As we said, as far as drugs are concerned, a bit of everything is grown in this region: cannabis, poppy and coca. But the coca industry remains by far the most important one, in terms of numbers of jobs and of profits it generates. After the panic of 1982, the problem of the debt stabilized, and the East-West competition disappeared, so that drugs seem to have become the dominant issue on the agenda of the relations between the United States and the rest of the continent: the main enemies of the war on drugs Washington claims to be waging are precisely the cocaine traffickers of Latin America.

According to the U.S. Department of State, 21 countries of the region are involved in the drug trade with various roles - production, refinement, transit of the substances and of the chemical precursors, money laundering, etc. These countries are Argentina, Bahamas, Belize, Bolivia, Brazil, Colombia, Costa Rica, Cuba, Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Mexico, Nicaragua, Panama, Paraguay, Peru and Venezuela (55). In practice, the entire continent.

The key countries, however, are only 3, and namely Bolivia, Peru and Colombia, the former two being major producers of coca leaf, and the third the chief centre for refinement and marketing.

According to the official statistics of the Bolivian government, in 1988 coca leaf was grown on 61,000 hectares, or 4.3% of the country's cultivated land. Between 1980 and 1988, the Bolivian agricultural production rose by 24.6% vs. 253% of the production of coca leaf (56). Half a million Bolivians are allegedly directly involved in the coca industry; in other words, about 20% of the labour force of a country with 7 million inhabitants (57). The estimates on the ensuing yearly value of this activity range from a minimum of $600 million to a maximum of $2 billion - the equivalent of 3/4 of the legal exports according to conservative estimates, half the GNP according to the less conservative ones (58).

The fact that the coca economy saved Bolivia from bankruptcy seems to be an ascertained fact: the return of the civilians to the government in 1982, with President Siles Suazo, coincided in practice with the explosion of the debt crisis; between 1980 and 1984, the per capita income shrunk 30%; between 1984 and 1986, the value of the exports decreased by 1/4, reflecting respectively the collapse and the fall of the price of the two most important legal exports, tin and natural gas.

As of 1985, the governments of presidents Paz Estenssoro first and later of Paz Zamora complied with the prescriptions of a drastic stabilization plan established in cooperation with the Monetary Fund: this has lead to a modest growth in the GNP and to a reduction of the inflation, from 24.000% of 1985 to 18% of 1990. The foreign debt has also dropped by 12% between 1987 and 1990. In order to achieve this, it has been necessary not only to reduce the public expenditure and subsidies - causing the loss of 80,000 jobs, obviously compensated by the simultaneous growth of the coca economy - but also to assimilate the profits generated by the drug traffic, deposited in the bank accounts of the Caribbean banks into the national banking system. As of 1985, an amnesty has been issued on the crime of fiscal evasion on exported capitals, and the investigations on the origin of the wealth introduced into the country have been banned. Furthermore, the central bank has its own counter - called ventanilla siniestra - wher

e foreign currency is changed without any embarrassing questions.

Considering this situation, it is no wonder that the efforts to eradicate the coca crops are more cosmetic than anything else, like the ones to repress the traffic: in 1990, only 1% of the coca paste produced in Bolivia has been intercepted.

The U.S. administration, while having cognizance of the country's economic-financial situation, insists on intensifying the struggle against the drug trade and on mobilizing the army: of the almost $190 million in U.S. aid to Bolivia, allotted in 1991, 2,1 went to the development of alternative crops, vs. 13,5 for the repression of the traffic and 26 used to enhance the armed forces (Cf. chart 4).

Most of the population fears this enhancement not only for its potential effects on the coca economy, but also for those on the democracy itself of the country.

Recently, the Bolivian government has been trying to persuade the international public opinion of the fact that some of the uses of coca should be legalized: in May this year, Paz Zamora intervened at the OMS assembly, asking this agency to investigate the possible medical and nutritional uses of the substance.

The main idea is to produce and market a coca infusion, which is already largely consumed in Peru; according to the government, this would have the effect of increasing the revenues of the farmers-producers compared to the revenues presently obtained by the cocaine traffickers (59).

