Drug Cartels Benefit From NAFTA

But proponents argue free trade will hurt drug traffickers in the long run

Former Peruvian President Alan Garcia called the drug cartels ''the first successful Latin American multinationals.''

While the North American Free Trade Agreement (NAFTA) has opened up cross-border trade for legitimate goods, drug cartels also appear to be reaping the benefits of free trade.

Officials in the United States and Colombia admit that America's dream of creating a free-trade zone from Alaska to Patagonia has removed one of the natural deterrents of drug trafficking: trade barriers.

Although the ''war on drugs'' has lasted 12 years and cost more than $32 billion, free trade is simply more important, says Myles Frechette, United States ambassador in Bogota.

''It was felt by those who supported NAFTA and by the Clinton administration that using the argument that any increase in trade could increase drug trafficking and money laundering was not a sufficient argument to overcome the need of the United States for increasing markets for its exports abroad,'' Mr. Frechette says.

Colombia began to adapt macroeconomic measures directed at welcoming foreign investment four years ago. Although these policies are not entirely to blame, Colombian government figures show that the monthly value of shipped cocaine has risen from $2.5 billion three years ago to more than $3 billion today - or 4 percent of Colombia's gross national product.

US Drug Enforcement Administration (DEA) officials admit that freeing up foreign investment, banking practices, currency exchange, and modernizing ports and airports benefits commerce equally for legitimate as well as illegal goods.

Colombia has had great success in arresting five of the seven leaders of the Cali cocaine cartel in the past five weeks. But that may be undermined in part by free-trade practices, officials say.

American officials estimate that the cartel is responsible for shipping 80 percent of the world's cocaine. Drug traffickers transport the drugs in hollowed-out boards, coffee, and even frozen broccoli.

Methods to repatriate drug profits are equally inventive, officials say. First, traffickers purchase legitimate goods, using drug dollars earned in the countries where the drugs are sold. Then they ship the products to Colombia and ''dump'' them quickly so traffickers can enjoy their profits in Colombian pesos.

Colombia's prosecutor general, Alfonso Valdivieso, says free trade helps this practice, too, as customs restrictions are lifted and port systems are improved through privatization.

Many officials claim Colombia will not be a candidate for NAFTA because increasing the flow of goods would offer further opportunities for drug traffickers. Instead, the free-trade group is considering Chile, says Jorge Ramirez Ocampo, president of the Colombian Exporters Association. ''But for Chile to join NAFTA, it will have to prove that it doesn't have Colombia's [drug-trafficking] problems,'' he adds.

Colombia has placed its peso on the free market, permitted unrestricted foreign ownership of banks, allowed banks to offer a much greater range of services, and privatized financial institutions. ''These reforms are exactly in tune with American pressure for decades,'' says Alejandro Reyes, a political science professor at the National University of Colombia in Bogota.

MONEY launderers have benefited from these liberalizations, driving Colombia's foreign reserves up to $8 billion, officials say. It becomes hard to separate out drug money from legitimate investments as the flow of money becomes greater.

The influx of drug monies is also partially responsible for a real estate boom in which some traffickers are keen to invest in properties and others provide capital to build. Police say cartel trafficker Jos Santacruz, who was arrested on July 4, owns some 2,000 apartments in Cali, Columbia. The real estate boom has caused Colombia to take a step backward in its march toward free trade, restricting foreign investment in real estate to embassies and multinationals with headquarters already here.

The DEA has criticized Colombia for removing government controls and for privatizing, which makes institutions more accessible to traffickers.

''That sets a dangerous precedent for the region,'' states a DEA report released last year titled ''Colombian Economic Reform: The Impact of Money Laundering within the Colombian Economy.''

Colombia already enjoys free trade with Venezuela, and drug traffickers have taken advantage of this. One Medellin trafficker said he can virtually double his profits by shipping through Venezuela. Drug shipments from Colombia go by private plane because the US Customs Service checks many shipments from Colombia. These deliveries cost about $8,000 per kilogram (2.2 pounds) of cocaine.

But cocaine shipped through Venezuela goes via commercial airliners and ships, which are not as closely watched when they come from Venezuela. Kilos shipped by this route only cost $2,000 per kilogram.

Free-trade proponents argue that free trade will strengthen the economies of drug-producing countries such as Colombia, Peru, and Bolivia. ''You can't say the internationalization of the economy was developed to help 'narcotrafficking' but to do just the opposite,'' Professor Reyes says.

The downside, he says, is that ''there would be no way to slow down world monetary exchange to catch the drug money without causing a worldwide recession.''