Colombians ask how much drug money in economy?

By Michael Stott

BOGOTA (Reuter): A public argument this week between government officials has dragged into the open a taboo subject here: just how hooked is the economy of the world's top cocaine exporting nation on drug money?

No one doubts that the great majority of Colombia's economic activity is explained by solid industries such as coffee, oil, mining, clothing and cut flowers but the "subterranean economy", as one expert calls it, has always been an unknown quantity.

Government officials prefer not to discuss the topic at all. Most Colombians claim the figure is minimal and far outweighed by the costs of the drug war in extra security and lost foreign investment -- but not everyone agrees.

A construction boom which has turned large chunks of Bogota and the southwestern city of Cali into building sites, an abundance of gleaming new BMW and Mercedes cars and soaring property and land prices have suggested to some that drug profits may be fatter than the government thinks.

National Narcotics Director Gabriel De Vega Pinzon infuriated his superiors last Tuesday by saying in an interview in Vienna that traffickers funneled US$5 billion back to Colombia last year -- nearly 10 percent of the country's Gross Domestic Product and equal to 80 percent of all legitimate exports.

His superior, Justice Minister Andres Gonzalez Diaz, immediately dismissed the estimate as "lacking all foundation and the fruit of speculation". He even said De Vega's future in the post was being considered -- but added that the drug money problem was too complex for him to give his own figure.

Central Bank president Miguel Urrutia Montoya also poured scorn on De Vega Pinzon, saying the $5 billion estimate was "exaggerated if not stupid". He too declined to suggest an alternative figure despite having authored a study on the problem before taking up his current post.

A senior government official, speaking on condition of anonymity, said the number generally used within the administration for drug proceeds was around $1 billion a year. Anti-drug agents, on the other hand, use a range from $3 billion to $8 billion a year.

Eduardo Lora, director of Fedesarrollo, an independent economic think-tank, said reliable calculations simply did not exist. "What you have is a variety of estimates in a range from $700 million to $3 billion and even $4 billion", he said in a recent telephone interview.

Estimates are tricky because most drug dollars come back to Colombia either stuffed in briefcases or through "laundering" -- the channeling of illicit proceeds through apparently legitimate business enterprises to make them look legal.

Lora said the import of luxury goods, particularly cars, and construction were the two methods most favored by money launderers.

Most economists who have studied the problem concentrate on two areas of official statistics where they believe drug money tends to be concealed -- dollar receipts from tourism and dollar remittances in cash from abroad.

These two headings totaled around $2 billion a year in 1991, 1992 and 1993 but not all of the money comes from drugs. Equally, the official figures do not show at all the enormous contraband trade, much of which is financed by drug money.

One top smuggler, for example, claims to buy 2.4 million bottles a year of Scotch whisky and the Colombian cigarette industry has been virtually bankrupted by a torrent of cheap contraband Marlboro.

"Most of the international estimates on income from drugs trafficking appear to us to be fairly exaggerated and rarely pass basic tests of consistency," Colombia's National Association of Financial Institutions ANIF said in a study of the problem published last month.

"On the other hand, there are domestic symptoms that drug trafficking is a very long way from suffering an economic decline."

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