Spain, which had banned the consumption of coca infusion at the Seville expo, now seems to support the Bolivian proposal: Queen Sofia first and later the Prime Minister Felipe Gonzales tasted the drink while visiting the South American country; Gonzales also publicly appealed to the WHO, urging it to investigate the problem (60).

The economic situation of Peru collapsed later than the Bolivian one, but, if possible, in a quicker way and with worse effects. Between 1988 and 1991, the country's product contracted by about 30%. A month after his election, in August 1990, President Alberto Fujimori launched a stabilization program, decided in cooperation with the Monetary Fund, the effects of which on the prices over a 24 hours period were the following: food +700%; petrol +3.000%; drinkable water: +800%; electricity +500%. In a month's time, the salaries in the public sector shrunk by almost 60%, those of the private sector by about 40%. The consumption in the families of the capital, Lima, which has dropped by 46% in the period 1985-1990, lost a further 24% as of August 1990. At the end of 1991, about one million people had lost their job following the austerity plan. All this had at least enabled Peru to lower the annual inflation rate to 140% (from 7.000% of the previous year), to once again have access to international credit (with

Japan and the Inter-American Development Bank) and to reorganize part of its debt (with the Paris club of public creditors) (61). However, the suspension of Parliament and of the constitutional guaranties, decreed by Fujimori on 8 April 1992 with the support of the army, has had the effect of freezing part of these new credits. Moreover, less than a month after the president's self-coup, $200 million had already been taken abroad, according to estimates of the government. And all this despite the fact that the public opinion and the entrepreneurs welcomed the authoritarian turnabout (62).

If this economic disaster were not enough, the country must still deal with an authentic civil war between the government and the guerrillas of Sendero Luminoso. Over a period of 12 years, the conflict has claimed over 20,000 victims and 200,000 domestic refugees. Already before Fujimori's coup, 40% of the national territory was in a state of siege.

The Peruvian coca industry has far reaching effects both on the political and on the economic situation. The political and military force of Sendero Luminoso lies in its violent mediation between the farmers-producers and the Colombian traffickers who buy the coca paste, and in the defence of the farmers themselves from the attempts to repress and eradicate the crops, periodically attempted, through with scarce conviction, by the authorities. Thus, the guerrillas draw from it a political basis and a source of income - the latter through the collection of a sort of protection levy.

The estimates on the annual value of the coca production vary from a minimum of $1 billion to a maximum of $2,8 billion (63). The most conservative one corresponds to 2/3 of the value of all other Peruvian exports combined. About 15% of the labour force allegedly depends on this activity. Like the Bolivian one, the central bank of Peru does all it can to absorb the dollars generated by the drug traffic, through its agencies in the valleys of the upper Huallaga river - the area where most of the coca industry is concentrated - and even by sending its own employees to buy on Lima's black stock market. The predictable result is that part of the foreign debt service is paid with the revenues of the drug traffic.

Despite the fact that it would be patently suicidal for Peru to engage in an all-out war against coca, it is precisely for this reason that the U.S. administration continues to advance this request, at least officially. Of the $200 billion in U.S. aid to Lima in 1991, almost $18 finance the interdiction of the drug traffic and the eradication of the coca crops, $1 million goes to the development of alternative crops and $24 are in aid to the armed forces (Cf. chart 4). The Peruvian military, while having a record of abuses and heavy interference in the political life of their country, are nonetheless extremely reluctant to engage seriously in the repression of the drug traffic. They believe that this would be the best way to increase the political support to the guerrillas. Such belief is certainly strengthened by the ease with which they are corrupted by the drug traffickers.

Compared to the situation of Bolivia and Peru, Colombia could be considered a lucky country, especially from an economic point of view. A unique case in the whole of Latin America, this country has witnessed a constant growth in its product throughout the eighties, and has respected the payment of its foreign debt with perfect punctuality. Even if the drug economy has played a role in this success, the country's several other resources shouldn't be overlooked: oil, coal, precious stones, coffee and other agricultural products for export, such as flowers.

