Figure 11: Trafficker Costs and Profits for Cocaine Sold at the U.S. Border

Note: All values are best-point estimates of industry averages. Actual individual organizations’ costs can vary. At an average sale price of $15,000/kg at the U.S. border, traffickers earn $4,500/kg. These point estimates average trafficker profits and cost of seizures for two scenarios: 1) Colombian traffickers maintain ownership of the cocaine to the U.S. border, and 2) Colombian traffickers turn over ownership to Mexican counterparts on the high seas.

Traffickers actually face significant fixed costs for raw materials, money laundering, aircraft and boats, and business overhead such as bribes. Even assuming everything goes according to plan, Colombian groups are typically placed in the unenviable position of handing over an astonishing 40 percent of a given load of cocaine to Mexican traffickers in exchange for the Mexican groups’ agreement to smuggle the remaining 60 percent across the border. (Urban ethnographers who looked into the economics of street-level crack dealers in the early 1990s found much the same thing about profitability: many of the kids who supposedly could not be bothered with earning $5 an hour at McDonald’s were actually making less than minimum wage dealing crack.)

But, to press the argument, why are the critics necessarily wrong about the impossibility of successful interdiction, especially given the enormous challenge of finding small shipments hidden along extended borders or on vast oceans?

Answering this question requires a closer look at how interdiction is increasingly being focused in ways that cause damage to drug markets. Briefly, interdiction can damage the drug trade precisely because those agencies with responsibility for the interdiction mission— including the Department of Defense and elements of the Department of Homeland Security such as the Coast Guard—do not look for traffickers in millions of square miles of ocean or along thousands of miles of border. Rather, such agencies rely on intelligence to narrow the search and seek out natural chokepoints where they exist.

Interdicting the Flow in Colombia

One such chokepoint is the maritime movement of almost all Colombian cocaine through that nation’s coastal waters.

More than 700 metric tons of cocaine is exported annually from South America to the United States and Europe. Roughly 500 mt departs South America in noncommercial maritime conveyances such as elongated “go-fast” boats, each carrying between 0.5 and 2.0 mt of cocaine, and fishing vessels, which typically carry multiton loads of cocaine.

The cocaine threat can thus be described, admittedly in somewhat simplified terms, as 500 maritime shipments heading north annually from the Colombian coast to Mexico and the islands of the Caribbean, in the first stage of multi-leg movements to the U.S. border. According to estimates contained in an interagency assessment of cocaine movement, the 500 shipments are divided roughly evenly between those departing Colombia’s north coast (heading both to the Greater Antilles and to Central America) and the west coast (destined for Mexico). In the Pacific, larger cocaine-ferrying fishing vessels are used to consolidate loads far off the Colombian coast, to continue the movement to Mexico.

Go-fast boats are effective because they are small, easily launched from numerous estuaries and small pier locations, and difficult for interdiction forces to locate on the high seas. Colombian traffickers have a significant investment in each shipment as it departs South America—as much as $3 million per go-fast boat. That investment, moreover, is uninsured. Once the cocaine is handed off to

Mexican smugglers for the second leg of its journey, a rudimentary form of insurance takes effect in some cases, with Mexican organizations typically taking as much as 40 percent of the load while agreeing to reimburse Colombian traffickers if the drugs are lost in transport. (This arrangement has had the perverse effect of encouraging local consumption in Mexico, because organizations sell some of their product locally.) While in transit to Mexico, however, cocaine is uninsurable and is owned solely by the Colombian organization.

Attacking go-fast movements in coastal waters thus holds out the promise of rendering unprofitable or minimally profitable a key business sector. The United States will work with the Government of Colombia to direct our air and maritime interdiction resources and assets accordingly, as appropriate, while seeking to create a dedicated sensor infrastructure and establish a robust Colombian capability to interdict drug flows in their coastal waters. The seizures that result will not occur in isolation but will engender investigations into major trafficking organizations and result in better intelligence on future smuggling activities.

About 90 percent of the cocaine entering the United States originates in or passes through Colombia. In addition, the cultivation of opium poppies in Colombia has expanded from almost nothing in 1990 to roughly 6,500 hectares now, producing roughly 4.3 mt of high-purity heroin—enough to supply a sizable portion of the U.S. market. In light of this serious threat, DEA has transferred agent positions from offices in nearby countries to create a heroin task force in Colombia. The Bogota Heroin Group will work with the Colombian National Police on cases involving high-level traffickers servicing U.S. markets.

