NCPA - National Center for Policy Analysis

Combating Colombian Cocaine With U.S. Dollars

March 31, 2000

The House of Representatives has approved $1.3 billion in aid to help the government of Colombia rebuild its weak military. That will supposedly help them defeat the leftist guerrillas who protect coca farmers and cocaine producers. Then, the theory goes, the government can attack coca fields directly and help farmers transition to legal crops.

But some economists don't buy that scenario. Without the guerrillas' protection, farmers may indeed have to move to smaller and more dispersed plots, but that would have little impact on the price of cocaine in the U.S, they say.

  • It costs refiners only 30 cents to purchase the coca leaf needed to produce a gram of cocaine -- which then sells for about $150 in the U.S.
  • Even if the price of the raw leaves doubled, it would make little difference in the street price here -- and consumption won't decline without a hefty hike in prices.
  • Supposing the farmers could be lured into planting legal crops, cocaine refiners would simply increase the price they pay for leaves and farmers would just return to the coca business.
  • Although U.S. aid packages may have helped decrease the acreage devoted to coca production in Bolivia and Peru, acreage in Columbia increased from 90,000 in 1992 to 300,000 in 1999.

This strongly suggests, critics point out, that coca farming -- even if pared back in Colombia -- will likely increase again in Bolivia and Peru. That's because cocaine production responds to the law of supply and demand. As long some Americans demand cocaine, there will be sellers in Latin America willing to supply it.

Source: Peter Reuter (Urban Institute and University of Maryland), "One Tough Plant," New York Times, March 31, 2000.


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