LATIN AMERICAN AND CARIBBEAN DRUG PRODUCERS: THE IMPACT OF DEPRESSED ECONOMICS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00586R000200140005-9
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• Document Creation Date: December 27, 2016
• Document Release Date: December 22, 2011
• Sequence Number: 5
• Publication Date: February 1, 1985
• Content Type: REPORT

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Latin American and Caribbean
Drug Producers: The Impact
of Depressed Economies
Key Judgments We believe depressed economic conditions, among other key factors, have
Information available contributed to the recent expansion of the drug industry in a number of the
as of 10 January 1985 source countries of Latin America and the Caribbean (Mexico, Colombia,
was used in this report.
Peru, Bolivia, Belize, Costa Rica, and Jamaica). First, recessions in official
economies have meant a step-up in the relative economic rewards for
participating in the drug sector, encouraging increased production of drugs.
For example, higher unemployment has provided more and cheaper labor
to traffickers, farmers, and other organizers of narcotics activities. Similar-
ly, some businessmen and investors, faced with bleak opportunities in
official economies, have moved into narcotics activity. Furthermore,
adverse price trends for some of the major agricultural commodities of
these countries have encouraged farmers to substitute drug crops.
Second, the slack regular economies also have sapped enforcement efforts
of these countries. Governments probably have become more resistant to
taking enforcement actions-such as crop eradication and involuntary crop
substitution programs-that would reduce employment and income at a
time of already depressed conditions. In addition, some leaderships have
become preoccupied with economic problems, so that controlling narcotics
receives less attention. At the same time, government budget cuts have
limited funding-despite US aid-of such key elements of enforcement as
police personnel, courts, and prisons. Finally, reductions in real incomes, a
result of austerity measures and inflation, made government workers in
these countries more susceptible to narcotics-related corruption.
The poor economic outlook for the major source countries in Latin
America and the Caribbean-especially in the absence of improved terms
of trade or significant economic policy changes-promises to delay bring-
ing the drug industry under control and may also contribute to further
expansion. In addition, similar economic conditions in other regional
countries, such as Brazil, Argentina, and Venezuela, will make them more
vulnerable to the growing narcotics activity.
--8ftret
GI 85-10033
February 1985
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Table 1
Latin American and Caribbean Drug Producers:
Estimated Increase in Cultivation, 1983 a
Belize
Bolivia
International Narcotics US Embassy, Narcotics Intelligence
Control Strategy January 1984 Estimate, 1983
Report b
180 d
0
a Unless otherwise indicated, the percentages in this table are based
on changes in hectarage used for growing drug crops. Because of
major uncertainties in data bases and estimating methods, the
figures are subject to large errors and should be considered as only
indicative. In particular, the estimates in the range of 10 to 20
percent are probably well within the error of estimation. Thus, it is
not certain that cultivation actually increased in these cases.
b "International Narcotics Control Strategy Report," in US Re-
sponse to Cuban Government Involvement in Narcotics Trafficking
and Review of Worldwide Illicit Narcotics Situation, US Govern-
ment Printing Office, Washington, D.C., 1984, pp. 79-233.
Narcotics Intelligence Estimate, 1983, The National Narcotics
Intelligence Consumers Committee, Washington, D.C.
d Based on estimated cultivation data in metric tons.
e Source indicates that any estimate would be highly speculative.
r Based largely on DEA estimates.
s Source does not quantify cultivation but does indicate that
production increased, in part because of more rainfall.
h Based on estimated exports.
Based on seizures of marijuana at the US border.
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Latin American and Caribbean
Drug Producers: The Impact
of Depressed Economies
Cultivation of drug crops expanded during 1983 in
most of the Latin American and Caribbean source
countries and sometimes increased substantially as in
the case of Belize (table 1). Recent evidence indicates
that the expansion, at least in Mexico, continued in
1984. Analysis of an aerial survey conducted in
February 1984 showed a 65-percent increase in the
number of poppyfields in the northern growing region,
which suggests that the opium crop roughly doubled
in size in 1984. Furthermore, Drug Enforcement
Administration (DEA) reporting indicate
considerable expansion of Mexican marijuana produc-
tion in the past year or so.
