THE ANDEAN DRUG INDUSTRY: THE BALLOON GOES UP

The "Success" of Plan Colombia in Cutting Coca Production Has Started to
Undermine Governments Farther South

"A TURNING point" is how John Walters, the director of the United States'
office for drug control, jubilantly described figures released by his
government last week, which claimed a 15% fall in 2002 in Colombia's crop
of coca, the plant used to make cocaine. This follows eight years of steady
increases in the amount of land under coca in Colombia, the source of
three-quarters of the world's cocaine.

For American officials, last year's fall is evidence that "Plan Colombia",
a programme of mainly military aid begun by Bill Clinton and continued by
George Bush, is starting to pay off. Under this plan, the United States has
provided Colombia with extra helicopters and crop-dusting planes to spray
coca with herbicides. Most of these have finally arrived, and Alvaro Uribe,
who became Colombia's president last August, has been happy to use them: he
has unleashed a massive spraying campaign which officials say is at last
outpacing the ability of coca farmers to replant.

Yet there is a hollow quality to this victory. Over the past three decades,
rich-country demand for cocaine has created a monster in the Andean
countries. The illegal-drug industry has corrupted institutions, distorted
economies, wrecked forests, and financed armed groups such as Colombia's
FARC guerrillas and right-wing paramilitaries. But the "drug war" has
imposed its own costs. One is known as the "balloon effect": local squeezes
simply move the industry elsewhere, spreading violence and corruption with it.

Thus, in a reversal of a trend begun a decade ago, drug production is
rising in Bolivia and Peru, and this year coca farmers there have mounted
new challenges to governments; this "politicisation" of the coca industry
is "most troubling" admitted Mr Walters. This shift comes at a delicate
juncture: weak economies, weak governments in several countries, political
conflict in Venezuela and Bolivia, and Colombia's intensifying wars have
all aroused fears about the Andean region's stability.

A second worry concerns the figures themselves. Mapping the coca crop is
difficult, and not everyone trusts the American figures. But the trend is
clear enough. The UN will next week publish its annual coca census, which
is more comprehensive than America's sampling. Having reported an 11% fall
in Colombia's coca area in 2001 to 145,000 hectares (358,000 acres), the UN
is expected to reveal an even steeper fall for 2002. But its estimate for
Peru (46,700 hectares in 2001, with a small increase last year) is higher
than America's. The UN also reports that more productive coca varieties are
being used in both countries; in Peru it reckons that fields may be
producing 10% more coca than a year ago.

Nevertheless, the shrinking of coca land in Colombia will comfort the
United States' Congress. It is anxious to see some return from aid to
Colombia of around $500m a year. That is especially true after FARC last
month shot down an American spy plane apparently on an anti-drug mission,
killing one American and taking three hostage. Even so, American officials
believe this year will be better still: Mr Uribe has pledged to spray
200,000 hectares. If that happens, Mr Walters thinks, coca farmers will
despair of profit and give up. He told Congress that America had "an
unprecedented opportunity to seriously reduce the availability of illegal
drugs". Klaus Nyholm, the UN's drugs man in Colombia, says better prices
for legal crops are helping: excluding drug crops, the country's farm
output expanded by 3.5% last year, double the growth of GDP.

The results are a fillip, too, for Mr Uribe, who faces mounting urban
terrorism by the FARC. Some of Colombia's most drug-infested areas are
close to giving up coca. Putumayo, where the UN reported 66,000 hectares in
2000, can eliminate the crop by December, says a local official. But the UN
reckons it is spreading to smaller plots (to evade spraying) and that
output is rising in other areas, such as Guaviare. Mr Nyholm says coca will
not be eradicated until Colombia's wars end.

Fears of Retreat

The guarded optimism in Colombia is mirrored by increasing problems farther
south. In recent years, Bolivia was the drug warriors' success story.
Between 1997 and 2001, its government eradicated 40,000 hectares of coca in
the Chapare, the main growing area; aid money trickled in for alternatives,
such as bananas. But American officials are now nervous about a retreat. In
the past two years, new planting has outstripped eradication. And
increasing amounts of Peruvian semi-processed cocaine-base are now being
smuggled through Bolivia to Brazil and thence to Europe. Cobija, a poor
northern outpost, has acquired sudden wealth; locals report an influx of
heavily-laden, armed "backpackers" from Peru on the logging trails in the
surrounding forest.

This year, Bolivia's powerful coca growers' movement has drawn blood
against a weak government. Evo Morales, the movement's leader, was
emboldened by winning 21% of the vote in last year's presidential election.
To head off protests, President Gonzalo Sanchez de Lozada offered to expand
the area in which coca can be legally grown for traditional uses (such as
chewing and tea) if a study of demand showed this to be justified. To no
avail: in January, protests by coca farmers brought much of the country to
a standstill for two weeks. Mr Morales played no direct role in violence
last month, in which 33 people were killed in riots and clashes between
striking police and the army. But these events have left Mr Sanchez (who
claims there was a plot to kill him) in no position to take the offensive
against coca.

In Peru, too, the politics of coca has become more confrontational. Until
the mid-1990s, Peru was the world's main source of the shrub. But the price
of coca has been climbing again since 1998, and production rising. Worried
about the backflow from Plan Colombia, American officials have stepped up
aid to Peru, while also pressing for a tougher policy. In September, the
government said it would begin forcible eradication in hard-core coca
areas, a policy Peru eschewed in the late-1980s, after Shining Path
terrorists exploited discontent over it.

The response was a wave of violent unrest in traditional coca-growing
areas. More than 70 people were injured in an 11-day "strike" last month;
in Aguaytia, protestors smashed up the government's anti-drug office,
burning equipment. For the first time, the coca growers may have a
political leader, albeit not with the clout of Mr Morales in Bolivia:
Nelson Palomino, who was recently arrested on charges of supporting the
(much weakened) Shining Path, something he denies. His arrest was greeted
by a protest by thousands of coca farmers in Ayacucho, the Shining Path's
birthplace. Such protests are a novelty for Peru. The farmers have now
called a three-week "truce": they want the government to agree to an end to
forced eradication and more money for development schemes.

Further afield, there are other worrying signs. This week, Rio de Janeiro's
carnival took place under the eye of the army: on its eve, the city's
leading drug gang bombed buses and buildings, its second such show of
strength against an ineffective state government in five months. And
following tougher action by Mexico, more drugs now flow to the United
States through Caribbean islands, as they did in the 1980s. The drug
industry has an unerring eye for institutional weaknesses. As long as
cocaine is demanded, victories over it involve defeats elsewhere.