An Industrial Geography of Cocaine

Christian M. Allen

• Publisher: Taylor & Francis
• Year: 2013
• Print ISBN: 9780415949408
• eBook ISBN: 9781135932275
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Political Economy
• Index: Politics & International Relations

Latin American cocaine trafficking organizations comprise an indigenous, globally competitive, multinational industry. Their business operations are deeply ingrained within the economic and political systems of countries throughout the region. While criminal enterprises operate in a more complex and uncertain setting than licit firms, their competitive success is determined in fundamentally similar ways. Models developed by geographers to explain the spatial behavior of licit multinational firms are profitably applied here to the operations of drug trafficking operations.

Chapter One
Through the Lens of Economic Geography: Cocaine in Space and Place

The production and marketing of cocaine has a great deal in common with the sales of legal products. The transferability of skills and technology from legitimate business enterprises to drug trafficking has spurred its development into a modern trans-national industry. Latin American trafficking organizations hold significant competitive advantages in the industry, owing to their effective use of local factor endowments. Their success stands in stark contrast to the limited success that the region’s licit firms have had in international markets.

Trafficking organizations have developed impressive industrial, financial, transportation, intelligence, and communications networks on an international scale. This infrastructure reflects the exceptional degree of organization and expertise required to manufacture and distribute an illicit good valued in the tens of billions of dollars a year. The industry’s success in generating foreign exchange earnings means that the actors comprising it can wield significant influence over political and economic institutions at all levels throughout Latin America (Lee, 1999: 6).

The recent and widespread adoption of market-oriented economic reforms throughout the region has re-drawn its economic, political, and social landscape (Brohman, 1996; Otero, 1996; Kay 1993). Drug trafficking organizations (DTOs) have demonstrated unusual success in their response to these new and challenging conditions. Their export strategies are inspired by the development policies recommended by international lending organizations like the World Bank (Castells, 1998: 173). Indeed, Andreas (1999a: 125) has described Mexican drug trafficking organizations as “the quintessential expression of the kind of private sector entrepreneurialism celebrated and encouraged by neoliberal economic orthodoxy.” Moreover, such policies encourage expanded flows of international trade and capital, which, in turn, offer DTOs many opportunities to exploit licit channels to move product and profits across borders. Such opportunities reflect a fundamental tension between the two broad policy regimes that most influence the cocaine trade. Exploring the nexus of economic liberalization and drug prohibition is a secondary objective of this research.

The primary objective is to model the cocaine industry and its firms. The cocaine trade has attracted a great deal of popular attention, yet remains poorly understood. A huge volume of relevant information exists, (especially from state sources) but it is poorly organized and too often isolated from meaningful context. This research generates a conceptual model of cocaine production and distribution, one that reflects Chorley and Haggett’s (1967: 21) catholic view of models–that they need not be a theory, law, or equation, but rather a structured idea or synthesis of data. It seeks to place the cocaine trade within a meaningful context, by helping the reader understand the economic, social, and political landscape within which DTOs act. This is accomplished by disintegrating the cocaine industry into its functional stages (from the cultivation of coca leaf at its source to marketing operations in the United States) and assessing each individually. In the concluding chapter, the component stages are re-integrated and the cocaine business is considered as a whole.

Drug trafficking organizations operate in and across space much like licit firms. While criminal enterprises face a more complex and uncertain landscape, their potential responses to the challenges and opportunities presented by space and place are fundamentally no different than those of licit firms. Models developed to explain firm behavior in licit industries are no less applicable when applied to an illegal economic activity. Models borrowed from economic geography facilitate the development of normative structures used to evaluate cocaine industry processes. They play an important guiding role in the categorization and classification system used to organize the data collected for this research. Finally, they help to fill gaps in knowledge about the cocaine trade that result from poor or insufficient data.

Glasmeier (2000) and Dicken (1998) produce valuable explanations of industrial development across space and time, demonstrating the descriptive and analytical value of many of the organizing principles applied in this research to the cocaine industry. Rengert (1996) conclusively demonstrated the utility of geographic models for enhancing understanding of the drug trade. A narrow focus on downstream marketing stages limits the potential contribution of his approach, however. Extending the use of location theory and modeling to the entire production and distribution chain provides valuable insight regarding the strategic decision-making process of business enterprises (Hanink, 1997; Hayter, 1997; Jones and Simmons, 1990).

The notion of competitive advantage details the links between firm and industry-specific determinants of success and the location-specific characteristics from which they are derived (Porter, 1990). It helps explain the complex interplay between firm and place, and is therefore an invaluable (yet under-appreciated) tool for modeling the spatial organization of industrial systems (Grant, 1994). It is used in this research to evaluate how different home environments influence the development of drug trafficking organizations. DTOs commonly pursue functional specialization in a relatively small subset of industry activities, often focusing on just one. The scope and functional orientation of any DTO reflect relevant local conditions.