A number of factors have contributed to this growth
of the drug industry in the Latin American and
Caribbean regions, including:
? Adoption of new strategies by major traffickers (for
example, Colombian narcotics organizations have
encouraged coca production within Colombia as
supplies from Peru and Bolivia declined because of
increased processing and trafficking capabilities in
the latter countries).
? Changes in the political environment that loosened
controls on narcotics activities.
? Increased demand.
? Entry of new traffickers and producers.
? Depressed economies.
The importance of these factors varies across coun-
tries, depending on geography, local customs, econom-
and the Caribbean. We do not mean to suggest that
the economic problems of these regions provide the
major explanation for the probable expansion of the
drug industry, but we do suspect that the impact of
economic recessions has been more than a negligible
factor in the following Latin American and Caribbean
countries-Mexico, Colombia, Peru, Bolivia, Belize,
Costa Rica, and Jamaica.
Depressed Economies Encourage Resource Shifts
Slack economies, reflected both in higher unemploy-
ment and lower profits in traditional agriculture,
almost certainly have encouraged some expansion of
the drug industry
Increased Unemployment
With the sharp slowdowns in economic growth, offi-
cial unemployment has risen substantially in most of
the Latin American and Caribbean drug-producing
countries (table 2). Greater unemployment in the
official economies tends to provide more and cheaper
labor to major traffickers, as well as to farmers and
other organizers of narcotics activities at lower levels
in the production chain. We also would expect that
migration increased to centers of drug activity, many
of which are flourishing economically. For example,
in Mexico the opium production- and trafficking-
based economy in and around Culiacan is thriving and
almost certainly has attracted financially strapped
migrants from elsewhere in the country. At a mini-
mum, greater unemployment will make it harder to
get current drug sector workers to quit in favor of
other work
Businessmen also increasingly might shift their re-
sources and entrepreneurial skills to the drug indus-
try. Activity in this area probably takes many differ-
ent forms, reflecting various motives. For example,
is structure, and political situation
This paper focuses on the role that depressed econo-
mies have had on the drug industry in Latin America
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Table 2
Latin American and Caribbean Drug Producers:
Economic and Narcotic Situations
Declines in export prices since 1980
have led to a 30-percent decline in
national income. In the 1980 cen-
sus, unemployment was estimated
at 14 percent of the labor force.
Although later employment data
are not available, it is believed that
unemployment has increased since
then with the slowdown in the
economy, according to the IMF.
The IMF estimates growth of GDP
was 2 percent in 1983 and growth
was not expected to be much higher
in 1984.
The Bolivian economy has been
battered by a $4 billion foreign
debt, high interest rates, depressed
export prices, adverse weather, and
political instability. Domestic pro-
duction has fallen by about 30 per-
cent since 1980. According to Min-
istry of Labor data, the rate of
unemployment in 1983 was 9 per-
cent compared to 6.6 percent a year
earlier; the labor force defined as
underemployed almost doubled in
1983 to 46 percent, compared to 28
percent in 1982.
While escaping negative growth
rates, Colombia's economic per-
formance has fallen off sharply in
the last few years contrasted with
the 1970s. Growth of GDP proba-
bly averaged 1 percent per year in
1982-83. Measured unemployment
increased from 8.2 percent in 1981
to 10.1 percent in 1982 and then to
12.5 percent in 1983, as reported
by the US Embassy Bogota. Unem-
ployment reached a record 14 per-
cent in June 1984. Large current
account deficits and cutbacks in
new lending from abroad recently
caused the government to place se-
vere restrictions on imports.
Sugar represents about 60 percent
of exports. Given decreasing export
quotas in the US preferential mar-
ket and a much lower free market
price, the unit price of sugar ex-
ports has fallen one-third since
1980.
According to Embassy reporting,
marijuana has recently become a
major cash crop. Cultivation is esti-
mated to have increased by three to
five times in 1983, in part due to
weak markets for traditional crops.
According to recent Embassy esti-
mates, production did not increase
in 1984, but growers showed in-
creasing sophistication in the use of
irrigation, fertilizer, and
intercropping.
Although volumes are small, the
unit prices of both sugar and coffee
exports have fallen by about one-
half since 1980. Furthermore, Bo-
livia's policy of providing food sub-
sidies has kept food prices low for
producers as well as urban consum-
ers.