Colombia’s narcotics industry fuels that country’s terrorist organizations, which monopolize coca cultivation and are increasingly involved in drug production and trafficking. The Colombian Government estimates that cocaine profits fund more than half of Colombian terror-group purchases of weapons and provide key logistics funding to that nation’s illegal armies. Accordingly, U.S. Government policy seeks to support the Government of Colombia in its fight against drug trafficking and terrorism. Those entwined problems are especially evident in parts of Colombia east of the Andes that are underpopulated, and lack a government presence. Most of Colombia’s drug crops are grown in such areas, where the rule of law is weak
and government access is limited.

In the face of this huge challenge, the past eight months have witnessed a revolution in the way Colombia perceives the link between criminal and political terrorism, drug trafficking, corruption, and weak government institutions. Rather than meekly accepting these as facts of life, Colombia’s President Alvaro Uribe is pushing back, both against the drug trade and the terror groups it sustains.

Colombia’s rural population, in particular, has been terrorized by Colombia’s illegal armies: the FARC, ELN, and AUC. In a single raid last May, FARC rebels incinerated 117 residents of Bojaya, including 45 children, who had taken refuge in the local church. Analysts surmise that the rebels intended to regain control over a smuggling corridor.

Regrettably, the Bojaya tragedy is not an isolated incident. Terrorist attacks killed more than 3,000 Colombians in 2001. Another 3,041 were kidnapped. The ELN, FARC, and AUC rebels were responsible for more than 2,000 of these victims, including 205 children as young as three years old. The AUC has killed two Colombia legislators in the past year, and the FARC has kidnapped five legislators, a presidential candidate, and a Catholic archbishop. The three terrorist groups have also assassinated 12 mayors, and the FARC has threatened many others, leaving them with a choice of resigning or being killed.

With the election of President Uribe, Colombia has accelerated implementation of its drug control program, eradicating record levels of coca and moving aggressively in several areas to weaken criminal and terrorist organizations, reestablish the rule of law in war-torn regions, and protect the rights and security of Colombian citizens. Significant drug control gains in Colombia will require—and President Uribe has committed to pursuing—restoration of the rule of law to areas that are currently terrorist-controlled and used to cultivate and produce illegal drugs.

With U.S. assistance, Colombia has established carefully screened, or “vetted,” law enforcement task forces comprised of investigators, prosecutors, and support personnel with specialties including asset forfeiture, money laundering, and human rights. Colombian authorities and their U.S. counterparts from the DEA are also working to attack the Black Market Peso Exchange money laundering system, one of the mechanisms that enable Colombian traffickers to repatriate their drug profits.

Figure 12: An Expanding Coca Eradication Program in Colombia

Note: Estimates reflect total ground area covered. Source: U.S. Department of State

Aerial spraying is a major component of Colombia’s strategy for fighting the drug trade and is the program with the single greatest potential for disrupting the production of cocaine before it enters the supply train to the United States. Spray operations have the potential to cause collapse of the cocaine industry if the spraying is intensive, effective, and persistent. Replanting coca is expensive for farmers, in terms of both labor inputs and opportunity costs (coca seedlings typically take a year to begin bearing harvestable leaf ). According to estimates by the Institute for Defense Analyses, eradicating 200,000 hectares of coca would cost farmers $300 million—costs significant enough to cause growers to conclude cultivation is uneconomical.

The Government of Colombia may have achieved this rate of eradication in the coca-rich parts of Putumayo and Caqueta during parts of 2002, although repeated spraying over the next twelve months will be necessary in most areas to deter replanting. Continued U.S. support will be critical for Colombia to maintain this level of eradication.

Where eradication prompts hoped-for movements of growers out of remote planting areas, alternative development programs managed by the U.S. Agency for International Development will be there to absorb some of the disruptive effect on local economies.

U.S. assistance will focus alternative development aid in areas where projects will be economically viable and self-sustaining and where there is, or soon will be, enough government presence to ensure that the projects will be implemented for the benefit of legitimate production and democratic rule. Implementation should be fully integrated with Colombian government efforts to establish security and implement other anti-drug, economic, and social programs.

The Andean Ridge

Rising demand for cocaine in Europe and Latin America and expanded drug control in Colombia are placing increased stress on Peru and Bolivia, with farmgate prices for coca products at high levels in both countries. New administrations in both these countries face difficult challenges in reducing drug production while confronting economic weakness and political instability.

The economies of Peru and Bolivia have suffered through the sluggish global economy and the economic deterioration of traditional export markets in Brazil and Argentina. This in turn has put a strain on employment and alternative development. In some cases, traffickers are pushing legitimate governments through a combination of lawlessness and radical demands. These actions are undermining democratic institutions, making them vulnerable to increased corruption and violence—the path that Colombia faced many years ago.

In Peru, the Toledo government faces the significant challenge of rebuilding democratic institutions in an atmosphere of reduced public confidence. Coca cultivation is rebounding in regions frequented by Sendero Luminoso terrorists, while Peru has weakened its security presence in some drug cultivation regions and slowed implementation of its overall drug control effort. Peru must act with renewed decisiveness to prevent a resurgence of the volatile combination of Sendero terrorism and expanded cocaine production.

