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Globalization and Drug Traffiking

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 GLOBALIZATION
AND
DRUG TRAFFICKING

Cristina Elena Petcu

The New School University

Course: Theories, Histories, Practices of Development

Professor: Sheba Tejani

Date: May 15, 2017

 Table of Contents
1. Introduction .........................................................................................................................2
2. Globalization of transnational organized crime ........................................................................3
3. Globalization and the cocaine market ......................................................................................5
3.1 Trade liberalization and its effect on the illicit drug market ...................................................7
3.2 Evolution of drug trafficking routes .......................................................................................9
3.3 The emergence of new cocaine markets ............................................................................... 11
4. Drug trafficking and its connection to violence ...................................................................... 14
5. Law enforcement efforts and policy implications ................................................................... 17
6. Conclusions ........................................................................................................................... 18
Bibliography ............................................................................................................................. 20

1
 1. Introduction

Globalization has expanded and facilitated not only the movement of people, but also the

flow of goods, capital, and services. Globalization meant technological revolution which

consequently made transnational activity take place faster, easier and cheaper. The world started

to have a new shape, and nation states became more interdependent with each other. Major

changes, like the expansion of markets and openness to trade set the basis for a global economy

in which billions of people are participating today. Growth of international commerce, the

exporting of jobs from developed to underdeveloped countries, along with advances in farming,

access to food, medicine, and sanitation have all been generally positive effects of globalization.

However, even though globalization has been a major generator of progress, not all its

consequences have been positive. Despite the great advancement we have witnessed, the world’s

governments and population were not ready to support the level that globalization reached in

such a short period of time. Trade liberalization was the engine for increased inequality between

North and South. The growing income inequality has prompted an increase in migration and a

growing market for human smugglers and traffickers. Nation states were unprepared to control

mass movements of people and experienced social fragmentation and economic dislocations.

Consequently, when combined with the breakdown of political and economic barriers after the

end of the Cold War (which provided access to global transportation) globalization has had the

negative effect of facilitating the expansion of transnational crime such as global terrorism,

people and drug trafficking, immigrant smuggling and money laundering.

This paper will discuss how globalization influenced transnational organized crime by

analyzing global trends in cocaine production and trafficking, and the emergence of new routes

2
for cocaine smuggling and new markets for retail sales. This analysis will form the basis for

arguing that globalization facilitated the expansion of narcotrafficking, and therefore inflicted

instability, corruption, and high levels of violence on producing and transit countries.

2. Globalization of
transnational organized crime

Over time, transnational

organized crime (TOC) has evolved

considerably in ways that outpaced the

growth of mechanisms for global

governance. By offering access to new

telecommunications technologies and by

facilitating the free movement of people,

globalization encouraged criminal

organization activity to expand into

international markets. The volume of

international trade rose substantially

through the bilateral and multilateral

economic agreements that reduced trade

barriers between regions and continents. Reproduced from WTO in UNODC (2010,40)

Not only can goods and people move more easily, but also more cheaply. For example, median

fares for airline travel have decreased by 40% between 1980 and 2005, making it more

affordable for people to travel in places considered inaccessible before (UNODC 2010, 40).

3
 These factors contributed to an increase in commerce, which has included a greater

amount of illicit goods: “Between 1980 and 2005, world container traffic increased tenfold, from

39 million twenty-foot equivalent units (TEU) to 395 million TEU. In addition, the rise of global

supply chains and just-in-time delivery of goods and services has greatly increased the pressure

to keep commerce moving through ports of entry, decreasing the amount of time for inspecting

goods” (Hanna, 38). Human and commercial flows are so high that it has become harder to

distinguish licit from illicit. The sea, which represents three quarters of the earth surface, is used

to transport more than 90% of global trade, and very little of the cargo moving from one port to

another can be inspected (UNODC, 2010, 30).

The expansion of Internet and mobile communications transformed the traditional

criminal organizational structures and empowered them with new tools to engage in more

sophisticated crimes like cyber-crime and cyber-espionage. For example, the internet is used as a

new open space for selling illicit drugs, pirated intellectual property, and trafficked persons

(Hanna 40).

The post-communist transition, the structural adjustment programs and trade

liberalization intensified socio-spatial disparities, and therefore, increased exclusion and

unemployment in developing countries. When combined with poverty and unemployment, this

pushed marginalized groups to engage in illicit activities (UNESCO, 1999, 5).

