Created: 11/1/1989

OCR scan of the original document, errors are possible


S: III iterjll nenplliis In His dstimesl ai


International Narcotics Situation Report H

Ml Haku INI

Menem'i Aniinarcoila


America |

contributions from other affitei. Il aisesses nartotlti related dctlupmtntt worldwide. The report leadshott Perspectiverug-related lime or trend lhat wet of special importance The Peripetia is Intended to bendtnerote diseuisioa. Theollowed by feature articles, and the remainder of the report etamtnei -a'ious dimensions of the drug problem Bf region Questions and comments are welcome and should be addretted to the I

Ol if snnir r* oo iMM

Inter nationalrn Reportm


Traffickers:be (mrrdklie*

Recent unprecedented stirores underscore iht potcniial that interdiction cToiu hold, bin iliey also rtlteci the resiliency and ihe growing efficiency ol ihe South American cocaine industry H

Durlnc Ihe put (our momhi.v.nn kMeotiSsealed tome JS metric loan of cocaine in separate operations in ihe Unitedbe Caribbean, and (he Gulf of Menco In oat rudgroem.ton sorure ia Loaeptember andon veirure in HarUngcn. Inn ia October suggest lhat ibe traffickers have larceied major US distribution pom, in particular and that they have confidence in the security of such enterprise* I

ihe potential revenuei tost from the recent seizures are in the millioniofhe industry appcan to have weathered these shocks easily. For eiampic. wholesale and retail prices in the United Stales reportedly have not snot up. nor have pricesouth Americaignals that wouldrambk byi to replenish supplies aad recoup ftnanaalccordingly,hat theseindeed, other larie ones that hare taken place during ihe past few >eats- reflect trends in the drug industry toward more efficient shipping and marketing operations.j

are capitalizing on the increasingly well-stocked cocaine pipeline by assembling joint loads and sending shipments io be stockpiled near major distribution centers By pooling their loads and turning to large-volumeraflkhera iretheir operational costs while also improving their anlity to respond quickly to increased demand

The increased efficiency afforded by large-void roe smuggling is complemented by eipanded coca cultivation, which we believe lo be the traffickers* most effective weapon for countering interdiction aimed at curbing supplies. Coca cultivation,ample, more than doubled in. Without an effective crop-control program in (listing growingimilar growth pattern couldM

esult, we believe lhat Ibe drug threat is likely to strain tbe interdiction effort increasingly over the nest few years. While ibeae challenges will be most pronounced for the United States, burgeoning cocaine markets in Europe and elsewhere suggest thai authorities there will soon become equally hard pressed

Aruba: Drug Money Optra lions o( Randolph Habibe IJJJJJJ

Caribbean businesses tn.Xt uwlui partners lor major Soulh Americanffrckers Takenthese businesseslrab'e drug wrvite mduury consisting of import-uponair and maritime shipping companies,! uliona These companies can facilitate ihe iraiuihipmcm of bulk narcotics destined for ibaSulci and handle currencyern teals en rouiehe drug lords The traffic ken eaa use theuntainted ownership, legitimatendconnection! of these firms io per torn key itept in ihe money-laundering cycle.

Aruban Randolph Habibe exemplifies the Caribbean entrepreneur whoide range of business and financial 'crvices for i

many Colombian narcotics traffickers. Many of these traffickers are based in Barranquilla. Santa Marta, and Cartagena on Colombia! north com. other trafficker coatacts are ia MedeOifi. CaH. TheAruba. and clKwherc ia ihe Caribbean. In addition. Habibe has links to several companiesio be involved in shipping cocaine in bulk lo the United Slam and has participated in in*etimcnis with reputed tiafflckers.


Moil of Habibe's tiesrag traffickers arc through the variety of Aruban buiineuct thai be controls. Habtbc'ico-owned withdealumber of other firms in drug-producing or transit countries of the Caribbean and Latin America that engage in shipping, trade, and banking. The mix of legitimate and illicit activitytoiled through his business enterprises prondes. Habibe withIk pi cover aad great fleiibililyin meeting the needs of hii trafficking clientele I

The hub of Habibebusiness network is Zunoca Freeione Aruba. an eiport-import firm that operates oui of Amba'! free root. Habibeirector and ihf


drug usmckcrttransactions are wholesale trade in auio pai ii BJ

Habibe owns alt or companies ihal are invoked in some legitimate commercial business:

air transport company. Avia Air. is cotocaicd


flights and has only one smallnother Habibe company. Tabula, has been the consigneehipment of precursor chemicals.

Habibe. owned by Habibe and his wife, manages Habihe's extensive commercial real estate hosdlnga In Aruba.|

Habibe also uses shell companies that allow him to distance himself and his clients from drug money while retaining direct financial control. Illicit funds can be moved easily through the accounts of thesewhich can be set up in any of several financialhide ihe origin of ihe money. Aai ideal shell lompaay arrangement rs Optimafiduciary services company owned by Habibe and Aruban narcotics trafficker Luis Mansur.