Coffee accounts for about 60 per-
cent of Colombia's exports. The
unit price of coffee exports was
about 25 percent less in 1981-83
than in 1978-80. According to the
US Foreign Agriculture Service,
coffee production fell in 1983 and
was expected to drop again in 1984
as producers face a profit squeeze.
Higher production costs have not
been matched by higher,
government-administered coffee
prices, despite a recent boost in the
world price.
The IMF indicates that coca
leaves-the raw material for co-
caine-is the only cash crop show-
ing substantial growth. According
to estimates from the US Embassy
in La Paz, production, which is
legal in Bolivia, increased by about
20 percent since 1981. According
to the IMF, high profits are crowd-
ing out other crops that face lower
prices, whether because of weak
demand or price regulations.
We estimate marijuana production
increased sharply in 1983, contrast-
ed with the previous year when
drought held production down, and
was somewhat higher than produc-
tion in 1979-81. Our estimates in-
dicate coca cultivation has tripled
in recent years-from approxi-
mately 5,000 hectares in 1980 to
some 16,000 hectares in 1984. As a
result of the government crack-
down in 1984, some minor traffick-
ing organizations have been shut
down. Major traffickers have large-
ly adjusted by relocating operations
in neighboring countries and by
diversifying shipping routes and
smuggling techniques.
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Table 2 (continued)
Starting in 1980 the Costa Rican
economy entered a severe recession
as the result of high interest rates
and cutbacks of foreign lending
and also delays in taking needed
financial policy adjustments. The
measured unemployment rate rose
from 5 percent to 9 percent, and
real wages fell by about a third.
The economic decline leveled off in
1983 when GDP grew at an esti-
mated 0.8 percent.
For much of the 1970s, the Jamai-
can economy suffered recession and
high unemployment. The economy
recovered somewhat in 1981 but
since then has been hit by weak
world demand for aluminum, pro-
longed drought, and reduced sugar
prices. According to estimates of
the Bank of Jamaica, GDP growth
has averaged about one-half per-
cent per year in 1982-84. Accord-
ing to an Embassy report, Jamai-
ca's unemployment rate was 27
percent as of late 1983.
To meet import and debt servicing
costs, Kingston borrowed heavily,
and the external debt reached $2.2
billion by yearend 1983. Foreign
credit dried up when Jamaica fell
out of compliance with IMF targets
in late 1983. Recently, Jamaica has
launched a new austerity program
to correct imbalances and to quali-
fy for IMF loans.
Coffee, bananas, sugar, and beef
make up about 60 percent of total
exports. The unit value of coffee
exports fell by a third from 1980 to
1983; sugar fell by almost one-half
from 1980 to 1982 but recovered
substantially in 1983 because of
increased sales to preferential mar-
kets. The unit value of meat ex-
ports decreased 20 percent from
1980 to 1982, regaining about 5
percent in 1983. Only bananas
have registered price growth since
1980, rising about 9 percent by
1983.
Jamaica has access to protected
markets in the United States and
the United Kingdom for its sugar
exports; it also has a large quota in
the United Kingdom for its banana
exports. Nevertheless, the unit
price for sugar exports declined 15
percent from 1980 to 1982. In 1983
this price recovered by 10 percent.
The unit price of bananas fell 30
percent in 1981-82; it rebounded by
about 25 percent in 1983.
Embassy reporting indicates that
acreage under marijuana cultiva-
tion has roughly doubled in size
since 1981 to about 950 hectares in
1984. (A successful enforcement ef-
fort in 1984, however, resulted in
the eradication of 245 hectares.)
Expansion has occurred primarily
in the sparsely populated rural
provinces, where small-scale farm-
ers have shifted to marijuana pro-
duction as a more profitable cash
crop than traditional crops. The
Embassy also suggests that the de-
pressed legal economy has attract-
ed others to the big money avail-
able from drug trafficking.
Although documented evidence is
sparse, Embassy reporting states
that both Jamaican and US en-
forcement officials believe marijua-
na cultivation is increasing, in part
because of depressed economic
conditions.