Bolivia is also in the middle of a turbulent period. In the past year, radical groups launched violent protests that have damaged the economy and challenged the government. These groups, including coca growers, indigenous activists, teachers, and urban consumers, have divergent goals and have not followed a single leader in the past, but more recently they have demonstrated an ability to work together. Opposition and minority political groups have had their legitimate issues hijacked by a vociferous pro-coca movement, and serious reformers may find themselves uncomfortably aligned with a cast of marginal political figures who believe Bolivia’s destiny is to supply coca to the world.

The Sanchez de Lozada government has strenuously avoided violent confrontations but is now being pressed to grant concessions that could undo the gains made by the previous administration to substitute legal employment for coca cultivation. In 2002, Bolivian coca cultivation increased by 23 percent over 2001 levels, sufficient to produce roughly 60 mt of cocaine. The United States has been clear in its message that Bolivia must stay the course on eradication or risk losing much U.S. Government assistance and economic support.

Mexico: Building on Success

Mexico lies squarely between Andean Ridge cocaine producers and American consumers. It produces thousands of tons of marijuana, more than seven mt of heroin, and an unknown quantity of methamphetamine yearly. Here the situation is both a great challenge and a great opportunity, offering more hope than at any time in many years. On entering office, President Vicente Fox recognized that his vision for a prosperous Mexico had no place for institutionalized drug cartels and the corruption and lawlessness they foster. He is taking serious action against them, targeting the murderous Arellano Felix Organization, among others. He strengthened law enforcement cooperation with the United States and began the process of reforming dysfunctional and sometimes corrupt institutions.

Such bold action comes at a price. In February 2001, in an incident credited to the drug trade, masked men armed with machine guns herded 15 men and boys into the back of a truck and killed 12. In November of the same year, two Mexican federal judges and the wife of another judge were cut down by AK-47 fire from a passing vehicle; one of the judges had reportedly angered traffickers with a ruling. (President Fox described the latter attack as “a crime against the state as a whole.”) More recently, a counterdrug police commander was boxed in on a highway and shot to death, a hit popularly attributed to drug traffickers. Despite all this, Mexican resolve to end international drug trafficking in their territory remains strong.

Since President Fox assumed office in December 2000, 14 major traffickers have been apprehended, and almost 300 of their immediate subordinates have been taken off the streets. Cooperative law enforcement targeting the Tijuana-based Arellano-Felix Organization— responsible for smuggling over one-third of the cocaine consumed in the United States— culminated last March with the arrest of Benjamin Arellano Felix (shortly after the killing of his brother, Ramon Arellano Felix). A month later, the Gulf Cartel’s second in command was arrested. The leader of a Juarezbased gang that often coordinated shipments with the Gulf Cartel was arrested last May. In September, Mexican authorities placed in custody the head of a gang that controlled Mexico City’s drug trade.

Key Fox Administration steps toward institutional reform have included compartmentalizing Mexico’s anti-organized crime unit to reduce leaks and ensuring that all new members are vetted with polygraph tests and psychological evaluations. A new Agencia Federal de Investigaciones was established by Attorney General Rafael Macedo de la Concha, and Mexico’s National Drug Control Program was published in November 2002. Finally, the Fox Administration has been unafraid to go after corrupt officials in government and in the military, as evidenced by the sentencing in November 2002 of two general officers accused of aiding the drug trade, and the arrest in October 2002 of two dozen individuals charged with leaking information on the drug control activities of the army, federal police, and the Attorney General.

Other positive signs include a steady stream of internecine trafficker killings, as smugglers vie for market control and command of trafficking routes. Major challenges remain, however, including reducing the backlog of extradition requests from the United States. Meaningfully disrupting the flow of drugs to the United States will also require sustained progress toward strengthening law enforcement and ending impunity to the rule of law.

The United States will continue to support Mexico’s drug control efforts through a combination of technical and material assistance that focuses on training and operational support for organizational attack and arrests, disruption of money laundering activities, cocaine and marijuana interdiction initiatives, and enhanced and expanded aid for marijuana and opium poppy eradication.

Afghanistan: Rebuilding Drug Control Capabilities

The state of internal disruption immediately following the fall of the Taliban has brought with it renewed poppy cultivation and a partial rebounding of opium production. Although production levels remain below those of the boom years of 1996–2000, recent increases have returned to Afghanistan the dubious distinction of world’s largest opiate producer, with 2002 production estimated to be more than twice that of Burma, the world’s other major opium producer (see Figure 13).