1 thecould be used to accept drug cuiiency or transfers of drug money fiom accounts held by Ha-bibe. Mansur. or Colombian traffickers.

In addition. Habibe is an investor in several joint ventures with Colombian traffickers in Aruba.liheyesort or

I II Off

mc-ihaimgtailed CMfeH Palm Viltaajr pan)nossibly at hit trtvciimcm share in the proved. He mi>bepartner in European Motors, in mm dealership owned by several iraflittcrt I

Ditrrsifted Laundering Nel-orh

Habibe's busmen network comprises everythingto cany out sophisticated money-launderingTor major drug traffickers

labibe uses hit butincu and financial resources in all phases of the drug money cycle. Such activities include mi* ptatrmmi lo move currency into the banking system. layering to protect ihe origin or ownership ef fundi from invest igators, and iruegraito* of untraceable funds in potentially profitable legitimateJ

Cash Ptaeoseni

Much of ibe reporting that Ins Habibe to drag money laundering focuses on anandling dragBalk movement of currency is relatively easy to detect, and national taws are often designedounter or identify such transitiions Traffickers therefore need to convert the incriminating drug currency into more manageable and secure financial assets to begin ihe laundering process Drug service companies can arrange these placemen! tcmces mote easily lhan ihe trafficker by claming an origin from legitimate transactions and by using their banking connect ions

Habibe uses his business status in Arubaandle large amounts ofderived from drugofficial interference The moil revealing cash transaction,!

[was theillion handled by Hat avidtsbul another BMBlAruban moneyNovember ilKSr-ivedranch of Aruba Bank with JO suitcases containing small bills wrapped in foil and covered with powder The bank accepted the Cith andheck in the ume of an-fied IjS ciuren The check was subsequently deponedS bank for transfer loa Colombian trafficker


etwork of businotet and their numerous baak accounts orter scv.ral opportunities Tor layering drug funds. Indeed.hcve lhatinancial infrastructure far exceeds the needs of hn mtv'ii legitimate business holdings.

IJ iccounttTTlatiyTTabibe and his companies in banks in Aruba. Panama. Switzerland, and Luxembourg.

Aruba Bank appears toentral role in this process, but we do not know how all of the fundib-.equenily laundered through ihe banking tyiiemstructure of Habibe's financial network, however, suggests several options:

Deposit into any of several Habibe accounts at Aruba Bank or into accounts of traffickers ai ihe bank.

Wire transfer io other accounts held by Habibe at banks in several countrica to accounts of the drug traffickers, ortter money lauadertrs

heck on Aruba Bank aad physically send it io Habibe's brotber'sccurred in the ia rmlhoa transact ion into the

Launder the funds through <hc commercialof "ne olompanies |

In practice. Habibe may use any or all ofat different staget in Ihe laundering-

arranges for mcneyhruugh hit account at the Trade Development Rank in Luxembourg byourieretter to ihe bank and return the verification to him. The "lelter" could *cllank check issued bv Aiuba Bank or by anoihcr bank where he has deposited currency. The funds could then be moved easily to Habibe's account at the Swiss branch of the Trade Development Bank or to any of his other accounts by wire transfer according to the Instructions provided in tbe same letter.


Narcotics revenues can be returned to ihe trafficker at any stage of ihe laundering cycle, but. for grcatct pfoiecilon from law enforcement investigators,usually want to integrate Ihe money into legitimate business operations. Tr.iiickers can invest directly in companies owned by drug service entrepre* ncurs or form other joint ventures with ihcm. Kabtbe's investmentPalm Village It the bestdesigned to return tcgillmitcd drug money to ihe trafficker. Theoffer the same advantages for moneyas do Habibc's oiher partnerships with traffickers, and theyetter eiplanation for the show of wealth and income.!-

Counternarcotks Problems and Opportunities

hinds-on involvement in narcotics. Although theof Aruba is attempting toougher approach to narcotics, including pursuing newinitiatives, we believe its clToris will be inade-Quate to overcome Ihe corruption that protects Habi'- bsssujj

Drug service entrepreneurs, nonetheless, incur sub-sUalisI naks because they-otatc numerous Laws of several countries -for tiamrXe. the currcao traesac-iions reportingbehalf of tramckerv While prosecution of Habibc and other entrepreneurs could increase tbe consequences for engaging in the drug service business, weomprehensive program involving improved legislation, upgradedand regional coopetation would be neededisrupt and ultimately ieduce the sire of ibe entire industry. i

service entrepreneurs in Ihe Canbbean have operated with relative impunity, lacase, Ambon law enforcement and government officials have long suspected him of Illegal narcotics activities have never taken action. |

success In avoiding pioiecutlon remits from his bribery of Arvbanweaknesses in Aruban laws and enforcement capabilities, his ficxibilily in manipulating hitempire, and his ability to distance himself from