One of the most developed forms of organized crime is drug trafficking which has not only

affected societies by increasing the number of people with drug use disorders but has also fueled

violence, corruption, and instability in producing and transit countries. The Andean region

became the world’s leading source of illicit drugs due to its high coca production. As per 2010,

the value of transnational illicit trade in cocaine was estimated at $88 billion per year, and had 17

4
million users, with 43%of the market value in North America and 39% in Europe (UNODC,

2010, 92). Considering the big economic, social and political impact that at national and local

level, I will further focus this study into looking at how globalization impacted the illicit drug

trade, and, in particular, the transnational illicit drug trade in cocaine.

3. Globalization and the cocaine market

Most of the world’s cocaine production is concentrated in the Andean region (Colombia,

Peru and the Plurinational State of Bolivia) but the markets destined for consumption have

shifted drastically over time. This shift is related to the fact that cocaine trafficking is dependent

on both the supply and demand for it (UNODC, 2011, 7).

Coca bush cultivation (raw material for the manufacture of cocaine) started in Peru and

the Plurinational State of Bolivia in the middle of the nineteenth century. During the period from

the end of World War II through the 1980s the two countries were the biggest world suppliers of

coca leaf and refined cocaine for the U.S. and other markets around the world. However, in the

mid-1990s, the U.S. led war on drugs in these countries shifted coca cultivation from the

southern Andes to Colombia (Bagley 3). Consequently, by 2000, 90% of coca production was

concentrated in Colombia. This process is known as the balloon effect, i.e., pushing cultivation

out of one country will change the location of production but it will not eradicate the problem

itself.

The same balloon effect can be found in the twenty-first century. Due to a drastic decline

in cocaine prices (which is discussed below) and substantial achievements in reducing the area

used for coca cultivation through the U.S.-funded Plan Colombia, coca cultivation in Colombia

decreased by 58% between 2000 and 2009. However, it then increased considerably in the

5
Plurinational State of Bolivia (doubling to 75% of its 1990 peak) and to a lesser extent, in Peru

(UNODC, 2011, 7).

All these changes in production, supply, and demand are not mere facts. They are

consequences of globalization and trade liberalization reshaping the illicit drug market. In order

to connect the dots between them, it is imperative to look at how trade liberalization affected

illicit drug prices, how globalization opened up new routes for drug traffickers, and how and why

new markets for cocaine users emerged in other parts of the world.

6
 3.1 Trade liberalization and its effect on the illicit drug market

Illicit drug markets are determined by demand, price and availability. Therefore, the size

of the markets can be reduced by decreasing demand for illicit drugs, by increasing prices, or by

lowering availability in different ways than increasing prices. “One way to think of this is in

terms of increasing time, risk, and inconvenience required for a consumer to find a supplier, a

concept referred to in the drug abuse literature as search time” (Kleiman, 12). Since 1995,

cocaine retail prices have declined spectacularly, by nearly 50%.

Reproduced from UNODC, 2011

According to an empirical study by Claudia Costa Storti and Paul De Grauwe, the decline

in retail prices for cocaine and other illicit drugs is directly related to a decline in the

“intermediation margin” (the difference between retail and producer prices), which is the largest

part of the retail cost (4). The decrease in the intermediation margin in drug trafficking can be

7
explained by globalization, which impacted the most important determinants of the

intermediation margin: the “risk premium” and the “efficiency of intermediation.” The “risk

premium” consists of high returns to those engaging in high risk activities (like selling drugs).

Because drug trafficking is illegal (and the penalties, if caught, are high), those who engage in

such activities are able to command a risk premium. However, the more “efficient” the

intermediation process is “(stock, management, transportation and distribution), the more it

reduces the number of intermediaries involved and thus reduces the aggregate risk premium”

(Storti and De Grauwe, 5).

But what specifically contributed to such a large decline in the intermediation margin?

Storti and De Grauwe believe that globalization played a significant role in improving the

“efficiency effect.” As transport became cheaper and the technological revolution made

communication between producer and consumer faster and safer, the number of intermediaries

needed for the distribution of drugs decreased. Moreover, despite government crackdowns on

money laundering, the new financial system allowed traffickers and dealers to engage in money

laundering more easily, and therefore, remain undetected. All these factors contributed in

lowering the cost of drugs distribution (Storti and De Grauwe, 17).

