Partly because of massive overproduction.
Villages across Catatumbo, a coca-abundant region in the north near the border with Venezuela, used to be awash with money off the back of the illicit market. Music used to blare through the streets and billiards clubs were full on the weekends. But for the past year shops have been closed and locals have started to go hungry. “People who sell now, sell at a loss,” says Holmer Pérez Balmaceda, whose family, like most in that region, used to cultivate coca leaves. Similarly in Cauca, in the south-west of the country, prices have plunged from 70,000 Colombian pesos ($17.25) for a unit of coca leaves (12.5kg) a year ago to 38,000 pesos today.
And Colombia is not the only supplier flooding global markets with coke (see chart 2). Peru has increased its production by 62%, from 49,800 hectares in 2017 to 80,700 hectares in 2021. Bolivian production has increased by 24%, from 24,500 hectares to 30,500 hectares in the same period. Production in Venezuela, Honduras and Guatemala is taking off, too.
A bump in the road
“Overproduction is certainly happening. But it cannot explain everything,” says Ana Maria Rueda at Fundación Ideas para la Paz, a Colombian think-tank. Another factor she points to is the shifting fortunes of criminal groups. Colombia’s cocaine market used to be dominated by individuals such as Pablo Escobar, who ran the Medellin gang. Their rivals were the Cali gang. In the early 1990s these groups were broken up when their leaders were killed or captured. Their activities were mostly overtaken by two guerrilla organisations: the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN). These guerrilla outfits also “regulated” the market for coke, controlling the whole supply chain as the Medellin and Cali cartels had done: looking after everything from harvesting and processing coca to transporting it out of the country.
However, in 2016 the Colombian government struck a peace deal with the FARC. That ended an internal armed conflict almost half a century long. It also had the unintended consequence of splitting the drug market. Now there are more than 500 criminal groups across the country. Gangs who buy cocaine wholesale can pick and choose which regions they purchase it from and drive prices down locally, says Ms Rueda. (...)
These developments have halted coca processing in some regions. It has also helped disrupt the established norms over price and quality. According to Mr McDermott, the fragmentation of Colombia’s criminal networks means that gangs who are buying the finished product wholesale—mostly Mexican, but also increasingly European gangsters, too—now travel all the way there to put together big shipments themselves. Previously, Colombians would have done this for them. International gangs tend to prefer to go to areas where they already have established connections. An example of this is the Nariño region, which borders Ecuador and where there is a permanent presence of Mexican gangs, says Mr McDermott. It has not seen the same fall in prices as in other parts of the country. This hints at a potential changing dynamic in the drugs market. The power used to lie with the gangs who had the drugs; now those who have good access to distribution networks call the shots.
Another factor affecting the price of cocaine was the election, last year, of Gustavo Petro, Colombia’s first avowedly left-wing president. During the previous right-wing governments of Juan Manuel Santos and Iván Duque, crop-substitution programmes doled out subsidies to coca-producing families to abandon their illicit crops. This had the perverse effect of making coca farmers grow more, and of prompting others to start growing it too, in order to gain access to these benefits, says Ms Rueda. These subsidies were combined with mass coca-eradication policies.
Mr Petro has long argued against his predecessors’ approach, particularly targeting farmers and destroying coca fields, rather than going after criminal intermediaries. In his inauguration speech he declared that “the war on drugs has failed”. (Mr Petro also blames the fentanyl crisis in the United States for the falling price of cocaine, though many experts doubt this has had much of an effect.) (...)
As a result, all Mr Petro has done so far is to slow the government’s coca-eradication efforts, with a goal of eradicating coca on 20,000 hectares of land annually, which is 30,000 hectares fewer than Mr Duque achieved. Alongside this, President Joe Biden’s administration has rolled back American satellite monitoring of coca in Colombia. Both policies have contributed to the coke pile-up.
Falling prices mean not just a collapse of the rural economy in parts of Colombia, but also an acute social crisis. More than 230,000 Colombian families rely on coca as their primary source of income, according to a federation which represents peasants who grow illicit crops. In July the government began to give out cash to families in some of Colombia’s 181 coca-producing municipalities. “This is a contingency plan,” says Felipe Tascón, director of the government’s illicit-crop substitution programme. He thinks that a change in the substitution policy is needed, in order to get farmers to move away from coca to other, legal crops. “What we’ve been doing till now hasn’t worked,” he admits.
by The Economist | Read more:
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