Additional insight is provided through corporate geography, which explains location decisions by the factors that influence strategy formulation. It is a normative approach incorporating a variety of factors that influence firm behavior (Laulajainen, 1995). Factors internal to the firm include its motivations, expertise and existing spatial structure. State policy, market conditions, and the strategies of rival and supplier firms are all significant external influences. Thus, the formulation of successful firm strategies must incorporate the firm’s own ‘inertia,’ the anticipated behavior of other organizations, and the general economic climate. The strategies a firm decides to pursue both reflect and influence its spatial organization (Dicken and Lloyd, 1990).

It is important to remember that all the models used in this research are subjective approximations of reality that do not include all observations. Their value lies in obscuring incidental detail while presenting significant features or relationships in a generalized form (Chorley and Haggett, 1967: 220). Geographic models are employed here as guiding principles that illuminate the spatial form and behavior of drug trafficking organizations. Their application to a unique, non-traditional industry provides original and valuable insight into the operations of a poorly understood business. Models are not used here to generate formal, equation-based, quantitative descriptions of industry processes. The available data is neither sufficiently comprehensive nor reliable enough to warrant such an approach.

Data

The model developed in this research is primarily of a qualitative nature, as quantitative model development is hampered by an almost total lack of relevant firm-scale data. Considering the illicit and secretive nature of the industry, such information is understandably difficult to collect (Laserna, 1995b: 25). The figures used to describe the production, transportation, marketing, and consumption of drugs are little more than ‘guesstimates,’ subject to critical interpretation (Economist, 2001d: 3). A joint State Department-USAID report on the cocaine trade in Bolivia reflects this troublesome fact:

A number of guesses and estimates have been used in the absence of precise information. Resulting values are very approximate and should be interpreted accordingly (see Holden-Rhodes, 1997: 149).

Further obstacles to quantitative modeling are inconsistencies over space and time in the methods used to collect and present drug-related data. Different countries and their numerous law enforcement and intelligence institutions pursue unique goals and maintain individual standards, making it difficult to reconcile their figures into a comprehensive picture. Worse yet, these standards are subject to change (commonly without explanation) even over short time periods. Discrepancies over space and through time suggest that estimates are used as much to support political objectives, demonstrate the efficacy of law enforcement efforts, or justify funding levels as much as they are to provide an accurate reflection of industry conditions (see Laserna, 1997: 203–212). Even the Office of National Drug Control Policy notes: “Drug smuggling is … not easily subject to controlled research conditions (ONDCP, 2000: 3).

Using less charitable terms, Reuter (1996: 63–64) describes:

an essentially madcap series of federal figures on international production and prices that make a mockery of the whole enterprise. These estimates and their components are so inconsistent and erratic that they demonstrate what might reasonably be called a “reckless disregard” for the truth…. the numbers are in fact just decorations on the policy process, rhetorical conveniences for official statements without any serious consequences.

Despite these limitations, reports produced by the anti-narcotics intelligence units of federal agencies such as the Departments of State, Justice, and Commerce remain an important source of data used in this research. While it is necessary to recognize the limitations of such sources, it is a mistake to dismiss them entirely. Over-simplified estimates of coca cultivation, cocaine production, interdiction rates, or consumption deserve skepticism, yet the abundant qualitative observations contained in these sources are essential to the description and model-building objectives of this research.

Counter-narcotics expert Holden-Rhodes (1997:152) argues in favor of a qualitative approach for research into drug trafficking, as a balance against the ‘body count’ mentality prevalent in existing anti-drug intelligence. This attitude reflects an obsession with flawed quantitative measures of the cocaine trade like the amount of land cultivated in coca, its yield, conversion rates for the refining process, or the volume shipped to the United States. While some criticize qualitative research as ‘storytelling,’ “a qualitative approach is intellectually rigorous and … concerned with the quality of the knowledge it produces (Schoenberger, 1992: 216).” Rigor in qualitative research comes from a process of ‘triangulation’ involving the use multiple sources, methods, and theories (Bradshaw and Stratford, 2000: 47).

The bibliography contains a complete list of official sources used, but a sampling of the most important is provided here. These incorporate qualitative treatments of drug production and trafficking activity, as well as raw quantitative data and related models of cocaine production, distribution, or consumption.

• National Drug Intelligence Center, 2001. National Drug Threat Assessment
• ONDCP, 2000. Estimation of Cocaine Availability
• Federal Drug Information Center, 2000. International Crime Threat Assessment
• Dept. of State, 1995–2000. International Narcotics Control Strategy Report
• Drug Enforcement Agency, 1999. Briefing Book
• ONDCP, 1997. What America’s Users Spend on Illegal Drugs
• USAID, 1997. Bolivia’s Coca-Cocaine Sub-Economy: A Computer Model
• National Narcotics Intelligence Consumers Committee, 1996. The Supply of Illicit Drugs to the U.S.