With the economic problems of the rest of the region, Colombia seems to share only the very bad distribution of its income, aggravated by a public expenditure which is strongly limited by fiscal evasion: the Colombian state collects and spends no more than 15% of the GNP (64). Despite the fall in the price of coffee and the inefficiencies in the electric networks have recently been creating further difficulties, the general situation remains one of the rosiest of Latin America.

However, the political situation is far less bright. Despite the fact that the country can formally boast one of the most long-lasting democracies of the region, the current regime can better be defined as a two-party oligarchy, which coexists with levels of violence which are almost unprecedented. With the exclusion of the countries at war, Colombia has the highest rate of homicides of the world, so much that this is the primary cause of death for male citizens aged between 15 and 45 (65). Throughout the eighties, the drug traffickers of the so-called Medellin cartel have been responsible for the assassination of hundreds of military, dozens of judges and journalists, a minister of justice (a former minister was severely wounded in an attempt in Budapest, where he was ambassador to Hungary) and a presidential candidate - without considering the countless kidnappings committed by the same people. Nonetheless, it would be a mistake to conclude that drugs are the sole cause for the violence in Colombia. First

of all, because of the country's historical precedents: the undeclared civil war of 1948-58 between the two major parties, the Liberal Party and the Conservative Party, has caused between 200,000 and 300,000 casualties, deserving the explicit but simple name of 'la violencia'. Traces of this period persist, for example in the presence, in the Right, of the so-called death squadrons, and, in the Left, of guerrilla movements with 12-15,000 guerrillas (in 1988) (66). Secondly, there are a variety of armed private police forces in almost all sectors of the economic and political life. Police forces in conflict with the others forces and with the State: it is estimated that the rivalries associated to the trade of precious stones has caused 3,000 casualties over a period of five years (67).

With regard to the drug traffickers, the Colombian governments have fluctuated between an attitude of inflexibility and one of negotiation, while it must in any case take into account the U.S.'s pressure on the one hand and the force of intimidation of the drug traffickers on the other. Several times during the last decade there has been a series of events opened with a campaign of governmental repression, followed by a wave of terror on the part of the traffickers, followed then by attempts to reach a settlement. The core of the conflict has almost always been the treaty of extradition with the United States, the application of which is opposed by the traffickers with all means.

In 1984, the Medellin cartel offered to withdraw from business, dismantle the organization and repatriate its capitals (estimated to amount to $ 15 billion, i.e. the country's entire foreign debt). In exchange, they asked for guaranties on the non-extradition to the United States and an amnesty enabling their reintegration in the Colombian society. The agreement failed, both for the opposition of Washington and for the government's belief of being close to a victory - after the assassination of the Minister of Justice, Lara Bonilla, a strong repressive action had forced the top traffickers to flee to Panama. It was a "missed opportunity to reach an advantageous agreement for Colombia" (68). Progressively, the cartel managed to reconstruct its organizations and commercial channels. The heads of the cartel also managed to return to Colombia.

The same thing occurred in 1987, when the extradition to the United States of one of the major traffickers, Carlos Ledher, triggered another wave of violence - all this unaffecting the quantity of cocaine sent abroad.

After the election of César Gaviria Trujillo for president, in Summer 1990, the Colombian government seems to have chosen the solution of the negotiation - opened with the guerrillas by his predecessor Virgilio Barco Varga. One of the groups of armed opposition, M-19, peacefully integrated itself in the country's political life, even if the Army of National Liberation (ELN) and the Revolutionary Armed Forces of Colombia (FARC) still remain active. An identical approach has been adopted toward the cartel of precious stones in war against each other and against the State. As to the drug traffickers, the rejection of the treaty of extradition with the United States has lead to the surrender of the major exponents of the Medellin cartel: the three Ochoa brothers, between December 1991 and February 1991, and Pablo Escobar Gaviria, in June 1991.

The importance of these arrests was more symbolic than material. Apart from the controversy on their conditions of imprisonment - a luxury villa, more than a prison, had been built for Escobar - the fact is that they had been able to continue to control the drug traffic. This had caused inevitable protests, especially on the part of the U.S., and lead the government to mobilize for Escobar's transfer. The latter reacted in July 1992 by escaping the prison in a spectacular way, a fact which greatly jeopardized Gaviria's credibility (69).

