Biden Proposes ‘Debt for Drugs’ Swap to Reduce Coca Crop in South America

In an ambitious plan to swap “debt for drugs,” a key Senate Democrat proposed Wednesday that the United States offer substantial debt relief to Peru, Colombia and Bolivia in return for commitments that the savings would be used to reduce cocaine production.

The effort would break new ground in the United States’ anti-drug campaign, devoting millions of dollars in government resources toward programs designed to persuade impoverished South American farmers to grow crops other than coca, the source of cocaine.

While described as preliminary, the proposal by Sen. Joseph R. Biden (D-Del.) indicates a determination among Democrats to compete with the Bush Administration in pledging to devote national resources to waging war on drugs. Biden is chairman of the Senate Judiciary Committee, the principal panel overseeing the government’s anti-drug effort.

The Administration’s drug strategy, to be unveiled next week by President Bush, is expected to call for a $300-million increase in foreign aid to help South American countries crack down on drug traffickers.

But Biden said the United States should extend that effort by adopting the debt relief program, designed to enable governments to afford programs that would subsidize growers who switch from coca to less profitable crops.

“It is not a giveaway with no strings attached,” Biden said. “Americans love a good deal, and the debt-for-drugs plan is exactly that.”

Colombia Owes $17 Billion

In exchange for their help in reducing coca production, South American nations would be assisted in lightening their staggering debt loads. Peru owes foreign banks a total of $19 billion, Colombia $17.2 billion and Bolivia $5.7 billion.

That debt currently sells on secondary markets for an average of about 20% of its nominal value because prospects are scant that it will be repaid in full.

For that reason, Biden said, an outlay of $400 million could free up enough South American funds to subsidize the withdrawal of every acre of coca currently in production in the three countries.

Biden said he regards his crop-substitution plan as a supplement to the more pressing need to help South American governments wage offensives against drug traffickers in the region. “This is going to be a very difficult period for those countries,” he said.

The senator acknowledged that the bargain-basement aspect of the plan remains problematic. Any indication that the United States is prepared to buy up vast quantities of foreign debt, he conceded, could quickly cause the debt’s price to rise above affordable levels.

But Biden expressed confidence that the dilemma could be resolved and said he will introduce legislation creating debt-for-drugs swaps as soon as details are worked out.

Peru, Bolivia and Colombia, which together produce an estimated 90% of the cocaine imported into the United States, also rank among the nations most heavily burdened by international debt.

The debt has made it all but impossible for them to provide incentives to farmers to plant crops other than high-profit coca. The cost of such subsidies could approach $10,000 per hectare of coca, according to the Senate Judiciary Committee, bringing to $2 billion the total cost of crop substitution for the 200,000 hectares believed to be under cultivation in the region. A hectare is about 2.5 acres.

Under Biden’s proposal, however, the discounted price of the South American debt could generate the necessary $2 billion through the $400 million in debt relief.

Purchases on Secondary Market

The plan calls for the United States and other interested nations to purchase the discounted debt of coca-producing nations on secondary markets. The debt purchasers would then offer to forgive interest payments on the debt if coca-producting countries agree to spend part of the savings on crop-substitution programs.

Once long-term coca reduction targets were met, Biden said, the outstanding debt principal would be forgiven in full.