.ui' i. ai- seizure* of drug-rclalxl aueti by (he Colombian Government have disrupted narcotics op-erationi during the past few months, even though they have not crippled the drug kingpins In our judgment, however, the disposition of assets is likely toource of continuing controversy for Bogota, and it may also genet air more violence

The government's actions arc In accordancevI6 Colombian drug law that contains strongon asset seizure and forfeituren provides for the confiscation or financial assets Nevertheless, before the crackdown was precipated by theof presidential candidate lui* Calan in mid-August, asset seizureittle-used stupon The proceit required initial investigative work b> security personnel, prior Judicial approval, and effectiveprosecution The processfunhe- stymied by an inlimvdstrd and corrupt judiciary and by increasingly frustrated security personnel who lacked investIgative skills and resources. After Galan's death, however. President Barco issued antidrug decrees lhat effectively circumvented ihe paralyzed judiciary and paved the wayroad campaign of assei seizures by security personnel.

Especially important, we believe, were the Colombian Supr;ourtsctober that not upheldecrees but went much fuithcr in crackdownany obse.-er> had expected in additionanctioning extradition, the Courta decree pcrmitling the occupation of proper-net suspected of being used in drug-iraltVlmg opera-lions, or bought with narcotics proceeds, and upheld Ihe provisional irantfei of seized properties to the government for iu use. Tbe Court meanwhile siruckecree thai providedpecial tribunaldjudicate the permanent disposition of assets. Short. Ij thcieaftcr. Barcoew decree responding to the Court's calleturn the process to appropriate judges Currently, authorities musi present an mven torj of propenours of their seizure to Colombia's National Drug Council as welludge

with proper jurisdiction: the Council then decides on iii* provisional transfer of ihe properties, and ihe judge rules on their final disposition I

Pr.vaure on Ike Traffickers

Since the crackdown began, government forces have continued harast-rtg traffickers byide range of their assets.

Colombian authMitwfflve^fijJseiTecfrnorc

.roperties. hurrfreeSsoTaircrafi, and large amounts of weaponry, communications equipment, trafficking data, vehicles, cash, and jewelry. The upahol of these actions hat been to force affected liuflsckers to replace vnal facilities and equipment, as well as to alter compromised schedules and methods. The lawyer of kingpin Gonzalo Rodriguez Gucha rimary target of thetrying lo regain

1 hr'r

omputereenteririeogoijanil many conftv

r-ajeeiplaises and vehicles, the loss of which has

Bhampe'ed lie Rodriguez Gacha group's

Operations I-

In our judgment, the Courts rulings nave tho givenwyckotogical and.acticalif the government makes use of seized properties while awaiting judicial Crecisiont on the finalot rath asset Shortly afier the Court's ruling, press reports 'aOrcaiMational agrarianagency hadural estates, that urban properiie* were givenocial welfare institute, and that vehicles were handed over to the National Police and the country's domestic security agency. Aircraft *ere earmarked for tbe military, is nf|


report, may have been erroneous.

|ibe-agraiian re formirst transfer of properly In addition, neither the police nor the armed forces arc currently making use ofrafficker aircraft that

supposedly had been pcovu-onally assigned toctober gJJjJJJ


Problems and Limitations

Guarding veiled iititt including lonvr rural irjiM-er esiaiet lhal0are hectares, if


manpower Armed Forces Commander General MejiaO0l theembers are guarding moreonfiscated properties, and

embers of other services are invohed.

At the same time, lowcver,aniicipatc protracted legal battles on the linal diipos'iion of assets, with trafficker briber) and intimidation playing an integral role. Although >hc recent process of* tics provisionally may free many security ocrsonncl from guard duly, the forces' responsibilities could increase should, as is likely, drug lords turn their anger on persons using (heir properties.

Corruption among sccunt)lso Policehim continue processing cocainearmColombia after heribe' region have tetoried large sums from moreuaffiekers io prevent confiscation of their

Even discounting government problems withand corruption, tbe top traffickers arc billionaires whose financial holdings and transnational narcotics operations seem impervious to asset seizures inalone. Although their business and real estate holdings are considerable, most of their moneyin foreign bank accounts or investmenu.ajajajj

If Bogota keeps up the pressure, tfie drug lords ire likely to relocate more narcotics personnel and facilities to neighboring



We believe thai Ihe capture and extradition of drug kingpins will probably continue as the government's primary focus in Ibe coming months, but assetwilley part of Bogota's overall Strategy Although many Colombian* still view the drug lords astrtcible. local media coverage showing raids on estates once regarded as untouchable is sure to chip away aih The raids and publicity will also eaposc the often decadent lifestyles of the top traffickers and further .ilicnatc the people from ihem.

cocaine industry is both helping and ham-inn 'he economiei of South Americanin the case of Bolivia. Colombia, and Peru. Over time, we believe ihe negativeof which are sublle andoverwhelm IheefTeeis and threaten ihe region's socioeconomic development as well as ihe economic well-being of its people. Still, many poor South Americans have gained considerable immediate economic benefits from the industry and the sudden loss of these benefitswould require painful adjustments for them. Moreover, the hard economic times most South American countries arc currently experiencing would compound the difficulty of weaning iheir economics from drug incomes. H

