always have the mal1 traders in their power. in that
they lsnd monq at high interest or pal lowcr prices arguing an oventock. Smail traders
art. the besr consumers of the services available in the coca pane terminai sertings. In the
second stage. commercial movrment of coca paste is almon completçly open. Everyone
know who is who in the business. and it is not rare to 0bsen.e local and non-local smdl
dealers \valking around with their saddlçbags hung ovcr their shouldrrs.
Coca paste from die second stage goes to the national market via surface
transportation. Buses. tntch. and private cars cmy the drus declarïng it as food king
transponed from coca production zones in Cuzco. .Ayacucho. San Martin. Huanuco and
La Libcrtad ro Lima and other cities on the CO= such as Piura. Tumbes. Trujillo. and
.-lrequipn among othrrs. whrn is chrckrd bu the t.raffic police stations. In theop. these
stations are responsible for searching for cocaine in the vehicles travelling the route.
Ho\vever. it is an impossible task for feu- policemen to do more thm simply check
personal identifications. detain suspects. or accidentally discover smuggled coca paste.
Smugglers and dealers have their o m w y s of finding their way out when passinp these
controls.
In these urban cîties. some se11 theu produc: to cunomers or people to whom they
u-ere recommended, and some are caught by police,
Important reasons for brin~bing coca paste to the market in the cities are to satisfj-
indi~jdual consumption and to supply it to refming laboratories. Slums and shantytovns
52
arc idral senings for cuning. packaging. distributing. and rtnablishing smoking areas. It
t d s s unsuspected roads and routes to international markets. The mon outstanding feature
of disrri bution and marketing of coca paste is its retum to the jungle.
2.1.3 .Crmcrure und Dirision of . Luhour
The underground nenvork is a rigid hirnrchy. The people who participate in the
national and international underground economy are oqanized and labelcd according to
production. distribution and marketing of both the coca paste and the cocaine
hydrochloride. .Ar the top of the p y m i d is the boss of the operation who is its link to
international organizations. He is always knom as a "coIocho". a nickname used in the
jungle to dçnotr a Colombian but which in the cocaine ind-. simply rneans someone
associated with the processing and trafflcking thar is cenrered in CoIombia However. this
does not m m that the t&ic in cocaine is totally controlled bu Colombians. Many
nationals from other Latin .4merican countries are connected directly to the United states4'.
Xnother social Ievel that is widely used in Peni and that carries recoc&tion. respect.
and prestige bxed on economic power on the Iocd and. to some elqent national Ievel is
the word "narco". A narco alwq-s has an investment in one of the sectors of the economy.
His Iqal activity is to incorponte narco-dollars into the lgal economy and thereby to
participate in rvery aspect of national Iifr. a phenornenon knom as bleaching cocaine
money. Moreover. a narco may be a jungle crime boss who is stipulating pnces and
conuolling Iocd population and to those who Iive in the jungIe. the boss is a shadow~
tigure h o w oniy by his code name. Other o u p s structured around the participation in
the iIIicit economy are the pick-up men: IocaI bosses or patrones: runners, or coI1ectors
53
of coca pas7s: and transporttition and securic support staî'f msmbcrs.
The pick-up man. or "bag man". coma in an airplane to transpon the merchandise
ro Colombia. The plane is loadrd with contraband such as watches. appliances. liquor.
m s . etc. The pick-up man and the pilot are the ody occupants of the srnaIl plane. Fuel
supplies and the size of air fields and planes are drcisive factors in Ianding. Becciuse some
srnaII planes do not have the fuel capacity to cross the borders they o%en rehel or leave
thsir Iorids at points where sevml Ioads are colIected for tmspon in large planes.
Commrrcid. private. and air force airstrips are sometimes used with the cooperation of
compt officiais. Although the communication with Colombia is criticai. because of tight
control. new methods and routes of transportation and communication are developed
constantlu. After landing. neithrr the pilot nor the pick-up man leave the plane. The
operation is so well organized that from landing to departure takes Iess than ten minutes.
The delivery men c a F a Full load of coca paste to the plane where also bodyguards and
two or threr gunrnen position themselves on the ground w i h their fingers on the aigger.
and there the? stay until the plane Ieaves with the merchandise.
.-lnother important member in the organization is the patron. who may be a colocho
or a narco. A person with an enviable liféstyle. His residence is full of Iuuuries. Color
television sets. home video equipment and imponed liquor are very common place there.
In towns and villages. the patron can eat drÎnk. and entenain his Fnends mithout any cash
in his pockets. .rIthough his involvement in the dmg business makes him seem Iike a
dangerous man to many local t o m people. he acts lke a gentleman and a humanitarian.
He helps the poor and rnakes sure that his b o d y g d rhrow out crooks that are either
disturbine the commimity or ~spec ted of king agabt him.
54
Continuing down the structure. the organization presents a group of people known
as runners or collectors of coca paste. Drpending on the number of r tmer s and pick-up
tliphts. the patron _nives the runners cash to buy coca pans. The range of maximum
nmounts collected by the m e n is between 50 and 100 kilos. h o cash the range is fiom
$50.000 to 5 100.000. The coca paste collecter gets a commission of about S50 to S 1 O0 per
assignmenr. which takes fiom three to five da?^.^'
The lowst people who handle the coca paste are the delive? men. The- are mostly
unernployed rnizmts and highland peasants who tmspon the dmgs for extra income. In
their regular actit.ities they m e be coca Ieaf piclers. hiph school srudents. teachcn or
;tny person who tvants to makr more money. depending on distances waiked or skills.
They deliver the illegai gmd to consumer markets and retining Iaboratories. The' are
inrennediaris between selirrs and buyrrs of coca pMe or couine hydrochloride. The
seller rnay br a producer or a dnig deaisr. the buyer may be a coca pane or cocaïne rerailer
or both. or a national or international wholrsaler. In addition given the kinds of goods
tmsponsd and the risks f a c d their wages are v q iow. The average pay for a delive-
job that takes from three to five days is U O to 560. or the cquivdent of NO month's wonh
of minimum sd-.'"
.As we c m see. the illqal trade generares a variety of occupations and activities that
support both legd and illegai econornies. Moreover. the underground economy helps
maintain Içgd industries that producs materials for the preparation of coca paste and the
manufacture of cocaine."
Estimation of the cocaine industq-'s size and profitabilin. coofronts the problem of
continuous innovation wïthin the industq- itseif. Narcotics enterprises in the 1990s are
55
more dynamic. evolving, and increasingly efficient. As Iaw enforcement pressure has
increaxd. production techniques. s t o q e technologies. and smuggling mategies have
improved commennirably. For i nmcr . some cocaine laboratones now are equipped with
chsmical recycling and recoveq. plants as well as with vacuum-packing facilities and
microwavç dry ing ovens. Smuggling methods continue to advance and to pro1 i ferate.
Drug-rnftickers have extended their smuggling reach by buying or leasing cargo planes.
includinp jets and turboprop aircnti: smuggling aircraft today m q carry one to six tons of
cocaine comparrd to 4C0 to 500 kilo:-ams in the 1980s. The sheer vari+- of vehicles that
modem smuggling ux to move bulk cocaine shipments such as cargo jets. maritime
containerized cargo. tractor tnilers. camoutlaged srnail boats, and even semi-submersible
vcjsels. represents a new considerable challenge to lawv enforcernent officials".
The matia organintions and the coca lobby connitute whar might be called the
cocains constituency in South .\merka counuies. These orgnizations intepte a m g e of
rictivities. arc multinational in scope, and command substantiai technical. financial. and
huma resources. This indmry is relativrly conccntrated and the actors cooperate on both
strategic and operational maners. In general. the mafia's mucme. capabilities. and
methods of operation convey the impression of s-en-@ and resiiiency.
2. I . 4 CC.7tat does Cocu Ufer?
For m a v fimners in Pem Boliwia and Colombia coca is the sole cash crop.
because it v,Cfers wvhat is in man); respects the complete package for fanners. .Utho@
market conditions vary. coca is ~picalIy much more profitable than licit cash crop in Pem
Bolivia and Colombia The hi& protits associated wïrth cuitivating the pIants mean that a
56
tàrmer who wants to start a coca farm cm obtain tinancing, krtilizer. seed and even
technical assisace frorn dmg tnffickers or their intemediaries. The plant is easily
cultivatcd and seems to tlourish in agronomie and clirnatc conditions that are unsuitable for
most other crops.
Statistically. according to Perds Andean ~ e ~ o n ' ' . a coca f m e r in the Upper
Cluailaga Valley could earn a maximum gross income of S 12-30 per hectare per year 1990:
of this sum- 60 percent was protlt. .A coca farmer's net per hectare earnings were ten times
thoss of a cacao farrner and ninsty-one times those of a rice f i e r . -4s it $vas shown in
Tabte 2.1.1 .g. prices of South Xmerican coca I d have dropped siyificantly €rom their
pt-ak levrls. primarily because of the overproduction of leaf and intensified enforcement
against cocaine tabontoties. However, coca yields rehively quick retums. Coca c m be
hanrsted 18 monrhs afier planting. Many aitemarive cash crop. for example. oranges.
rubber. tea or cotTee require 4 years or more from planting to the tÏm h m e n In m.
coca cultivation presents a very superior cash tlow option for Pmvian, Bolivîan and
Colombian fmsrs.
Within the area of coca cultivation some lands are more marginal than others. The
tlat alluvial lands dong the river. which are suited to growing traditional crops contrast
~v i th the humid j ungie hillsides. which are not. Farmers in some cases may have shifred
Imd out of food production like rice. bmanas. oranges. and the like. into coca
cultivation. Data fiom the USMD project in Peru indicates that the net income per hectare
for coca was si~gificantiy higher than mon altematives (see Table 2.1 .-La). The net annual
income per hectare for coca is h a t e d to be US$ 1178. compared to USS 156 for
traditionai crops?
Table 2.1 .4.a: Pem - Estimate Net Annual Incorne. 1994. Coca and Legai Crops
L h i k citrus and pineapplr c m match thesr returns using ûdvanced technologies and
optimum conditions. the cultivation methods for these crops are much more sophinicated.
and the initial invernent costs are much higher. In the case of pineapple. the initiai
invatment is 4 times that needrd for coca. Crops such as mancuya and paim hearts are
çrops which iur now being gown only on a limited scaie but because they have relativeIy
thin markets. substantiai increased production is likely to Iower pnces and economic
Crop
retums.
Compared to esotic products with uncenain markets. coca produces quick yields.
wncrating enough cash to repav the initiai invmment In addition. coca has a hi& vdue C
to weight ratio and presents tèw handling pro blems for f m e r s . Coca can harvested at any
timc. and the laves dned and stored until collected. Crops such as bananas. citrus and
pineapplc must be picked when ripe and shipped on time. Remotr areas are not natlnally
the b m areas for grow-Ïng these buiky commercial crops which are a h e d at urban and
esport markets-
1.178 330 920 308 89
463 I 56
L
Coca Pineapple Mancuya
Citrus Fruits Bananas
Palm Hearts Tnditiond Crops
Initial Investment ( UsSIha)
Source: USA ID. Alternative Developmcnt Projea. Lima 1994. p. 2. Nct .-Innual Incomc r'tciudes initial invesrment cost.
1
1-1 18 1.635 2.936 2,565 643
1.898 617
Net Annual income ( USSfha)
.A constrriint on developing protitable alternatives to coca arises fiom the relative
distance of the regions that produce the plant. Such regions are hundreds of miles from
urban centres and are not connectcd to them by roads or commercial air transport. Pem's
Ilpper HuaIlaga Valley lies 400 to 750 miles from the capital. a ten hour drive from Lima
to the closest city (the t o m of Tingo klaria) at the southem end of the Valley.
Distance c m increase the required cost to ship cornmodities to market and in the
coca growing region of Peru. Bolivia and Colombia these costs are likely to be very hi&.
Consequçntly. peasants find themselves at a comprtitive disadvantage. If cocaine indusuy
dots not operate as an efficient enginc o f economic progress. it still provides an escape
tiom poveny and misery for man)- inhabitants of the h d e m world. Moreover. for rurai
dwAlers especially. the cocaine indus- offers 3 kind of ins~ant introduction to modem
tifest>-le. For these reasons. it is difficult to imagine h t coercive measurrs against
pcaants could evcr have positive results. Prasants producing coca have nothing to lose.
.As long m coca provides a famil? livelihood they will protect their coca crop at d l costs.
In this \\.a?. coca cultivation and cocaine traficking have created radicdly new
sspectations and aspirations mithin Andean socieiies.
2.7 The Socio-Economic Impact of ivarcorics in Pent
The following section wilI analyzr the effect of the underground dollar rconomy in
the Financial System. It also describes how cocaine production constitutes a sigificant
source of employment: the implication of coca chewing as a natural. social pnctice in the
.-hiean sociery. and their concomitant ecological and cost impacts.
Sarcotics money laundering has cvolvcd oover the last three ysars into an important
toreign policy as well as a tinancial management pri0t-i~ in many key financial center
countries. Thesc prioriries are retlrcted in vinually wholesale changes to laws and
rrguiations. as well as improvsd cooprrration. T h s e changes remit From a grow-ing
international conviction that h g uatficking cm not be hdted unlcss ws deprive traficking
organimtions of their proceeds. as wrll as frorn a shared srnse of responsibility for halting
- - .. the production. traffxcking and consumption of dntgs-- .
The purchase of state-own enterprisa. the acquisition of businesses by private
incestors. and the shift to Full currency convenibiIity al1 procide ample scope for financial
manipulation by criminai organizations associated with the illicit cimg industry. This threat
if ofien generalized under the umbrella term of money-laundering. Ttie intemationalization
of money laundering has been brought about by nvo factors. F i a the inrebmt.ion of
tinancial markets throt@ the IiberaIization uade @en by rnacroeconomic reforms into a
cornples. global entiv: and second the effort b- Mxcking to avoid deteaion by
concentrating operations in countrïes where dorcement is \veak and Iegislation is absent
60
Untortunate&-. many corntries fd l into this latter catcgory. in particular those cIassified as
emrrging markets. In becoming more internationalized. mons?; laundering is in tact
simply followhg the global macro-economic trend of Isgitimate goods and financial
services. It works to the benefit of the laundrrer in as much as it creates more scope to
move from one place to another. taking advantages of gaps in legislation and discrepancies
in regulato~. control.
The Financiai Action Task Force, established in 1989 bu the heads of State of the
Group of Ssven major industridized countriss. estirnates that approximately S 85 billion is
Iaunderrd cach year in Europe and the United States. The new shifi in tocus tow-ards
emerging markets in Asia and Latin Amenca raises concem about the nsks facing
crnrrging tinancid sYstems? Such risks go well beyond the mere recyling of illicit
revenues into Isgitimate enterprix an act which amounts to litde relative to the totaI value
of private sector capital Howing into devrloping counrries. With the trend towards
privatintion. the real danger cornes from the ability of dmg traîXcking not only to launder
funds. but dso to acquire portions of what constitutes a second-hand sale of global
proportions.
Most of the biIIion of dollars m e d bu cocaine tr;ifTickers stay abroad in offshore
heavrns such as the Cqman Islands, Barbados. .-ba or Panama or in investments in
toreign real estate. securities. and business. In Peru. according to the -4nti-Narcotics
National ~ureau-DINANDRO". Reynldo Rodripez Lopez a nafficker who was a
trusted adviser to Pem's top police officiais. owned a me1 agency that m e d as a cover
for his cocaine srnuggIing operations Similady. other Peruvian rraRickers who were
çapnired in the 1993-95 perïod such as Dernetrio Chavez Pefiaherrera Umberto .Ammaturo
61
Rochino. Cachique Rivera and Tijero G m h . convolled nationnide and through
intermediaries real estates: cattls ranching: commercial stores (wholc sale and retail):
lusup rrridences and condominiums (mostly in Lima and Tingo Maria): services and
recrearion (gymnasiums. hotels. restaurants. and discotheques ): small light aircr;ifts and
I u s u n c m .
