Regional Stability

Peru: the New King of Cocaine

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Two lines of cocaine. Image: Nightlife of Revelry/Flickr

This article was originally published by the World Policy Institute on 3 February 2015.

The home of cocaine production has a new address. Stepping out from behind the shadows of its more notorious peers in the region, Peru is taking the helm from its South American neighbors as the leading producer of cocaine in the world. While Colombia’s production declines due to concerted efforts by both its government and U.S. foreign agencies (along with FARC being open to negotiations), a once dormant industry from Peru’s troubled past has resurfaced to meet market demand.

In the early 1990s, Peru was a major producer of cocaine but was eventually surpassed by Colombia following aggressive government policies in Peru to combat the black market trade. These policies have faded over time, and thus the expansion of cocaine growing has boomed once again.

In 2008, the production of cocaine was equivalent to 17 percent of Peru’s GDP, which would have made it the largest industry within the country.  The result is nearly $1 billion in revenue to Peruvian drug syndicates while driving almost $7 billion in revenue to crime organizations inside Peru. Though the country has enjoyed the greatest economic growth in South America in the past five years, it is pivoting toward a lowered expectation of their economic forecasts. In the wake of the slow down of industrial sectors of the economy, the drug trade continues to be a major supplier of income, even if it is off the books.

A unique component of the cocaine trade in Peru is its structure. Many cartels and crime organizations usually seek to implement a vertical monopoly over production. Instead, Peruvians typically control each stage of production based on familial association, using established and foreign crime organizations as tools for export and distribution. While farming, production, and local movement of the drugs is done by native Peruvians, the final product is then smuggled out by players like the Mexican cartels and Brazilian crime groups.

Prices are based largely on volume and yield from the coca leaf, something Peruvian growers have the benefit of ranking number one in both categories. The low price which Peru is able to establish for its cocaine has drawn the eyes and wallets in neighboring Brazil, who account for their number two overall purchaser after the United States. According to some estimates, over 35,000 kilos of cocaine leaves Peru for Brazil every year. The effects of such a steady stream are evident, as Brazil houses the second largest population of cocaine users in the world, estimated at over 1 million.

While the world awaits the expected emergence of the BRIC nations and the economic prosperity they will bring to the region, the unintended consequence is that disposable income helps to grow both new industries as well as drug trafficking and black market activities. Increased disposable income also draws in the cheap and readily available drug suppliers, who often transform cocaine into a cheaper but highly addictive form of crack. As a result, Brazil is experiencing a crack epidemic that some compare to levels seen in the U.S. during the 1980s.

With such established drug producers on its borders, the flow from Peru of coca leaf products is steady and prosperous, leaving both local economies and international crime syndicates to benefit from the damage caused to Brazilians. The UN World Drug Report noted that Brazil is both a leading consumer of cocaine as well as a major exporting hub for coca products from Peru, Bolivia, and Colombia.

In São Paolo, Brazil’s crack epidemic is at its apex. In a sector referred to offhand as “Cracolândia,” it is reported that one in three people die in five years of living on its streets. The glaring issue of drugs has greatly impacted both the minds of Sao Paolo’s citizens and in its politicians. However, initiatives to increase funding and support to addicts stands in stark contrast to the War on Drugs pursued by the United States.

Attempts at rehabilitation centers, legal help, and direct police action are an approach that Brazil’s politicians hope can address the epidemic. These initiatives have seen minimal effects, as noted by journalist Vincent Bevins, who has covered the Brazilian cocaine issue for the past several years. He tells World Policy Journal that “the fact is that it takes very little effort to stay high, fed, and warm… this is often perceived as a better and preferable life than accepting a bed at a shelter.”

While the fight in the streets rages on to save addicts, emerging markets may be sentencing Brazil to a perpetually bleak future. USAIDS report predicts an increase in cocaine use to develop in Africa, seen as a growing market for the drug in the coming decades. Doing so would put Brazil at the forefront of both smuggling and exporting from the producers in Peru, Colombia, and Bolivia. Kyra Gurney, a reporter for InSight Crime in Colombia notes a massive conglomerate of drug traffickers and producers are “propelled by significant domestic markets in South American countries such as Argentina and Brazil.”

If this is the case, a broader approach by the Brazilian government may be needed, including working with Peruvian officials and international governing agencies to prevent the development and dispersion of coca leaf products.

On Peru’s end, supplanting the role of the coca market with tangible and legal professional opportunities may prove impossible. With such a large portion of their economy depending on its production, defusing a black market on par with 17 percent of their GDP would leave a massive portion of the population without work and ostracized. However, a gradual reduction in coca production could help to implement far-reaching benefits to both Peru’s own populace dealing with crime syndicates as well as its neighbors, where the crack epidemic has them reeling.

Elsewhere, employing such tactics as assisting citizens in their transition into professions outside the drug trade have proved beneficial in the past. The steady decrease of Colombian produced cocaine in the early 2000s “coincided with a decline in U.S. cocaine overdose deaths, positive workplace drug tests, and the purity of cocaine available,” according to the Office of National Drug Control Policy.

Though the steady flow of cocaine into neighboring countries allows for cheap and continuous dispersion, simply attacking supply routes worries many in South America. As Bevins notes, “Most Latin American countries in general take the same stance towards cross-border trafficking, we are all against it, it needs to be stopped, and we are trying our best,” but increased efforts may lead to the blood outbreak seen in Mexico in recent years. Despite seizures and attempts to curtail drug dispersion, the massive influx across the border currently dwarfs efforts to prevent it.

Patrick Balbierz is an editorial assistant at World Policy Journal.

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