Whether the government adopted a hard or soft line, the practical impossibility of interrupting the flows of export of drugs from Colombia seems to be an ascertained fact (70). The explanation for this is rather simple, and lies in the economic force of the traffickers: the estimates on the value of the exports of cocaine and marijuana - without counting heroin, recently added - range from $1,5 to 15 billion yearly (71). To make a comparison, legal exports amounted in 1989 to $5,7 billion, the GNP to $39,4 (72).

First of all, with such a mass of tax-free money at their disposal, the drug traffickers are obviously in a position to corrupt anyone, all the more since the salaries of the public officials (police, judiciary, etc) are particularly meagre. Vice versa, they resort to violence when they are confronted with large-scale repressive campaigns, or to avert the threat of an extradition of the leaders of the organization to the United States. Moreover, the violent action affects almost exclusively the Medellin cartel. The other major circuit of drug traffickers of Colombia, the so-called Calì cartel, has on the contrary maintained a far less subversive profile, while administering a growing share of the drug industry (73).

Secondly, in addition to the direct corruption, there is an indirect one: as in Peru and Bolivia, the balance of payments and the foreign debt service are more than sufficient reasons to convince the government and the central bank to take all necessary measures to attract the capitals generated by the drug traffic into the country. The authorities themselves show with facts that the struggle against the drug industry is an enterprise which basically clashes with the general interests of the country.

There are theses that maintain the contrary. It is true, for example, that while in Bolivia and Peru consistent shares of the labour force depend on this industry, the revenues of the drug traffic concern a far more limited number of people: the refinement and marketing operators (74). Therefore, instead of being distributed in a relatively uniform manner, this form of income allegedly fosters visible consumption, property speculation and, for its great quantity, inflation - the latter, however, never grew beyond 30% yearly over the last decade, a modest rate considering the region's average (75). We must also consider the costs for Colombia of the struggle against the drug traffic, estimated to amount to $2 billion yearly (77), as well as the political costs of the destabilization and violence related to this activity.

In the light of a costs-benefits estimation, nonetheless, the government's choices to negotiate with the traffickers and encourage by all means the return of the capitals from abroad remain understandable. The negotiation enables Colombia to minimize both the economic and the political costs of the struggle against the drug traffickers. The return of hard currency acquired with the drug trade, while affected by the above mentioned distortions, facilitates the stability of the exchange rate and the debt service.

The Colombian government has been helped in this manoeuvre by the toughening of the measures against money laundering, enacted in the industrialized countries after the signing of the U.N. Convention of 1988 against the Illegal Traffic of Narcotics and Psychotropic Substances. It cannot be ruled out that the narcodollars play an important role also in the growth of the Colombian stock exchange, whose index in dollars rose six times between 1987 and 1992 (77).

Difficult as it may be to draw general conclusions from a review of countries that are so different, a few things many be remarked.

First of all, even taking with caution the most conservative estimates, one can conclude that the revenues ensuing from the production and trade of drugs play too important a role in the economy of these countries for them to seriously engage in a struggle against the drug traffic. On the contrary, there is the possibility that new producers, such as the Asian republics of the former Soviet Union, could add to the list, or that traditional producers such as Afghanistan, could increase the cultivated surface - while a diversification of the Colombian heroin industry seems to be an ascertained fact.

On the other hand, the sums which the North allots to the conversion of the crops are really not such as to represent a realistic incentive - as may be seen by the UNDCP's limited budget, and by the division of the U.S. aid to the Andine countries. It has been quite aptly said that "the prospect of providing alternative economic possibilities to convince the farmers of Peru, Colombia and Bolivia to relinquish the production of coca seems to be remote, considering that marijuana has become the most important crop in terms of value in California, where there are plenty of alternative possibilities" (78).