Another way globalization affected the intermediation margin was through the “risk

premium effect.” The open-borders effect of globalization allowed millions of poor and low

skilled workers to engage more easily in transporting and distributing drugs. Most of these

workers were willing to take the risks involved because they had little to lose, while others were

attracted by the still relatively high intermediation margins of the drug market (Storti and De

Grauwe, 17). Therefore, the decline in risk premium was influenced by the surplus of these new

categories of people who entered the business.

8
 Hence, we can infer from Storti and

De Grauwe’s hypothesis, that globalization

played a significant role in reducing the retail

prices of major drugs like cocaine by making

it easier for consumers to buy them and

harder for drug enforcement agencies to

reduce drug use in major consumer countries.

3.2 Evolution of drug trafficking

routes

Although reducing drug availability for

consumers has proven harder due to price

World Drug Report (2016, 37) decreases, globalization has partially offset

the impact of lower drug prices by improving the overall drug enforcement capabilities of states

in waging the war on drugs (especially with important technological advancements in modern

radars and surveillance technology, which drastically improved and extended the intelligence

operations). An important component of this is the open-borders effect, which encouraged

“greater cross-border drug enforcement coordination” between different countries and regions

around the world (Bartilow and Eom, 121).

According to the World Drug Report (2016), from 1998 to 2014 the total quantity of

cocaine seized in South America doubled. Colombia alone accounted for 56 per cent of all

cocaine seizures in South America.

9
 But the decline in production, and consequently in demand from the U.S., didn’t

intimidate drug traffickers. When American law enforcement and military operations succeeded

in closing down the routes established in the Caribbean by the Medellin and Cali cartels in the

1980s, the drug dealers replaced the old routes with new ones in Panama, Central America, the

Gulf of Mexico, and the Pacific Corridor so that drugs could cross from Mexico into the United

States (Bagley, 7). Partial victories on the war on drugs have most of the time led to a balloon

effect, and so, over the past thirty years, drug cartels have successfully shifted production from

the Andes to different areas and frequently changed their smuggling routes: “A combination of

maritime routes to Mexico with a land border crossing in the USA came into fashion. The

Mexican groups were paid to transport the drug across Mexico and the US border, turning it over

to Colombian groups in the USA” (UNODC, 2010, 87). Mexico became central for smuggling

cocaine into the U.S. as it had a substantial advantage over its neighboring countries, a common

land border with the U.S. through which a large volume of licit trade every day, making it much

more difficult for police to inspect the merchandise.

Unfortunately, Mexico inherited more than a primary role in drug smuggling from its

Colombian counterparts. Major criminal networks became involved because cocaine profits were

much greater than what they could earn from any other activities. The same pattern of extreme

violence caused by the fight over smuggling routes seen in Colombia in the 1990s can be seen in

Mexico today. Contested drug trafficking areas enhanced the dispersion and fragmentation of

Mexican cartels and the proliferation of gangs or pandillas that work in close association with

major cartels (Bagley, 8). The rise of many more drug cartels and street gangs further

undermined the state’s capacity to counteract this phenomenon.

10
Bagley (2012, 9)

However, the monopoly that Mexican cartels had over cocaine merchandise within its

territory started to be seriously threatened by the new Mexican national security strategy adopted

in 2006 and Plan Merida, an U.S. initiative to combat narcotrafficking and organized crime in

Mexico and Central America. Despite the high militarization of the war on drugs, the initiative

did not eliminate the key Mexican cartels, but it did make smuggling in the country more

expensive and dangerous than before. As a result, drug dealers moved substantial portions of

their operations to Central America where they targeted weaker states in which to conduct their

business (mostly Guatemala and Honduras) (Bagley, 7).

3.3 The emergence of new cocaine markets

Although there has been a dramatic decline in cocaine use in United States since the

1980s due to decreased cocaine production in Colombia, increased law enforcement efforts, and

massive cartel violence (UNODC, 2011, 11), cocaine use in Latin America and Europe has

skyrocketed. From 1998 to 2008, the total number cocaine users in Europe doubled, from 2

11
million to 4.1 million (UNODC, 2010, 6). In Europe, 60% of cocaine users are from the United

Kingdom, Spain and Italy, while in Latin America the top consumer countries are Brazil,

Argentina and Chile (UNODC 2011, 10).