For post-Taliban Afghanistan, the stakes could scarcely be higher. By funding local warlords, the Afghan drug trade contributes to local political instability. It also threatens governments worldwide through the financial assistance that drug profits can provide to terrorist organizations such as al Qaeda. For these reasons, the United States strongly supports multilateral efforts to reduce the illegal opium and heroin trade that is returning to Afghanistan.

These multinational efforts include as partner nations members of the G–8, particularly the United Kingdom, which is the G–8 lead nation for counternarcotics programs in Afghanistan. The aim of our multilateral efforts is to diminish the destabilizing influence of illegal drugs in Afghanistan and break the links between Afghanistan’s drug trade and its terrorist organizations. We intend to achieve these objectives through long-term initiatives that will disrupt Afghanistan’s opium trade and provide alternative livelihoods and economic opportunities, a real and effective rule of law, and an environment favorable for an effective representative central government.

The strategy has two key elements. First, it seeks to disrupt the activities of the most significant drug traffickers through interdiction and law enforcement. Through activities such as DEA’s Operation Containment, the United States will bolster the counternarcotics capabilities of the countries bordering Afghanistan to choke off the flow of drugs, precursor chemicals, and related supplies into and out of that nation. Second, the strategy seeks to cut opium production through alternative livelihood initiatives for farmers, coupled with comprehensive eradication efforts.

Consistent with this international effort, the United States will support the establishment of a drug policy agency and an anti-drug law enforcement agency and will work to strengthen Afghanistan’s judicial institutions to enable the expansion of the rule of law. Afghan military and law enforcement personnel will be trained and equipped to perform the border and regional security functions that are vital to extending government control to areas without the rule of law and permeated by the illegal drug trade. Concurrently, near-term efforts will be started to eliminate drug-related corruption from the central and regional governments and the military.

We will collaborate with the international community and international aid organizations to create opportunities for legitimate economic livelihoods for Afghan farmers and laborers through initiatives that provide micro-credit alternatives and subsistence loans, legal crop substitution options, and cash-for-work programs for migrant workers. Where possible, programs will be focused on projects to redevelop the education, health, public safety, social services, telecommunications, and transportation infrastructure of Afghanistan.

Figure 13: Afghanistan Net Poppy Cultivation and Potential Opium Production

To be successful in Afghanistan, the international community will have to provide a long-term commitment to both the counternarcotics efforts and the broader challenge of nation building. These activities all involve multilateral international efforts, in which the United States is one of many participants.

Developments in Western Europe

The market for illegal drugs is international in scope—the world trade in cocaine now includes significant satellite markets in Europe. Consumption of Asian-produced heroin is also widespread throughout European Union nations. Any market-based understanding of the drug trade must account for the operation of these markets, which, if left unfettered, have the capacity to buffer U.S.-led efforts to disrupt the drug trade in this hemisphere.

The United States is thus watching closely as the debate in several European countries increasingly frames the drug issue as a public health rather than a law enforcement problem. As discussed in detail earlier, a closer look at the drug problem reveals the difficulty of disentangling the two. The fact is, some nations may face an increase in both public health and law enforcement difficulties as a consequence of policies being adopted.

Figure 14: Drug Violation Arrests Accounted for 11% of All Arrests in 2001

Source: Uniform Crime Reports

Decriminalization policies are being promoted as precisely what they are not—a public health response to the drug problem. These “tolerant” approaches are contrasted with the supposedly more “punitive” drug policy in the United States. As a recent media report put it, “The trend in Western Europe is to decriminalize all drugs, including heroin and cocaine, and treat drug use as a health problem rather than a crime.”

There are two ironies in this characterization. First is the notion that U.S. policy is driven solely by the desire to punish, when, in fact, drug arrests account for a small fraction of total arrests (see Figure 14) and U.S. prevention and treatment programs are the most developed and best funded in the world (President Bush has pledged to increase the drug treatment budget by $1.6 billion over five years.) U.S. medical research on treatment and prevention, led by NIDA, is unsurpassed and heavily outweighs the amounts spent on enforcement- and interdiction-related research (see Figure 15).

The second irony is the posture that such “harm reduction” approaches represent a genuine public health approach. No policy can seriously be considered in the public good if it advances the contagion of drug use. Yet that is precisely the effect of harm reduction actions such as marijuana decriminalization: as the drug becomes more available, acceptable, and cheap, it draws in greater numbers of vulnerable youth.

Figure 15: Federal Research & Development Spending for Treatment and Prevention (FY 2004 Request)

The United States will continue to engage this issue in various multilateral forums, including the U.S.-E.U. Demand Reduction Seminar, which has led to a commitment to exchange ideas and experiences in combating drug use and drug dependence. Other important multilateral fora include the European Monitoring Center for Drugs and Drug Addiction.

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Last Updated: May 7, 2003