Once cstablished in the legitimate domcjric econorny. dmg tratlïckrn gencrally
have considerable frecdom: (a) to transport illicit goods undrr the guise of lep l
merchandise: (b ) to create new markets for who1esaIe or retail distribution: (c) to establish
or arrange for nrw sources of precurjor chrmicals: and (d) to launder even more illicit
revenues.
Wht'ther ~affickers invest their mon- at home or abroad depends on several
conditions in the source country: i n v m e n t opporntnities. interest rates. politid
stability. and perhaps the most important. governent policy towards the dmg trade.
Pro tits that return or remain at home may add to the country's O tlicial resm-es or rnay
circulate in the underground dollar econornu. Due to the dificultia in derking an accurate
and precise figure for the amount of rnonry laundering. different esperts have provided
some rough &mate of the arnount of rnoney l a u n d e ~ g occmring in the country.
Unfortunately. the vast majori' of institutions lack d i c i e n t data to support any
credible estimate. The most comprehensive figures remain the resdts of the study
producrd by Macroconsult ~td.". which says thar of the approsimately 1.100 miIlion
dollars that the dmg i n d u , generated for Pem 870 million never entered the country's
financial ?stem due to capital ffight Hatf of the remaining 700 million dollars are
beIieved to have been im-ested in the Peruvian goods and sertlces industn;. while the
61
rcmaining 350 million dollars found their way into the lqal banking system. Other
sources. such the Centrd Bank. provides tigures ranged fiom USS 1.300 million to USS
2.000 million for the amount of money laundering during 1995. Moreover. odier experts
otTered data on sums seized pursuant to money laundering investigations or prosecutions.
Thus. somr of them were unable to establish the magnitude of money laundering taking
place. but as an esarnple could show that the Drug Enforcement Xgency in 1995-96. had
1.233 cases of money laundering proxcuted with a totd value of USS 1.61 billion".
FIowevt.r this information doss not support a valid estimate of the amount of tainted b d s
cntering the Irpitimate financial Stream. as it c m only be a srnaIl percentage of the total
nmount of proceeds of crime because most of the money laundering taka place in different
tinancial markets. involving criminal organizations worldwide. through wholesale and
retail channels.
Uhen viewed in terms of macroeconomic indicators. the impact of the illicit dnig
i nduse on (i producer countrfs vade balance such as Peru tends to be positive for the
simple reason that esports of i l l q d dmgs gencnte inîlows of foreign eschange. This is
precisel>- the reason why some andyns have the assumption that any producer country
benetïts tiom illicit drug exports. 'lamely. the monry is not ailocated to investments
~r-hich are considered productive ttom the aspects of economic developrnent but are placed
in the balance of pay-ments to be part of the payments for the senicing of Peru's extemal
drbt. Hoxever. there is no etidence of nich opedons because as nade in illicit drugs is
not recorded bdance of paqment variations c m give only indirect ches as to the size of
the trade and its impact.
Cocaine money aiso brings in10 the industry money brokers who spread cocadoIla.
63
throughour thc country. kIonry eschanges travel back and forth through the cocaine towm.
collecting cocadollars and conccnuating thcm in Lima and. to somr extent spreading
them throughout the country. In addition to rnaking US. dollars available to the general
public- coca-dollar brokers send the American currency back to the United States.
Thsrefore. because of its underground roots- it is sstremeiy difficult to know or estimate
the amount and proportion of cocadollars that remain in P m or leatave the countryh0.
Banks otfer 3 \vide nnge of tinancial products and hold the larges share of the
tinmçiai market. and accordin& the services tht'y provide are widr1y used for moneq
laundering. However. non-bank tinancial institutions and non-hanciai businesses are
hecoming more attractive to these brokers for introducing ill-gotten gains into replar
hancial chmels as the anti-monsy laundering rrgulations in the Pewian banking sector
becorne increasing effective. Some delrgations continue to report a sipifÏcan< shift in
laundering activity from the tnditional banking sector to the non-bank financial sector and
to non-iïnancial businesses.
Among the most generai esampIr is that in the capid city. circuIaûon of coca-
dolim h3s become wide open. Since 199 1 - dozens of new money-eschange offices are
oprned in donntown and middle-clas sections of Lima In particular. Lima's financial
district is tlooded with US. doltrirs, Hundreds of drdsrs holding th& calculators and
bundles of doI1ars and soles deal ttith pasers-by . Tomists. businessrnen. and others who
needed to buy or sel1 dollars wouId go to these sreets of Lima
This bureaux de change. exchange oftices or casa de cambio pose an ever more
sigificant money laundering threat. niey offer a range of senices which are attractive to
cn-minals: (a) eschange senices which c m be used to b- or sel1 foreign cwencies. as
64
rvell as consolidaûng srnall drnomination bank notes into I q e r ones. (b) exchanging
tinancial instmrnents such as travelers cheque. money orders and personal cheque. and (c)
telegnphic transfer tàcilities. The cnminal element continues to be attracted to bureau de
change because they are not as htrviIy regulated as tnditional financiai institutions or not
regulatcd at ail. Even whrn regulated the bureaux oîien have inîdequate educarion and
interna1 control -stems to guard against money laundering. This weakness is compounded
hy the tàct that most of their customers are occasional. which rnakes it more difficult for
them to know their customer. and thus makes them more tulnerablshl.
.-1s anti-money laundering regdations is consolidating in the national financial
sector. the cnminals place increasing reliance on professionai money laundering
facilitaton. The experts reportcd a significant number of cases involving Ia\\yers.
accountants. hanciai advison. notaries. xcretaial companies and other fiduciaries
whox services are emplo~ed to assin in the disposai of criminai profits. . b o n p the most
comrnon tactics observed have bern the use of solicitors' or attorneys' cIient accounts for
the placement and layering of fwids. By this method the launderer hopes to obtain the
advantrige of anon>mity. through the solicitor client privikge. n i e making available of
bank accounts and the provision of profasiond advice and serc-ices as to how and where to
launder criminal money is IikeIy to increase as countor measures become more effective.
In addition to the use of shell cornpanies. there \vas dso wvidrspread use of real
businesses in Peru. to camoutlqe the ilIegitimate laundering of money. Techniques used
in conjunction wiith these businesses included fdse invoicing. commingiing of Iegd and
illqd moneys. the use of Ioan back arrangements and Iayers of transactions through
otrshore shell cornpanies. Often the Iaundered proceeds dsvould then be invested through the
62
r d Company into real estate or other businesses. though one country reported that there
\vas a trend away from investing illegai proceeds in reaI estate. and into i e s visible
in\rstments such as financial businçssd'.
Drug trafficking remains the most frequently mentioned sources of illegal proceeds.
Sou-adays. in the 1990s. drug traficking is sri11 the largest single g n m t o r of illegal
proceeds. Banks and bankers are compeflçd by due diligence conventions and other
sanctions in nurnerous countries to accept responsibility for ensuring that their institutions
take affirmative steps to prevent narco tics money laundering. We belirvr banking systems
in many k q - countries are less ~ulnttrable today. at least at the placement stage. thanks to
the adoption of new laws and banking regdations.
1 - 2 2 .Yo~iO_Demo,~t.uphic Impucf
Traditionallp in Peru. the indigenou population of the Andean region were always
rissociated with their habitua1 coca-chewing. This traditional sociaI and c u 1 W practice
has changed to more sophisticated and addictive behaviours. Cigarette smoking and
dcohol abuse are probably stiII the most serious health hzards and social problems
atTecting vaditional and modem societies alike. But another. coca paste smoking. has
appeared in Peru and some Latin .;\mencm countries. Wlile production coca paste and the
retriiling of "ketes" (in the 1980s. coca paste \vas retailed under this name). have created
an cconomic dependence and caused iinlationq prices. they have also brought about
physicai and psyhologicai dependenceh'.
Beside econornicaIIy supporthg the undenvodd the highland peasants undergo the
socid consequences of using coca paste. Their trend of coca-chewïng. especiaily among
66
Young male p e m t s . is now changing to the ux of coca paste. that is to a more addictive
and dangerous habit.
Bcsides the obvious availabili~ of coca paste. there are two main reasons for the
consumption of the substance in the jungle: sconomic and social. In the jungle. food is
cspensivr. Since the cocaine entrepreneur has ro provide the peasant with food during his
srnployrnent. it is to the entrepreneur's advantage to keep production espenses low by
lettiny his workers consume coca pastr. Sociûlly. the .Andean pesant is used to workins
under the srimulation of coca and is aware of the social impact that has been attached to
cocri-chswi ng.
The most damaging effsct of addiction io dmgs is the selfdestruction of hundreds
and thousands of children who enter the dnig subculture vrry w l y in their lives. Statistics
from population surveys have shown that smoking coca paste begm tvhen children Lere
ninr or ten years old. and across the board. they have been smoking coca paste for one <O
t k e !cars. The ounger addias usuaily get their daily dosages by ~vay of homosexuai
senices or eschange of sexwl gratif cation. Son-addicted homoxxuals and heterosexuals
aIso traddr coca paste for the same purpose?
The illicit h g trade brings with it drug abux and a hon of other social problems.
.-\vailable cvidence. thouz& suggest that consumption of cocaine and other drugs is far
Iess widsspread in Latin America than in the United States. In Colornbia for instance, a
1992 study commissioned by the National h g Directorate showed that 1.4 million people
(4.1 percent of the population) had conntmed at 1- one illegai h g at some time in thek
Iives. In the United States. hoviever. Iifetime h g prevdence is 77 million or 3 l percent
of die LLS. population. Comparable tÏ-mes for cocaine are 34û.000 (1.0 percent of the
67
population) in Colombia and 23.5 million (9.4 percent of the population) in the United
States. In Prru. accordinp to the NE[. lifctirnr prevalence as of 1995 is somewhat higher
than Colombia ( 1.5 percent for cocaine and 2.9 percent for cocaine paste). Such nurnbers
are still much loiver than those in the U.S. in Bolivia a study by the National Directonte of
D r q Prevçntion. Treatrnent Rehabilitation and Social Reinteption found that only 1.2
percent of the BoIivian population had used cocaine paste as base at some time in their
l i s . Uhilr current ntes of use are Iow. it is Iikiy that the continued presence of a well
de~eloped illegid cxpon drug industq- will rventudly focus on dsveloping domestic
consumption. and usage ntes are likely to rise in the future"'.
Therefore. the Upper Huallaga VaIlry. the region of great concem due to its
important cocaine indu-. has had a very signi ficant increase since 1 940. This increase.
nevcnhslrss. has not ken homngennus al1 over the valley. Overd1 population gro~trh
thcre has ben higher than the national average as c m be s e n in Tabie 22.2.a. But if we
malyze the g o u h rate according to two clusters of places. the t'trst localities amund T ingo
XIaria and the second one around Cchiza. things change considerably. For the tirst cluster
ive h d a dsscending dthough higher than average growth rate since the period 19404960-
People got to those places especidly between 1930 and 1970. as part of a migraton; wave
to a very promising region, bien in the second part of the 1970s the coca boom bqm at
the same time that a very severe sconomic crisis. the duster became an important point in
the development of the cocaine i n d q . Rqressive policies that included forced
sradication. simple substitution schemes and sheer force. pushed the whoIe production
systern in the direction of Tarapoto and created the second cluster. Indeed it is very clear
that population growth rates are ascending for that cluster and get to an d l Mie hi$
68
hst~vren 1982 and 1990. This corresponds with the period when the insurrection of Shining
Path devrloped and probably the cocainr indus- and the subversive movement combined
in creating the big mizptory \va\.s that corresponds to the last Fears.
.-\bout 80% of the urban population is concentrated in Tingo Mansa Uchia
Tocache and Nuevo Progreso. One of the moa important fea~ires of the area's population
is that almost 90% of it is made up of people who amred there recently and followed a
cofonization pattern that run from south to north in the direction of the construction of the
marginal highwq. a project of former prcisidrnt Fernando Belamde.
Table 2.2.2.a: Population and Population Grouth Rates in the Lpprr HudIaga Valley and Two Clusters Within tt
1 940 1961 1972 1982 1 990
This colonkition was. as noted. promotc-d by the mte- but without any senous
planning beyond noting the region's dsvelopment potentid. Mon of the mibgrmts came
from Pent's northem h i ~ ~ a n d s . in a disorganized and spontaneous way. The sertiers'
motivations included xcuring land obtaining jobs and Iess fiequentiy. fàmiiy ties with
colonists who were already there. In some of the sunreys undertalien in the region
marginal road construction and mibption trom the Andean -on coincide w3.h the failme
69
Total
Growth Rate
Cluster 1
(Tmgo Mana. Progrwo)
G r m h Rate
Cluster II
(Juanlui. Tocache.
Bellavtsta. Sion.
Uchua. Pachza)
Growth Rate
71.832 124.454 185.094 241 .O1 1 313.090
2.60% 3.70% 2.90% 3.00%
2.6 19 24.475 55.631 31 241 112.988
1 1 20% 7 80% 4.20% 3.70%
8.882 20.712 36.605 54.231 109.179
6 70% 6.80% 4.30% 9.70% J
Source: Innituto Nacional de Estadistica e informatica Peni. Oficina de Estudios Derno@kos - Sociales. Repone Anual. 1996. p. 17.
of the miIitq- govemment's agrarian reform policies and the lack of opportunities in the
citie?'. Some of the newcornrn were second time migrants who. disenchantrd with city
l i fe. hit the road for the jungle.
Cleariy. the govements in the past nvo decades actsd W-ice: first promoting. via
road construction and a certain initial organizing prcsonce: then disappearing, leaving a
sort of gate used by a disorderty migration tlow in ssarch of opportunities. one of \vhich. if
not the most important. is the coca indusu'.
Two additional factors have intluencird the shiîi tiom Iqal to illegal crops.
incIuding the purely economic hctor. On the one hand. cultivation \vas based on field
rotation more than on crop rotation. This. of course. promotes displacement and
instability in the relationship between the peasant and the soil. On the other hand, the Iegal
system that regulated land tenancy \vas cumhsrsome and inefficient so that obtaining a
property title \vas nearly impossible. But s titls is needed in order to receive a bank loan
credit and technicd assistance. so that illsgal crops xere a naturai and drnost
understandable option for mmy of the settlers. most of whom were aîyectsd by the lack of
Iegal stability. Of course. those that cultivate illirgd crops are by definition excluded fiom
ml- -stem of national or international cooperation. In other ~vord. it is a vicious circle.
The most recent initiative as was mentioned before. promoted by the current goverment,
intends to change that situation by gven legd tities to the farmers. From that point a
progressive substitution scheme uith intemationai nippon wodd follow ( Dmg-traficking
Smtcgy Enforcement 1990)". LVith this register. it becomes feasibk to promote
alternative crops and avoid a lxger tlow from rin;il regions into urban, wkch would only-
\\orsen the problems of Iow standards of living and unemployment .-Uso. it is possibIe to
70
ncgotiatr a crop substitution program and improve it over time. ..\n evaluation of the
progras of the program. t h d s to die land registlation and le@zation process. can lead
to the concentration of thé repression and Iegal tight againn the drug made itseK and those
that do not comply uith the crop substitution agreements. It cm also support the fi&
against the terrorists.
The drug vade has had a nqatiw effect on the grnenl qualit? of life in affected
countrirs. and panicularly in the Andean producer countria. have contributed to a hi&
Iwel of social violence. Drugs are associated with the de~ndation of the judicial sector
and with the increasing inefTectivençss of the coun systems in resolving civil disputes. The
cocaine ethic also has diminished the mord basis of the society. spewing corruption at al1
IsvsIs. and increasing the incidence of kidnappings and Street crime. These sociai costs
c m also have a direct economic COS. in terms of reduced Iabor productivity. increased
çosts for crime prevention and securityhx.