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Table 2
Latin American and Caribbean Drug Producers:
Economic and Narcotic Situations (continued)
Rapid economic growth in 1978-81
based on petroleum and foreign
borrowing came to an end in 1982,
when increased inflation, an over-
valued peso, and large debt service
costs resulted in a halt of foreign
lending and capital flight. The re-
cession continued in 1983 when
GDP contracted by 5.3 percent.
The economy picked up somewhat
in 1984 with GDP growth of 2 to 3
percent.
Nevertheless, we believe the rate of
unemployment has more than dou-
bled since mid-1982 and now
stands at more than 20 percent; it is
close to 30 percent in urban areas.
Major agricultural exports are cot-
ton and coffee. The unit price of
cotton exports fell about 20 percent
in 1981-82 while the unit price of
coffee exports fell about 10 percent.
Furthermore, rapid and volatile in-
flation, combined with government
controls on producer prices of agri-
cultural goods, probably has dimin-
ished production incentives.
The US Embassy has reported that
both opium and marijuana cultiva-
tion are spreading to nontraditional
locations. This probably reflects ef-
forts to avoid detection as well as
increased incentive to obtain cash
through drug production, given the
slump in the Mexican economy.
Substantial foreign borrowing and
high commodity prices allowed av-
erage economic growth of about 3
percent during 1979-80. Since
then, however, weak export prices,
increased debt service costs, and
disastrous weather in 1983 have
resulted in at least a 10-percent fall
in per capita income. Unemploy-
ment and underemployment com-
bined rose possibly as high as 60
percent in 1983.
According to the US Foreign Agri-
culture Service, production of some
foodstuffs for local consumption is
falling as the result of reduced pur-
chasing power among consumers.
In addition, although prices to
farmers are generally uncontrolled,
the government procures substan-
tial food imports which has the
effect of holding down prices to
farmers.
There are several indications of
greater narcotics activity in Mex-
ico. Our preliminary estimates of
the opium crop for 1984 suggest
that the harvest could exceed 30
tons, almost double 1983 produc-
tion. According to a press report,
Mexican newspapers now frequent-
ly report raids on drug labs, while
seizures of refined heroin have in-
creased 10 times in the last few
years.
On the basis of data on seizures,
DEA in the US Mission in Mexico
estimated that marijuana produc-
tion roughly doubled in 1983. More
recently during operations in the
State of Chihuahua in November
1984, a large marijuana seizure of
an estimated 1,500 to 2,000 tons
took place. The size of this seizure
implies that Mexico produced
much more than previously
estimated.
Cultivation of coca leaf is a major
cash crop in Peru. Although there
is little information available on
production trends, the expansion of
cultivation to nontraditional areas
indicates the opportunity to obtain
higher incomes than from alterna-
tive crops. As pointed out by the
Embassy, the fact that reported
prices for coca paste fell during
1983 suggests that supply is grow-
ing. While some of the price reduc-
tion is explained by production
growth in Bolivia and Colombia,
greater production in Peru proba-
bly also has contributed.
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some businessmen desperate for foreign exchange
might agree to provide a front for partners in the drug
trade in exchange for hard currency. Bankrupt or
near-bankrupt individuals might attempt to take a
direct hand in production or trafficking of narcotics.
Private investment resources could increasingly be
channeled to narcotics activity, which may offer not
only increased returns compared with the official
economy but also hard currency and low risks
Some examples of this activity have been noted
in Bolivia many for-
merly legitimate businessmen have gone into nar-
cotics trafficking while continuing to run their
businesses.
over the last two years have caused many banks to
extend loans to known drug traffickers. Under the
cover of farm loans, small traffickers use the funds
to finance their enterprises, while large traffickers
use the loans to establish a legitimate cover for their
illegal activities.
in Jamaica ~ a
trend toward large, commercial-level marijuana-
growing operations in which farmers receive financ-
ing either from private investors or major traffick-
ers. The private investors are often small groups of
local Jamaicans or sometimes foreigners.
