OSEE THE In recent decades, criminal gangs in Latin America have diversified their activities. They are no longer just smuggling narcotics from South America to the United States, as Pablo Escobar, the most famous drug lord in Colombia, did in the 1970s and 80s. Now they are also involved in illegal gold mining, human trafficking, the production of synthetic opioids (especially fentanyl), along with the extortion of those operating in perfectly legal markets, such as avocados and agricultural limes.
Even so, drugs remain an integral part of their business model. In 2020, for example, the global production of cocaine hit a record high of 1,982 tons, according to the United Nations Office on Drugs and Crime (UNODC), although this is probably an underestimate. North America remains the largest consumer of the drug, with about 2% of people aged 15-64 (or 6 million people) estimated to have taken it that year. But cocaine’s global reach is spreading. Guinea-Bissau has become an important route for South American cocaine destined for Europe. An attempted coup earlier this year, in which gunmen attacked the presidential palace, was blamed on drug gangs. Most of Europe’s cocaine is imported through Rotterdam in the Netherlands, which has led to an increase in gang violence. The head of a Dutch police union has warned that the country risks becoming a “narco-state”.
Cocaine remains an important part of the gangs’ income not because it is addictive, but because it is so profitable. Estimates of how much a kilogram of the drug costs in different places vary because, as with any illegal market, it is difficult to study. The UNODC, however, publishes a series of estimates that show how large the profit margins can be. In 2019, the latest year for which data is available, a kilo of cocaine in Colombia typically costs $1,491 at wholesale prices. In Mexico, that kilo was $12,433 at wholesale prices. In El Salvador it is $28,873.
But the real profits come outside of Latin America. A kilo at wholesale prices in the United States typically costs $69,000 in 2019. The further you go, the more expensive coke becomes. In China, where some Colombian gangs hope to boost their profit margins even more in the next decade or so, a kilo costs $69,380 on the mainland and $72,510 in Hong Kong. In Australia a kilo in 2017, the most recent prices available, typically cost $152,207.
As long as cocaine remains illegal in rich countries, gangs continue to pour their profits into recruiting members, buying weapons and bribing officials. Legalization has cut into the gangs’ main source of income and made the product safer. That’s why The economist I argue that it is time to legalize things. ■
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