Size of (be Trad*

We estimate the cocaine industry8 may have contributed roughlyillion to tbe economies of the South American countries lhat produce and iraffic coca and coca products. (The accompanying insei discusses the methodology used lo estimate cocaineolombia received by far the largestof cocaine earnings2 billion, orercent of itsthough it it ru; one of the largest cultivators of coca. Although mot! of their drug earnings remained offshore,Colombian drug-traffickingssociated with the Medellin and Can cocainesizable portions of the huge profits they garnered through sales to the United Stales and other industrial count ries.B

Peru and Bolivia were next in rank with cocaine industry earnings8 of5 million and MOO million, respectively, according io our cslimalcs In Bolivia, the income was equivalent ioercent of GDP and.ajor pan of the economy. By contrast, Peru's drug incomeess significant Torce in the national economy, representing aboutercent or GDP. The narcotics incomes of both countries were generated mainly through theand idle of cocaPeru and Bolivia provided more than SS percent of the world's cocathe processing of the leaves into coca derivatives.

The nareotics incomes of several other Southcountries may fall0 million range. The large amounts of coca leaf eradicated by the Brazilians lastif it accounted for as much as half of total coca cultivated in the country-suggest that Brazil's output was topped only by ihe three main Andean growers. In addition. Brazilignificant processor ofeading source of chemical inputs io processing, and an importantroute for cocaine originating eisewhetc. Cocaine traffickers also transship sizable amounts of their product through Ecuador, Venezuela, andand are known to have "laundered" some of their profits in the fiisi iwo of these countries.

Who Kccciits the Cocaine Income

The bulk of the cocaine money injected inio South America's economies represents the huge profits of Ihe traffickers who marketed the narcotics abroad. Consequently, cocaine-related wealth has beenin the hands or Ihe principal drugand has reinforced what already ha*erious maldistribution of income in the region. Fotbts magazine, for example, has listed several of Latin America's largest cocainePablo Escobar and Jorge Luisthe world's richest people. MEM

Most of those in tbe cocaine industry who grow coca or provide lower-level coca-processing andservices receivemall share of Bolivia. Colombia, and Peru's tout combined cocaine-related7 percent according to our calculations. I


UHpeemc Related Incomehan of GDP. IMI'

estimate ihil some Dyed in iheolivia andfarmers, coilecsorsho purchase aad talker ibe coca leaves, truck-drivers,nd other intermediaries. In Peru and Bolivia, these people account for anercent andercent of national labor forces, respectively

Ho- the Money I* Spent

South American drug trafficker* havea/or ronton of th.Jr repatriated earnings to purchase realpalatialarge cattle ranches, and rnodernlymboli of wealth such as artwork and luaury imports They have also invested in high-profile entertainmentasor professional soccerand retail businesses, including auto dealerships and drugstoreuch

ted in cstablislung major manafactaring orenterprises Drug baron* also bave used part of their wealth to bribe judge* and politicians and to

Eltlmaliae Melkedetogy

Attempts to estimate ihr magnitude ojincomes in ihr drug-pr.dueing countries of Somh America ore hindered by Ihe poutny and unreliability id data on com and earning! for the cocaine industry process, from the ruliivetion of rav. coca leaf through the refining of Intermediate COCO pane and coca bait lo the final manufacturing and trafficking of cocaine hydrochloride ICHCI) Wehowever, that our estimation methodologyavailable price and prodwllvly data to calculate Ihe value added at each stage af ihe industry can yield instructive and plausible estimates.substantial pant af this underlying data are at least somewhat tenuous and even moderatem ihetr values could result in significantin the estimate totaii The largeiitherefore, tke men questionable links in our value-added chain cancer* procetting conver-iion ratios and the percentage! of earnings ihal trafficker! repatriate

We believe the combined UJ btllion of cocaine income for Bolivia. Colombia, and Peru yielded by our methodologyseful and plauiible bateline estimate, although we recogniie that II is subject to suable change under certain alternative assumptions. For example, if average ratios ofor convening coca leaves to CHCI In Bolivia andby the US Notional Narcoiitiwere used instead of KOI. exports af cocaine for the three eounlries would beons leu. and income derived from the trade would be some II billion let! than under our bateline estimateuch smaller converiion ratio of lessor all three countries were uted. the table would ihow cocaine exportsons greater and related income tomeillion larger than our baseline toials. Likewise, iheillion Income emmaie would swing SI billion either way bypercent plus or minus margin af error fro IS orercent' topercentpeafit remittance rate we chose as our bateline








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Biiadraiiaaaolombia Can* Mm oaimi in Cokvta

iaciMMd anddnnd iautedom in;nu'i fill* W (apaiMd io Colombii fa* fuilhn pnaaaina;.