Nor is it likely that the aid for the conversion of the crops will be significantly increased in the near future: the idea, advanced at the U.N. level by a group of developing countries, to obtain a reduction in their foreign debt in exchange for the eradication of the crops has received a cool reception by the creditor countries, which are concerned about a possible blackmail effect: "the indebted countries might be tempted to reduce their anti-drug commitment, so as to force a debts-in-exchange-for-drugs agreement on the international community" (79).

Secondly, despite the importance of these revenues, the sums that remain in the producing countries are but a small share of the global turnover of the drug traffic - even if this, as we will see in the following chapter, is almost always calculated by excess. The profits generated by the drug industry remain mostly in the North of the world, both because it is at this stage of the distribution that the price increases, and because it is in the North that part of the capitals of the traffickers of the South is invested. Therefore, it cannot be ruled out that if the drugs were legalized, the producing countries would manage to keep the current profits, but with the obvious advantage of taxing them and removing them from the control of terrorists and criminals. Clearly, all this while other conditions remain: an excess supply caused by the introduction of new producers would change the entire scenario. In any case, the fact that a country such as Bolivia is attempting a solution of the kind of the legalization

is perhaps a sign of the credibility of such approach.

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(55) Cf. International Narcotics Control Strategy Report, cit., pp. 25-34.

(56) Cf. Alaine Labrousse, "Amérique Latine: l'économie de la drogue", Politique Internationale, summer 1990.

(57) Cf. "Latin America's killing fields", The Economist, 8 October 1988.

(58) Cf. Peter R. Andreas and Kenneth E. Sharpe, "Cocaine Politics in the Andes", Current History, February 1992; "The kickback from cocaine", The Economist, 21 July 1990.

(59) Cf. Nathaniel C. Nash, "Bolivians Make Their Case for (Legal) Coca-Leaf Tea", IHT, 18 June 1992.

(60) Cf. Ignacio Cembrero, "Felipe Gonzáles se muestra favorable a la legalización de la hoja de coca", El Pais, 11 June 1992.

(61) Cf. Andreas and Sharpe, cit.

(62) Cf. Nathaniel C. Nash, "Capital Flight Deepens Peruvian Gloom", IHT, 29 April 1992.

(63) Cf. Andreas and Sharpe, cit.; "The kickback form cocaine", cit.

(64) Cf. "Colombia's bloodstained peace", The Economist, 6 June 1992.

(65) Andreas and Sharpe, cit.

(66) Cf. Bagley, cit.

(67) Cf. "Gem wars", The Economist, 21 July 1990.

(68) Bagley, cit.

(69) Cf. Marcel Niedergang, "Une nation à la dérive", Le Monde, 24 July 1992.

(70) Despite the fact that the seizures of cocaine from South America are estimated by the U.S. government to represent about 30% of the global production, this has left both the price and the consumption unaffected. Cf. Melvyn Levitsky (Assistant Secretary for International Narcotics Matters), Statement before the Subcommittee on Terrorism, Narcotics, and International Operations of the Senate Foreign Relations Committee, 20 February 1992.

(71) Cf. "The kickback from cocaine" and "Latin American killing fields", The Economist, cit.

(72) Cf. The World Bank, World Development Report 1991, Oxford University Press, Oxford, 1991, pp.230 e 208.

(73) It is commonly held that the Medellin cartel controls the market of the east coast of the United States, whereas the Calì cartel controls the west coast and Europe.

(74) In any case, it should be considered that the role of the Colombian families is very advanced in the commercial chain: for years now, after having eliminated the Cuban-American rivals, the Medellin cartel supposedly controls most of the wholesale market in Miami. Cf. Bagley, cit.

(75) Cf. Paola Vinciguerra, "L'industria della droga in Colombia", Politica Internazionale, January-February 1991.

(76) Cf. Rensselaer W. Lee, "Colombia's Drug Negotiations", Orbis, Spring 1991.

(77) Cf. Catherine Burton, "Latin American Stocks Sustain the Pace", IHT, 29-30 August 1992.

(78) Theodore H. Moran, "International Economics and National Security", Foreign Affairs, winter 1990/91.

(79) Ian Hamilton Fazey, "Campaign to swap debt for drugs aid gathers pace", Financial Times, 6 May 1992.