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The Economic Consequences of Cocaine Production in Bolivia: Historical, Local, and Macroeconomic Perspectives1

Published online by Cambridge University Press:  05 February 2009

Mario de Franco  and
Ricardo Godoy
Ricardo Godoy
Affiliation:
Mario De Franco is Director, Gestión Pública, Instituto Centroamericano de Administración de Empresas, Managua. Ricardo Godoy is Research Associate, Harvard Institute for International Development and Lecturer, Department of Anthropology, Harvard University.
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Extract

Cocoa, coca, cotton, and sugar are of great interest. The development of any one of the four crops would bring about great relief to people's present miseries and would not hurt nearby provinces… The development of one province need not occur at the expense of another. (Francisco de Viedma, 1787).2

Type
Research Article
Information
Journal of Latin American Studies , Volume 24 , Issue 2 , May 1992 , pp. 375 - 406
Copyright
Copyright © Cambridge University Press 1992

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References

2 Our translation. The original text reads as follows: ‘El cacao, la coca, el algodón y los cañaverales son de mucho interés; cualquiera de los cuatro que se fomentase y pusiese en el estado de prosperidad que ofrecen sus terrenos, atraenía grande desahogo en las presentes miserias, sin causar a las provincias inmeditaes las perdidas que pudieran hecerlas decaer;… el restablecimiento de una no ha de ser con decadencia de otras.’ De Viedma, F., Descriptión geográficay estadistica de la provincia de Santa Cruz de la Sierra (La Paz, 1969 ‘orig. 1788’), p. 160.Google Scholar For a discussion of Viedma's role in developing the Cochabamba lowlands, see Larson, B., Colonialism and Agrarian Transformation in Bolivia: Cocbabamba, 1950–1900 (Princeton, 1988), pp. 253–8.Google Scholar

3 Cocaine production bolstered democracy in Bolivia by reducing the incentives among the military to bring down the government and by increasing incomes for the rural poor, particularly during the stabilisation programme of 1985. In neighbouring countries lacking the history of political turmoil or the experience with stabilisation measures, the cocaine industry fails to encourage democracy.

4 Tullis, F. L., ‘Cocaine and Food: Likely Effects of a Burgeoning Transnational Industry on Food Production in Bolivia and Peru’, in Hollist, W. L. and Tullis, F. L., Pursuing Food Security (Boulder, 1987), p. 257. Yet, as one reviewer pointed out, the experience with the exports of bananas or coffee suggests that the legalisation of cocaine would not be a panacea for Bolivia's rural development. Clearly, the country requires something more.Google Scholar

5 United States of America (USA), Drugs and Latin America: Economic and Political Impact and US Policy Options, Proceedings of a Seminar Held by the Congressional Research Service, 26 March 1989. Report of the Select Committee on Narcotics Abuse and Control, 101 Congress, 1st Session (Washington, D.C., 1989), p. vii.

6 Morales, E., Cocaine, White Gold Rush in Peru (Tucson, 1989), p. 47Google Scholar and Tullis, , ‘Cocaine and Food’, p. 251.Google Scholar

7 The Dutch Disease is one of those illnesses most developing countries probably wished they had to cure their other ills. It spreads when the exports of one commodity, such as oil or coca, overshadow other exports. The export boom siphons resources from other activities, which decline, and causes an exchange rate appreciation. As the key export expands, other exports decline and imports increase as a result of the stronger currency. Dependency on a single export renders the country more vulnerable to market downturns.

8 Alvarez, E. H., ‘The Economics and Political Economy of Coca Production in the Andes: Implications for US Foreign Policy for Bolivia and Peru’, The Nelson Rockefeller Institute of Government, State University of New York (Albany, 1988).Google Scholar

9 Craig, R., ‘Domestic Implications of Illicit Colombian Drug Production and Trafficking’, Journal of Interamerican Studies and World Affairs, vol. 25, no. 3 (1988), pp. 328–329.Google Scholar

10 Henkel, R., ‘The Bolivian Cocaine Industry’, Studies in Third World Societies, vol. 37 (1986), p. 60Google Scholar; Alvarez, , ‘The Economics and Political Economy of Coca Production in the Andes’, p. 15.Google Scholar

