News- Peru

The End of Cocaine?

Falling price may signal a crisis for drug producers, and an opportunity for government actions to wipe out a deadly industry

By Alejandro Bermudez

The long dominance of the drug-trafficking business in Latin America could be reaching to its end. But that scenario would require the leaders of cocaine-producing countries in the region to take advantage of an unexpected situation: the dramatic drop of the international price of the coca leave and its derivatives.

Thus far, the changes in the international drug market have not been visible at the buyers' end; demand remains strong. But the economic shifts in this unique industry have transformed the business for producers and intermediaries that, in the foreseeable future, some very important changes may be felt throughout the chain of underground markets that brings the drug from growers in Latin America to consumers in the developed world, especially the United States.

In the short term, the unexpected drop in coca prices has produced a negative social impact in the producing countries. A sharp drop in personal income has created an economic crisis, and the first warning signs of social unrest, in coca-growing regions such as the Upper Huallaga Valley in the Peruvian jungle or the Chapare Valley in Bolivia, where thousands of families produce the coca leave for a living. Late last year, a great number of coca farmers of the Upper Huallaga Valley organized regional strikes, demanding President Alberto Fujimori to increase the government's social spending in their region. The strikers demanded that the government must somehow compensate local communities for the income lost when the coca price fell.

The spectacular profits available to farmers willing to harvest coca had, over the years, given growers a taste for personal wealth--in a region traditionally afflicted by poverty. Now these same farm families have been plunged into poverty. In fact, those who concentrated exclusively on coca have found that their market has entirely disappeared. The 20,000 tons of coca leaves legally cultivated in Peru are more than enough to cover the actual needs of the two million consuming Peruvians--mainly peasants and miners who chew the leave (an ancient habit that is equated to smoking)--as well as chemical laboratories and coca tea producers. But the remaining150,000 tons of coca leave tons which have been produced each year in the region to supply international drug traffickers have now been completely wasted. Those leaves were left to rot in the fields, or putrefy in their clandestine jungle storehouses.

Bolivian coca growers have faced a similar situation. On December 1995, hundreds of women from the Chapare Valley marched toward the capital city of La Paz, ostensibly demanding a change in government social policy. In their subtle way, the marchers were actually demanding an end to the government's efforts (with US support) to eradicate the crop, and a new policy which would support a better price.

OPPORTUNITIES FOR ENFORCEMENT

But the fall in prices has a far brighter side. The drop in the price of the coca leave opens up the first serious opportunity in years for an orchestrated campaign to promote alternative crops and thus dramatically reduce--if not yet end--the drug-trafficking business in the region. According to Peruvian Drug Enforcement Police, in October 1995 the price of one kilogram (2.2 pounds) of cocaine base paste decreased from $600 to $150. The price of the coca leave arroba--11.5 kilograms--also dropped, from an average of $60 to $80 to between $2 and $4 in the last months. The plunge in prices has been so dramatic that coca is no longer the most profitable crop farmers can raise. Products such as coffee, pineapple, cacao, and achiote (an aromatic and coloring herb) can now be far more profitable.

The Peruvian Agriculture Minister, Absalon Vasquez, explains that an investment in infrastructure such as roads, airports, electric power, and efficient irrigation systems could dramatically expand the number of profitable products. Those developments would be especially useful in allowing farmers to produce and market fruits, which are in heavy demand in the American, Japanese, and European markets, but cannot be produced successfully without advanced irrigation and efficient means of transporting the product to market.

Analaysts caution that the reasons for the dramatic fall in prices are temporary; the prices will remain low only if authorities in the region pounce on their opportunity. One main cause of the disruption in the cocaine market has been the dismantling of the Colombian drug cartels based in Medellin and Cali, which in turn has led to the series of bloody battles among the lesser drug merchants scrambling for position to step into the vacuum. With one set of buyers leaving the market, and another distracted by warfare, coca farmers have seen a drop in the demand for their product.

Another key factor has been a newly reorganized fight against the drug traffic in Peru. President Fujimori introduced a new strategy, learned in part during his government's successful campaign against the "Shining Path" terrorist organization. His administration has concentrated on fighting corruption in the drug-enforcement agencies, and striking its most powerful blows against the centers of the drug-trafficking Mafia. Special police forces, relying heavily on intelligence work, have sought to identify and capture the leaders of the Mafia cartels--known as "churches" in the region--and disrupt the transportation routes that link the leaders with their production bases.

This policy bore real fruit in 1995. The Peruvian police captured and destroyed the complex commercial structure of Demetrio Chavez Penaherrera, known as "The Vatican" because of his control over the "churches." Also successfully crushed were Abelardo Cachique Rivera, number two on the list of Peruvian drug barons, and the Lopez Paredes family, the most important providers of the rising Mexican cartels of Guadalajara and Sinaloa.

At the same time, Peruvian air force has been methodically capturing or destroying the numerous airplanes that once were used for quick flights to Colombia or Brazil. This surveillance policy has been highly successful thanks to radars and AWACs planes provided by the United States Drug Enforcement Administration (DEA). One single flight could move nearly one ton of washed coca paste.

PROBLEMS THAT REMAIN

These successes in the fight against drug trafficking still leave unanswered the question of how government can address the plight of 200,000 Peruvian families, and another 70,000 in Bolivia, who have fallen below the poverty line. At present, neither Peru nor Bolivia has the financial resources necessary to develop efficient global programs to promote alternative crops--let alone to furnish the coca-growing peasant families with the standard of life they had come to enjoy. Even the substitution policy at the Chapare Valley in Bolivia, where the United States invested heavily in roads, water, and electric installations, has not proven successful; coca farmers are not willing to accept harder work for lower income, even if the new work--unlike the old--is legal.

But the level of government investment in such programs is also a question of political options. Peru's Jaime Yoshiyama, the Minister of the Presidency--a "super minister" responsible for Fujimori's special projects--has said that the government will invest heavily in the infrastructure needed to make other products commercially viable. (That policy leaves other important factors--such as the prices of altenative crops--subject to marketplace forces.) At the same time the Peruvian government will continue its energetic campaign against drug trafficking, to ensure that coca prices stay down.

Nevertheless, Peru's campaign against drugs will not be totally successful if it is not coordinated with similar campaigns in other countries. Fujimori insists, reasonably enough, that drug traffic in the region can only be defeated if the big distributors, who buy the raw material from coca farmers and produce refined cocaine, are also subjected to intense law-enforcement pressure. Today those distributors, once concentrated almost exclusively in Colombia, are now waxing powerful in Mexico. But the most serious effort must be made by consuming countries, mainly the United States, whose permanent demand for cocaine keeps the drug wheel spinning.

Alejandro Bermudez Rosell writes for ACI-PRENSA in Lima, Peru.