Bolivian economy hooked on cocaine

THE two lanes of blacktop road winding down from this city in the Andean piedmont to the lowlands of Santa Cruz de la Sierra slice through some of Bolivia's most underdeveloped backlands. Mud huts, sleepy little truck stops, and the occasional gas pump hug the roadside, like some sorry pauper's gauntlet.

Yet here in the Chapare, as Bolivians call these subtropical lands, squalor lives alongside prosperity. Set back in the woods, solid brick and steel buildings have cropped up. A thicket of TV antennas pokes up above adobe hovels, and just beyond the rickety front gate sit four-wheel-drive Toyota pickups, Honda motorbikes, and shiny new Volkswagen sedans from Brazil.

Hard as it is to imagine, this stretch of the Bolivian countryside -- the size of New Jersey -- is the center of a booming $2 billion-a-year clandestine economy. And all the bustle and glittery display of consumer goods are bounty from the country's most dynamic economic produce: coca, the scraggly plant from which pure cocaine is extracted.

In official terms, Bolivia could not be in a sorrier state. For the last half year, this landlocked nation has lived with some of the toughest austerity measures anywhere in Latin America. President Victor Paz Estenssoro, seated in August, devalued the peso by 95 percent in order to wrestle down inflation, which six months ago soared to 20,000 percent. Prices were set free of government controls at the same time the national minimum wage was frozen at $15 a month.

As prices of tin, the leading export, plunged on world markets, dozens of mines shut down. Up to 30,000 tin miners are still likely to lose their jobs.

The International Monetary Fund, which lends money to nations facing balance-of-payments problems, has suspended a standby loan agreement because of Bolivia's repeatedly missed economic targets. International banks have all but shut down their Bolivian operations. This nation of 6 million, wedged between the Andes and the Amazon, seems to teeter near disaster.

Yet the books don't tell the whole story. Despite their nation's recession, the Bolivians survive, and some even flourish. Many economists call this a full-employment economy. The answer to this puzzle rests in the acres upon acres of waxy-leafed coca bush that cover more and more of the Bolivian countryside.

More than half the cocaine that enters the United States comes from Bolivia -- mostly from the Chapare and some from the Yungas highlands and the rain forests that fan out from the Beni River. In recent years, the US Drug Enforcement Agency and the US Congress have alternately cajoled, demanded, and threatened the Bolivians with a cutoff of financial aid in order to stem the drug trade.

Recently, the Organization of American States met in Rio de Janeiro to talk about staunching the international drug trade. The members approved a proposal to establish a voluntary pan-American fund to finance the war against narcotics trafficking.

This week, US officials began issuing open denunciations of what they say is a huge increase in drug trafficking through Mexico, suggesting that high-level corruption is contributing to the enforcement problem.

Yet, if Bolivia is any example, the battle against narcotics will be protracted and costly. For the Bolivian economy is, in many ways, addicted to cocaine, and up to now efforts to deal with it have been almost entirely ineffective.

In the past, diplomats attributed the burgeoning trade to a combination of laxity and official complicity with the drug dons. And in the past, government figures -- from the ``cocaine generals'' of Gen. Luis Garc'ia Meza's military junta to regional clerks -- were notoriously buyable. Analysts concluded that the justice system was as leaky as a sieve, and, to this day, major narcotics dealers are untouchable.

``We would like to get at least one Class-A narcotics violator,'' a US drug enforcement official says wistfully.

Perhaps the most formidable barrier to rooting out the drug trade is not the wealthy coterie of narcotraficantes that rule this potent underworld, but the peasantry, which survives by it. The numbers alone are impressive. Some 100,000 coca farmers harvest 50,000 hectares (125,000 acres), producing an estimated 170,000 metric tons of leaf a year.