aaa-xnina baa* is HvdrorMinda

iHCIi Colombia'irntni of

mtinni a! PbVi Mm

Cehimbuf^ht.Cc-tmb. fcaWi andhhw and ICloa. iMBi'fl)

ircfm of inm of mdiiwe

oxiMrta*hum ai er mi iM USn

mi Aim. local inuidlciion afoiuhxhiii of IandOfn In Botirt* and CoHmMa. raacwb-ii,

Wa aaawpa ihal If raw o< iMraiitiaO^iM iNna eoviitnn

manipulate government policy Anu" some Ilit even procured highly trained mercenary soldi?rs and aid-em wee pomeep governmentsay I

Coca farmers and lower-level middlemen, meanwhile.robably spent njai of thor much imaller shares of cocaine wealth on basic con turner iiemi suet as food and clothing as well at additional agricultural inputs Accordingress accounts, coca farmers earn0ear, consider-ably more then they might earn growing legitimate craps but not enough to escape fairly austere Irving condition! The US Embassy La Par notes, forlhat coca farmers In the Chapaie do not have molor vehicles, live in houses of humble construction, and generally show link evidence of i

The portion of the repatriated cocaine incomein South America bat had multiplierdomestic economies through severalof spending on goods and services. Indeed,has contributed to business booms inas construction, retail trade, and bankingNcvcrtbcksi.igh percentage ofis spent onluiurygoodt. airplanes and arms, and inputsprocessingthe cocaineimalkr lhan conventional national multiplierscase of

than two-ihitdt of the country's repatrialrit cocaine earnings hat been spent on nonproductive imports

Coca cultivation has discouraged the production of other agricultural crops and has contributed iu shortage! of food staples.

serce ofome cases hatinvestment by legitimate businessmenaboul intimidation or drug violence,also have aggravated social instability by providing financial support to insurgents.

The drug irade has enlarged therowing share of economic activity to be conducted beyond the authority of ihe

Equally important, the cocaine industry isong-term malignant effect on these countries'dc'Cloprneni The hefty bribe* thatpay to protect their cocaine operations arcsocial values Public officials on the take often betray their country's economic and social interests when these interests conflict with the needs of the drug barons In addition, trafficker payoffs help foster acceptance of corruption as an acceptable andbusiness practice. The large profits lhatmake with relative case also may contribute to the frequent dec.sions of Bunnell men to focus more on opportunities for quick financial gains instead of long-term investments requiring hard work and per severH

Despite Many Harmful

The cocaine trade has hurt the economies of South America'a drug-producing and -trafficking countries:

The substantial inflows of cocaine money have contributed to overvalued domestic currencies and have undercut effoni to eipand licit exports

The cocaine industry has eaacerbaied inflationary pressures by eapandlng the money supply aodlabor and land costs

ragffrri Rrglou Crrtal*

Desplte the harmful effects, the governments of the major coca ine-producing countries have ihown thatprut some of the drug trades saort-iermadditional job* and foreignbuffers against ihe harsh realiiies of depressed economic and financial conditions.cccame production hat drawn many workers away from other employment activities, it hat abo generated numerous employment opportunities in the Chapare and Yungat regions of Bolivia and the Upper


Valley pf Peru. Coca farming in Ihe Yungot region, for example, provided employment for moreolivian lin miners who were laid offesult, many coca farmers and oiher middlemen have been able to escape or jvoid abject poverty because of the growing cocaine business.

Cocaine haseading export and source of foreign exchangeew countries. Last year, for example, il yielded foreign exchange foe Bolivia ihal far exceeded its combined earnings from natural gas and Un; Tor Colombia, cocaine earnings surpassed receipts from coffeend. for Peru, these earnings roughly equaled copper revenues The US Embassy in Bogota estimates that the Colombian central bank in recent years has added0 million of cocaine earnings annually to its balancc-of-payments' services window, widely known as the ttnlanitla stnittlra or back window. Peru's central bank has periodically purchased sizable amounts ol US drug dollars on the informal exchange markets this year to bolster its reserves.|

The Difficulties of an Economic W

Tbe Barco administration'* crackdown on drugthat began last August has contributedeneralnotii adversely atfeeu.ig.

business confid -nee. the balance of payments, anddeficit. Nonetheless. Colombia's financialposition remains strong, and the economy l tale.|

of their assets, may invest less of their earnings in Colombia boi that this will have liitle ecortomk impaci. If drug violence continues, consumerremains low. and coffee prkes stay depressed, however, economic conditions could substantiallyOCX! >car. in Our judgment. |

Ihe Colombian Government's antidrug actions also have shown signs of damaging the economics of neighboring Peru and Bolivia. In Colombia thedisruptions to the production and trafficking of

cocaine hydrochloride-the final product thai is mar-kctedto haveeduced the demand lor cuca Ic.-ves and ihe lower-stage processedpuste and base -from Peru and Bolivia.

mg ol these drugs Irom to Lotomoia nas declined and ihe prices of both Peruvian and Bolivian coca leaf and derivatives have dropped considerably. ii* major decline in the Row of cr*airK^eliied US dollars entering Peru and the resulting surge in the country's parallel exchange rale for the dollar. If sales and prices of coca products continue to slump, the coca farm earnings as well as the foreign exchange receipts of boih Peru and Bolivia could suffer substantially.