Information gaps prevent us from making even crude
estimates of how large an impact increased unemploy-
ment, or increased bankruptcies, in official economies
has had on the drug industry. Nevertheless, on the
basis of the evidence presented in table 2, we suspect
the impact has been at least moderate in most of these
countries
Lower Agricultural Profits
World market prices for many agricultural commod-
ities have declined over the last few years. According
to International Monetary Fund (IMF) statistics, cur-
rent world prices of food and agricultural raw materi-
als are, on average, still 10 to 20 percent below the
peak year of 1980, despite some recovery during the
last year. Prices for sugar, coffee, and cotton-major
agricultural exports of the study countries-are down
substantially. The price of sugar now stands at about
15 percent of the 1980 price, while the price of cotton
is down about 25 percent and the price of coffee is
about 10 percent lower (see figure).
While there is a large diversity in the level of
sophistication of farmers in many LDCs, they all
frequently show a strong sensitivity to price shifts and
react quickly to make crop substitutions that imply
higher incomes. The prices received by farmers for
nondrug crops as well as the prices they pay for
production inputs, such as labor and fertilizer, for
these crops thus are important factors affecting the
incentive to produce drug crops.
We suspect recent price trends for agricultural com-
modities and inputs have tended to increase the
relative profits from growing drug crops in some of
the countries we examined. The evidence we have
usually is only circumstantial, composed of adverse
price trends for nondrug crops accompanied by indi-
cations of greater cultivation of drug crops. Thus, in
general, we cannot discount an important role for
traffickers, who may be driving the increases in
production.' Nevertheless, higher relative incomes ap-
pear to be a key influence in a number of cases,
particularly those involving marijuana, because traf-
fickers often have a smaller role in this crop than in
coca leaf and opium:
? According to the US Embassy, marijuana has be-
come a major cash crop in Belize, in large part
because of the decline in earnings available from
sugarcane and, to a lesser extent, other legal crops
such as corn and beans.
? The Embassy in Costa Rica attributes much of the
spread of marijuana production there to the severe
economic recession and the worsened financial situ-
ation of small farmers. The Embassy suggests that
improved economic conditions in the countryside
will be needed to undercut the economic rationale
for marijuana growing.
' Another possibility is that expanded cultivation of drug crops in
some cases reflects an ongoing adjustment to traditionally higher
drug crop prices that existed even before the recent decline in
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Selected Agricultural Commodities:
World Price Trends, 1975-84a
countryside,
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I I I I I I I I I I
0 1975 76 77 78 79 80 81 82 83 84
0 1975 76 77 78 79 80 81 82 83 84
I I I I I I I I I I
0 1975 76 77 78 79 80 81 82 83 84
marijuana growing was replacing
sugar, bauxite, and, in one case, indigo dye as a
source of income and jobs.
? Recent Embassy reporting from Bolivia indicates
that in the regions of greatest coca production, the
Chapare and Yungas, not only is coca the principal
cash crop but also, increasingly, farmers are turning
to coca monoculture. Farmers still growing food and
other crops face not only relatively weak prices but
also increased labor costs because they have to
compete for workers employed in coca-leaf growing
and processing who are paid relatively well.
Government exchange rate and price policies also may
have played a role in raising the relative returns of
drug activity. Because most of the legal commodities
are priced in US dollars, the appreciation of the dollar
should increase the domestic prices received by farm-
ers in these countries. Some of the countries, however,
have attempted to maintain overvalued exchange
rates, a step that prevents the potential price gains
from reaching the farmer. In addition, some of these
governments control farm-gate prices to keep down
food prices in urban areas. This practice further
lowers the profits from legal farming relative to those
of drug production, encouraging the latter activity
One of the source countries also has had to face
smaller preferential markets for its exports in recent
years and, hence, lower average prices. Starting in
1982 Belize has had to shift more sugar exports into
the free market at prevailing low prices because of
smaller quotas in the US market. As a result, the
average price of sugar exports from Belize was some
percent lower in 1983 than it would have been.
We believe that economic recessions have tended to
diminish the willingness of most of the major drug-
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While a variety of forces probably influence farmers
to produce drug crops, many analysts agree that
higher earnings often is a major motivation. However,
it can be argued that market conditions and profits in
nondrug crops are not relevant to farmers' decision-
making because of the large role of major traffickers.