In analyzing the socio-demognphic phenomrna generated by the coca boom in the
high jungle. we End characteristics that are not unespected in a country Iike Peru, or for
that matter in a region where sudden economic sxructural reform is undertaken: lack of
continuip- and planning by m e that at fm grnerates expectations. This is followed by a
lack of authon-. institutionalization and suppon which are compensated through
unorganized but vi_oorous illegai forces that do not abide by the des.
.An important direct con associated with the dmg mde is the con of enforcing the
drus 1au-s. prosecuting drug kingpins and implementing demand reduction via treatment
and prevéntion pro-gams. Peru's national cimg budget is about US$ 2 billion this year or
about 3.4 percent of Peru's GDP? Of thÏs amoünr alrnost 90 percent is allocated to the
72
Ministn of Defense and the National Police. for crop cradication and counter-traficking
rictivitiss. while the rernaining amount goes to the Ministries of Heaith and Education
~vhich share rrsponsibility for fighring dornrjric dnq addiction. D n g control efforts are
ve? cosrly. Thus. the Andean countries bsar a rrlatively hi$ cost for sudning efforts
againsr drug production and drug ab=- and these etforts divert resources from the
cIswAopmsnt of other parts of the sconomy.
The most imponant part of the prognm is that it should adopt the point of virw of
the poor. creating institutions which support their efforts to attain the nght to their
property. theretore integrating hem into the Iegal market fmmework. I t aIso becomes
possible to establish the presencc of the sate in the coca production areas as a legitimate
authorit?. and source of alternatives for the millions of peasant land holders.
? ? - - . , . J C ïuZencr und Imtrgenq-
The impact of the h g trade on the Penivian politicai and socio-economical system
has b e n considerable as it is founded upon an alliance benveen leftist guemlia groups and
coca f m e n . Therefore. it is n e c a s q to rspIore this important cornplex relationship and
coIIaboration with the cocaine indusm.
The violence and insurgency pl-s a sicpifrcant rote in the Latin Amencan drug
rradr. The dnipinsurgency reIationship is the formation of political-militaq- enclaves
conuo1lc.d by tnffickers in aiLiance wïth Ieftist. revolutionan; groups. This means that the
iùnding and equîpping of terrons activities are accomplished by involvernent in h g -
relatrd activities that may include the production and e'rport of narcotics.
it is in this scenario that the Shining Path a tefi-wing perri1Ia movernent emerged
72
in May of 1980. The initial focus of the Shining Path's terrorin acts \vas the city of
Ayacucho. where socioiogists. anthropoIogists. philosophsrs and students at the
Lkiversity of Huamanga incited both Young mestizos and peasants to attempt armed
strugglrss against the government. Ihç moving forced behind the Shining Path's creation
\\.as .-\himael G m h . a philosophy proksor at the University of Huarnanga. Noting the
striking cIas differences in the society. G m h concluded that as Peru approached the
twenty-t?st centuy it was stiII a semi-feudal and semicolonid society. Moreover. the
covrmrnent rmbodied a fiscist structure masquerading as democncy and engaging in the t
construction of a corponte stats and the dsvelopment of bureaumatic capitalism.
Guzman's politicai ideology was predominantly Maoist. As such- Guni51-1 held that the
social reform could be had only by making revolutionaries out of Peruvian peasants for the
purpose of ovenhrowing the es~ahlishsd govemrnent.
The Shining Path first c m e to widespread public attention after a Full decade of
dogrnatic selksarnination and rigorously selective recruitrnent. The violence against the
government began in July 1980. and by the end of the yçar some 2-10 incidents had been
recordrd including the destruction of local txx records. bombing of government offices.
and sabotage of elecnical pylons. By 198 1 the rate of incidents had increased cvpanding
to such activities as the raiding of banks. mines. and the police posts. Kidnapping and
amcks to offices and personnel associatrd with the madication of the coca plant and control
70 of the production and aafficking of cocaine ws added the following year .
In the jungle. uniike the rest of the country. no banks. schools or power plants
hm-e bem destroyed. Such ternorisr acts would have affected local h g econornies more
than the nationai economy. Cities that provide consilmer go& to drug-producing areas
73
hws not besn targets of any kind of swious terrorist attacks so far. whereas other highland
çitiss and towns whose economies are not based on cocaine have attracted the Shining Path.
bforeover. i l thr Shining Path rvcre politically important in towns and villages producing
dmgs. and if the rnovernent were supponed by organized crime. thrre would have been
on&- spondic attacks. Both the highland guerriIlas and the cocainc undenvorld have been
more organized and better equipped than the national 3rmy in the ma- ' .
Most of the victims of the drug trafickers' iinacks are police intomers. policemen.
and mernbers of the armed forces. They set fire to encampments and offices. torture thrir
victims and chop their bodies iinto piecrs. put thsm in plastic bags. and dump hem in the
wods or throw them in the river. \%%en the' ger their hands on people the? want very
hadly. they beat them up and han, them with wires. puning s i p s on their bodies w-hich
rad. "This is the wvay infomrn The drus traI'frckers communicate and organize so
quickly against poIice raids. that man- law enforcement officers are more concemed with
thsir own sun-ival and Iivelihoods than with law enforcement hnctions.
The idrologicd politics of the Shining Path becmc most evident in the focus of its
tsrronst activities during 1986. In southern Peru. the Shining Path guerrillas capnued
plantations and haciendas. sometimes kiIIing their o w m r and employees. and distributing
canle. sheep. alpacas. and other goods to local peasants. .-\ state of emergency, with
conaitutional _ruaantees in abeyance. cxisted in drnoa nvo thirds of P e n af5ecùng half
the popuIation- Moreot'erer the Shining Path \vas beIieved to have tielded some 5.000
guerriilas and 500.000 foIIowers nationwide-'. - The Shining Path has acted with a combination of what codd be called tacticai
simplicie and strate@ sophistication. Since the \var e-an in 1 980. it has had long-range
coals and mid-range goals. and has taken immsdiate. specifc action. dl carefùlly and - crntrally planned by Grni in.
Shining Path has imposed iwlf in some regions of the .Andes through sheer terror
with linle social support. n e Upper Huailaga Valley is. in that sense. an ideal setting.
Statc control is almost absent. and when it is prexnt it brings contlict. repression and
corruption. The drug tnfickers represents violence and sconomic esploitation. -4s we
have rilready seen. the psasruits. poorly organized and lacking social support systerns. are
mistreated bu cvepone. The Shining Path protccts the coca cultivators. regulates their
dsalings with the trafickm. harasses the fsw people who represents the statr and defends
coca cultivation against international and national eradication prograns. In other words.
the Shining P a h has established a Iegitimacy in the region that it has not been able to
ric hiew c 1 sewhcrre. The latest antidmg mtsgiss ( mi litanzation oFthe antidrug efforts, via
the -y). suit Shining Pathos ideology pex-îkctly ris the contlict t k s s on an international
scope. The coca growers would bc at the crnter of the KU of national resistance against the
. - b e n c m efforts to take the Peruvian peasants livelihood away tiom them.
Dntg traf'fickers and Shining Path gurrrillas represent two totalIy different socid
movsments. Drug uafficksn are members of an underground social organization with
purel? rconomic interem-'. The? are d l y consen-ative and s~atus quo-onented. They
do not have an? ideologicai and emotional identification with national problems. The
Shining Path and other politid groups. on the other hand are d l ? seeking to radicaliy
uansform k i r respective socieùes by overthrowing their govemments and impiemenring a
re~oiutionaq nets- order usually bassd on an offshoot of Mar?ust-Leninist iddo,--.
Hundreds of people in both the hi&Iands and urban areas did join the p e d i a s . For them.
75
there was no other way to express the tiustration. povaty. rnisery and abuse esperienced
in the country. For this reason. the highlmd Indians and pe;isants directly or indirectly
have supported the rural guemtias.
The narco-terrorism link. however. apparentl? deteriontes in the downstrearn
phase of the cocaïne induse. Cocaine dealers and guenilIas cornpete bitterly for territory
and resources and for control over the coca growïng ptrsantry.
Giïcn this patrmi of contlict it is not surprising that the Pemvian sociologist
Gustavo Gomti suggests that drug dealers can develop certain forms of coopedon and a
tacit alliance with the state. From the state's perspective. after d l . guemllas pose a greater
strategic threat than the cocaine industry.
Sonetheless. powertlil groups related to drug nafficking have cvolved in the pan
feu years. The? have tned to intiltrate and convoi society and influence politicai parties.
Tu-O csmplrs corne to the mind: between 1975-1 980. dmg traf"ckrr Carlos Lanberg
built up an intluence nenvork during the last yrars of the milita? goumment. He
intluenced leaders of the Ieft-of-center .VRA Party which everyons thought was shed to
\vin the eiections f i e r the r e m of the military to thsir barracks. Lmberg contributed
genrrously to the .QRA politicai campaign in 1980. .After the riectoral drfeat *RA
undenvent a renewd that saw .Alan Garcia a Xoung and largely unknow~ politician, rise
to pom-er. From the Garcia focused on the presidencq-. which he achieved in 1985.
Xnother example is ReynaIdo Rodripez Lopez an obscure accountant who. berneen
1 980- 1 985. built up a nenvork of illicit activïties tied to drug tralticking protected by the
highest ranking police oficen during Fernando Belaunde's second governent between
1 980- 1985. Con- to Colombia however. once drug tratEckers are exposeci. the? and
76
their oganizations tend to crumble. The two centrai figures and mm? o t k r s are still in jail
and attempts to liberate them haw met uith svong and effective opposition fiom the
poiitical establishment and frnm the press".
These two aspects entertain with civil society diverse and ambiguous relationships.
.As for production. there are more and more doubts about the intelligence of treating the
coca f'en as criminals. ahich only makes the Shining Path. the most real and important
danger to the country's integnty. stronger. Thnie statr should accept the Iegitimacy of the
coca fmcrs ' organintions and design with them alternative devrlopmcnt plan. .As for
dru, tnfickrrs. les powerfui in Pem w d Bolivia than in Colombia. for esample. the
prob1t.m is one of corruption. The? are capitdist entrepreneurs that do not uant to be
bothcrcd b? the sa te and should be vigorously sachcd for and enprisoned.
Drug tnitficking is. indecd qnonynous with corruption, To cite an example: in the
Cpptr Hurillaga Valley. in the Juiy-.Aubpst of 1988. as well as in other years.
traîtickers reportedy paid SIZ.000 in bribes per shipment of cocaine base flown out of the
C'dlsy- In one recorded case. S5.000 \vent to the Iocd mi1im-y cornmanci. SS.000 to the
Iocd contingent of the nationd police. and S2.000 to comlmity o~anizations affiliated
direcrly wth the Shhhg ~ a r h . ~ ~
On the rare occasions when lading affi~ckers are arrested. they on b n i their way
out of custody on ihe spot Wlen &ckers do. in spite of evq-thing. land in jail. compt
judges or prison wardens rnay release hem Liom custody. For esample. one of Latin
.krmica's most notorious drug traffickers, Juan Rambn Matta Bailestores. escaped fiom
prison in Bogota Colombia by paying $2 million to each of his Cyards.'
There is a Iimit to the mafia's ability to p e t n t e and comrpt enforcement qencies: it
77
cannot buy irnmunity for dl its activities. Hrnce. the mafia needs an intelligence network to
supplcment the protection n e ~ o r k and provide advance warning of planned anti-dmg
operations such as nids on labontona. custom xarcha. and police nveeps. The nenvork.
consists of strategicall y placed in fomants in the bureaucracy . Sometirnes cocaine traffïckers
thernxlves occupy position of trust and responsibility. In P m for esample. the W ~ c k e r
Rg-nûido Rodnpuez Lopez \vas an advisor to the Director of the Penivian Investigation Police
uhilr rnainraining an office at the headquarters.
This intelligence capability hctions within a broader .stem of social relationships is
çrcarçd by the narco-mafia. Cocainr tdEckm am tnends and supporters mithin society by
spending money within the society.
Cocaine trafficking. as already noted. bu? protection from police. prosecutoa
judges. înb whrre necessu?.. the mili-. Timr magazine reporteci in F e b m 1985 that at
[ a s t 100 Colombian air force perso~el and 200 national policemen h d k e n dischargeci
becaux of drug connections. .AISO. -100 judges repottedly unda investigation by the
Colombian Attorney G e n d ' s otfice for allegai complicity in the trade?
CocaÏne aaffickers sometimes try to nvay ofticid policy by capitalizing on
covçrnments' tinancial problems. For esample. the Bolivian trafficker Roberto S u i k a in a - meeting with president Siles' narcotin adviser in 1983. offered to give the Bolivian
ZOI-emment S2 billion in four SjOO miIIion instalment to help pay off Bolivia-s foreign debt - Suirez according to accounts of the meeting n-mted the Siles governrnent to acknowledge
the independence of his cocaine trafickiq enclave. In eady I9W. a Pennian aafficker by
the narne of GuiIIemio Cardenas reportdy o f f d to pay off Peni's national debt in r e m for
his tkeedom from jail. In the same year. Colombian cocaine tratfickers. in m e e ~ g s mith that
75
country's attorney g m d . otTered to repatriate an mimated SZ billion to Colombia in r e m
for otticiai amnesn;. Rou~My 2 y m later. th- offered inîiomwlly to pay Colombia's SI 3
billion national d ~ b < ' ~ .
The state has played an incoherent rolr that has oscillated benveen a certain
resignarion towards an activity that has psrmitted it tg mitigate certaîn aspects of the
national cnsis. csprcidly the lack of hard currency and increase in domestic production.
and intense. although inconstant actions targeted more at the coca famen than at the
cocainr indus- as a whole. fhe tmth is that the Upper Huallaga Valley is not quiv under
Pemvian governrnent control and it cannot offer the people who make coca their livelihood
crop substitution schemes. The rffects of this issues are already transfoming the Huallasa
population's perception of rlected and tùNre govemmrnts.
22.4 E,rrernaliiirs of rhr Cocw Indzar~
From a global perspective. it m m bc recognized that the environmental damage
c a w d by illicit dmg production is minimal compared with that produced by other causes.
such as the production of clorotluorocîrbons. I t is. hoviever. at the country level where
the impact of illicit dmg production is inquably del-astatin$".
Environmental problems associated nith the narcotics indumies c m be inciuded in
the catqory of indirect economic costs. Such costs are associated with the pollution of
P m ' s wvatenvays. Chernicals required for the refining of coca such as kerosene. sulfunc
acid. quicklime. carbide and acetone. are dumped into the major riven. Further
de forestation is caused by the slash and burn techniques used by the coca f m e r s to clear
plots of land (see Table 2.24-a). Resent consumption is h a t e d at 10 million Iiters of
79
suIfunc iicid. 16 million liters of cthyl éther. 8 million liters of acetone. and up to 770
million liters of kerosene. annually. aithough somc of this cm be recycled. To the extent
that processon spi11 or dump used chernicals ont0 the ground. the? quickly end up in the
region-s rivers. The result is widespread deforestation dong the riverbanks. land erosion
and the poisoning of rivers which are so vital for the Iivelihood of industries and the
population at large"'.
In this light. it is al1 the more tragic that the Huallqa region has evolved into the
world-s p r imq source of illicit coca. Psni's coca grotviing areas spanned thousand of
hectares since the 1980s. The local cconom! of the HuaIlaga region \vas once based on
cocoa and coftee produced by small-scde landholders.
The system detexionted owing to the following: (a) the lack of appropnate land
ownership legisla~ion: (b) inadequate agricultural extension semices: (c) the absence of
viiibIs marketing options and distribution channels: and (d) isolation due to civil strife.