Concerned about the potential social consequences of eliminating the livelihoods of large numbers of coca formers, ihe Governments of Bolivia and Peruare intenl on shifting the focus of regional antidrug efforts frommeasures such as forced coca eradication to alternative economicstrategies. President Paz Zamora stresses that Bolivia and its peasant farmers musi not become poorer because of antidrug actions. Peru's President Garcia, mean- .nit. saysew antidrugcan succeed only if it helps coca farmers and solicits their support in combating traffickers. Both leaders urge lhat comprehensive crop lubxtiiution programs funded by large-scale foreign assistance serve as the centerpieceew international coun-ter narcotics strategy

Ecuadoriche intb* Regional Antidrug Effort

officials are tupping ip efforts toole in the Andean antidrug fight. They apparently are motivated by fear that successful antidrugio Colombia. Peru, and Bolivia would increase Ecuador's vulnerability to narcotics, concern that Ecuador may not receive any new antidrug resources offered by Washington, and worry tbat Ecuador's exclusion from the US-backed plan will tarnish their aspirations for greater regional prominence. Wethese officials will continue pressing US dipto-mais for direct participation in the Andean antidrug plan, while also focusing on regional organizationsorum to demonstrate their commitment to the war on drugs.

Trying To Exertdenfaip

During the past few weeks. Ecuador's leaden have sought to enhance their bona fides on (be antinarco-tica front byeadership role on the drug issue in regional forums In mid-September the Agriculture Ministerey rote in meetings of the Andean Pact in Lima devoted to devising plans lo improve coca eradication and formulate proposals onalternative crop programs. In lateQuitoeeting of tbe antidrug Andeanlegislative members from live of the region'sformationegional front against drugand iw-,te. The commission also called for establishing an Andean research institute on drug use and prevention and proposed lhat tbe United States help devise ways to convert tbe foreign debt of Andean countries to drug-fighting ventures.delegate) took tbe lead in advocating standardized sanctions against drug trafficking and money

Quito also appears determined io be in the forefront of new antidrug enforcement efforts Ecuador's Su-preme Courtare summit for regionalCourt presidents in early October to coordinate judicial and penal reforms. At last month's Andean Parliament meeting, Ecuador's Attorney Generalfavorable commentary on Quito's proposed new antidrug law. which he hailed as incorporating the "latest juridical and legal advances In drugHe claimed that the law--developed in close cooperation with USprovide for:

Strict new licensing procedures on the importation of drug-refining chemicals.

A central clearinghouse for restricted chemicals.

A ministerial-level antidrug council to coordinate government antinarcottcs efforts.

Streamlined procedures for asset seizures.

Tighter controls on money laundering.

Clear definition of and penalties for narcotics crimes.

Establishmentmall corps of judicial police to assist investigations of drug cases and ensure thai judges comply with the law.

the beginning of Bogota's recent crackdown, Ecuadorian security forces have redoubled efforts to work closely with their Colombian and Peruvian counterparts in antidrug operations B

d or. an

ed Medellln cartel associate Evaristo Porras.the highest profile trafficker arrested to date. Two weeks earlier, an Ecuadorian Army unit cap-lured and deported two Colombian traffickers whose plane had crashed in Ecuador's eastern jungle while en route to Peru to meet coca base suppliers.police have joined Colombian and Peruvianforces in long-planned border antidrug strikes backed with US financial and material support. The missions arc Intended to destroy coca plantations and processing labs, and lo interdict drug-refiningand processed cocaine.


tpected Results

Wc believe Qjiio fieri aa upfcil! struggle la Hi effort ro puriiaade other countries la tbe region to treat Ecuadorey player in the Andean antidrug Agfti Although ibey -ill applaud Ecuador '* attitodc on countering the drug trade and wdcome the assistance ilxtending, they will probably continue lo look on Ecuadorarginal actor. The Andean groupings, whichittle financial backing and virtually no enforcement capabilities, are weak institutions through whrih to institute regional antidrugMember states likeof their nationalalmost certainly beto subsume their antinarcotics strategy under one dictated by regional groups. Moreover. Peru's Presidenthis cue from US plans to focus antidrug resources on Peru. Colombia, andwill not promote Ecuador'sm the regional drug plan. He limited invitations to an antidrug summit onctober to Colombian President Barco and Bolivian Presided Pat /amors

Boys evidently is genuinely convinced that Ecuador is vulnerablepillover from antidrug campaigns in Colombia aad Peru, he abo probably worries that his delation from the US antidrug plan will damage hn credibliiyespected statesman Therefore. Borjs ran be expected to push hard to be included directly in the new US plan and to gain additionalassutancc from Washington.

