The Economy of Drugs

Heroin and cocaine

Cocaine is mainly produced by coca leaves from Bolivia; Columbia & Peru are the largest exporter of this. 90% of Cocaine of the world is supplied from these three countries. And if talk about heroine, alone Afghanistan produces 90% of heroine; it is made from opium poppy. Around 600000 farmers cultivate opium and from this opium heroin is derived. Covid-19 impacted growth of many businesses and net worth was also reduced but the production of opium poppy raised by 37% during that period.

How Drugs Are Produced?

Cocaine produced by processing coca leaves with some chemicals and to produce 1 kg of cocaine 1 ton of coca leaves is required. Coca leaves are not too much expensive, 1 ton coca leaves costs around Rs. 28000 but after processes its price get raised and cost of 1 kg cocaine get doubled around Rs. 60000. But when it reaches to user, its price explodes. Let understand the distribution and how cartels run their business.

Distribution of Drugs

Manufacturing and production business of drugs are very low margin business but its distribution business has very high margin business. As we saw per kg cost of cocaine is Rs. 60000 but when it reaches to user its price reaches to 7500000 Rs. In earlier days, it was transported to Europe via Afghanistan, Iran, Iraq, Syria and Turkey. And from Europe it was transported to USA. But when the war started in Syria, cartels changed their route to smuggle drugs. Drug mafia always desires to produce drugs in countries that are unstable and transport through that countries that are highly stable. After the war, drug mafia chooses African countries Kenya and Tanzania and now from there they transport drugs to USA and Europe.

Drugs Distributors or Drugs Cartels

This drugs cartel works same as a corporate, like McDonald and Dominos. Like corporate, these cartels hire people , train them and give incentives like T-shirts and Caps so that they can feel the business and among these cartel named “The Zetas” is popular. It is very easy to hire drug peddlers from countries like Columbia where the 80% of the population in below the poverty line. Due to unemployment youths generally chooses wrong way.

Cartels are divided into 2 categories, the first who takes responsibility of distribution only and the second one who manages the entire supply chain. But with the technological developments, these cartels are also evolving their businesses. They are trying to digitalize their business. In 2011-2013, there was a website names Silk Road on the dark web. This website was the e-commerce platform for the illegal goods. And within the span of 2 years 100000 crore worth goods were sold from the website. And that’s why it was on the hit list of Federal Bureau of Investigation (FBI).

In past 30 years shocking fact about drugs business is that its price value is stable and due to stability of prices, many farmers and distributers join the business and further there is no risk of fluctuation. Here the point to understand is that the most of margin comes from the distribution sector of drugs and they kept the price approximate same.

Ultimate Beneficiaries In The Business

Mostly terrorist organizations are ultimate beneficiaries of the business. For Taliban, 60% of revenue comes from drugs business and for the countries like Mexico and Columbia, local cartels are beneficiaries. Drugs are banned in many countries even then its demand is at peak. Now the question is why these things are happening even after ban? Addiction is the answer.

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