Guns, cocaine: One market out of control

ISN: Gone are the days when the black market for cocaine required a few strong men, limited bribes, and involved the purchase of a few revolvers. The cocaine trade has expanded well beyond the Andean mountain corridor and the control of local actors there.

The market for small arms and light weapons has completely overlapped the cocaine market. Purchases for arms are no longer made with cash but with cocaine, and the same routes used to smuggle cocaine out of South America are used to smuggle guns in. Actors far and wide rush to meet the weapons demand created by continued conflict in Colombia.

What used to be two separate cash-for-product markets has blended into one nearly perfect market.

Due to the conflict in Colombia, perfect elasticity of demand exists for anyone who can smuggle guns into Colombia. And the market there will absorb any and all weapons at the going rate, which in this case is measured not in cash but kilos of pure cocaine for one functioning rifle.

The incentive to smuggle guns into Colombia is doubled because the cocaine received in exchange for guns is consistently in high demand. Trading one product - guns - in high demand for another - cocaine - with even higher demand is good business.

This market is inherently transnational, beyond the control of any single government.

While the word waits for the next terrorist attack in the US or Western Europe, the black market for cocaine and weapons continues to erode democratic institutions in Latin America, breeding corruption, instability, and, ultimately, contempt for elected officials.

The ready availability of small arms and light weapons in both South and Central America coupled with the lack of police presence on borders and in backwater areas makes the market a very fluid one.

What used to be a system of limited purchases for cash - made largely to individual gun smugglers by the leftist Revolutionary Armed Forces of Colombia (FARC) and the paramilitary United Auto-Defense forces of Colombia (AUC) - has turned in to bulk purchases of weapons paid for with pure cocaine. The suppliers range from Central American street gangs and Mexican mafia to Brazilian organized crime groups and Islamic radicals in Trinidad and Tobago.

Honduran police seized 218 weapons and over 50,000 rounds of ammunition in April last year, uncovering a slick guns-for-cocaine operation while adding evidence to the pile that puts Honduras at the center of Central American black market operations. Police seized 161 M-16 assault rifles, 26 Soviet-era AK-47 rifles, 11 US M-60 machine guns, nine grenade launchers for attachment to the M-16 rifle, and five portable grenade launchers, among other things. These weapons were to be exchanged for one to two metric tons of pure cocaine.

The Honduran government believes that these weapons were destined for the FARC. Police in Honduras claim that a functional M-16 or AK-47 is worth around seven pounds of pure cocaine. Using information gathered from interrogations, Honduran police conclude that cocaine that lands there is worth some US$1,350 a pound, while a rifle is worth over US$9,000.

According to the United Nations Office of Drug Control’s 2005 World Drug Report, US retail prices averaged at US$71 a gram, or US$34,050 a pound, in 2003. While this price has most likely gone down since 2003, it is still possible to conclude that gun smugglers stand to earn tens of thousands of dollars on every rifle traded for cocaine as long as they are able to get that cocaine into the US.

A recent study sponsored by the Small Arms Survey concluded that there may be as many as two million illegal weapons in circulation in Central American countries.

Due to the relative high supply of pure cocaine coming out of Colombia and a stable market for cocaine in the US, anyone with a rifle, a cell phone, and some secure trade routes stands to make good money. Any individual or group busted for smuggling is quickly replaced by another. This cycle will last as long as there is demand for cocaine, a supply of weapons, and individuals willing to move both.

Current estimates place the number of FARC fighters between 13,000 and 17,000. Despite the AUC disarmament process in Colombia, there still remain between 3,000 and 7,000 men at arms; counting those believed to be demobilized, this number jumps to 30,000.

In Brazil, where organized crime has come to control the gun and drug trade, there is an increasing demand for both products. In Rio de Janeiro alone, analysts who study violence in the shantytowns estimated in 2003 that there were at least 10,000 armed gang members. This number has likely grown significantly.

Organized crime actors in Brazil purchase weapons from providers in the tri-border area joining Brazil, Paraguay, and Argentina. There are so many black market weapons in Brazil that organized crime has been trading weapons for pure cocaine with the FARC since 2000. Some claim this barter system originated in a deal between the Red Command crime faction in Rio de Janeiro, and members of the FARC in southeastern Colombia.

Recent studies conclude that there are some four million illegal weapons in the hands of organized crime in Brazil. Brazil’s demand for cocaine has grown, placing the country at the top of the list of worldwide cocaine markets, behind only the US. Both the CIA and Interpol agree that up to 60 per cent of the cocaine that enters Brazil stays in Brazil, while the rest lands in Europe, Africa, and in some cases the Middle East and Asia.

Venezuela, known as a major cocaine transit country, extends this black market east from Colombia as far as Trinidad and Tobago, where radical Islamic groups are believed to be heavily involved in gun smuggling.

This twin market extends as far north as border towns between the US and Mexico. Nuevo Laredo, just across the border from Laredo, Texas, has recently been the focal point of violence between rival gangs there and local police. Mexican involvement in the region’s black market creates a soft underbelly along a 2,000-mile boundary across which anything of any size can be smuggled.

Tens of thousands of illicit actors propagate a market that proves to be highly lucrative, flexible, and networked. There is no center, no head, no leader to kill.

Counting all the countries involved just in the Americas, there are over 11 governments independently working to improve national security. Plan Colombia, the region’s high-profile arrangement between the US and Colombia to reduce cocaine supply and diminish the FARC’s presence, is a failure. The plan has stimulated markets for guns and cocaine rather than reduce demand in the US or the military capability of the FARC in Colombia.

In fact, the FARC is stronger now than ever. Supply for cocaine has not diminished, nor have prices soared as originally planned. In fact, increased militarization in Colombia has exacerbated the problem, stimulating the demand for black market guns in Colombia. Militarization is the leading policy for Mexico, Brazil, and Central America, where organized crime and street gangs are running amuck.

The escalation of violence is the only outcome for military solutions to what are essentially social problems. More violence demands more guns, more guns means more cocaine, and so on. This cycle has continued for decades, and will only get worse until leaders work together to seek alternative policies to deal with a massive black market that is quite clearly out of control.

Sam Logan is an investigative journalist who has covered security, energy, politics, economics, organized crime, terrorism, and black markets in Latin America since July 1999. He has reported from Santiago, Sao Paulo, Brasilia, and Buenos Aires. He lives in Rio de Janeiro and has a website at www.samuellogan.com.