In part of this effortrrange for high-level bilateraldesigned to provide public recognition ofmportance at ao antidrug player and to establish new avenues for cooperation in ihe regional war on drugs.

Nevertheless,elieve Ecuador'srealuc the limitations of regional forums -will per list tn trying tooleegional antidrug plater. Tbey probably will concentrate on seeking io convince Washington that Ecuador'samid the worlds largest coca-growing and-pro-cetiing countries requires that il be included in ihe US antidrug Initiative. President Borja may point to theJ deport at ion of Porra lo support this argument and to assert that he stands ready to aid the regional narcutics fight


Argentina:Anlinarcotics Drive LsssssM

hit first four months in o'ncc. Argentine Pretident Menem has launched an aggressiveaniinareolics campaign and taken an active role In ptornoting regional counlernarcotics cooperation. While sincere in his desire to curtail drug use and traffickingountry Hill on the periphery of the Latin American drug trade. Menem also hopes to use hts campaign to polish his image at home and abroad and to procure foreign financial assistance. Theof bis domestic at well at regional efforts, however, will be coniirained by limited government retourcet, chronic bureaucratic inefficiencies, and growing corruptionublic-sector work force that Isharp erosion in real wages.

Aminercotics Low

failure of the aniinareolics bill by Ihe Venule last September wasotor victory far the Menemmore activist approach lo drug issues The bill emerged after more than three years in Congress with significantly stronger penoltietfor the production, trafficking, and export narcotics than its earlier versions and with conirpis on precursor

raft of ihe^^mrva^eakerirTiwa^igmcani respects: coca chewing was decriminalised andfar more lenient treatment of cooperativewere removed. Major points in the finalInclude:

(pern's Program

Menem's decisive moves against domestic narcotics use and trafficking have both surprised and impressed political pundits. He used valuable political capital earlyhis administration was pressingto pass emergency economicalso lobbyough antinarcoticj law. Last September, the Senateill with stiff penalties for drug traffickers and users,ontroversialrriminaliung possession of imail amounts of narcotics for personal use- Menem appointed one of the author! ofjnarcotics secretariat responsible fv> coordinating government efforts against drug abuse, productiort. and trafficking. He also launched an offensive against international drug traffickers by strengthening security along Argentina's porous northern border and by promising to seek legislation providing for the death penalty for traffickers. Most recently. Lestelleew national drug control plan that will focus oneducation at all schoolandrug traffickingH

TAoje convicted of trafficking, producing, ornarcotics and precursor chemicals for Ilia-gitimate purposes will receive fourprison termsine. Financing or organising these bunrrreJ will draw eight'year terms in prisonine.

Those convicted of providing an area fordistribution, storage, or use of narcotics will receiveyear prison sentencesine Businesses where such activity occurs will be closed.

Investment sale, purchase, or transfer of assets or profits produced or ocauired through trafficking will be punlthed with two-year prison termsine.

Assets produced or ocauired through narcoticswill be selred and used for narcoticsand rehabilitation programs.

Individual enforcement entities may enforce the law anywhere in Argentina, regardless of Jurisdiction.



Al lb* urrc line. Menemook on (he drugasas Nareosies Secretaryav* soughi to makelayer ia :f. regionrm narcotics1

ell-publicized movetember. Menem offered Colombia (hreePucaia) airerafl worth some SIO million as well at the exchange of legal and inon serviceselp in lis drug war.

In Ibe same month. Argentina signed an agreement with Peru lhal included an eachange of lechnkal assistance information links, and assistance on drug rehabilitation

estimated lhal therers among ibe1copk WiJ* narraco rain-vaiion is outlawed produeuoa may be km.led more by tbe poo* qualityfhe retain* accessibility ol" cocaine from Bolivia and marijuana from Paraguay. Open source and Embassy reporting indicateetric tons or marijuana were imported last year for Argentine consumption

ce IMS. particularly among ihe middle class and affluent sectors, aad along the Bolivian border. Chemical abuse, including alcohol andreportedly elists largely among the young and poor, while hashish and opium derivatives arc almost totally absent mjm

Aires haslan for increased antinarcoties cooperation with Bolivia, including joint training operations and Ihe tichange of legal services.I

The Chilean and Argentine Governments arejoint policies to fight drug trafficking along Ibeir common border, according to press reports.

- Argentina and Uruguay are discussing joint coast [uard gainst trafficking I

In addition to these bilateral programs withcountries, the Menem administration has used multilateral forums, such as ihe Nonahgnedthe United Nations, and the Latin American Group of Eight, to repeat calls for regionalMenem However, has stopped short of proposbg detailed regional initiatives!