For centuries, Indians chewed coca leaves as a mild stimulant and hunger depressant. But the legal market for the leaf accounts for less than 20,000 tons. The rest gets crushed into coca paste, the base from which nearly 400 tons of pure cocaine is made. That fetches up to $2 billion a year on the international drug market.

``Bolivia has gone from the economy of tin to the economy of coca,'' says former Finance Minister Flavio Machicado. ``If [the drug industry] were to disappear suddenly, overnight we would have rampant unemployment. There would be open protest, violence. It would be a catastrophe for the country.''

That violence has already surfaced in coca country. In January, thousands of angry Chapare peasants surrounded a contingent of Leopards -- the US-trained and -funded drug police. The Leopards had conducted a number of raids on clandestine coca laboratories in the countryside. The peasants, using machetes and hoes, held the Leopards at bay for five days. The Bolivian government had to intervene to negotiate a truce, but tension remains high.

Despite the insistence by the US Congress for programs reducing the acreage of coca plantation, voluntary programs to replace coca with other crops have been a miserable failure. By this year, according to a 1983 US-Bolivia aid agreement, Bolivia was to have removed 10,000 acres of coca plants. To date, virtually no coca has been pulled out of the ground.

Yet Bolivian and foreign diplomats alike note that the $350 a hectare (2.5 acres) the US is offering peasants to uproot their coca plants can hardly compete with the $8,000 to $10,000 a year they earn harvesting the same area of coca. And even the simplest peasant knows that oranges or rice cannot come close to competing with the earnings from four crops per year of coca leaf.

The US has spent a relatively small $1.5 million on interdiction, a sum that pales before the revenues generated by the drug trade. As a result, the battle has been lopsided. The drug dons have automatic weapons, planes, and state-of-the-art radio gear, while the Bolivian drug police use pre-World War II M-1 carbines and three Huey transport helicopters in chronic disrepair.

Some more radical antidrug warriors advocate a program of wholesale destruction of the coca fields. But many here fear that would cause widespread social unrest.

``We can't ask the Bolivian government to attack two-thirds of the population,'' says one foreign drug control official in La Paz.

And it's not only coca growing that keeps the countryside at work. Tens of thousands of people are employed in transporting the chemicals, kerosene, acetate, and ether necessary to process coca leaves into paste. Along the Chapare Highway, flatbed trucks brim with teen-age boys in knee-high rubber boots on their way to crush troughs of chemical soaked coca leaves into paste. A stomper can earn $10 to $12 a day, nearly the monthly minimum wage, for a 10-hour shift of stomping the coca leaves.

There are no reliable studies of the cocaine economy, but economists know that a great deal of coca wealth winds up in foreign bank accounts or invested in US real estate. Former Finance Minister Machicado estimates that the trade in coca leaf and paste pumps $900 million worth of pesos into the Bolivian economy a year.

As legal exports have fallen, contraband has swelled.

``Two-thirds of the export economy is from contraband and narcotics,'' Planning Minister Gonzalo de Lozada says.

Meanwhile, up to 40 percent of imports are illegal. Brazilian cars, luxury goods, gasoline, and chemicals are often bought with dollars from the coca trade.

The coca barons worry Bolivian government officials.

``Soon, these people accumulate wealth and organize into armed groups, which become a risk to duly constituted authorities,'' Planning Minister de Lozada says. ``It is more in our interest to solve the drug problem than anyone else's. You get it or it gets you.''

De Lozada and other government officials are caught, however, between the need to rein in the drug trade and, at the same time, put Bolivia's unruly economy back in order.

``Bolivia is recovering from the seventh-highest rate of hyperinflation in history,'' says Jeffrey Sachs, a Harvard economist and inflation specialist and consultant to the Bolivian government. ``But this may be the only time the government has had to do it on its own.''

So when the US cut off $10 million in foreign assistance for failing to carry out coca reduction programs, Bolivians shrugged in exasperation.

``We're struggling barehanded with a tiger,'' says de Lozada, ``and they want us to go and kill the alligator.''