Additional information was generated through a series of open-ended interviews with officials from the Office of National Drug Control Policy, Drug Enforcement Agency, Border Patrol, Customs Service, Defense Intelligence Agency, National Imagery and Mapping Agency, and U.S. Aid for International Development. While these contacts rarely produced formal quantitative databases, the discussions provided a rich context in which to place and better understand the raw information acquired from the open sources detailed above. Unstructured interviews explore lines of inquiry in a flexible manner and are an important source of information for intensive research (Hayter, 1997: 11). Clark (1998: 73) argues that this ‘close dialogue’ method is a useful means of promoting conceptual innovation in economic geography. In most cases, the interviewees did not extend permission to the author to formally cite these discussions.

Another major source of data used in this research is the existing body of academic books and articles offering description, models, or analysis of the drug trade and associated themes. Such works contribute immeasurably to the scope, depth, and relevance of the contextual landscape developed in this project. A few of the most important sources of this type include:

• Andreas, 2000. Border Games: Policing the U.S.- Mexico Divide
• Friman and Andreas, 1999. The Illicit Global Economy and State Power
• Jacobs, 1999. Dealing Crack: The Social World of Streetcorner Selling
• Farer (ed.), 1999. Transnational Crime in the Americas
• Holden-Rhodes, 1997. Sharing the Secrets: Open Source Intelligence and the War on Drugs
• Clawson and Lee, 1996. The Andean Cocaine Industry
• Rengert, 1996. The Geography of Illegal Drugs
• Riley, 1996. Snow Job? The War against International Cocaine Trafficking
• Thoumi, 1995. Political Economy & Illegal Drugs in Colombia
• Dombrey-Moore (et.al.), 1994. A System Description of the Cocaine Trade
• Painter, 1994. Bolivia and Coca: A Study in Dependency
• Kennedy (et. al.), 1993. A Simple Economic Model of Cocaine Production

The final source of data for this project is hundreds of magazine and newspaper articles from international news services. The quantity and quality of coverage by The Economist on drug-related issues in Latin America is particularly noteworthy. News articles add valuable ‘local’ detail to the author’s understanding of the cocaine trade. The majority of the material collected in support of this research can be considered ‘open source.’ The lack of access to classified materials does not in any way devalue the conclusions reached here. Products generated from open source intelligence are commonly valued for their scope, depth, and for the accuracy of their findings and forecasts (Holden-Rhodes, 1997: 100).

Analysis in Economic Geography

Source material for this project totals tens of thousands of pages. This volume of information must be critically evaluated and refined in order to produce meaningful conclusions about the cocaine trade. This filtering process is guided by a series of organizing principles that determine how information is selected, analyzed, and presented. The explicit focus of this research is the spatial organization of the cocaine industry and its component firms, therefore its organizing principles reflect the theoretical models commonly used to explain the form and behavior of economic activities in space.

from its beginnings the central tasks of industrial geography have been, and remain, to explain the location of industrial activity, changes in the location of industrial activity, and the implications of changing patterns of industrial location for national, regional, and local economic development (Hayter, 1997: xiii).

No single model can account for the dynamism and variability found in economic systems. Accordingly, this research uses a variety of conceptual tools and research methods: neoclassical location theory, behavioral approaches to location decision-making, corporate geography, central place theory, spatial diffusion, and the notion of competitive advantage each offer explanatory value in the context of the cocaine trade. This approach generates a diverse set of theoretical constructs that organizes and integrates the body of qualitative and quantitative data collected in support of this research. Reliance on contributions from different theoretical perspectives reflects the fact that business organizations are “socially complex and densely spatial objects of analysis” that are messier than our theories of them (Del Casino, et.al., 2000: 535).

The approach used here reflects a recent trend towards theoretical pluralism in economic geography (Wai-chung 2000: 301). What has emerged to prominence is a qualitative and speculative mode of analysis that seeks to portray the spatial scope and diversity of economic systems (Clark, 1998: 74). It recognizes that the development of economic systems in time and space does not result simply from ‘geographic’ processes like the friction of distance, but also from wider econo...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures
• List of Photos
• List of Tables
• Acknowledgments
• Chapter One Through the Lens of Economic Geography: Cocaine in Space and Place
• Chapter Two Globalization and the Competitive Strategies of Criminal Enterprises
• Chapter Three From Coca to Cocaine
• Chapter Four Colombian Competitive Advantage in Cocaine
• Chapter Five Cocaine Distribution and Mexico’s Growing Competitive Advantage
• Chapter Six Marketing Cocaine in the United States
• Chapter Seven Policy Implications
• Chapter Eight Conclusions: Through a Glass, Darkly
• Bibliography
• Index