The environmental impact of dmg production is an issue that m u s bc seen within
the conte- of sustainable development The linli benveen population pressure and dnig
production. for esample. is not ai fim sight obrious. but is crucial nonetheless.
Population grotvth often renilts in greater agiculturai espansion aimed at mainraining
minimum subsistence Ievels. This otien results in a decrerix in follow periods. Ultimately
soi1 krtilic is reduced. This lowers the potenùal for maginai yields. In view of their
income potential and relative ability to withstand harsh terrains. illicit crops are seen as an
muactive alternatives. But their h m d n g Ieads to funher soi1 degradation. thereby
sliminating the possibility of a r e m to other crops-
Tabis 2.2.4.a: Cocaine Processing
' x i d solution.
Stsp 7 . Thc solution is tiltcrcd and thc prcsipihtç is d i s x k d . .\rnm«nia watcr h addcd 10 thc 1Ïl;c~rJ solution and mothm prccipiwrc is lomcd.
1 I ! Stcp Io: 1 [>dmchlorir: =id dilurcd in xcriinc or cihcr ih ddcd 11) thc c b n c wlution. ïhc addition o f the 1 : h>drochloric =id uus6; the ci>uinc to pn-ipiwc out ot'thc wlution ra; u a n c hydrochloridc. l
j
1 CILSU plastic uids for d e to ctbtomcrs. I
1 Source: Andestudio. Market Study: the coca I d international possibilities. Final Report, E'IACO. 1992. p. S.
In this I igh~ illicit cimg production tits into the oh-cited nmus of popuhtion growth.
qricultunl stagnation and environmental dqndation.
Coca I d was cultivated for centuries in the .Andes with techniques that were
efficient and respectfil of the environment. This was carried out in response to socid and
culture pressures of the ancient .-dean word. This. in ntm controlled the extension of
cultivated areas. But in the hi$ jungle regions where new areas of cultivation have
espanded u-iIdIy in the 1last 15 ycars. things are different CoIonists setded here attracted
hy prospects of easy mon-. They indiscriminately esploit an eco-stem that has enormous
potentiai for the future development of Peru.
81
Notes
' Sanc? Lois Richards. "Ec.thra~lon CTicu in rhc P~nmiun Highfunds: Prucricc-P und Belietfi. Y Univcrsiry of California 1980. . - - - ' - G . Pennano. "Lu Economiu c l ~ / C'cruche" (Iquitos. Peni: Crntto de Estudios Teologicos de la .-lmazanonia - - 1988). ' ' "Coca en Peru.- Prni Econcirnico. j a n u q 1984. p.50. : I Edmundo Morides. -Coca and cocaine economy and social change in the Andes of Peru.- EL-onomic D~.r.~.lt)prn~-nr un J CC~druruI Chunse. VO 1. 3 5. No. 1 ., 1 986. - . '' blathea Falco. "The Big Burinrss oflfficit Dmp-. 'leu York Times Magazine- 1983. "' J.M. Caballero. -Econorniu .-igruriu rit. fu Si~*rru Pcnrunu-. Institut0 de Estudios Pcruanos. 199 1 . . - ' This was thr kei sconomic theon. for developrnent in Latin Amerka from the mid 1960s tilt the rnid 1980s. The idca luas ro replace the Latin Amecîcan nations g m t dcpendmcy on impons with local production by national industrirs. The probiem was industries h d neithrr sutXciicimt capital nor technoIo,- to pmperly rcplace the import products. '" i ldrbrando Castro Pozo. '..\iiLstru Cornunirlud lndigcnu ". L ima-Peni 1 979. f i l
hlacroconsult L rd. "C*OC.-iI.Y.-I: Prohlcmuiï J Sdtic-iones .-lndinu.s ". APEP, 1 990. ;ri Rcnssr taer . W. Lee 1 II. "The Witt. Luhp-inrh: C;rcuinC und Poliricd P r )wr ". (Transaction Publisha: 1 9s9,. p.43. " Jriv ier Escobar and Marco Cmtil Io. ".-i,~ricuIrurul Prrcc Policics. Incom Disrrihurion and insrnion in rhr .Ucrrkcr ". Dsvelopment Analysis Group. 1992. . . '- ?&croconsu lt Ltd, ".-lnu!~sis of the Production ~ ~ C ; J C C I in the Cpper Jungft* ". Lima. 1 995. 1 :
-'R'ymrr of-rhti Inrernutionul .l'urcoriciv C'onrrol Bourd fijr f WEi ". United Nations Publications. 1996. &a Cuhto S.A. " P h enCifus 1995". Lima-Peni. :< Ministp of Agriculture. Xgicufture Information Office. Annual Stritistics. 1995. &9 This is slightl~ ovmtated sincr illqal activities are not included in GDP. and the value added for cirus includes amounts which are not repatriated. Value added estirnates for Colombia based on 6096 of gross revenue. ;- U S . National Dntg Conuol S m t q ~ . Februv 1995. l x Dtug Enforcemcnt Agency. Special Report. "CC'orlJ,riJr CCtn-urne Truflcking Trenk-'. Washington D.C.: DEA. 19S5. 8' t E Jmundo Momies. "Cocuinc: Wh& Gofd Rush in Pcm ". (The Universin. of Anzona Press: 1989). p. 90. il 1
Monles, p. 92. I M o m l ~ * p. 92 < - - US. k p t . of Justice, National Dm? Intelligence Centrr, Aprii 1993- i:
" The .-fndcun Reporr ". Lima Decem ber 1 990. p. 2 4 . ' a USA 1 D. ".-i lternarke Deveiopmenr Prqiecr ". Lima 1 994. p. 2. i 5
Orsan ization of Amencan States, ".Vurcorics .I-lonq Luundering in rhe .-îrnericas: u I-ulnerabiiig .-isstlvsrnm ". Washington D.C.. 1993. '" OECD. Report of the Finuicial Action Task Force in Mon- Laundering. Ms. 1990. <-
in formation supplied by the National An ti-Narcotics Buteau, D m ANDRO-Report of rhe Technical Supporr (?(?7~v-Peru, 1 997. in Macroconsult Ltd.. 1995. '" C S . Department of State, INSCR 1996. '" Carlos E, Percovich, ".Clonqi. Laundering ". L ima-Pem 1 996.
Report of the Financing Investig~tion Div ision-Dmr AN DRO-National Police. 1 995. "' Ibid. #. . - "c'~,c-u Gruwing. Cocuine Colzsllrnprion Sen us .Vurionul Pruhiems '. intewiew with Edprdo Machado. El Cornercio. June 16. 1989. hl Monles, p. 1 1 S. '" Maria D u n --Dedi Bem ". New York: Harper Collina. 1994.
t i r C. E. .4nm buru. "Lu &conornia Parccluriu y el C'ulrivo de ku <-mu ": El caso del .Alto HuaIlaga in Leon and Castro de la Mata R.( Ed.) Pasta Biisica de Cocaina. CEDRO. Lima 1989. " hl in isterio de Agricu l tun. "C'clmpendio &I Sccror ..l.:rop~.r-uurio / 993- 1994." Lima 1 995. p.26. I n n Anthony Maingot. "The Mit-ir D q Trude in the .-indeun C-orrnrries". Use. Tnnsshipment and Money Laundering. Report prepared for the World Brink. 1995. "" .Announccd by the Ministq of Health. Marino Costa. Published in the Cornrrcio's newspaper. August 50. 1997.
-1 ) Michasl Reid. " k m : Purh ro Port* ". London: Latin America Bureau, 1985. p. 1 OS. - 1 -. Lee I I I . p. 1 78. -Hugo Salazar del .4lcazar. "La Otredad de Sendero". @rerhucerr. J a n u v 1990. Vo1.62. --
Pe ter Janke, "Gite.rriiiu und Te.rrr)ri.vr Orguni=rrrinm ": X World Dirrctorq and Bibl iognp h'. N a v York: blacmillan. 1983. p. 505. - 1 Scott B. kIacdonald. "Duncing on u 1 iilcuncj. T h Lurin .-fmcricun Dmg TruJc* " (New York: i 988). pp. 5- 6 . -a
Gustavo Gorri t i . ".Qndero Luminoso. Hisrorru de /u tiucrru .Ilil~'nuriu c'n ci Pcmi ". Lima 1 990. "Bureau of In tcmational Narcotics Maners. US. ikpartmsn t of State " l n~~rm~ ionu l .~;uL.ori~-.s C-onrroi Srraregr Rcprt - (I.YCXR) ". ( Washington. D.C, 1957) . p. 70.
Ibid.. pp. 70-7 1. -?(
Fighring rhc Cimine Ct'urs ". Time. Fcbruap 25. 1 985. - 1
.A lan Riding, "Coccine Bi1iionuire.v ". The New York Times hl a p i n e . 1 987. Y f I Sou thnxst Resarch Associates incorponted, "&mironmcrnrd und Ec.oiogic.crl Eflecrs r$ the Coco C.trmwsron inclusrn.". Januap 1993. a study sponsored b? the USAID. * 1 M. Durojcanni. "&nvironm~.n~ui hpucr f h m C;)c*u Cirlrirur~on und Producr~on rf Cocuine in rhe .Jmcon Busin ". CEDRO. Lima, 1989.
III. Part Two Assessing P olicy Alternatives
3.1. Problems. Sti-ategies and Solufions [O Attack Drug Traficking
The problems of narcotics control in the .Andean counies stem largely from the
powsr of sntrenched narcotics interests. ffowever. such problems are also atrributable to
othcr tictors: weak control of government the absence of nrong public suppon and
tension benveen civilian and militaq authorhies. The dmg issue has also ken a source of
conflict and munial recrirnination benveen North and South Am& Roducing counûies
and conniming counaies blame =ch other for the accelerathg h g Paffic and advocate.
respxtively. demand-side and supply-side solutions. The existence of widespread narcotics
cultivation and uaffi~ckllig in the Andean region. inevïtably accompanied by comrption of
governent and armed forces officiais. weakens the reliability of the Latin berican
counnies. Thm. the United States considers the iIl-aI flow of cocaine From Latin .4merica a
serious threat to U.S. nationai secen;.
Has there k e n an- clear propess in campai+gns against drug abuse and tmf35cking?
Nlat has failed? What has worked? What have k e n the outcornes. intended and
unintended of goovemental intervention in dlls area? Therefore. it is the objective of Part
Two to and- the efforts to d u c e or diminate both the production and supply of illicit
h g s and its consumption. Lt b e g b with an overtiew of the role of govemments and
military: and the responsibilin; of supply and demand countrïes. The section concludes with a
description of the United Stata policy. an evduation and measure of effdoveness and some
options aimeci at combating narcotics production and aafticking in the region.
81
3. I . I Role of Governmenrs
.Andean govemments find thernselves in an uncomtbrtable position in the u.ar against
dnigs. On the one hand the cocaine mde injects n d e d dolIars into Andean economies and
cmploys hundreds of thousnds of people. Dnig dorcernent measures generaIllly have linle
popular a p p d because it is pmeived as a pr0L-m imposed on the Andean region by the
United States. Certain US. measures such as extradition. the spnying of iIIicit crops, US.
military intervention againsr cocaine tabontories and economic sanctions qainst cocaine-
ssponing countries have caused considerable anti-.h&can popdaity: i nded th- arouse
substantial opposition. Governments themxlvs are apt to fwl that the tvar ~~ dmgs
çonflicts with other prioritis: for example coping with intlation and unemploynent
promoting sconomic g r o ~ I ~ . and combating crime and subversion.
.At the same tirne. Latin Mericm govemrnents are under some domenic and
international pressure to control drug tmfEcking. Moreover. Latin LImerican govemments
face the threat of reprisais by the United States for not taking strong action. .aerican
Con-gressional attitudes have hardened in ment ysars. and Iegklation has endorsed
progessïvely Nffer and more wide ranging sanctions ga ins govemments that are
uncoopenti\-e on drug control.
T h s e contradictoq tendencies condition die ways that govemments approach
narcotics concol. So. it is possible to mention severai distinct approaches. First
govements set up elaborate bureaucratie smctures for fighting the dnig nflic. Second
they sought to mavimize the intlow of international aid for this ptnpose and to m h h k e rheir
OWI outiays. Third. in Peru and Bolivia the? nied to refocus drug control strategy. stressiog
interdiction o v a ~~itdicatïon. Govemments find it potit idy easier to raid cocaine
85
Iaborarories than to destroy peasants* coca fields. Finally. continuing controversy over
narcotics policy within the bureaucracy and w-ithin the sociel at large. has immobilized
govrmmenrs in important ways. They cannot implrmcnt enforcement measures diat couid
matsrially advance the cause of drug control. Signifiant measures apparently on hoId include
the use of herbicides to eradicate coca and the estradition of Ieading cocaine tnffickins to the
I-hited States.
Latin .-lrnwican governments s e the tvar on drus as a drain on scarce resources and
ris undsrtùnded by the international cornmunip. They cite the awesome economic and
rni1ita-y power of international cocaine mafias and the relativeIy low leveIs of international
support as reasons for their failure to conwl the h g a;iffic. In addition. govemments in
vq-ing m a u r e perceive narcotics control as imposing economic and social sîde effects.
principalIy in the hm of Iost income and jobs. Thr rich dmg-consuming colmaies. in their
visw. should compenute for their Iosses with major new infusions of money and
development assistance.
5.1.2 Rolr of the .lfiIitq.
Andean military establishments do not have a major anti-narcotics mission. Rather.
the: provide occasional logistical ntppor~ such as helicopters and pilots. for operations
planned, executed and controlIed by antiidnig units of the national police. In Peru and
Bolivia. the m i l i t q has contriiuted alrnost no resources or manpower to fi@ the cimg
naffi~c~'. Furthemore. th- have. in fact. k e n qisodes of coilaboration between militarq'
factions and cocaine trafEckers throughout the Andean worId. The hbges ma>- derive. as it
was discussed above. f b m corruption. h m stmtegy considerations. or even fiom shared
56
political and ideoiogical values. Also. the inherent nationalism of the md forces has been
a barrirr to increased international cooperation qainst narcoUcs. Finally. there is rivalry and
historical animosity benveen the milita? and the national police in the Andean region
hlilitary rsrablishments seek etktive control over the legitimate use of force in the zone: for
this rerison the? have resisted rtTorts by the national police to deyelop an independent drug-
tighting capability.
The wents of the last decades suggsst rhat the US. sponsored narcotics control effort
in South .hnerica is to some estent a hostage of the militq. The police must depend on die
milit* for mobility and tirepver. It is wident that Peni provided a much better q g e n t
for the use of military. for it is both the principal source of coca and a place where penillas
are invoived in the dmg enterprise.
The crop and lab destroyrs in P a fàced two serious problems. Farmers planted
tislds and tdEckers built tabs in net; and more isolateci locations. More serious. however.
\\as the inability or unwillingness of Peruvian secirn'ty forces to protect antidrug workers
%ainst the violent resistmce which inevîtabb occurreci sspeciaiiy that of the Shining Path. If
the crop endication and the Iab destruction p r o L m \vas to nicced the L'pper Hudlaga
Valley had to be made secure''.
Many residents of the HuaIlaga Valley welcomed the arrivai of the Shining Path
hlrn coca growing and naffcking boomed in the lawless of the Vdey and tensions were
subxquendy raised by the antidmg campaip. the perdlas moved into the Valley and
impoxd ordm. somethinp the Pennian governent had not done. Colombian aaffickers.
who had k e n abusing the groweers. were disciplineci and taued; the Shining Path thus gaineci
support tiom the groers and income uith which to purnie its poiîtical ends.
87
The Penivian military failed largely because it \vas ordered to folloa a contradictory
policy. It could tight the guerrilla or engage in antidnig efforts but not both. htidrug efforts
drove people into the protective amis of the Shining Path while anacks on the guemllas gave
the drug producers a kee hand to purme their business. Peni~ian milita? leaders. by and
large. prekrred to concentrate on the guemlla believing that the Shining Pa& \vas the
xrious threat to national security and one that the rnilitary w s trained to tight The United
States. howver. more interested in destroyinj drugs and protecting antidrug worken.
pressured Peru to focus on drus.