UNODC (2010, 102)

Before 2000, cocaine was shipped directly from Colombia to Spain or the Netherlands,

but the growing number of seizures in ports as well as on the well-established maritime routes

changed the pattern of shipments. As direct shipment declined (UNODC, 2012, 79), other South

American countries like Ecuador, Brazil and the Bolivarian Republic of Venezuela, along with

the West African region, became important areas for smuggling cocaine from Colombia to

Europe: “Africa is often supplied with cocaine coming from Brazil […] The African countries

most mentioned as countries of departure or transit for shipments of cocaine within Africa were

Nigeria, followed by Ghana, Mali and Guinea” (UNODC, 2016, 39). Cocaine produced in Peru

and the Plurinational State of Bolivia seem to be used more within South and North America,

12
and has little impact on the European market (UNODC, 2010, 10), while the Bolivarian Republic

of Venezuela grew in importance as a key transit country for shipments to Europe.

Reproduced from UNODC 2011 (25)

The emergence of new cocaine markets also was facilitated by globalization, which

encouraged the cooperation and formation of alliances among criminal organizations in different

countries around the world by fostering the expansion of trade and global transportation

networks. Even though methods like air couriers on commercial flights, postal services or private

aircraft are used to transport cocaine from Colombia to Europe (European Monitoring Centre for

Drug Addiction, 22), maritime transport remains the most efficient method as boats have the

capability to transport considerable quantities. According to the European Union Drug Markets

report, the maritime trade has increased considerably over the years, and so did the transport of

cocaine. The expansion of transport across the globe resulted in infrastructure developments

which “allow ports to handle more and larger vessels both in the Americas and in Europe” (2016,

13
22). Major ports of Europe are targeted by drug cartels as in these ports, illicit cargo has a lower

probability of being detected by law enforcement.

4. Drug trafficking and its connection to violence

The impact of drugs in people’s lives and the economy of the countries is complex and it

ranges from issues associated with violence, corruption and extortion to costs associated with

illegal activities introduced into countries’ economies and the negative consequences of drug

consumption on individuals and society.

Due to its nature, drug trafficking became a global threat whose effects are felt most

locally. Drug trafficking is not necessarily connected to violence if we look at the low levels of

homicide related to opiate trafficking but in the Latin American region, cocaine production and

trafficking has been a main factor in undermining development and the rule of law. The high

14
profits from drug trade are motivating armed groups, terrorist organizations and simply

individuals who live in poverty, to engage in drug trafficking. According to the World Drug

Report, “the drug trade flourishes where state presence is weak, where the rule of law is

unevenly applied, and where opportunities for corruption exist” (2016, xix). The immense profits

allow traffickers to penetrate the highest levels of government and the military. In countries

where law enforcement is weak and the economy is not sufficient to sustain its people, officials

are more prone to turn a blind eye to illegal activities for bribes that can exceed what they

otherwise could earn in a lifetime. If resistance is encountered, violence rises. For example, after

reporting the military involvement in drug trafficking, several journalists had to flee Guinea-

Bissau because they received death threats from traffickers (UNODC, 2010, 236).

As trafficking routes expanded over the years, Central America became a central point

for smuggling cocaine to the U.S. and Europe. The national security strategy implemented by the

Mexican government in 2006 led to an increase in the cocaine trafficking through Central

America and the Caribbean. This promoted competition for territorial control in weak states like

Honduras and Guatemala where groups were already engaged in criminal activities and migrant

smuggling. As a consequence, violence erupted in these countries and homicide rates increased

to uncontrolled levels (UNODC, 2012, 11).

15
 UNODC 2012 (12)

Organized criminals became so powerful in their relationship with the state that whenever

the state dared to oppose them, high government officials and federal police agents would be

murdered as a form of revenge. The flow of cocaine through Central America declined over the

years but this didn’t lead to a reduction in murder rates. On the contrary, instability in the market

can drive violence. One example is Jamaica, whose cocaine flow dropped from 11% in 2000 to

1% in 2007 (UNODC, 2011, 51), but whose murder rate rose from 34 per 100,000 in 2000 to 59

per 100,000 in 2008 (UNODC, 2011, 51).

