Francisco E. Thoumi
During the last twenty-five years Colombia has become a leading producer and trafficker of illegal drugs. Its drug entrepreneurs turned coca, opium poppy, and marijuana into important crops, manufactured cocaine and heroin, and established themselves as the main smugglers of those drugs into the United States and as important suppliers of Europe. 1 It is undeniable that this illegal industry has had a great impact on Colombia; however, while certain effects are easy to identify and measure, many others are not, making it difficult to answer some questions, the provisional answers to which are a necessary prelude to effective public policy. Among these questions are the following: What is the actual weight of the industry in the country’s economy? What are its effects on fiscal and macroeconomic policies and management? Would the destruction of the industry cause an economic crisis? What have been the industry’s effects on the democratic process, local governments, peace negotiations, armed forces, political parties, and corruption? These are all complex and difficult questions. In this chapter I attempt to respond to those questions, but I acknowledge the difficulty of obtain-ing definite answers. First, I summarize the evidence on the industry’s economic impact, then I focus on the social and political effects. I end the chapter with a short summary and some conclusions.
What economic effects of the illegal drug industry might one hypothesize? The abundance of foreign exchange the industry generates can cause overvaluation