Pmrvians are udikely to d n their fear and anger about illicit h g production.
Thry \\il1 become bored with dmg news and divert their attention to other issues. sspeciaily
as t h q s l o ~ l y adjust to the reality that a certain percentqe of the population men though
highcr than they mi@ rvish. will dways produce illicit m. The h g problem pales in
cornparison to other national problems even though it received an inordinate amount of
attention through past years- The drug issue has been part of a much larger issue in Peruvian
soc ie~ . that of social conuol. The Peruvian gooemments represented arnong 0 t h things-
an effort to restore social conuol. Peruvian wznted theu nationai ~ovmmemt to fight those
things which the? believed threatened the normal of life such as terrorism. its educaûonal
-stem, the persistence of p o v q , deterioration of its economic iriii.astructure. reduced clout
in the intemationd economy. rnban decq. m\ironrnentai pollution budget deficit and
uhat d e it wiI1 play in international affairs.
3. I . 3 Responsibilip of .'zipp[v Chuntries
Severai Latin American counuies account for the bulk of i11-al marijuana cocaine
and heroin smuggkd into the United States =ch v a r from the Wmem Hemisphere. Some
of al1 imponed marijtiana that entm the U.S. market origînates in one of the following
counuies: Mexico. Colombia Jamaicri or ~elize".
Colombia emerged in the mid-1970s as the principal refming country and for more
than a dscads has controIIed roughly 75% of a11 the refined cocaine esported tiom the Andean
rtgion to the Cnited tat tes*'. In the last three years xveral other countries: Venezuela
Brazil. Ecudor. Paraguay and .kgrntiria have revdrd not onlp transit points but also
budding processing centres as well. although still on a relatively srndl scde. This has corne
sbour in large part. because nrpped-up CS. and Latin ..\merican enforcement operations
have driven soms gowerdedrrs to ssarch for ch- and saî-èr d t e d v e s for cultivaion
and processing outside the tndÏ tiond coca-grotvin_r rqions" .
Since a permanent though varqing demand for ille@ c h g s is Iikely to persih it uill
be necesW. to reduce the supply of available drue. h g avdabiIity can be dscreased by
operathg @ns eveq link in the dnr, chah h m cultivation to production and -cking.
Drug crop cuitivation must be addressed both domesxidly and abroad ûrugs m u s be
interdicted tvhile in transit The diversion of precursor chernicals must be prevented, IUicit
profits m m be traced to their criminal sources and where possible. seized and aafficking
organizations mus be broken. Because dntg nafficking is hdamentally a profit onented
enterprise. aniicking the economics of every aspect of the illegai drug ind- offers a way to
reduce dnig availability. interdiction must continue to be a t j td component of a balanceci
supply-reduction effort- Bilateral. mulnlaterai. regionaL and international cooperation is
89
criticai ro the success of any rffçctive interdiction efforts which require flexible and
intelligence driven operariow. Moreover. it will be essentiai for the reduction of h g
availabilic the continuai development of law rntorcernmt pro-ms and o~anizations that
c m movr eftéctivelp qaim sophiaicatd tdXckinp organizations. For this reason and in
complimce with international drug controt treaties. cmperation benveen countries \vil1 need
to includc the exchange of inîbrmatioit rspenise. and assistance to reduce production of
illicit dmgs in supply corntries.
Supply reduction etTon should focus on specitic crops gown for illicit purposes in the
major cultivation zones. This will be supplemented with alternative development projects in
ninl sconomic zones. which saive to gnrrate and promote lawfi.11. pmfitable. and
environmentally sustainable production and help to make it possible to overcome the condition
that gave rix to illicit crop cultivation. The nerd here is to promote the cultivation of other
crops. such as banana tobacco. pineapple. rice. coffe. cacao. and potato among others.
The use of these crops provides the assurance of the e';istence of a market. However. it aiso
means that the new producer will be competing with rstablished producers for the same
market niche. or \vil1 have to try to create 3 new niche.
C l o x coordination in @cultural development poli- benreen the .4ndem corntries is
r i h needed. so as to diminish competition khveen producer countries. .Ail South American
coca producing regions are located in a simila. climatic belt and are therefore ke ly to be
producing the same altemative crops. II should aiso be considered that the Uoired Süues are
IikeIy to be the main euport =et for any coca replacement crops. and strong competition for
ri L-S- market niche may result.
The suitabilin. of alternative foob foddrr and potential cash crops to larger scaie
production. their yield potential. and their suitability for ninainable fuming systems ni11
nreds to be evaluated. Basic production problems need to be solvd such as disese and ~veed
conmol. and unfamiliarity of the grower with the cd tivation requirements of the crop.
In ordm to revive and develop the agriculturai potential of the .findean region much has
to be done to reverse the damage of Iand mismanagement and to cope with the increasing
demands of an inmeshg population- The best approach appears to be the development of
agroindusv systems integrated into a niral development package which should be aimed at
srnaIl to medium shed f m s in areas that are not too isolated to be intqpted into regional and
national markets. The objective m u t be to nop and reverse mclronmental degradation.
rehabilitate terraces. increase the producticity of dopes. protect and regdate w-ater sheds to
improvc and develop crop wrieties and their adapthon to the environment Agricdniral
devçiopmrnt m m be accompanied by the buiIding of local infrasmctura (roads are to be
upgradrd power plants and agricuiturai îàcilities consmicted and marketing facilities).
by making credit available to local fkners. and by gainhg the cooperation of local people
through invohing them in the decision-making processes Wïth active community
participation in planning and esecution activïties ~vi t1 be developed to create Iawfbl
opportunitics to generate income. reduce poverty. raise the quai* of life. and conserve the
sn\ironrnent in order to reduce the supply of drugs.
3.1.4 RespomltSIbi~@v of D e d CozmmCnes
There are appro'cimatel'; 33 to 28 million marijuana smokers in the United States. 6.3
miIIion n@ar users of cocaine and 0.7 mllion heroin addicts. At retaiIer street p r k a the
91
United States public ma- spend as rnuch as SI 50 billion on iI1icit dmgs a y&'. According to
Donald Mab-. the profit potential is obviously immense at ai1 kvels of the indumy.
although some 90% of the value-added is redized in the distribution proces once the dmgs
have b e n brought into the United States: only 8% tu IO% of the profits accrue to the Latin
.-\mericm source and transit ~ounuirs. '~ In the short-na a genenl strate= to drasticaily
reducs the Amsrican consumption of narcotics has to be dcfined. This strategy couId inchde
rehabi litation and prevention prozms. Pursue a vigorous advertking and public
communications p r o F m dealing with danger illicit drugs. Stren-&en Iaw enforcement
including frdrnl. sate. and local drug task force. to combat drue-related violence. disnipt
criminal organintions. and arrm the laders of illicit drug cartels. Break the -Ir of d r y
ab- and crime. Promote international policies and laws that deter money laundering and
hcilitats mti-money taundering inwxigations as weII as seizure of associared assets.
In order for supp[y and dçmand initiatives to work the? m u t be supported by
appropriate organizattional smctwes. including comprehensive. coordinated community
bsed stntegiss. and i n t e r g o v e m n n (t'ederal, stats. and local) coordination. Information
on n-hich drug policy decisions are based must be Umely, accurate. and avaîlable to al1 cimg
control asencies. Initiatives should be supponed by r-ch and the application of emeqEing
technologies. Specific operations mua be supponed by good intelligence that both anticipates
drug ü a f 5 c b g efforts and allow for their criminal prosecution.
3.1. j Penn-im Position Fucing the Dntg TrMcking Prohlcirn
The Pentiian governent has never esercised full control over its national
t e m t o - . In these remote jungIe regious. traffickers establish coca plantations.
92
labontones. airmips. and norage faciIities. Such areas are rernotc from metropolitan
centres. relatively inaccessible. and patrolled by guemllas or other hostile groups.
During the a I y ei&ties. a blind sue. tvhich means that there was no effective
profram initiated against drug trade in the region. \vas cast by the Belahde administration
on the dnig trade even though it was rurnored that the police and the army were involved.
The United States brgan pressuring Prm to fight against the illicit industry. They supplied
Peru nith tinancing for lavi enforcement. crop endication and crop substitution p r o z m s .
Economic hard times. hot-rwx memt that a lot of the plans backfired and hi@
uncmploymcnt and hyperinflation contributrd to the growing number of dissatisfied
pesants. The Shining Path took advantage of the growing unpopularip of the government
in remote areas where the cenrral authorîty's power \vas tveak. The guemllas intended to
rict as a union tbr the narco-peasants hy attempting to CUI out the Peruvian middlemen. In
this w u . the? intended to nejotiate a better price for the peasants who. in r e m . were
taxrd bu the Shining Path to fund the purchax of ammunition and weapons. Further
backlashes to the anti-narcotic policies w r e due to the fact that the? were king identified
nith exxrnai pressure. particularly from the United States. The Garcia 3s weII as the
Fujimori administrations stepped up the anti-drug policies by destroying laboratories.
bombing clandestine airsû-ips. seizing coca paste and arresting those involveci.
.-\s it \vas mentioned in the fim seaion presÏdent Fujimoti announced in Iate 1990.
his cornmitment to fi@ drugs through the implrmentation of a comprehensive strategy. The
matqy tvodd place narcotics-relatai miiitq- and law enfiorcement efforts. demand
reduction and alternative development under one specidized govermental office. the
.\utonomous Audiority for Aiternative Developrnent
93
U S . has been in engageci discussions uith the Pmvian government on the basis of
this proposa1 and are hopetiil tSiat the NO g o v m e n t s wiII be abk to work together to combat
narcotics production and naflicking in the hturc. The ability of the Peruvian government to
implsment its comprehensive mrcotics smtegy will be an important indicator of its resolve in
narcotics issues.
The government policy is to elirninate illqal coca production by providing viable
economic alternatives. This effort is nationwide. recognizing that wide-spread povew is a
major impctus for continued drug traîfickinp. The govrnunent's proznm aiso includes
etforts to improve the administration OC justice and to promote public awareness of the
hami dom by the drug uadr. The . m e d Forces increasingly have recoyized their
responsibility to support carcotics en forcement since it is evident that narcotics supportrd
interna1 suhvrrsion. and incursions of CoIornbian trat'f?cl;ing aircrati into Peruvian Vr
spacc. thrcaen nationai security. Police units charged with counter-insurgency and other
functions brgan making narcotics arrests and seizures as well. Nrvertheless. progess has
been made in regaining control of narcotics cultivation and processing areas fiom the
Shining Path. resdting in oniy modest narcotics seizwes and lab destructions.
The govsmment labors under many handicaps. but it has undertaken a variety of
initiatives to elvercise more effective control. Thus. according to the United Nations Drug
Control ProCgramme. Peru has signed comprehensive drug control and alternative
development qeements fo1Iowed by supplementary agreements on counter-narcotics la%
enforcement. economic. and m i I i t q assistance with the foIIott-ing countnes: .&gentha
Bolivia, BmzÏl, Colombia Chile. Ecuador, the United States, ttaly. Mexico, Cuba and
~ a r a ~ u a ~ ~ ~ .
To date. the following multilatenl dmg control agreements have been signed by
Pau: establishment of the Inter-Amencan Drug Abuse Control Commission ( 1986). Inter-
Amencan Progmme of Action (1986). Dcclantion and Programme of .Action-Ixtapa
( 1 990). and Inter-.Amencan P r o ~ m e of Quito ( 1990). Relevant subregional agreements
sipnrd by Pem include the followinp: Cartagena .\greement. signed by the president of
Bolivia Colombia the United States and Peru ( 1990). San .Antonio Declaration. signed
hy Bolivia. Colombia. Ecmdor. Mexico. Venezuela the United States and Peni ( 1992).
and the blrmorandum of Undsrstanding (MOU) signed by .*sentina Chile. Bolivia
Peru and UNDCP ( 1993).
In the pan years have seen Cnited States drug agencies pay increased attention to
international aspects of cocaine traficking. Rrcognizing thar police actions aione mil1 not
work, the Dntg Enforcement .+dminimfion and the Internationai Narcotics Matter Office
of the CS. Stao Department proposed to the govemment of Peru that it reduce coca I d
cultivation through a program of crop endication and economic incentives
The Lr.S. govenunent in cooprration with the government of Peru. proposes
tinancing a set of economic alternatives to coca IeaQxoduction in the hi@ jungie. whiIe a
massive endication and control pro- there is concurrentiy carried out.
The goal is to eliminate coca kaf totally in one area of Penitian hi& jungle (the
foothills of the hdes) . where the US. govemment claims that enough leaf is grown to
supply up to 35 percent of the cocains consurned in the United States. The proposai cdls
for the development of an econornic intiasmicture in this region which. for over a decade.
has seen very linle development and which remains poorly inte_gmed with the rest of the
nation. Therefore. strategies have been ongoing with the objective to reduce illicit coca
91
production in Peru. In such. in May 1995. a project gram agreement \vas signed between
the povernment of Peru and the United States acting through USMD related to the funding
o f alternative devrlopment activitia in determined coca gro~ving areas (See Map 4). The
budgr- provisions include an rnimated USAlD funding of USS 30 million over a five
year period. supplsmented by a cornterpart contribution of the Peruvian govemment of
C'SS I4 million'".
Rrgarding interdiction. n new strategy ?-vas announced for the ftght against drugs.
~vhich cornprehends the control of the rksrs in the coca zones (a new transport route for
dmgs ruid production supplies). Likewise. the creation of 3 Antidmg Tactical Operation
Di~visions (DIOTXD) which cover the east of the counw have also been announced.
Moreovcr. the creation of 2 antidmg bases in these zones has been announced for 1997.
as w l l as the creation of twenty mobile bases. which would travel the areas with the
Iargest amount of dmg traficking activip in the jungle (their installation would count with
North Xmencan support).
In January 1997. the Secretaq- of Hdth and the head of the Fight ..\gains Drug
Abuse Council (CONTR4DROGAS). Dr. Marino Costa Bauer announced the institution's
objective to reduce the cultivation area by 50% for the year 2000. They seek to reduce the
area to approsimately 60.000 ha and in the long term to an amount &cient to fùlfill
medical and traditional uses.
The initiation of the National Aitemative to the Cultivation of Coca Laves
Development Program was announced. According to officiai sources. it MI1 require an
investment of 1.5 to 2-0 billion doIIars. The Fust stage will begin in early 1998. A group of
projects for die development of the productive idktmcture and the fi& agak t dmgs (in
96
prevention and rehabilitation areas) for 430 million dollars has been presented to the
rnember countrirs of the Mesa de Donantes (Donors Board) to srsk tinancing through the
cancrling of drbt through investment. Likewisr an agreement behveen the National
Devrlopment Innitute and the International Development Agency for 4 million dollars
destinrd to credit for the prasants of the Xpurimac River valley to substitute the cultivation
of coca Ieaves bas also been announcrd (See Maps 5-6).
Rqarding the administration of justice for dmg txafficking cases. the National
..\nti-drug Upper Court was created in 1996. According to the International Commission of
lurists. it specidizes in illicit dmg mffic crimes. which will permit the processing of the
most serious cases. As of November. 5 decentralized oficss had been i d I e d . kvhich in
two and a half months received 601 cases rendering judgemrnt in 38 of them. In March
1997. the Judiciai Power Reorganiwûon Cornmirtrr deactivated the Court. establishing
that the cases be handled by the Second Transitory Criminai Branch of the Supreme
COUT''. Said branch wouid be in charge of creating a new judicial administrative structure
and handling the tinai appeals in the caxs of dru= U;tf'f?cking and related crimes.
