Narcotics in the Peruvian Economy

Reference: Wikipedia

Background

Coca has a long history of cultivation in the Andes, and has always been a traditional part of Peruvian life. However, the narcotic properties of coca were known only locally until 1786, when Lamarck listed the leaf in his botanical encyclopedia.[37]After the arrival of the Spanish, coca cultivation increased and its use became more common and widespread.[38] Since 1543, coca has been internationally recognized for its trading value, and regulations imposed upon it have attached increasing economic importance to the plant.[38] Exchange of the coca leaf between consumers in the highlands and growers in the low lying hills has gone on for at least the last millennium, strengthening local economic ties.[39] Between 1884 and 1900, coca and cocaine grew in popularity for medical purposes and mass consumption in the United States. From 1905 to 1922, anti-cocaine sentiments in the US resulted in criminalization of both coca and cocaine. It was not until the 1920s that US diplomats began to extend drug prohibitions internationally.[40]

Current Trends

The Peruvian coca and cocaine industry is as huge as it is today because of advanced industrial nations’ demand for drugs. This high demand has created a framework of dependence on “coca-dollars” and on US drug policy.[41] Money from cocaine trafficking feeds local economies, supports inflation, and even causes social changes such as cocaine smoking among indigenous Peruvians.[42] Coca farming today is still a significant source of income for peasants, as it accounts for 48% of total net family income in the high coca-growing Apurimac River region.[43] In an effort to reduce drug use in America, for the past 50 years the US government together with the United Nations have been waging a war on drugs.[37] The US Drug Control Program maintains that “eliminating the cultivation of illicit coca and opium is the best approach to combating cocaine and heroin availability in the US.”[44]

With US government cooperation, the Peruvian Government installed the National Plan for the Prevention and Control of Drugs in 1995.[43] This government prohibition of narcotics trafficking in Peru has resulted in a 70% reduction of coca leaf cultivation since 1995. However the reduction in cultivation may not have actual effects on cocaine production, as recent advances in coca growing and more efficient processing methods allow for greater cocaine yield.[45] The size of the narcotics industry as a part of the national economy is difficult to measure, but estimates range from $300–$600 million. An estimated 200,000 Peruvian households have economies based on the production, refining, or distribution of coca.[43] Many economists believe that large flows of dollars into the banking system contribute to the traditional depression of the dollar exchange rate vis-a-vis the sol. The Central Bank engages in open market activities to prevent the price of the sol from rising to levels that would cause Peruvian exports to become prohibitively expensive.

Hurt economically by Peruvian Air Force interdiction efforts in the mid-1990s, drug traffickers are now using land and river routes as well as aircraft to transport cocaine paste and, increasingly, refined cocaine to consumers around and out of the country. The Air Bridge Denial program was suspended in April 2001 after the Peruvian Air Force and strength of the U.S. DEA misidentified a civilian aircraft as a drug trafficker and shot it down, killing two American citizens on board. Peru continues to arrest drug traffickers and seize drugs and precursor chemicals, destroy coca labs, disable clandestine airstrips, and prosecute officials involved in narcotics corruption.

Working with limited aid of the U.S. Agency for International Development (USAID), the Peruvian Government carries out alternative development programs in the leading coca-growing areas in an effort to convince coca farmers not to grow that crop. Although the government previously eradicated only coca seed beds, in 1998 and 1999 it began to eradicate mature coca being grown in national parks and elsewhere in the main coca growing valleys. In 1999 the government eradicated more than 150 km² of coca; this figure declined to 65 km² in 2000, due largely to political instability. The government agency “Contradrogas”, founded in 1996, facilitates coordination among Peruvian Government agencies working on counter-narcotics issues. Alternative crops, however, are not economically comparable to coca. 2004 prices indicate an annual income per hectare of $600 for coffee and $1000 for cocoa, versus up to $7500 for a hectare of coca.[46]

Effect on Family Economies

The anti-coca policies imposed in 1995 have had adverse effects on Peruvian’s household economies. Many families dependent on coca farming have been forced to send their children to work as eradication of crops has decreased their household income.[43] In states where coca is grown, child labour increased by 18% in 1997 and 40% in 2000. Work hours and domestic work increased as well, with girls taking on 28% more domestic work with boys doing 13% more. Wage work for adults also increased since 1995. As such, it can be inferred that the increase in child labour since eradication policies have come into effect is caused by children filling in for working parents.[43]