16
 UNODC 2011 (51)

5. Law enforcement efforts and policy implications

Most policies and programs implemented to eliminate drug producing and trafficking

countries have been focused on a militarized and oppressive approach. The consequences paid by

Latin American countries have been “high in both blood and treasure” (Bagley, 13). It weakened

governance and was largely ineffective due to weaknesses in the local criminal justice systems:

“poor investigation, lack of prosecutorial capacity, and judicial corruption have resulted in

extremely low conviction rates, effectively ensuring impunity” (UNODC, 2012, 13). UNODC

stated that in order to implement an efficient plan to stabilize all countries in the region and

address the transnational flows affecting these countries, assistance from the international

community along with support in strengthening local law enforcement and governance is needed

(UNODC 2010, 242). Open borders promoted interconnectedness, which further expanded

17
international cooperation and partnership. This factor can, of course, facilitate drug trafficking

practices, but it can also serve as a mean to build a global strategy to combat transnational crime

activities. The solution, as some literature suggest (see Bartilow and Eom and their analysis of

how trade openness affects the ability of states to interdict narcotrafficking), is not to limit the

flow of drugs by imposing trade barriers. The solution is more complex and it can range from

intervention to directly reducing demand, such as through drug use prevention, treatment and

rehabilitation of drug users to creating “a global anti-crime network, strengthened by public-

private partnerships and international law enforcement efforts” (Hanna, 44).

6. Conclusions

Globalization boosted the movement of people and enhanced the flow of goods, capital

and services. The elimination of trade barriers generated economic growth and brought world

nations closer to each other. In short, globalization improved relationships between nations and

created a new world order, which is more interconnected than ever, but perhaps in some ways it

has progressed faster than our ability to control it. (UNODC, 2010, 18). Despite its positive

effects, globalization made countries more vulnerable to transnational crime. As international

trade has increased in volume, criminal and terrorist groups have had more opportunities to

engage in illicit activities and to do so more easily. Cooperation among criminal organizations

expanded, and therefore, it strengthened their power and ability to evade detection by local law

enforcement. The establishment of free trade zone and free trade agreements decreased the

capacity for law enforcement authorities to distinguish licit from illicit trade and track it from the

producing country to the destination. Moreover, retail prices of drugs decreased considerably

18
over the years due to a more efficient distribution and a reduction in the risk premium involved

in dealing drugs.

Despite increasing cooperation among drug trafficking criminal organizations,

globalization also played a significant role in fostering global law enforcement cooperation,

which significantly contributed to the seizure of greater quantities of drugs and the incarceration

of narcotrafficking leaders. However, as discussed in this paper, all these “successes” are not

sufficient. Drug traffickers continue to find new markets and routes to sell their merchandise, and

the competition for these markets and routes causes high levels of violence in producing and

transit countries. Accordingly, progress has to be made in strengthening the rule of law, in the

ability of governments to address local threats, and ultimately, as UNODC suggests, the control

of transnational organized crime has to be part of a larger project of global governance

(UNODC, 2010, 18).

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 Bibliography
 Bagley, Bruce. Drug trafficking and organized crime in the Americas: Major trends in the

twenty-first century, Woodrow Wilson international Center for Scholars, 2012.

 Bartilow, Horace A. and Eom, Kibong. Free Traders and Drug Smugglers: The Effects of

Trade Openness on State’s Ability to Combat Drug Trafficking, University of Miami,

2009.

 European Monitoring Centre for Drugs and Drug Addiction and Europol, EU Drug

Markets Report. Strategic Overview, EMCDDA–Europol Joint publications, Publications

Office of the European Union, Luxembourg, 2016.

 Hanna, Mark. SOF Role in Combating Transnational Organized Crime, Chapter

3:Transnational Organized Crime in an era of accelerating Change, The JSOU Press,

MacDill Air Force Base, Florida, 2016.

 Storti Costa,Claudia and De Grauwe, Paul, “Globalization and the Price Decline of Illicit

Drugs”, The International Journal on Drug Policy, No. 1990, 2008.

 UNESCO. “The Globalization of Drug Trade”, No. 111, 1999.

 UNODC. “The Transatlantic Cocaine Market”, 2011.

 UNODC. “Transnational Organized Crime in Central America and The Caribbean. A

Threat Assessment”, 2012.

 UNODC. “World Drug Report”, United Nations, New York, 2016.

 UNODC.“The Globalization of Crime. A Transnational Organized Threat Assessment”,

United Nations publication, sales No. E. 10. IV.6, 2010.

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  Viano, Emilio C. “Globalization, Transnational Crime and State Power: The Need for a

New Criminology”, Rivista di Criminologia Vittimologia e Sicurezza, Vol. III, no.3, Vol.

IV no. 1, 2009-2010, pp. 63-85

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