In this context. the mti-dnie czar. B q McCaffrey. praised the governments
successes in the cultivation reduction policy. The ruIl catiticarion received by Peru is
Ixgely due to these achievements. The rupture of the air bridge behveen Colombia and
Prru maintainsd the fa11 in the price of coca paste and forced the peasants 10 abandon coca
tor other crops which tvould not bring them !osse?'.
These certifications are the annual evaluation made by the president of the United
States on the anti-cimg management of the 5 I producing or uansfer counnies. Certification
this year offered no ntrpnses but simply confirmed the predictions of the analysts: Pem
97
and BoIivia were hI1y certified whereas Colombia vas once again decertified
notwithstanding the efforts made by its govi-mment in the fi@ against dm$ traficking. In
contrast. Mesico received full certitication dsspite accusations of cormption in official
instances. and the scanda1 caused by the dstention of the director of the National Instinite
for the tight againa drugs. Gcneral Jesus Gutiérrez Rebollo. a having been bribed by the
leader of the Juirez Cartel. 1 believs the ditTeriince in treatrnent, in cornparison ttith
Cotombia is basically due to political rtzisons and the desire of the United States to
maintain good relations uith a counw with which it shares a large border and with which it
maintains important commercial relations. How-ever. there is pressure in the governent
and Congress to review the certification of Mrsico.
Finally. the govemmént's overall objective is to achievc a balanced cooperation
programme. consolidating alternative development efforts and strrnh&ening activities in
the tieIds of supply and demand reduction and control masures. including precursors and
essential chernicals control. According to the LKDCP in Lima over the past ten years.
ssw-al projects have been concentrated mainly on supply reduction through aitemative
dçvelopmcnt in the HuaIlaga and QuiIlabam ba areas''. These alternative development
projects rire currendy undergoing consolidation phases. and are scheduled to end in early
1999-
Future alternative development stTorts in Pem must become MI? inte-pted in
national alternative-rurai devetopment p r o - m s that are effectively supported by the
~ o v i i m s n t mithin the framework of the Nationd Plan for h g Prevention and Conûol - 19942000. .Uso. new alternative deveIopment projects shodd count to the geatest extent
possible on substantial national and intemationai fmancial resources. Aitemative
98
dc~clopment and h g control should br Iinked with the broader drvelopment dimensions
of international rrchnicd cooperation. in particular considrring the need to count with
support for inrq-atted rural dcvciopmcnt. .AccordingIy. linkages need to be cstablished
ktivrrn alternative development in the contest of the National Plan for h g Prevention
and Control. and the developrnent plans in the selected regions. including the role of
national dsvrlopmsnr institutions such as the Ministq- of Education. M i n i q of Hal&
bl inistn of r\griculture. Ministp of Justice and the 'uational Developmsnt Insitute.
among others.
Such national institutions wiI1 need to promots the incorporation of the drug
dimension into mainmeam national rural development programs. with substantiai
crnphasis on the monitoring of illicit cultivation. the propagation of community
cornmitment towrds the dimination of illicit cultivation. and the design of intezgated a r a
drvriopment schrmes which addrrss dru j abux problem.
To curb i lk i t uatlic. rmphasis wi11 have to be placed on national and subregionai
Ia~v enforcement training programs. as well as on technicd c o o p d o n in the areas of
sducation. treatment rehabilitatio~ social intezation. custorns control. data gathering.
money laundering ana precusors control. Both in the demand reduction and control
rneasures kiclds. Peru ~ ~ i l l also ben& increasingiy from other subregional program
in\-olving &gentina. Bolivia Colombia. Mexico and Chîle and possible other counaies.
In the contes of the XatÏonaI Plan for Drug Prevention and Control. the
covcnunent ni11 necessq have to protide policy guidance and selected direct support in t
the field of institutionai capacip building. particdarly at the legai. training and managerÎai
lcvels. Special interest should be placed on assistance to drvelop mechanisms for
rnsasuring illicit crop areas. and monitoring the progess of drug control etrorts.
3.1.6 C nired SICIWS Inrenenrion
The primary LYS policy response to its domestic h g abuse problem has bsen to
attempt to reducs foreign h g supplies through interdiction. coca seedbed mdication
al temarive development lawv enforcernenr public awt'areness. and international cooperation.
These areas of cooperation are set out in agreements benvcten the nt-O countries.
Efictivr counter-narcotics law enforcment wiI1 raise the costs For tnfii~cking in Peru and
Colombia whilc interdiction and seedbed endication in P m will block the delivep of illicit
drup. erode the protitabibility of coca cdtivating and procrssing for coca growers. and create
cconomic conditions in which dtsrnarive development program become more amactive and
effrctivr. The govemment of Peru m u s provide adequate secuis for alternative development
propans in the coca-produchg a ras to be successtùl.
The United States has trciditionally v k w d h g abuse as a forei y problm crosshg
its bordtirs fiorn other countrîes. -4s a result the tocus of Lr.S. cooperative efforts has k e n on
reducing the q p l y of dmgs produced by its neighbours in the Western Hanisphere. M y
recentI?. has d r y abuse become a critical problem in these colmaies. mashg the historicd
distinction between consumer and producer nations. Governments mattegies mus now reflect
the cornples interaction of supply and demmd within individuai countrîes as weI1 as across
national bundaries,
There is a multitude of çocio1ogica.I. economic. and uidividual reasons for the growth
of dmg abuse in Latin Amerîca One theoc is rhat excessive supplies of coca a by-product
100
of the esplosion in LS. demand in the past nvo decades. helped create a new domestic market
in the producer countries. In contrast to the United States. where drug supplies rush in m
m e t demand the root of the problem in Latin .t\merica appears to be the reverse: that
increasingl y cheap- & I l available drugs led to new consuxnption.
The CS. proposal to endicatc coca Idand dewlop the Peruvian hi& jungle serves a
numbér ot'Xorth American govenunent interestS. [t wouId also m a t s economic incentives in
rhç hi$ jungle which would result in a transition away fiom t'amiing based upon a simple and
traditionai asgriculturai technology to the cultivation of cash crop for the Iqitimate market
tùnher integnting pesants into the commercial sc-ctor through the production of a marketable
surplus.
Cultivating and processing these 0th- crops and agr0indumia.i producrs depends more
on fârm m c m . chernicals and management senices than does simple coca I d f&g.
C S . ûid to çradicate coca leaf and promote alternative crops. therefore. implies P m i a n
dependence on imported f m technology as well.
Hencc the a p p d of the C.S. proposal would increase Perds @culture and
qroindumid exports as well as its production of food crops. It might kcrease work
opportunities for P e d s uaempioyed and a geo~mphical area into which some of Pm's hiz&Iy
concentrateci hifhland indian population might k beelled.
Another motive for the US. proposa1 to mdicate coca I d in Peru is that it represents
m anempt by d m g control agencies in the US. to show that they can effectively stop cocaine
trdficking. Therefore. the US. effort to eradicate coca Ieaf, even ifonly partid1y successful,
can also be vkwd as an effort by the United States governrnent to deai wîth the comrption
and disequilibrium of the Cucuiation of vast amolmts of iilgal currenq and Ïts causes.
IO1
In this scenario. Peru presents a dificult situation because of the cornplexi~ of its
prograns. Thtxefore. the United States has helped to improve counter-narcotics cooperation
with the Pcruviui policier assisting the Amed Forces to assume a more vigorous role. This
çoopmtion has resulred in increased xizure of drugs and sen t i a i chemicals. laboratory
husts and destruction of clandmine airstrips. Conxquently. pressure on the crafficking
cirganizations and destruction of their activities have increased.
Furthemore. the Fujimori adminisnation has publicly cornmitted itself to fi&
nxcotics trafickm and insurgents. and to adhere ro international human rights standards:
hut with a \ride range of xrious internai probletm. it has moved slowly and sometimes
uncertainly tomrd developing a cornprehensive smtcg . There is. howver. sizpificant
support uithin the govrmment and in the public for developing a wokablc counter-narcotics
p r o L a in cooperation with the United Smttts.
Despite the xcrrrity threat poxd by the Shining Path and nithout the entire
çoopention of the Penivian militap. Penivim Iav enforcement agrncies have de-oyrd
more labontories and seized more cocaine han in previous years (see Chart 5.1 -6.a).
However. these efforts only had a marginal effect on the overdl flow of cocaine base From
Pem.
In c o o p d v e efforts. the United States and Psm signed a Tay information
Eschange Agreement at the Cartagena Drug Surnmit in 1990.~ This agreement will allow
br the eschange of information between taï authorities of the trvo counaies. and will also
br hcipfd in money i a u n d e ~ g investigations.
C h w 3.1 -6.a: Coca L e d Coca Paste and Cocaine Seimes and D r y .kests i 1993 , 1993 1 1995 1 1996 ; 1
1
! 1 Seize of Coca Luf ( MT) , 103.95 145.64
l 1 19.32
1 ' Seize of Coca Paste (Kgs) 1 8.43 1-39 1 IO.Z10.Sj j 15.0022 1 1 1 1360.74
1
I ! i : Scize of Cocaine ( K g ) i 40.9
! ! 95+6s 1 7.658.83 1 692.06 l
I 1 I I .-lrrristcrd b? the National Police (000) i ; 6.6 I t 0.7 I t 5.5
1 i 1 I I I
Sourcc: tlnti-Xarcotics National Bumu-Dinmdro. Lima. 1996. 1
l'pon the request of the Director of the hti-narcotics Division of the Penitian
Sationai Police. DE.4 has k e n prodding direction and input on how to improve the
intelligence smicture of the mi-narcotics division and the ability of the oqanization to
provide counter-narcotics intelligence to fight dry-traficking.
5. I . - Ln& J SIUI~S Polk?. und Stru~qv GouLs
The h g problem has b e n assuming growing importance on the world scene. The
overall problem of illegal drugs and related crimes rrpraents a direct threat to the health and
wvell-king of the people of the hemisphere. The problems of- abuse and dernand a d the
production nafficking and illegai dimiution of drus. including designer cimg. continue to
be serious and intermineci. .AU counuies in the hernisphere are king affkcted by this and
reco-gnbe they have a shared responsibilip to rnsure that dl aspects of the problem are
addressed. This is a cornples. tvorld-wide and comtantly chanzjng problem for \.hich there
are no simple solutions. In this regard ci- pose as a nsk to national secinity in the
United States as well as in the hdean countrïes as tmorism entironmentai depciatioa
among other factors.
;\gairut this backdrop. narcotics control has emerged in recent years as an incr-n& C -
central issue in the formulation and implemrntation of .herican foreip policy. The U.S.
coal is ro reduce the îlow of d r u s to the United States by demonstrating to the international
çommunity that there is a common interest in stoppin- this menace and by working with the
producer and transit counaies to strenb&en their political \vil1 and stability to fight it.
In this contea. in 1988 several important brd-Ihroughs occurred that have put the
I - 3 . on a course reversing the dangerous and costly production traf'frcking. and abus<: trends
of carlier drcades. .\ccording to the U S . Department of State. the prissage of the hti-Dmg
.\buse .-kt of 1988 established the Ofticr of National Dmg Control Policy (the Drug Czar)
and mandated the devçloprnrnt of î comprehsnsive. intebpted. national dmg control
suareg>.. .+\r the same time. the United Xations completed the LJX Convention Against [Ilicit
Tmttic in Narcotics h g and Psychonopic Substances. an agreement that set the stage for
unprecrdsnted international cooperation to purnie increasingiy cornplex international counter-
The Ofice of National h g Control Poiicy has the ot.eral1 responsibilip for
tbrmulating and coordinating the f e d d govemment's cimg connol poli-. It moved
immcdiately to assess the counter-naniotics threat and in 1989 published the fim National
Drug Control Strategy. whïch it has updated annually. The stntegy is comprehensive.
addmsing nipply. demand and treamenr. its top priority beiig to reduce the availabilip of
cocaine to the United States. To translate the poIicy priontics into action the stratw seek to
achieve progres across the follotving tionts.
First it seeks to anack the major oqanizations by creating an intemational political
and Iqal environment that is hostile to narcotics trafficking. In man? cotmnies this me-
working to pass conspincy. asset forfeiture. and other Iatvs and then develop the inninitions
needed ta prosmute the Ieading tratXcka who manage and iinance the trade. Yet this
leadership has generaily k n ot-erlwked by past control tactics that have focused on
interdiction and crop suppression. The I ~ d m have been able to rebound fiorn these
opaations usually by expanding and depending their compt ries to the politicai. le&. and
~ c u r i t y institutions. The t a . to break this chah is for govemmmrs to target invenigate.
and convict the drug leaders.
Second the strategy seeh to increase the con of operations to international uafficking
through interdiction and other enforcement actions to attack the drug infnstnicture. T h e
rn~xsures are most effective u-hen they can mode nafficlim' profits and weaken their
organizations. raise dmg prices and lotver dernand and create tinancid barriers that prevent
new mpnizarions fkom entering the trade. In this regard the strate,?. emphasize irnproved
dçtrction and monitoring to locate d r q shipments. caches. and processing centers and
enhancrd capabilities of response forces to amck these targets.
Finall. the strate= aim at reducing and evrntuaily climinating the cultivation of
illsgd dmgs. This goai invoIves not only efforts to crntail production in ~ a d i t i o d areas that
supply the CS. market but to prevent cultivation from spreading to new areas as tell. Crop
substitution or nrraj development schemes \vithout the dbrcement deterrent simply will not
\ o r k and this larter condition airnon aitvays requins govemments to have political control
ot-er the growing areas. Consequentiy. crop controi etforts are not the work of a few months:
they take time to effect a substantid change.
Thus. a major component of the .herican international efforts continues to k
supporthg the principal cocaine source countries: Pent BoIivia. and Colombia in their
I OS
Rght q a i m thr multinational criminal orginization that nippon the production processing.
tmspomtion. and distribution of drugs to the United States and other counrries. For an
e t k t i v e long term conter-narcotics strategy. the US. is working with these counmes to
enhance thsir institutional capability. This effort \vil1 require high priorities to bilateral
proLms nith important dru-Lighting missions. such as man-Grne and c o d panolr
customs services and crop conuol h o u @ training and material assinance. In providing this
assistance. US. uill insist that internationaily accrtpted standards on h u m rights be
rcspected,
Since Brazii. Ecuador ruid Venezuela also have the potentid for large-scale profitable
cultivation of coca le& and because of their prosirnity ro large-scale M c k i n g centres. the
I.3. will need to ensure that neither the cultivation nor the trafficking organizations spread to
th- countnss.
-4 key question nised by policy m a k m is whether or not the strate9 can work: that
is, wilI the .knerican governent proposed inmases in aid (milimry. economic. law
cntorcrmrnt) pro~ide the Andean nations with suficient assistance to combat drug production
and mffÏc'? .And. if s a wodd this have a t'at'ourable impact in the sense of reducing
production of illegai dmgs and drug reiated crime?
The international drug control poli- of the United States is aimed at curtailhg the
international mde in illicit dm-. In rhis effon c o o p t i o n with and by odier nations is
essentiai. L.S. xeks to reduce the foreip mpply of dmgs by motivating other c o d e s to
engage their own resources and efforts to combat the worrIdwïde drug trade. to dismantle their
own illicit cimg indudes and to d u c e the demmd for drus.
CS. n i I l assis these pvemments with appropriate but selective proCgmms to
strengthen thcir institutions. and to encourage them to u n d d e more effective actions
against the drus rnde. paxticulady in such hi$-due elments as money flows and precursor
chemicals. Major emphasis on the cocaine transit areas is king pIaced on the three key
source countries of Peru. Boliiia and Colornbia. which are dal t with in the Andean strate,..
The principal focus of this s tnteg is to block the flow of dmgs drssned for the U.S. at the
i ntemational c heckpoints beoveen the three principal producer counuies and U .S. borders?