11 Tullis, , ‘Cocaine and Food’.Google Scholar

12 Carter, W. and Mamani, M., Coca en Bolivia (La Paz, 1986), p. 131Google Scholar; Grinspoon, L. and Bakalar, J., Cocaine, A Drug and Its Social Evolution (New York, 1985), p. 10.Google Scholar

13 Flores, G. and Blanes, J., Dóde va el Chapare? (Cochabamba, 1984), p. 156Google Scholar; Klein, H., ‘Coca Production in the Bolivian Yungas in the Colonial and Early National Periods’, in Pacini, D. and Franquemont, C. (eds.), Coca and Cocaine (Cambridge, 1986), pp. 53–54Google Scholar; Grinspooon, and Bakalar, , Cocaine, p. 10.Google Scholar

14 According to one source, some smallholder organisations in the Chapare levy taxes to build physical infrastructure, schools and hospitals. See Toranzo, C. F., Las condiciones de la violencia en Perú y Bolivia (La Paz, 1990), pp. 122–123.Google Scholar

15 Schuh, G. E. and Brandāo, A. S. P., ‘Suggestions for Agricultural Development Policy and Concluding Comments’, unpubl. ms. (Minneapolis, 1990), p. 659Google Scholar; Skinner, J., ‘If Agricultural Land Taxation is So Efficient, Why Is It So Rarely Used?’, The World Bank Economic Review, vol. 5, no. 2 (1991), pp. 113–133.CrossRefGoogle Scholar

16 Parkerson, P. T., ‘Neither “Green Gold” nor “The Devil's Leaf”: Coca Farming in Bolivia’, in Orlove, B. S., State, Capital, and Rural Society: Anthropological Perspectives on Political Economy in Mexico and the Andes (Boulder, 1989), p. 274.Google Scholar

17 Griffin, K., ‘Observations on Possible Coca Policies in Bolivia’, unpubl. ms., 1989.Google Scholar

18 Flores, and Blanes, , Dóde va el Chapare?, p. 156Google Scholar; Centra de Investigación y Desarrollo Regional (CIDRE), Monografía del trópico del departamento de Cochabamba (La Paz, 1989), p. 25. Although the term Yungas refers to all warm valleys, we use it in this article to refer only to the Province of Yungas, Department of La Paz.

19 Klein, , ‘Coca Production’, p. 60.Google Scholar

20 Carter, and Mamani, , Coca, p. 73.Google Scholar

21 Klein, , ‘Coca Production’.Google Scholar

22 Canelas, A. and Canelas, J. C., Bolivia: coca, cocaina, subdesarnllo, y poderpolitico (La Paz, 1982), p. 108.Google Scholar

23 Ibid.

24 Statistics for Figures 1 and 2 come from Rodríguez, A. A., ‘Possibilities of Crop Substitution for the Coca Bush in Bolivia’, Bulletin on Narcotics, vol. 17, no. 3 (1963), p. 17Google Scholar; and Unidad de Análisis de Políticas Económicas (UDAPE), Estrategia nacional de desarrollo alternative 1990 (La Paz, 1990).

25 Thibodeaux, B. H., ‘An Economic Study of Agriculture in Bolivia’, unpubl. PhD diss. (Harvard University, 1946), p. 181.Google Scholar

26 Parkerson, , ‘Neither “Green Gold” nor “The Devil's Leaf”, p. 272.Google Scholar

27 Larson, , Colonialism and Agrarian Transformation, p. 255.Google ScholarHeilman, L. C., ‘US Development Assistance to Rural Bolivia, 1941–1974: The Search for a Development Strategy’, unpubl. PhD diss. (The American University, 1982), p. 119.Google Scholar

28 Henkel, R., ‘The Chapare of Bolivia: A Study of Tropical Agriculture in Transition’, PhD diss. (University of Wisconsin, 1971), p. 59Google Scholar; Heilman, , ‘US Development Assistance’, p. 119Google Scholar; Wessel, K. L., ‘An Economic Assessment of Pioneer Settlement in the Bolivian Lowlands’, unpubl. PhD diss. (Cornell University, 1968), p. 34.Google Scholar