According to this view, traffickers are easily able to
set prices at whatever levels are needed to ensure that
growers supply the desired production. Thus, market
conditions elsewhere in agriculture do not really
affect the drug industry
Without denying that often the role of traffickers is
dominant, we believe that in other cases relative
profits also will be an important influence. Its role
becomes clearer kf'we distinguish between "old"
growers of drug crops and "marginal" ones. Old
growers can be considered those who are relatively
established. They have learned the cultivation meth-
ods, have developed long-term arrangements with
traffickers, and generally have little interest in other
agricultural pursuits. Consequently, the earnings pos-
sible from cultivating other crops may have little
bearing on their production decisions
producing countries in Latin America and the Carib-
bean to undertake stringent enforcement efforts.
First, depressed economic conditions have highlighted
the role of the drug industry as an economic safety
valve. With reduced employment opportunities in the
rest of the economy, governments probably are reluc-
tant to undercut the livelihoods of even more workers
by carrying out drug-control policies, such as crop
eradication, crop substitution, and crackdowns on
traffickers. Furthermore, such cutbacks in direct em-
ployment in the drug sector would have ripple effects
because legal businesses that provide goods and serv-
ices to drug-sector workers would suffer reduced
sales
Besides concern for the employment impact of crack-
downs, governments are also aware that the drug
trade provides large inflows of hard currency. Any
reduction of these flows would imply further deprecia-
tion of domestic currencies and greater pressures on
Marginal growers can be considered those who are
new to cultivation of drug crops or are currently
growing alternative products but are thinking of
raising drug crops. Marginal growers thus are much
more likely to compare alternative earnings possibili-
ties than established growers. Although a declining
market for nondrug crops might have little impact on
old growers, it may importantly influence the margin-
al group. How individuals in this group react will
probably vary widely. Some might approach known
traffickers and arrange to sell a future drug crop;
others might offer to work with established growers.
Often these actions could include migration to loca-
tions where drug crops are produced.
The future growth of drug production to a large
extent depends on the actions of marginal growers
rather than the established ones. As in the past, the
actions of the marginal group probably will depend to
a large degree on the production strategy of traffick-
ers and whether this strategy includes organizing new
growers. At the same time, we would expect market 25X1
conditions in the rest of agriculture also to influence
marginal growers and growth of the drug industry.
the external payments account. Indeed,
he Colombian Government may be
seeking to alleviate its financial problems by encour-
aging repatriation of drug revenues.'
The United States provides substantial aid to these
countries to support operations against narcotics ac-
tivity. Nevertheless, economic recession often has led
to cutbacks in government budgets that have reduced
spending on such other key elements of enforcement
as police personnel, courts, and prisons. Finally, ef-
forts to improve the economic situation have in some
2 We believe a hike this year in Colombia's official domestic price of
gold has mainly benefited traffickers, who have been purchasing
large quantities of bullion abroad for resale to the Central Bank.
Now the government is contemplating a measure that would
authorize unrestricted importation of goods purchased with funds
abroad-another action to which few groups except traffickers are
in a position to respond.
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cases served to relegate the narcotics problem to a
lower priority, both in terms of government resources
and leadership focus. There are a number of indica-
tions that the enforcement efforts of these countries
have been affected in one way or another by their
economic situations
Latin American Countries
Although Mexico recently has intensified its eradica-
tion efforts, we believe the government would be
reluctant to undertake the sweeping changes in pro-
grams and personnel needed to achieve major progress
in drug control. the Mexican
Government continues to be preoccupied with reviving
the economy. In Colombia, prior to the May 1984
crackdown, President Betancur showed little interest
in formulating a coordinated drug policy, being preoc-
cupied instead with Colombia's troubled economy,
Third World politics, and the persistent indigenous
terrorist and insurgent threat. Since then, the govern-
ment has demonstrated somewhat greater determina-
tion, most notably by recently extraditing four ac-
cused traffickers to the United States.
Although Embassy reports do not suggest that Peru's
economic problems have affected its commitment to
control the coca industry, the recession has led to
government spending cutbacks. The United States
largely finances the costs of coca eradication opera-
tions, but funding of other aspects of enforcement,
such as courts and prisons, have suffered, according to
an Embassy report. Until recently, the Siles govern-
ment in Bolivia made little effort on the narcotics
front because it was preoccupied with economic and
political problems. The possibility of a suspension in
US aid, in part, prompted a sweep by the military
through the Chapare region in August 1984, but only
a few arrests were made as most of the some 2,000
traffickers were able to flee.
