Bloomberg News

Peru Cocaine Output Rivals Colombia as World’s Largest

June 23, 2011

(Updates to add Naranjo quote in fourteenth paragraph.)

June 23 (Bloomberg) -- Peru’s production of coca, the plant used to make cocaine, has risen for a fifth straight year, putting pressure on incoming President Ollanta Humala to step up eradication efforts he has criticized.

A study by the United Nations published today shows that Peru now rivals Colombia as the world’s largest producer of cocaine after land dedicated to illegal coca production rose 2.2 percent to 61,200 hectares in 2010. Cultivation in Colombia, which receives $500 million a year in U.S. anti-narcotics aid, fell 15 percent to 62,000 hectares, according to the study based on satellite tracking by the UN Office on Drugs and Crime.

Peru’s cocaine production has increased as the government abandoned remote areas to drug traffickers and holdout members of the Shining Path guerrilla movement, said Adam Isacson, a researcher at the Washington Office on Latin America.

“They’ve ceded this territory, to all intents and purposes, leaving just a very small underpaid police force,” Isacson said in telephone interview from Washington. “The numbers are starting to catch up with them.”

Humala, a one-time ally of Hugo Chavez, has joined the Venezuelan leader and members of his anti-American Alba bloc of nations in criticizing the U.S. drug war and extolling the virtues of the coca leaf.

‘Wise’ Policy

In his 198-page campaign platform, Humala vowed to “fight for respect of the coca leaf as a traditional crop” while combating cocaine trafficking. The platform also calls for a “wise” anti-narcotics policy that disavows forced eradication and doesn’t “subordinate Peru to external interests.” Since being elected June 5, he’s distanced himself from the platform and said Peru needs U.S. support in its fight against drugs.

The coca plant, found only in the Andes, contains trace amounts of an alkaloid that in large quantities can be used to make cocaine. While the leaf has been used for centuries in Peru as a mild stimulant that helps ward off hunger, a 1961 UN treaty stipulates governments must gradually eradicate the plant and ban all traditional uses of it.

Isacson said the U.S. may use a surge in drug production in Peru to pressure Humala should bilateral relations sour for whatever reason. American anti-narcotics aid to Peru, which has a free trade agreement with the U.S., has declined from $148 million in 2002 to an estimated $40 million this year, he said.

“Even if coca production maintains its current pace of growth, this will be a pretext to decertify Peru,” Isacson said, referring to the annual U.S. government evaluation of a country’s drug control efforts.

Decertification

Currently the U.S. lists Venezuela and Bolivia, where former coca grower Evo Morales has been president since 2006, as two nations in South America that aren’t cooperating with U.S. anti-narcotics efforts.

Carlos Basombrio, a former Peruvian deputy interior minister, said that Humala doesn’t have a clear drug policy, though he has probably taken a more pragmatic view of the drug war as he distanced himself from Chavez during the campaign.

“Any changes in his position haven’t been visible, but given Humala’s transformation into another person during the campaign, his stance on opposing coca eradication was probably left behind,” Basombrio said in a phone interview from Lima.

Colombia Production

While coca production has been rising in Peru, it’s been falling since 2007 in neighboring Colombia, the main focus of the U.S. drug war in South America. Colombia and Peru each grow about 40 percent of the world’s coca, while Bolivia grows about 20 percent, according to the UN report.

Cocaine cultivation in Colombia, under pressured by U.S.- backed eradication efforts, has moved into neighboring Peru like air inside a balloon when it is squeezed, said General Oscar Naranjo, head of Colombia’s national police.

“Colombia is leaving behind its old image of the failed state in the hands of drug traffickers,” Naranjo told reporters in Bogota today, “but evidently -- to deny it would be a lie -- that has produced a balloon effect.”

The decline in Colombia, from an eight-year high of 99,000 hectares in 2007, coincided with a change in the country’s eradication strategy to depend less on aerial spraying of crops with herbicide. Instead, security forces are being deployed to Marxist guerrilla strongholds to protect workers who dig up coca bushes by hand. The average size of a coca plot has shrunk to as little as 0.7 hectare from 2 hectares in 1999, the report said.

“Manual eradication gets rid of the whole plant, not just one harvest, and requires the government to be there on the ground,” said Isacson. “It makes a big difference.”

Cocaine Prices

Colombia’s cocaine industry, the world’s largest for more than a decade, has been hit by a combination of falling output, higher seizures and a rally by the peso against the dollar, said Ricardo Rocha, an economist and author of the book “The Colombian Economy After 25 Years of Drug Trafficking.” The peso has appreciated 45 percent against the dollar over the last five years, while Peru’s sol has gained 19 percent.

“Everything points toward a loss of income for drug traffickers in Colombia,” Rocha said in a phone interview from Bogota.

Colombian wholesale cocaine prices rose 0.8 percent to 4.6 million pesos ($2,439) per kilogram in 2010, the UN study found. Prices have risen 5 percent since 2002, according to the UN, while the nation’s consumer price index rose 58 percent over the same period. Prices are up 59 percent in dollar terms over the same period, while coffee and sugar prices have tripled.

Rocha estimates that cocaine now accounts for less than 1 percent of Colombia’s gross domestic product, down from a peak of 6.3 percent in 1987, when Forbes Magazine listed Medellin cartel boss Pablo Escobar in its ranking of the world’s billionaires.

Colombia receives more U.S. aid than any country outside the Middle East and Afghanistan. Colombian President Juan Manuel Santos has pledged to continue the government’s eradication programs, saying that cocaine is financing the country’s Marxist insurgency. The Santos government aims to further reduce coca production by more than 30 percent by 2014, Naranjo said.

--With assistance from Blake Schmidt in Bogota. Editors: Joshua Goodman, Harry Maurer

To contact the reporters on this story: Matthew Bristow in Bogota at Mbristow5@bloomberg.net; John Quigley in Lima at jquigley8@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net


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