Januar Yap
MEANWHILE

October 7 , 2004
Traffic

IN STEVEN Soderbergh’s Oscar-winning film Traffic, the economist whispers to the undersecretary a rather tangential point on the matter of chasing drug cartels. “You’re not battling traffickers or dealers, but a market, and the market contains a paradox; if you arrest traffickers, you raise prices, and you also raise profits, which brings more traffickers into the business.”

Back in the real world, says the undersecretary, we’re talking about Mexico. The government, he says, will spend $18B this year on this “war”, and the question on the table every year is do we certify Mexico as an ally or not?

Someone overhears the two and joins the conversation, “You want to make a difference, hit the users. You don’t jeopardize our financial markets by some hypocritical stance on drug consumption. We’re not snorting it, why penalize Mexico for supplying it?” Don’t talk to me about Mexico, replies the undersecretary.

To this end, the economist persists with his argument, “It’s the stick of law enforcement that creates the carrot of huge profits. That’s economic truth.”

There’s an interesting “market analysis”, written by one Matthew Kwan, that profiles the drug cartel business in Cali, Colombia, reportedly a high-profile multi-billion dollar player in the cocaine industry.

The Cali drug cartel begins its business after buying coca leaves from farmers in Peru, Bolivia and Colombia and processes them into cocaine. A large majority of its products are sent to the US market and distributed through its deeply embedded network of ethnic crime gangs.

Kwan’s paper says the cartel’s strengths lie in its distribution network. Apart from being a perennial one, they are composed of people willing to risk their lives and freedom. They have developed a chain of airstrips, secret warehouses, and corrupt officials. Cali’s network, says Kwan, is also highly compartmentalized, and proficient at laundering the large quantities of cash it generates.

(e-mail januariusmail@yahoo.com)