29 Sanabria, H., ‘Social and Economic Change in a Bolivian Highland Valley Peasant Community: The Impact of Migration and Coca’, unpubl. PhD diss. (University of Wisconsin, 1989), p. 92Google Scholar; Wessel, K. L., ‘An Economic Assessment’, pp. 32 and 44.Google Scholar

30 Heilman, , ‘US Development Assistance to Rural Bolivia’, p. 120Google Scholar; Henkel, R., ‘The Move to the Oriente: Colonisation and Environmental Impact’, in Ladman, J. R., Modern-Day Bolivia: Legacy of the Revolution and Prospects for the Future (Tempe, 1982)Google Scholar; Zeballos-Hurtado, H., ‘From the Uplands to the Lowlands: An Economic Analysis of Bolivian Rural-Rural Migration’, unpubl. PhD diss. (University of Wisconscin, 1975), pp. 15–16Google Scholar; Stearman, A. M., ‘Colonisation in Eastern Bolivia: Problems and Prospects’, Human Organization, vol. 32, no. 3 (1973), p. 289.CrossRefGoogle Scholar

31 Wessel, , ‘An Economic Assessment’Google Scholar; Zeballos-Hurtado, , ‘From the Uplands to the Lowlands’.Google Scholar

32 Sanabria, , ‘Social and Economic Change’, p. 78.Google Scholar

33 Samabria, , ‘Social and Economic Change’, p. 74.Google Scholar

34 Henkel, , ‘The Chapare’, p. 65.Google Scholar

35 Parkerson, , ‘Neither “Green Gold” nor “The Devil's Leaf”, p. 284.Google Scholar

36 Healy, K., ‘The Boom Within the Crisis: Some Recent Effects of Foreign Cocaine Markets on Bolivian Rural Society and Economy’, in Pacini, and Franquemont, , Coca and Cocaine, p. 101.Google Scholar

37 Aspiazu, R. Bascopé, Coca y cocaina en Bolivia (La Paz, 1982), p. 32Google Scholar; Flores, and Blancs, , Dónde va el Chapare?, p. 156Google Scholar; Zeballos-Hurtado, , ‘From the Uplands to the Lowlands’, pp. 90–91.Google Scholar

38 Thibodeaux, , ‘An Economic Study’, p. 174.Google Scholar

39 Ibid. pp. 42, 174 and 181.

40 Henkel, , ‘The Chapare of Bolivia’, pp. 166–167 and 252.Google Scholar

41 Stokes, W. S., ‘The Contraproducente Consequences of the Foreign-Aid Programme in Bolivia’, in Schoeck, H. and Wiggins, J. W., The New Argument in Economics. The Public Versus the Private Sector (New York, 1963), p. 158.Google Scholar

42 Henkel, , ‘The Chapare of Bolivia’, p. 167Google Scholar; Thibodeaux, , ‘An Economic Study’, p. 174.Google Scholar

43 Healy, , ‘The Boom Within the Crisis’, p. 104Google Scholar; Sanabria, , ‘Social and Economic Change’, pp. 121 and 123.Google Scholar

44 Ibid. pp. 252–253; Henkel, , ‘The Chapare of Bolivia’, pp. 71–72Google Scholar; Weil, J. E., ‘The Organisation of Work in a Quechua Pioneer Settlement: Adaptation of Highland Tradition in the Lowland of Eastern Bolivia’, PhD diss. (Columbia University, 1980), p. 137.Google Scholar

45 World Bank, Bolivia. Agricultural Pricing and Investment Policy (Washington, D.C., 1984).

46 Healy, , ‘The Boom Within the Crisis’Google Scholar; Henkel, R., ‘The Bolivian Cocaine Industry’, Studies in Third World Societies, vol. 37 (1986), pp. 53–80Google Scholar; Macdonald, S. B., Mountain High, White Avalanche. Cocaine and Power in the Andean States and Panama (New York, 1989)Google Scholar; Sanabria, , ‘Social and Economic Change’Google Scholar; Painter, M. and Rasnake, R., ‘Human Rights Dimensions of the War on Drugs’, Bulletin of the IDA, vol. 7, no. 2 (1989), pp. 8–10Google ScholarHorton, S., ‘Labour Markets in an Era of Adjustment: Bolivia’, unpubl. ms. (New Haven, 1990), pp. 7–8 and 27–28.Google Scholar

