A controversial article from news conglomerate Bloomberg claims that cocaine is poised to overtake oil and become Colombia's largest export. This worrying report came on the heels of the United Nations Office On Drugs And Crime (UNODC) announcing (Spanish) that cocaine production in Colombia, the world's largest manufacturer of the narcotic, soared to a record high during 2022 for the fourth year straight. Colombia is also the world's leading cultivator of the coca plant, the leaves of which are the essential precursor that provides the alkaloid required to manufacture cocaine. Bloomberg's claim is of considerable concern not only for the U.S. and Europe, which are the largest cocaine consumers globally, but also for Colombia, where the vast profits generated by the narcotic drive conflict and extreme violence. There are fears booming cocaine production will cause Colombia to return to the dark days of the 1990s when acute drug-trafficking-fueled violence saw the country on the verge of becoming a failed state.
Bloomberg's article triggered a massive backlash (Spanish) against Colombia's first-ever leftist president, Gustavo Petro, himself a former guerilla and organizer for the socialist 19th of April Movement. Since Petro took office on August 7, 2022, crime has spiked significantly. The three main illegal armed groups still active in Colombia, who are responsible for most of the Andean country's cocaine production, have ramped up operations. This is despite Petro's plan for total peace and the opening of peace dialogues with the largest leftist guerilla group, the National Liberation Army (ELN - Spanish initials). Those events, along with heightened tensions between Colombia's public forces, the military as well as the police, and Petro's administration, are responsible for law and order breaking down in the strife-torn country.
The sharp increase in Colombian cocaine production, along with related violence, is spilling over into neighboring Ecuador, which emerged in recent years as a key international transshipment point for the narcotic. According to the UNODC, the volume of land under coca cultivation (Spanish) in Colombia during 2022 rose 13% year over year to 504,000 acres, which represents a worrying 21% increase over the 418,00 acres being used to grow coca during 2018. That acreage, according to the UNODC, had the potential to produce 1.4 million metric tons of coca leaf, which was sufficient to manufacture 1,738 metric tons of cocaine hydrochloride, a very worrying 24% increase over 2021. If this trend continues, various pundits claim that cocaine will overtake petroleum to become Colombia's number one export by value. Many prominent politicians, as well as analysts, are loudly voicing concerns that surging cocaine production will take Colombia back to the dark, lawless, violence-filled days of the 1990s. That alarm is easy to understand when it is considered that neighboring Ecuador is being shaken by extreme violence being perpetrated by the criminal bands trafficking vast volumes of cocaine through the country.
Data from Colombia's statistics agency, DANE, shows oil exports generated $18.7 billion during 2022, which is a third of all export earnings that year, making petroleum Colombia's largest export. According to Bloomberg economist Felipe Hernandez, cocaine exports last year were worth $18.2 billion, which is a mere $500 million less than export earnings from petroleum. He goes on to assert that with the value of Colombia's first half of 2023 oil exports falling 30% and demand for cocaine consistently rising, the revenue earned from exporting the narcotic will shortly exceed that generated by petroleum. That, according to Hernandez, means "â¦the latter could be Colombia's No. 1 export as soon as this year."
This, for obvious reasons, has sparked considerable alarm not only in Colombia but also in the primary markets for narcotics in the U.S. and Europe. Colombia's surging cocaine production is being blamed on the 2015 decision, made during the administration of President Juan Manuel Santos, to end aerial fumigation of coca with glyphosate due to health and environmental concerns. Petro's new drugs policy, which takes a public health-led approach to narcotics consumption and seeks to shift the emphasis from cracking down on coca growers to confronting cocaine trafficking networks, is garnering considerable criticism. While that change in policy will likely see coca cultivation continue to climb, it should lead to more arrests of senior members of illegal armed groups and increase interdictions of cocaine.
Petro has emphasized that Colombian authorities will take an intelligence-based approach to dismantle the country's increasingly sophisticated criminal bands by targeting their finances, logistics and leadership. That change in direction is also drawing considerable criticism from Petro's rightwing political opponents, notably those aligned with former President Alvaro Uribe and his Democratic Center party. Rightwing lawmakers allege that the new strategy will not only lead to cocaine production soaring even higher but strengthen the various illegal armed groups active in Colombia. This is despite the new policy mirroring the tactics used by U.S. federal law enforcement agencies to dismantle transnational organized crime syndicates.
Soaring coca cultivation, as well as cocaine production, is a major problem for Colombia and its neighbors. The vast profits being generated by the narcotic are responsible for fueling spikes in violence, corruption and conflict across the northern Andean region in South America. This is proving attractive not only for Colombia's illegal armed bands to expand their territory and power but also for organized crime groups from Europe, Mexico and the Middle East. Whether cocaine exports from Colombia will overtake oil to become the crisis-riven country's most valuable export is difficult to predict, but recent UNODC data coupled with the diminished value of oil exports indicates that it is a possibility.
By Matthew Smith for Oilprice.com
Matthew Smith is Oilprice.com's Latin-America correspondent. Matthew is a veteran investor and investment management professional. He obtained a Master of Law degree and is currently located… More