On lb* Prripfcerj efim Drug Trad*

Mencm's initiatives appear lo beincere desire to stem drug use aadrgentina, despaic us relatively limited drug problems, andear (hat drug wars heating up elsewhere inmerica could push traffickersk refuge in Argentina Drug use andrgentina are small by regional standards The government has

Drug officials recognize, nevertheless, that Argentinerug processing and transshipment it on the upswing The availability of precursorsuch as ether, acetone. HCL. and sulfuric acid from its well-developed chemical industry, has madeir^

ties- ii4 nw'rie. ions cocaitseHCT^aTouT^eiTenTorsouth American production was processed in Argentina last year. Al thetime, the country's poorly patrolled northerncombined wuh its developed air and shipping links, have madeempting inmUirpmem point for Bolivian cocaine and Paraguayan marijuana destined for th* United States and9 metnc tons ofrgentina on its way to the United Stales Iannereeni increasel

Argentine drug officials are worried lhatattract international traffickers fleeinghosnlr rn.nnnnenuatintraffickingArgentina to offset ihe recent loss ofColombian routes According to anreport, ihere it evidence suggesting lhatoperating in Argentina have connections tocancl and even toovement

Angling for Recognition Mil Support

In addition loan apparently sincere interest in com. baling drugs.believeminarcotic cam-puign has been designed lo boost his image by winning Ihe respeci of observers at borne and abrrad. Mcnem'x tough drug siance. his ability lo win final passage of the aniinareolics bill, and his prominence on the international aniinareolics slage have added to thetrong domestic popularity. He may hope that spotlighting his drug campaign from lime to time will help offset criticism of his economic reform program in the coming months. |

Menem's antinarcotics campaignroader foreign policy agenda of signalingdesire for closer alignmenl with the West and positioning his government for foreign financialHe hasumber of overtures to ihe West, including Ihe opening of negotiations with the British on the Falkland* and discussing US concerns related to Argentina's missile and nuclearprogram. As with these other issues. Buenos Aires has been quickink an expandeddrive, including provision of more planes for interdiction efforts, to requests for foreign financial support. So far, the Menem administration hasforeign aniinareolics assistance by signing twp new agreements with Washington for icchniea! assistance to Argentina's: federal pcrilee and olber security organization

While McncnYs regional antinarCulics rhetoric is likely io remain strong. Buenos Aires will be wary of apreanng to be Closely involved in ihe military and domestic security affairs of its neighbors, or of getting too far ahead of other governments in cooperating with Washington. Menem has refused to detailmilitary technicians abroad io train ihemilitary on the donated Pucara aircraft and has Hated lhat it Is too early tooint military antinarcotics force in Colombia. In our judgment, these positions reflect both constraints on Argentine military resourcesesitation to become involvedoreign military adventure


Despite Mcnem's best efforts, the success of his antinarcotics drive will be limitedhortage of government funds, bureaucratic inefficiencies, and corruption. Government coffers will not be able to finance sufficient stirvelllanee and drug testingfor provincial police for example. Drug czar Lestelle will face an uphill battle in coordinating jniinarcoticsncluding four federal agencies, three separate ministries, androvincial police forces In addition, the decline in realpercent for public-sector -orker* during the first eight months of thisincrease incentives for Argentines to become involved in the lucrative drug trade


Lath)Mixed Signals on Ih* Drug Wail

The Bolivian Govern mcnilssendiniiconn'icting signals regarding itsAccordingan polke force


rafficker ttiongliold in early November, arrestingutop Bolivian trafficker. At about the saneovernmentstated lhal La Par hopes to triple in eoui-iternireot-cs polio*personnel andPresPa fi-non

also inttrsO*r^mVur^tSSmi^^SSnKtMrmSrisigns were tempered, however, by Pat's assertion

Bolivia will not push an aggressive ant (narcotics program unul Ihe United Stales accepts the "global" plan he intends to unveil at the Ar-Jranar is meanwhile also (tiling to on information ksnanananananV

some newly appointed oTic-als tespons.ble for animarcoiics cprntiom have ties to


We believe the positive steps taken toward fighting the narcotics industryesire on the pan of La Pai to ensure that it receives lis share of the counternarootict assistance it anticipates as part of (he US Andean Initiative. Al ihe same lime. Par. Znmora's grandstanding and his reluctance to replace corrupt officials point to his resentment'S pressure for stronger action. Paz is likely to remain particularlyc entreaties for stepped up eradication operations, fearing thai such actions would generate violent protest from coca growers and traffickers

Ctdle: Cocaine Processing Ub

Chilean police recentlyocaine refining facilityouse in northern Chile, underscoring Chile's utilityhe Andean drug traffickers as an alternative processing site. According io press reports, the police arrested three people involved in the conversion of cocaalmost certainly originated in Bolivia orcocaine hydrochloride and seizedilograms of coca leaf, kerosene, and other laboratory materials. Antidrug officials also recovered two new military uniforms, possibly implying trafficker use of military cover for their activities.ime when Colombian traffickers arc coming under increasing pressure from government forces, we believe thai Chile will be viewedarticularly attractive processing site and export route for Andean cocaine given its sophiaticaled chemical industry and international transportation network.

di is strier *Mot

Original document.

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