47 Like many statistics in Bolivia, these numbers must be read with caution. The revenue estimates for the mid- and early 1960s vary widely. Henkel says that a Chapare farmer could expect to net US$575 per hectare per year in coca cultivation (Henkel, ‘The Chapare of Bolivia’, p. 232). Rodríguez says a farmer in the Yungas about the same time could earn as much as US$1,600 (Rodríguez, ‘Possibilities of Crop Substitution’). We use US$1,000 a rough midpoint value, as our estimate for the net returns from coca cultivation in the early 1960s. The 1985 figure (US$5,000) is an average of high estimates - US$7,500 Per hectare per year (Sanabria, ‘Social and Economic Change’, pp. 131–2; Healy, K., ‘Bolivia and Cocaine: A Developing Country's Dilemma’, British Journal of Drug Addiction, vol. 33 (1988), pp. 19–23)CrossRefGoogle Scholar – and low estimates – US$2,600 (Lee, R. W., ‘Why the US Cannot Stop South American Cocaine’, Orbis, vol. 32, no. 4 (1988), p. 517).Google Scholar

48 Tullis, , ‘Cocaine and Food’, pp. 266–267.Google Scholar

49 Sanabria, , ‘Social and Economic Change’, p. 129Google Scholar; Stearman, A. M., Camba and Kolla: Migration and Development in Santa Cruz, Bolivia (Gainesville, 1985), p. 39Google Scholar; Weatherford, J. M., ‘Cocaine and the Economic Deterioration of Bolivia’, in Spradley, J. and McCurdy, D. W., Conformity and Conflict: Readings in Cultural Anthropology (Boston, 1987), p. 414Google Scholar; Healy, , ‘The Boom Within the Crisis’, pp. 122–123.Google Scholar

50 Some may argue that wild fluctuations in the price/value of cocaine would deter smallholders from entering the drug industry. As shown recently in a major review of the literature, smallholders will take up the cultivation of perennials with marked price volatility provided the expected pay-offs are high. See Godoy, R., ‘Trees for Profit: The Determinants of Smallholder Tree Cultivation’, World Development (forthcoming).Google Scholar

51 UDAPE, ‘Estrategia nacional del desarrollo alternative’.

52 Gibson, B., ‘Modelo de equilibrio general con énfasis en los sectores agropecuarios’, unpubl. ms., UDAPE (La Paz, 1990).Google Scholar

53 Devarajan, S., Jones, C. and Roemer, M., ‘Markets Under Price Controls in Partial and General Equilibrium’, World Development, vol. 17, no. 12 (1989), pp. 1881–1893.CrossRefGoogle Scholar

54 Alvarez, , ‘The Economics and Political Economy’, p. 16; Tullis, ‘Cocaine and Food’, p. 254.Google Scholar

55 Morales, J. A., ‘Impacto de los ajustes estructurales en la agricultura campesina boliviana’, in El impacto de la NPE en el sector agropecuario (La Paz, 1990), pp. 9–70.Google Scholar

56 Lee, R. W., ‘The Latin American Drug Connection’, Foreign Policy, vol. 61 (1985/6), p. 146Google Scholar; Tullis, , ‘Cocaine and Food’, p. 252Google Scholar; Reuter, P. and Kleinman, M., ‘Risks and Prices: An Economic Analysis of Drug Enforcement’, in Tonry, M. and Morris, M., Crime and Justice: An Annual Review of Research, vol. 7 (1986), p. 311.CrossRefGoogle Scholar

57 The information for Figures 5 and 6 until 1984 comes from Tullis, ‘Cocaine and Food’, p. 267. Information for more recent years come from the following sources: (a) Production: United Nations, Comisión Económica para América Latina y el Caribe, Anuario estaístico de América Latina (Santiago, 1988), pp. 638–56; Wilkie, J. W. and Ochoa, E., Statistical Abstract of Latin America, vol. 27 (1989), p. 88Google Scholar; 1987 potato data from FAO Statistical Quarterly (Rome, 1989); (b) Food aid and food imports from World Bank, World Development Report 1987–1989 (Washington, D.C., 1990).

