The Coronavirus Has Gutted The Price Of Coca. It Could Reshape The Cocaine Trade.
The great coca crash of 2020 — prices for the leaf in some regions of South America have fallen as much as 73 percent — illustrates the extent to which the pandemic is disrupting every aspect of global trade, including the traffic in illegal drugs.
Lockdowns have sealed regional borders and sharply curbed domestic and international transit, challenging the ability of cartels to move product by land, air or sea. At the same time, the cartels are dealing with global disruptions in the production and importation of precursor chemicals, such as potassium permanganate, that are used in clandestine labs to refine the recreational drug.
As with legitimate goods, the breakdown in the supply chain is upending business models and causing market scarcity that has doubled retail prices in some U.S. Cities, according to the Drug Enforcement Administration. But for South American coca farmers, the pandemic has, at least temporarily, caused a dive in prices that analysts say could alter the landscape of the illicit drug trade for years to come.
“The [coca] economy has collapsed,” Leiva said. The 33-year old cocalero cultivates the leaf for traditional indigenous uses — largely for chewing or steeping for herbal tea.
“We plant coca because it is a solution for our survival,” he said. “But now, no one is buying it.”
The South American cocaine trade is one example of how the global underworld of narcotics and illicit drugs is confronting its own coronavirus crisis.
In Afghanistan, virus lockdowns have created acute shortages of lancers — the specialized workers, many from neighboring Pakistan, who cut the seedpods of mature poppies to produce heroin. The current challenge of sourcing precursor chemicals from Asia has disrupted the manufacturing of illicit drugs including methamphetamine and fentanyl in Mexico and amphetamine-type stimulants in Lebanon and Syria. Border restrictions have made it difficult for Colombians to obtain from Venezuela the cheap gasoline needed to refine cocaine, according to the United Nations Office on Drugs and Crime.
“In short, the cartels are taking a beating,” said Michael S. Vigil, former chief of international operations for the DEA.
U.S. Officials say they are aware of stockpiles of drugs and cash sitting at the Mexican border as cartels experience problems moving product into the United States. DEA field divisions across the country report that supplies of some illicit drugs appear to be running low in U.S. Cities. The street price of cocaine has climbed in markets including Miami, Atlanta, New York and San Francisco.
As drug traffickers contend with these challenges, officials say, they have shifted from sending frequent small shipments across the southwestern frontier to fewer but larger shipments. U.S. Seizures from January through April were down compared with the same period last year, suggesting a decline in traffic.
In Europe, seizures in the first quarter of this year boomed — suggesting what authorities describe as an effort by traffickers to flood the market ahead of strict lockdowns there. The U.N. Office on Drugs and Crime confiscated 17.5 tons of cocaine bound for Europe from South America in the first three months of this year, a 20 percent increase compared with the same period in 2019, Reuters reported. Large seizures have continued in Europe in recent weeks, suggesting a similar shift from more frequently smuggling smaller amounts to attempts to move high volumes in fewer shipments.
Analysts largely expect regular trafficking patterns to resume when lockdowns are fully lifted, but say the current turmoil could have lasting impacts. As with legitimate businesses, the largest operators are positioned to weather the storm far better than smaller competitors, suggesting the possibility of a consolidation as labor and smugglers defect to or are recruited by the strongest players.
“This will change the landscape of these cartels,” Vigil said. “The only ones that may survive are the supersized cartels. They’ll completely obliterate the smaller ones that don’t have the infrastructure or revenue streams to survive the supply chain disruption we’re seeing now.”
In few cases has the drop in price of the basic crop used to produce an illicit drug been steeper than that of coca leaf. That’s partly because there was a market glut before the coronavirus hit. Despite the U.S.-led war on drugs, which has included billions of dollars spent on eradication and crop replacement programs, data released last year showed coca production in South America at all-time highs. Now, farmers are left with acres upon acres of coca leaf and little means to sell it.
“The coca leaf prices are going down because they can’t move the product up the food chain and out of Bolivia and Peru,” said Douglas Farah, president of IBI Consultants, a Washington-based national security consulting firm that analyzes the drug trade.
Yet the fact that the street price of cocaine in the United States has not spiked even higher, Farah said, suggests that some of it is still getting in — mostly from reserves the cartels had on hand before the coronavirus hit.
More than most illicit drugs, cocaine is moved by sea. The United States has deployed Navy and Coast Guard ships for a massive counterdrug operation in the Caribbean, but the cartels have found other, less-monitored routes. They’re increasingly moving their product north up the Pacific coast from Peru to Central America, where some countries have curbed marine patrols during the pandemic.
Officials and analysts say the coca crash is likely to be temporary. As lockdowns ease, for instance, there are signs of a rebound in coca leaf prices in some areas of Bolivia, and at least a slowing of the steep price drops seen in Peru. As more transit restarts, some countries are already beginning to seize more drugs. Peruvian and Brazilian police took a small plane with 925 pounds of cocaine in northern Peru in late May. Peruvian police intercepted another 380 pounds aboard a ship bound for Europe.
In Bolivia and Colombia in particular, authorities see the crash as a chance to target illegal growing more aggressively. Colombian troops have accelerated forced eradication during the lockdown, sparking clashes, protests and two deaths as they seek to clear 320,000 acres of coca this year.
“Since the health emergency began, we have been clear — military and police operations [against coca] will continue,” Colombian Defense Minister Carlos Holmes Trujillo told the Bogotá newspaper El Espectador.
In Bolivia, socialist President Evo Morales — himself a former coca farmer and activist — gave the country’s cocaleros a new measure of legitimacy and protection during his more than 14 years in office. His departure amid political upheaval last year left a right-wing, anti-coca government in charge.
Those largely indigenous farmers say the new government has stigmatized what had been a thriving trade in legal uses for the leaf, and has sought to use coronavirus-era rationing to cut access to the gasoline they need to get the crop to market.
Marcela López, a coca farmer and local leader in the Chapare, Bolivia’s main coca-growing region, blamed the nation’s tough-talking, anti-coca interior minister, Arturo Murillo.
“He says we are criminals,” she said. “I think he would like to see us die from hunger.”
Murillo has declared a new era in coca eradication.
“Those who oppose coca eradication are the associates and allies of narco-trafficking,” he said in February.
Peru’s government, meanwhile, has sought to take advantage of low coca prices to convince farmers to embrace alternative crops. Even in the midst of a dramatic national recession sparked by the coronavirus, the Peruvian government has funneled cash to coca-growing regions to promote everything from avocado growing to fish farming.
But Jaime García, a researcher in international studies at the Catholic University of Peru, said he feared the recession will bring the opposite result: a new coca boom.
“Conditions for drug trafficking might be even better,” he said. “The economic situation in the country is going to be so bad that farmers turn to coca as the only alternative.”