COLOMBIA'S GROWING UNDERGROUND ECONOMY: ERODING ECONOMIC PROSPEC

Created: 3/1/2001

OCR scan of the original document, errors are possible

Colombia's Growing Underground Economy: Eroding Economic Prospects and State Capacity

A Research Pope.

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Intelligence Report

Office of Transnational Issues DI Colombia Working Group

Colombia's GrowingEroding EconomicState Capacity

A Research Paper

Findings

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The drug economy is increasing because of an explosion of illicit crops since the; Colombia lias become the world's top producer and trafficker of cocaine. In areas where the drug industry is concentrated, it skews local prices, wages, credit, and investment.

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Promoting Alternative Development Alternative development is critical toivrbhood fix the coca and. poppy gmwns and harvesters. Plan Colombia endorse* this concept, butfoe cash and distracted by the peacelo intensify its eHcrtt. wtuch are piogmting slowly in Putumayo:

Because illicit crops will always be far more profitable than licit crops, alternative development

demands physical security. Governmeniboth in protect those engaged in alternative develop-ment and to ensure that tbey do not revert to illegalessential.

Alternatives should develop the entire productionof legitimate crops need harvesters at affordable wages, means to move products,iable market, Some growers are in areas that aw not economically viable for any legal crops or industries; they should be relocated to work in other agricultural or manufacturing endeavors.

Experts note that the government could make productive use of lard seized from traffickers but acknowledge that finding buyers is difficult because of tbe physical and legal risks they would face. I

AlUrnativt Development in Colombia: A

In

inat targeted

annual investment in6 million for threeproper implementation and international financialwipe out the department's coca crop. In reality, the process of phasing the region out of coca production and Into alternative crops is proceeding slowly, and officials are cautious

inadequate roads ore the major obstacles:

security underpins efficiency in ruralPeople working in the agricultural sector were the second-largest group of kidnap victims in

ucna last year.

are essential to success because highcosts for traditional crops are one of the reasons local growers turned to coca in the first place. Fragile soil and heavy rains complicate both road building and maintenance and agriculairal pursuits. i

Contrary to expectations, income for the lowest links in the coca production chain is rather meager-making alternative crops attractive if marketing and delivery systems can be constructed and maintained. Some current estimates place peasant income0 per kilogram of cocaine base after paying for 'teniial substitute as rubber, palm oil. heart of palm. rice, andsignificantly less, but phasing out the coca economy would reduce the cost of living In these areas.

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regional development is more palatablethan simple crop substitution. ThePutumayo. for example, wants an alternativeplan including rural electrification croppetroleum investment, and constructionand bridges linking the area to bothEcuador and the rest of Colombia. Plans alsoto provide sufficient laborers at harvesthasifficulty faced bydevelopment

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Appendix B

Estimating the Sfcze of Colombia's Drug Economy

Bogota's eradication and interdiction efforts have done bttlc tothriving drug economy. Street prices for finished cocainestable over the lost few years, and coca cultivation insoared. Potential coca leal production0 was enough tometric tons of pure cocaine; Colombian traffickers also hadoons of Peruvian cocaine base.

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Original document.

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