58 Coca requires 210 person days per year per hectare in maintenance and harvesting; the next most labour-intensive crop, coffee, only requires 56. See Sanabria, , ‘Social and Economic Change’, pp. 37–38; Weil says coca cultivation in the Chapare absorbs more than three-fourths of all agricultural labour (‘The Organisation of Work’, p. 52).Google Scholar See also Henkel, , ‘The Chapare of Bolivia’, p. 210.Google Scholar

59 Healy, , ‘The Boom Within the Crisis’, p. 128Google Scholar; Stearman, , Camba and Kolla, p. 39Google Scholar; Henkel, , ‘The Bolivian Cocaine Industry’, p. 63Google Scholar; Tullis, , ‘Cocaine and Food’, p. 23.Google Scholar

60 Sanabria, , ‘Social and Economic Change’, pp. 40, 77 and 102Google Scholar; Healy, , ‘The Boom Within the Crisis’, p. 104.Google Scholar

61 Weil, , ‘The Organisation of Work’, p. 141.Google Scholar

62 Lee, , ‘Why the US Cannot Stop South American Cocaine’, p. 504.Google Scholar

63 Horton, , ‘Labour Markets in an Era of Adjustment’, pp. 24 and 30.Google Scholar

64 Healy, , ‘Bolivia and Cocaine’, p. 21Google Scholar; Wennergreen, E. B. and Whitaker, M. D., TheStatus of Bolivian Agriculture (New York, 1977), p. 69Google Scholar; Henkel, , ‘The Chapare of Bolivia’, pp. 152–156Google Scholar; Y Blanes, Flores, Dónde va el Chapare?, pp. 120–122Google Scholar; Sanabria, , ‘Social and Economic Change’, p. 37Google Scholar; Ministry of Agriculture, Bolivia, La problemdtica de lacoca y su relación con la producción de cocaina (La Paz, 1989), unpubl. ms.Google Scholar

65 Healy, , ‘Bolivia and Cocaine’, p. 21.Google Scholar

66 Sanabria, , ‘Social and Economic Change’, p. 37.Google Scholar

67 During the 1960s and 1970s in the Yungas, the area and production of citrus and coffee grew relative to coca (see Parkerson, ‘Neither “Green Gold”’, p. 276). The authors of a 1981 study showed that farmers in the Chapare devoted only 15% of their land to coca fields, but 30% to perennial fruit trees (see Blanes, J., De Its valles al Chapare.Estrategias familiares en un contexto de cambios (Cochabamba, 1983), p. 137.Google Scholar

68 One referee noted that this statement must be taken as a working hypothesis rather than as an established fact. Definitive conclusions will only arise when monocropping/intercropping studies control for farm size.

69 Henkel, , ‘The Chapare of Bolivia’, pp. 166–167Google Scholar; Weil, , ‘The Organisation of Work’, p. 52.Google Scholar

70 Ministry of Agriculture, ‘La problemática’.

71 Sanabria, , ‘Social and Economic Change’, pp. 252–253.Google Scholar

72 Blanes, , De las valles al Chapare, p. 137.Google Scholar

73 Albó, J., ‘El mundo de la coca en Coripata’, América Indigtna, vol. 38, no. 4 (1978), p. 969.Google Scholar

74 UDAPE, ‘Estimatión contrabando de bienes oficiales de consumo: metodología’, unpubl. ms.Google Scholar; Tullis, , ‘Cocaine and Food’, p. 268.Google Scholar

75 Gibson, B. and Godoy, R., ‘Alternatives to Coca Production in Bolivia: A General Equilibrium Approach’, unpubl. ms., 1991.Google Scholar

76 We are indebted to a referee for these points.

77 Ibid.; Griffin, ‘Observations on Possible’.

78 Healy, , ‘The Boom Within the Crisis’; USA, Drugs and Latin America: Economic andPolitical Impact and US Policy Options. Proceedings of a Seminar Held by the Congressional Research Service, 26 April, 1989; Report of the Select Committee on Narcotics Abuse and Control, 101 Congress, 1st Session (Washington, D.C., 1989).Google Scholar

79 Griffin, , ‘Observations’.Google Scholar