OVER THE in recent decades, criminal groups in Latin America have diversified their business. They no longer just smuggle drugs from South America into the United States, as the infamous Colombian drug lord Pablo Escobar did in the 1970s and 1980s. They are now also involved in illegal gold mining, human trafficking, the production of synthetic opioids (especially fentanyl), and extorting those who operate in completely legal markets such as growing avocados and limes.
However, drugs are still an integral part of their business model. For example, according to the United Nations Office on Drugs and Crime (UNODC), global cocaine production reached a record high of 1,982 tons in 2020, although this is likely an underestimate. North America remains the largest consumer of the drug, with about 2% of people aged 15-64 (or 6 million people) having used it that year. But cocaine is spreading globally. Guinea-Bissau has become an important route for South American cocaine to Europe. Drug gangs were blamed for an attempted coup earlier this year in which gunmen attacked the presidential palace. A lot of European cocaine is imported through Rotterdam in the Netherlands, which has led to an increase in gang violence there. The head of the Dutch police union has warned that the country risks becoming a “drug state”.
Cocaine remains a significant part of gang revenue, not because it’s addictive, but because it’s so profitable. Estimates of how much a kilogram of the drug costs vary from place to place because, as with any illegal market, it’s difficult to research. However, UNODC publishes a series of estimates that show how large the profit margins can be. In 2019, the most recent year for which data is available, a kilogram of cocaine in Colombia typically cost $1,491 at wholesale prices. In Mexico, that kilogram was $12,433 at wholesale prices. In El Salvador it is $28,873.
But the real profits come from outside Latin America. A kilogram at wholesale prices in the United States in 2019 typically costs $69,000. The further away, the more expensive the coke gets. In China, where some Colombian gangs hope to further increase their profit margins in the next decade, a kilogram reportedly cost $69,380 on the mainland and $72,510 in Hong Kong. In Australia, a kilogram usually costs $152,207 in 2017, the latest prices available.
As long as cocaine remains illegal in rich countries, gangs will continue to channel their profits into recruiting members, buying weapons, and corrupting officials. Legalization would reduce gangs’ main source of income and make the product safer. That’s why The Economist argue that it’s time to legalize things. ■
Read more on this topic:
Joe Biden is too scared. It’s time to legalize cocaine
Growing cocaine production shows that the war on drugs has failed
The demand for drugs led to an increase in child labor in Peru