Through these and otha pro-ms. the US. uiIl seek to raise the level of national
cnncern about the esxent and nature of drug production- afficking and use. the acute threat
to nationai scicurity posed by the entrenchment of drug traficking and their interem- and the
danger poscd by the dmg trade to stable s d n e d rconomic growth.
3. I . S EruIuucion und .Clraslire qf ' Efecrii.r(nes.~
.-1 key qumion facing poli- m a k m is how to cvaiuate the success of the strate?. .-\n
important issue is that given demonssed traITickm ability to adapt quickIy to policy changes
and change courje accordingly. 3 need ma)- esist to modie poli-. goals. and
implementation rnethods. For this reasoa the sûateg~ ma. be seen as a chanb~ing or evolving
procas. In this contest. quantitative goais- such as the reduction in the arnount of coca
produced are viewd as crucial aspects of progras. However. failure to achieve such @s
in the short nm does not nrcessarily m a n that the strateg ~ i 1 1 fail over the long m. Experts
ernmlly qree that due to the clandestine nature of the business. it is imposniIe to ho tv - nith any precision the exact arnount of coca leaf g r o w n cocaine produced. and cocaine
shipped: in addition to which important xctors of the trade are decentmiized by the presence
of man' small suppliers.
Without access to such data and uithout truly diable base figures. it is difficult to
tuas with any reliabiIity whether. inded, dmg production and shipment to the United States b
is incraing or decreasing according to any sqxcific pmentage. Moreover. since the law
enforcement cm seize srnaIl percrntqe of the drugs on the market m y sustained increase in
the amount seized may on- indicate. on one Level- that more d y s are entering the United
States and other consumer countries and are avaiIabIe for seizure. X major wealiness of the
arguments that question the reliability of staustics. how-ever. is that the? are the onIy measure
avai lable. Consequently. given these limitations. mon analysts use suc h figures with caution
and c~mplrmcnt their rvduation nith other. less tangible indicators.
Sorne of the indicators used in cvduating the etTecti\-enas of the strate;' inchde such
tangible figures as n u m k of a i r d seized or intercepted amount of cocaine seized.
nurnber of arrests of major -ckers. dollar value of assets x i z d quantities of chernicals
xized. and hectares of d m g s sradicated- However. andysts suggest that Iess tangible
indicators mi@ include host governrnent Ievefs of cooperation and attitudes. host country
public opinion on drug cooperatioa host nation levels of corruption changes in naflIcliing
modes. increase in costs to traffickers, resaucnrring of traffickers organizations. and Ievek of
coordination and cooperation arnong the U S . sovemment agencies that formulate.
implement tünd and oversee the strategy.
The evmtual criteria for evaluating U S . and host country law enforcement and
rnilitq- efforts ~~~1 be closely Iinked to the goai of suppressing the intemational drug trade
oganizauon Host coimaies wil1 be judged as much by the d t of their efforts as on the
I O8
stfons themselves. nie US. will judge as et'fective those efforts ~ u l t i n g in sustained. net
reductions in aafficking activity. not merel?. those efforts irnpoMng a net increase in hoa
country ettort or manpower.
5.1.9 Options
M a t is to be done'? One major U.S. tactical option mi& be to finance mobilization
of Latin Xmerica's hg-fighting capnbilitia. The United States could protide source
countria with the billions annually required to aab!ish rtfrctiw control over cimg-producing
art's. many of which are occupied by tmorist torctts of mafia organizations. In practice. this
option would require firepower- helicopters. communication quiprnent and intelligence
support. in addition producing countries could be given more advanced technologies for
cornbathg the narcotics indusaies via beefed-up b i l a t d and md t i l a td aid prograns:
herbicides for spraying. radar -nrms to track the movernent of dnig smuggIers' aircraft
modem amidmg weapons. electronic devices to bug and jam uaffickers' communications.
and heat-srxhg equipment to detect dmg laboratones. In many Lailn he r i can cornaies.
more sophisticated security synems for top govemment oficials. judges. and w h s e s
would have to lx part of diis option Such mobiIintion of course. cannot take place
unilatrnl1y: politicdly difficuit institutional reforms wodd have to be made in cimg-
producing and a y i s i ~ g counîries to enable hem to cooperate in a reciprocai €ashion.
A second US. tactical option might be to .4mericanize its anti-drtg operations in Latin
.berica which would entai1 the US. governrnent assumirtg h g enî'orcernent fiinctions that
source corntries do not perform. if those countrïes consent, Models of Amerianhtion are
the e'rnadition and nial of drug aaffckers in US. courts and the US. .Amy operation against
1 O9
cocaine labontories in the region. The effectiveness of the Americanization model. however.
inherentIy Iimited and can producr rejsctions in some countries for the introduction of US.
forces. .-\mericanization is therefore. a ris-. potentially counter-productive approach that
shouId be ripplied only under emordinary circumstances.
-4 third US. option mi& be to support Latin American governments' efforts to come
up nith viable economic alternatives to the dmg trade. The Lnited States codd make a major
contribution by helping the economicdly depresxd Latin ..\mrrican nations to provide crop
and incorne-substitution p r o c a s for drug t'amers. it could help open new economic
opportunitirs by Iowering imports barrias for lrigitimare esports (testils. sugar. coffi.
tlown. etc:. It couid also aileriate the nushing burden of Latin Amencan debt by taking the
lsad in devising new formulas of debt reliet: Indeed. it uill be d i s t i c to expect the
Andean counnies to commit rconomic suicide by destroying a major source of foreign
currency without some assistance to ovsrcome the destabiking effscts of such actions. in this
contest economic aid is viewed as part of the price that must be paid to obtain the
cooperation of host nations in impkmenting policies whose components ma? weII pmvoke
economicdly and politicdly dismptive tàllout. DefiniteIy. a renewti of economic
devdopment in the region is an essential component of any successful. long texm effort to
reduce h g afftcking.
-4 fourth. radicalIy different tactical option would be to abandon the \var against dru9
and move instead to Iegdize. or at Icast decriminalize, drug consumptioa
Proponents of legaikation or decrimînalintion claim thar a distinction should be made
benveen the public heaith probiems caused by cimg abuse and the violence and cnminality that
surround the cimg trade Nnply because it is illegai. The? believe that the ben way to artail
110
dnig traflicking is to treat dmgs as a public h d t h probkm rather than a criminal one. It
wuld be possible to remove the clandestine profits from the drug trade. rliminating the
motives of criminai gangs to get involved in the trade. compt police and judges and H I .
Moreovrr. the govemment could tas the sale of dnigs. thereby earning billions of dollars in
revenue to tinance prob- in drug education prevention and rehabilitation.
There are. of course. people that consider the idea of Iegaiizing d r y use out of the
question. Dmg abuse ma? increase if dru9 are Iegdized: there would undoubtedly be man-
pnctical probkms in sening up a distribution -stem for e s .
The central point is that the public h d t h and d e t y aspects of drug abuse cm. and
shouid. be separateci fiom rhe violence and crirninality arïsing from illegality. Logicd or not
however. it is abundantly clex that political winds in the United States are not in favour of
Itrgdization: hmce diis option. at ! es t for the time being. does not appear a viable or
redistic methoci for Latin .Amaïcan h g mde.
In this section I bring rogether various options to deai wïth the problem of dmg
uafficking. the proliferation of coca deshed for i l lqd consumption and the abusive
consumption of drus considered iI1qal. sspecidIy in the Andean corntries, cocaine.
1 am a defender of the coca le& of its vaditional consumption and cdtivation. and I
am in favour of its beneficiai indumial production. I m dso roundly opposed to drug
tmîicking and its consequences. as well a s the illegal use of dmgs in both North and South.
However. 1 reject the \var on dmgs as a mana of prliciple because it compromises the
sovereignp of the .Andean corntries and has been miable either to d u c e dmgs aafficking or
the abuse of drup.
This is the starting point of a US. intervention. because any solution based on militan;
or police actions only makss the problrm worse. The only result of more than 10 years of the
imposition of the US. strategy is the proliferation of dmgs aafficking. and the growh of
i 1 legal dru, (7s m.
The International Xarcotics Conaol Board has recognised that the policies followed
until now should be miewed. and the C S Commission on Narcotics Drugs has indicated that
the prohlem needs to be facrd as a wholr. respecting the social and cultural aspects of
consumption. 1 would agee with this. although 1 would stress that the same issue should be
rstended to producers of rhe raw materials used in the production of dnigs.
The peasants producers themxives should work to esmblish sustainable integrated
rural development projecrs in the areas in which coca is produced and in those areas where
most o f the peasants producers corne h m . Baides the neoIibeni market model, 1 beIieved
that a neu- proposal should be conceivrd tiom below. given impenis from nithin the producer
counuies. and designeci for their bendit smchirally independent decentraiised
redistributive and ecoloficûlly sustainable. This would involve the creation of interna1
markets. the development of qroindumy (ril~vays emphasising peasant production of
foodstuffs- a need to change the national food policy which has ofien promoted food irnports
over the development of .hdean crops). and would include the design of economic
dternatives to drug &cking and h g production
That is to say. the proposal implies a rnodel which diffêrs h m the traditional policies
imed at rackling poverty. one which involves the full participation of the population and
which respects the cultural aspects of agicuinna[ production and coflsumptioa The coca le&
is one of these traditionai agricultural products. \;hich Ïs finidamental to Pemian and
112
Bolivian Society. The proposed new sconomy wodd no< be based as has up to now been the
case. cllmost exclusively on the cultivation of coca and its illepl drrivatives: it would be
hased on a&uItlnal and agoindustrial diverdication. beside thich mail but necessq
culrivations of coca would be maintainai. The mode1 should be based on multicropping and
should combine dit'ferent ecologicd niches and produce primarily for the interna1 market,
although also for espon if this were considered advantagous. while alw- maintainhg a
balance with nature.
This kind of devsloprnent necessarily irnplies that the rconomy in which d r u s
tnfticking and ruraI poverty ssist would have to be replaced by an economic structure that
o tked a r d alternative. It wodd be important to p r m e the positive aspects (above al1
technical. social. and infrasmicturai) of the current diemative developmenr' progammes
tinanced hy international organintions (USAID- IJN'DCP. etc) and donors countries
( Germany. Sweden, Italy. Japan. etc).
Stimulus should be yven to macroeconomic policies b t h o u r rurai production. help
to reconswct the food production qnem the rational exploitation of forest and the e v r t
of cornpetitive pods- whde always prioritising the social agenda
This necessari1 y irnplies raising esisting economic policies which have palpable
negative strscts on sociep. Furthexmore. such policies are king retlsed around the worid.
b th in the '(:orth and the South. Severai bodies are ÏnvoIved in the search for new policies-
such as the CVorld Bank the IMF, the Econornic Commission for Latin America and the
Caribbean (ECLAC) and the Latin American Economic System (SELX). E C U C and SELA
identifi- the search as one for policies of growth ttith social pro-gess.
There shodd be a wholeule reassessment of policies on pnvatization agiculnuai
credit. eschange me. prices paid to producers. import duties. toreign technical assistance,
invment . nationai and foreign rrade- productive and socid infr;istnicture. and so on. The
current undecrn~ized poverty-producing ssport mode1 does not totally work for the
rnajority of the popdation. For this to be considered it is vitai that the social organizations be
involvsd in its retision.
Deding with the problem should be a serious concern m regionai. national and
international ievel. It is an aiarming situation. as important as the problem of urban and rurai
poverty. Indeed. it is perhaps more accurate to think of it as a consequence of this povertp.
.-btidnig campai_ps in the North and in the South shodd not fdl into the error of following
the otticial discourse of the \var on dnigs. a discourse rvhich speaks only in terrns of the
cuilty. that is. the countrïes of the South. and of the ~ictims. the countries of the North, The - problem is an overarctllng one. muitilateral and interrelateci. which encompasses medical.
public h d t h and cultural themes. as well as a stronger Iaw enibrcement and judicial systems.
kne r govemment control over cimg-producing zones. and a pattern of self-sustainhg
economic g o w h
" Donald J . blabc. ".f ndeun Dmg Truficking und rh~* .tfilitug. Oprion: The .\filirun. Rmtcw ". Wash ingon 1990. p. 39. s:
For more detailcd exmination of the coca enterprise and U.S. dmg poliq in Peni see Edmundo Motala. Cocrtinr: U'hite Gold Rush in Peni. 1989. u.t Rrnwlaer W. Lee 111. " 7 % ~ Drug fiudc und Dc~d<~piJlg Corrntr ;es ", ( Polie Focus 4: 1 987). " ~onrild J. $1 a bp. " 7 k Lcrtin ..lmrricun Surcnrics Trrrrlc* md L 3. .Vurionul .%~-urin. ". (New York: Grmwood Press. 1 989 ). "' L. 'ruliis. " Bmc.fkiuries of rhe Illicir Dmg Trudc*: Poliricul C;~nv~.yucncc~s und Internarionul Polk? ut the /nr~~r.v~t~rion r, / -S~pp!~ und Demund ". Discussion Paper 1 9. UN RISD. ;Marc h 1 99 1 . Y' Int~niarionril Narcotics Control Strate! Repon: N C S R 1996. us Xlabp. p. 45. * 'b Repon of the United Nations Drug Control Prognmrne, ".-lnri-.V~rr~-otic .-Icrir.iries in Peru /954-/993 ". SNI
ES. Congrctss. Senatc Comminrr on Appropriations. Department of Defense-Support for Dmg Interdiction. W'ashington D.C., 1995.
t .. The .-lntlcs: ~mrrgent or emergenq-.' ". A n d m Commission of Jurists. Lima. 1997. . I I
Intrfiiews with Peruvian narcotics experts in Lima. Septemkr 1997. Ibîd-
' ' ' ~ r = \ im of the 199 1 International Nxcotics Controi S t n t e z ~ R r p o n .iJ Internationai 'iarcotics Control Strateg? Report, L.S. Deparmient of State. 1996. il.
Re\ iew of the 199 l Intmarional Narcotics Control S t r a t ~ Repon.
IV. ConcIusion
The purpose of this thesis ha. k e n threefold: (a) to describe the politicai economy
of the size of the illicit dmg sector. (b) to have a bener picture of the structure of the
cocaine ind- and finaily (c) to provide assessments ofpolicy alternatives to attack h g
tratricking in Pem.
In the first section the purpose \vas to andyze the macroeconomic impact of the
illicit h g sector on the economy and viceversa during the penod IWO- 1997.
The problem facing Peru were a driunting complex of economic. political and social
ills. StnicturaI adjuments did not always succeed in such years. But neither did some
alternatives saategies. in the early 1980s Peru aied nabiliation pro_erams with linle
success. Its efforts codd not overcorne the etyects of both tvorld recession and the debt
crisis. Economic conditions deterîorated inflation soared real output fell. and widening
budget deficit appeared. Stabilization policia nonetheless beçan until the last quarter of
1988, when the govemment announced a severe readjustment of prices that inmeased
consumer pnces by 1 14%. The adjustments consisted primarily of pnce increases without
red ~vages increâses, characterized the Iast hvo years of the Garcia's administration. By
the time the Fujimori's administration came to power in 1990. inflation was ninning close
to 3.000% a year. Production and wages were fdling. Adding to the problem of Peru was
the Shining Pa& a corp of fanatic perriIIa insurgents seeking to purify Peru by violence.
Fujimori's reforms in trade. fiscal poliq and deregdation. coupled Mth renewed
debt senices payments that repaired relations with the international thancial community.
have restored the credibility of the Pem-ian goverment,
Fujirnori's commitment to real nnicturzil econornic reform has been put to the test
by a domestic political environment that remains troubled by labour unrest. sporadic
guemlla trrrorism. and popular discontent. Structural a d j m e n t demanded amen-: it
cdled for deep cuts in govemment spending to cut budget deficits. It also memt remoting
price controls and freeing market forces to promote efficiency.