Caribbean Countries
The depressed sugar industry in Belize and Jamaica
has promoted the numbers and political strength of
marijuana farmers. According to State Department
analysis, former Prime Minister Price of Belize sus-
pended the country's successful spray eradication
program in February 1984 in order not to jeopardize
his party's political base in the marijuana-growing
regions. A recent report from the US Embassy in
Kingston indicates that high-level officials in the
Jamaican Government frequently emphasize the po-
litical risks of a strong stand against marijuana
cultivation. They say the danger is that strong actions
would turn the many small farmers dependent on
marijuana against the present government.
Corruption
Economic recessions and government austerity may
also be weakening enforcement indirectly through
increased susceptibility to corruption. The enormous
earnings generated in the drug industry provide traf-
fickers and others the capability to make large bribes,
which will continue to be the main force behind
corruption in the major Latin American and Caribbe-
an source countries. At the same time, cutbacks in
government spending as well as inflation have tended
to reduce the real value of the salaries of government
employees, increasing their susceptibility to bribery
and other forms of corruption. In extreme cases, some
high officials and lower level employees may even
have been prompted to become directly involved in
narcotics activities.
Although it is difficult to obtain data on corruption,
there is some fragmentary evidence that points to
economic problems contributing to its spread. In the
case of Mexico,
lower level (and lower paid) administrative, law
enforcement, and military personnel have impeded
drug eradication programs and aided heroin and
marijuana smugglers. A recent Embassy report from
Belize indicates that low salaries and few opportuni-
ties for economic advancement make police and other
government personnel charged with narcotics enforce-
ment vulnerable to corruption. In another example,
desperation for funds has caused the Surinamese
Government to become involved in transporting co-
caine from Colombia, Peru, and Bolivia to the Neth-
erlands. Finally, a recent report from the US Embassy
in Paraguay suggests that high-ranking military lead-
ers may have become more involved in drug traffick-
ing because of the phasedown of the immense Itaipu
25X1
25X1
25X1
25X1
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 Declassified in Part - Sanitized Copy Approved for Release 2011/12/22 : CIA-RDP86T00586R000200140005-9
Table 3
Latin American and Caribbean
Drug Producers: Projections of
GDP Growth, 1985
Mexico
3.3
4.6
4.7
Peru
2.6
NA
2.6
a Data Resources Incorporated. Data are for GNP.
b Wharton Econometric Forecasting Associates.
Chase Econometrics.
hydroelectric project, which during its construction
provided ample chances for high-level officials to
enrich themselves.
The economic situation of the major drug-producing
countries in Latin America and the Caribbean proba-
bly will not improve much in the near term. First,
some world economic conditions remain adverse, par-
ticularly for the countries with large debts-Mexico,
Peru, and Colombia. Interest rates remain high, and
foreign loans often are not available. Even assuming
that the current debts can be continually rescheduled,
the interest payment obligations alone are huge and
will continue to constrain imports. Many commodity
prices are flat and show little indication of increasing
even though the industrialized countries are in an
economic upswing. Furthermore, in some of these
countries economic recovery is held back by burden-
some government regulations and policies. Given the
outlook for world economic conditions and the contin-
ued reluctance of governments to adopt more market-
oriented policies, forecasters anticipate continued rel-
atively weak economic growth in 1985 for most of
these countries (table 3).
We believe the poor economic outlook for most of the
major Latin American and Caribbean drug-producing
countries will continue to impede efforts to bring the
drug industry under control. Little or no growth in
opportunities and income in these economies certainly
will discourage drug industry participants from shift-
ing into other activities and, indeed, probably will
result in further shifts in the other direction. Enforce-
ment efforts will continue to be constrained by fund-
ing problems, preoccupation with the economic situa-
tion, and, perhaps most important, by leadership
concerns for the political and economic fallout of such
steps as crop eradication, crop substitution, and crack-
downs on traffickers.
Elsewhere in Latin America, other countries with
economic problems also could have trouble suppress-
ing increasing narcotics activity. Largely because of
their proximity to source countries, Brazil, Argentina,
and Venezuela have experienced increased production
and trafficking of cocaine. All three countries are also
large debtors, have had slower economic growth in the
last few years compared to the 1970s, and face tighter
government budgets.
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