.As Prni's economy has become more stable. the public and private sectors have let
CO hundreds of thousands of worksrs. But the government has not strongly focused 'et on C
social prognms Iike training for Iaid-off employees. education health care and housing.
1 rrcognize that in the contest of globd crisis triggered by neoliberai economic
adjusunent prozms. peasants producers have been lefi with no ahemative but to produce
coca for the drugs traffickers in order to combat their poverq. In the current national and
international circurnstances it is the only profitable product availabk to them. -4s a result
of this. the economic structure becornes dependenr on a prime expon product which
dqrades naturd resources. e ~ c h e s on& a mal1 section of socieo;. retards medium-term
production. and rnakes the pricing structure of the whole economy chaotic. FinaII-. it
Ieads to the development of an econorny which stnkes at the peasmt econorny. distorting it
by removing the incentive to produce foodstuffs.
Sociep as a whole becomes heavily intluenced by the problm of drugs. which
Ieads to evcr pater damage to the social structure by imposing the d e s of the garne which
the dmgs mafias foIIow.
Politics is affetted by the sarne procas. closhg the spaces which worker and
peawnt or~anizations had previously opened up. as well as destroying the fornial
democratic muctures which the ruiing classes had imposed on them.
I I7
The environment deteriorates. Ieading to 1eveIs of destruction in the Andean-
Amrizonian basin that are so great they cannot be measured. Wlereas the traditional
cultivation of coca leaves does not damagr and erods the znvironrnsnt. cultivation destined
for the coca by-product esport does.
The andysis of the macroeconomic impact shows that coca by-product exporcs
directly detemine the real exchange rate. and indirectly determine the exchange rate through
the intlurnce on non-banking securities. Thus. despite the declining importance of the coca
sector over Perüs GDP due to a dnstic fdI in the price of coca I d and its ovemock as a
consequence of stronger prevention activities in the .Andean region the w t o r stiII has an
important macroeconomic impact. It has aIso sffects when the dollars obtained fiom the illicit
esporcs are cashcd and uxd to buy good and senices. The indirect effects of coca exports
inducr a demand push on inflation diat esacerbates the pressures on anticipated dnliluation of
the nominal exchange rate. These st'fects have to be consjdered to tUIIy determine the coca
esport impact and interpret the implications of&ated impact coefficients.
In Part 1 an attempts has b e n made to improve &mates of and to cdculate the size of
the illicit h g xctor in Peru. It is important to mphasize here that to the extent that wr are
d d i n g uith an underground activity the resulting estimates can only be considered good
efforts to record an iIlicit sector. The data deveIoped here have been based on field work in
coca growing areas. and microeconomic data on iIlicit coca production gathered by various
organizations. It is also important to mention here that the quality of the estimates have been
improved sornewhat due to the availability of data for c& variables. such as prices at dI
levels. since the- are recorded for several zones. Thus. @en that coca p ~ c e s at various
sages (paste. base and cocaïne) are known at -ch of the different stages. the revenues
generated in the sector depend on the assumptions made regardhg hectares and yields.
Peni did not reaily produce official data on illicit dnigs. It is ody recently with the
N E I and the Mini- of Agriculture that data on iIlicit production are collected and published
otiicidl~. This information on the coca industry until 1995 is consistent mi th the private
consuIrnt Macroconsult Ltd, and the U.S. Deparunent of State's NCSR.
Their result for the yrar 1993 baxd on 1 15300 hectares produceci a coca sector value
added of approsimately CSS 1 .JO0 million. The National Developmmt Institute has
esrimatcd for 1995 an extension o f 125.000 hectares. Similarly. the Mini- of
culture's data for the same y a r range behveen US$ 1.450 and USS 1.600 miIIion. Its
estimates assume 120.000 hectares. Officiai sources announced the objective to reduce the
çul~i~ation are3 by 50% for the year 2000. The: se& to reduce the m a to approsirnately
60.000 ha. With respect to prices. the data were protlded by US. resources. LNDCP in
P m and t-arious Pemian sources. Since hfactoconsdt Ltd. did not consider al1 oher nrral
activitic;. such as cade raisina and the lack of recording by the Ministry of A_~cuIturès
~m~stica1 ofice of some crops. the number of hectares caiculated cm be considered much
higher-
Moreover. this section presented a historicai evolution of the illicit drug sector and
has dso attempted to descrik the smcture of the illicit coca industn; in P m Different stages
of evolution as well as the agents who participate and the current marketing procedures of the
indu- were identifieci and d e s c r i i Some of these issues are the type. or nature. of
incorporation of the coca producer to the cocaine industq. the products that are d e t e d
abroad and those sold domesticaliy. the type of nansponation tttiheci the types of centers of
119
production and international crime. The description of the structure of the coca econom);
shows the vertical intsCmtion which coca growrs have o n e through.
One fact that appears clcarly in a i s section is the moving nature of the activity.
Indeed. coca growing has spread wïdely and tiequently in the Peruvian jungle. ho ther fact
is the dymmic and quick responses given by the différent agents as their economic
mvironment changes.
Calculations made by several smdiss show that the value of the coca sector's
purchaxs from other sectors ranged bettveen 13 and 18 percent of the coca sector's
intermediate demand The major implication of this is. contrary to what \vas found in the
rariy 1990s. that the coca sector bas important backwrd linkages with the rest of the
economy. especially with the chernids. petrokum derivatives as we11 as transportaion and
storage sectors.
.An aspect that is dso worth discussing here is the empto-ment effécts of the coca
sector. T'he sector employai directly ben= ? 10.000 and 240.000 people in 1994. This is
about seven percent of the txonomically active @cuiniral population of the economy. or two
ro three percent of the total econornicaily active population of Pau These shares of the active
population would be higher if the indirect employment were considered
In precmptÏng the anergence of large-de firiiinciai activities by organized
international crime. conml efforts m u s focus on both the supply and demand sides of the
transactions in which criminai organizations have a role to play. International nime feeds on
the revenues from the drug trade. .And yet despite e n c o ~ g progres. the perception
Iingers that drug control is exclusivel~ a country-level
international Ievel must become a more central
120
concern. Drug-controI efforts at the
means of tacklizig cimg-trafficking
organizations: until they do. the revenues accruing to crime will continue to groow. and with
it. the threat of criminai finance will become an mer greater rhom in the side of economic
ret'orm.
Coa created by the illegal coca made are multiple. cornplex and extmneiy di ficult ro
masure. nirx costs may offset the benefits derived liom coca and create morr poverty for
the country in the long m. Principal arnong them are the ecoIogical demudon of the
Pmivian jungle and the alliance of convenience benveen the guerriila and those in the illqal
coca tnde qainst the state.
Part of the problem cm be solved thou& by $vine narco-dependent monomia.
such as the Peruvian case. feasible. Iegd alternatives to alleviate a nidr range of political.
cconomical and social problems which c m o t be done using only militaristic policies. It \var
theretire the purpose of Part II tn discuss the solutions which ddress the inunediate problem
presrtnted by cultivation while rmplojng a longer term stratep to attack drug aafficking.
In the macroeconomic framework. the country needs to take steps to control money
and credit growh and to stabilize d o r n d c demand so as to Iimit or reduce the cment
account deticit bp reducing import growh. It should aiso consolidate the eschange rate to
be morr tlesible (to avoid M e r foreip-ecchange reserve losses). reduce foreign debt
and re-esamine privati-/ation apicdniral creditr price stnrctures. tarîffs. technicd nrppon
and investment pro-rams.
Wlils we cannot tm the ciock back on tinancid Iiberaiization. we can ai Ieast
absorb the lessons of experience. Hoviever. diis does not mean that the country should
reverse the deregdation procedure. What is mquired is a liberaiized deregdated market
liamework so that cornpetition is accompanied by riskcontrolling~ consewative practices
121
on the part of the institutions themselves. such as adequate capital ratios. ample
provisioning. transparent accountinp and proper credit-risk analysis. A greater influx of
foreign rsprr-tise. technology and capital to the econorny would al1 help Pem to achieve
t hese goals.
Economic liberalization -with a human face- must be the objective of the Fujimori's
administration. Since taking office on July 25. 1995. he has renewed his elrctoral pledge
to continue the market liberalization policies of his previous govemment. but also has
served notice dix his administration will d e o more active role in solvinp [ongsmnding
social problems. If these efforts prove successtùl. the govsmment wiI1 serve to reduce
popular dissatisfaction and ~tren~gthen Peru's democratic institutions.
Financing these social espenditures will not be a problem. .\fier recording an
average m l growth gain of 706 in the 1993-1996 period the econorny will probably
espand at a 5.56% annuai clip in 1997. buoyrd by mong copper and tishmeal pnces and
rvrr l q c r csport earnings from the country's vast new rnining fields and agriculture
del-elopment. In fact in recent w r r h the govemment has taken severai precautionary
monetq- and credit measUres to cool demand and pnce increases and to squeeze escess
Iiquidity out of the economy.
The ne13 phase of reforms will require profound institutional changes to maintain
grow-th rates. and if possible increase them. The vaiidip of this type of generaiization mil1
t-ary uith the implicit assumptions regardhg the distribution of the benefits of growth
&tu-een income groups wïthin the corn-. In the recent past growth and investment have
varied ~ i d e I y behveen regÏons and there hris been a tendency toward more economic
inequaliq and evea in some cases- for economic gorvth to be accompanied by increases
133
in unemplo1;ment. So. in order to sustain high growth rates. Prru must appreciably
increase its savings rates.
The sustainabiiity of the refonn process remains a key issue. in view of the
enonnous costs that have been imposed on people. and the inequity wiirh which the benefits
of reform have been shared. Govemance is also developing into a crucial issue:
institutional reforms targeted at incrrasing the stEcicncy. Iqitimacy and equity of state
policies are vita! to the country's stability and to the pursuit of democratic development. In
addition. rampant corruption unrelated to dnigs. in both the private and public sectors.
rmains a S ~ ~ O U S threat to socio-rconomic growth and good ovemance.
Thus. consolidaring the political. economic and social reforms. making them a
permanent frarure of the Peruvian rconomic and social Iandscape. is an enormous
challenge k i n g in the prompt hture.
I think this is the moment to rrffectiveiy implment a redistic progam of integral
derelopment. Five years ago it \vas not nor will it be tive years fiom now since during the
next fivr y x s an>-thing can happen In the Iast nvo years. the price for Peruuian coca I d
and for coca paste for cocaine has plummeted. but not the pnce for r ehed cocaine. The
meet price for cocaine has risen in the US. Unri1 Decmber of Iast year. Perutian coca
s o ~ v m . both in the areas where coca is g r o w ~ for aaditionai consumption and even more in C
the areas growing coca for c h g trafncking. \vere king paid USS M per arroba which is
rquivdent to 1 1 5 kg. about USS 4 per kg. Right now. the price is USS 0.10 per kg. This has
caused a major economic crîsis as well as a major socid crisis in the countryside.
Another important element is the surpIus of both coca leaf and cocaine in storage.
While the overail consumption has remained about the same or has diminished somewhat, the
193
amount of cocaine produced continues to increase. leaving 3 surplus a c h year. And this has
been occumng for the pas four or five years. creating a huge stockpiIe of cocaine. To sum
up. 1 think this is a geat oppoonunity for P m kause the price for coca I d have fàllen. and
because the psai-~uit who ~ m w the coca teaf have been convinced for some time that it is
necasary to combine their traditional crops nith some cu1tivation of coca leaf for traditional
use and for knekia i products. Thmefore. it is exmmeIy important that nationaify and
intrmationally there is support for projets for integrai sustainable ntizil deveiopment that not
only look at the issue of crops. but aiso at marketing the products both domestically and
international&-. and aiso d d s with infnsmicture such as roads and highways to facilitate
access to new- markets.
In addition the suates mus dso combine eradication/interdiction prograns to lower
h g a w renuïis on the one hand and alternative dewlopmmt to nise the retums h m
nltmativr on the odier. Moreorsr. efforts to bolster the capacity of the states in the region to
pencrtrate remote. contlict-dden rural areas bsxt by drug tratr~c. to rein in paramilitary and
cuemlla violence. and to deliver asrntiai govemment smices must be s=nC&ened dong C
aith h g law enforcement efforts. It has been seen that the US. government could and
shodd provide support for comprehensive derelopment prograns as part of its overall
mridmg strategy. The United States clrarly nivil1 not be abIe to fwt the entire bill for the
Andean countrîes. much Iess for the entire hemisphere. but it codd and should contriiute
si-pificandy to nich efforts and encourage other developed nations to do so as weLl.
Bq. itself. h g law enforcement onnot be expected to solve the problem by itseK It
must be complemented by strong diplornatic initiatives. viable economic alternatives for
drug-Cp~ing pesants. effective criminal justice systems- and eaupandeci use of relatively
1 24
new approaches. such as rernoving the profit of h g nafficking and controllin_o precursor and
t s e t itial chemicais.
The .Amcrican administration must move kyond symbolism to serious and sustained
coopcration with the Andean and other source and d i c k i n g countries in Latin America
Excessive emphasis on military ruid police repression will not work and poses multiple nsks to
civilian leadership. human rights. and dsmocncy in the .Andes and dsewhere in the
hmisphrre. Insinnionai-building. rnultilatm1 coordination and sconomic development
musr dl be incorponted into a comprehensivr responx to the regional dmg trade.
Hard and sofi drugs pose serious challenges to societies. They shouId not be
decrimindized or Iqaiized Both supply and dsmand approaches are required [email protected] h m
crop endication (on the supply side) to greater public awarenrss. Wlat is required is a mass
mobilintion of consciousness about the sffrct of h g use m d rn invol~ement of ewq- -or
of the community. fiorn fàmilv to school. tiom workplacr to social clubs. in a sustained
propan ro discourage espaimentation w i t h totemce. and consumption of narcotics.
Moreover. there should be more tiequent regionai and intrrr%ional training xminars and
workshops for h g law enforcement personnel: protision of n p i d secure and direct means
of communication: and establishment of bilaterd agreements behveen States with common
problmis arising fiom the illicit WIC.
Thou&tfûi Pennians of varieci pditicai view. including members of the armed forces,
argue thar the spread of Sendero. the cuItivation of coca and the unheaithy e.upansîon of
rni1ita.q- power ttithui a democratic state are p r o b l a tvhÏch cannot be res~hed nithout a
cohaent strategy for deveiopment and national integration, Therefore, serious attention must
€x given to the medium and long terni h u r e of the drug phenornenon. US. and LaM
125
.Amencan leaders must anticipate and plan a MabIe strategy. and then implementhg it
consistently. This wil1 necessitate si_pificantly higher levels o f U.S. funding both
domestically and interriationally and sustained efforts to cooperate with Latin hericans,
Policies m u t include policing to atrack the indu- in the short tem. Hi& cos% and
low results do not Iqitirnize the existence of this mategy in the long term and thus.
dswlopmcnt of Pm's economy and reduction of the world's cocaine dernand must be
initiated on a large scale immediately. The longer the wait for this change in policies. the
more remote the possibiIity of reducing the coca industry.
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Anrzex-Maps
1 . Coca and Cocaine: .Major Cultivation and TntXcking Routes.
2. Principal Coca Growing Areas in Pem.
3 Vdieys with Coca Cultivation.
4. MADEWS.MD - Action Zone of the Alternarive Development Program.
5. Alternative Devefopment Project in the Valley.
6. COKTRADROGAS - Target Zones of the .Alternative Drvtiopment National Pro*m.
PRINCIPAL COCA GROWING AREAS IN PERU
Huailaga Valley
Pachitea Valley
La Convenc of
ibn y
I' OBRAS EJECUTADAS
ECUADOR COLOMBIA
CONTRADROGAS . . . . ZONAS OBJETNO '. .
-1 \ OEL PROGRAMA NAClONAt t s
1E OESARROUO ALTERNAmO "3
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