Rescuing Andean Economies From Cocaine : Drugs: We already swap Third World debt for environmental action, so why not try the same thing in the drug war?

Like the drug menace in this country, narcotics are deeply rooted in South America, where cocaine profits play an integral role in the Andean economy and daily violence in Colombia and Peru threatens democratic institutions. But the drug-producing nations of the Andes bear another burden--external debt--that seriously inhibits their ability to fight the drugwar.

The “Andean strategy” outlined by President Bush is notably silent on this problem. We must correct this flaw, and one way to do so would be to link debt relief to anti-drug efforts.

This initiative is not motivated by charity. It simply recognizes the undeniable link between debt and drugs in the Andes, where large debt burdens make both debt service and a full-scale war on drugs fiscally impossible.

The Andean economies have become “hooked” on drugs. Repatriated cocaine profits account for an estimated 10% of all export earnings in Colombia, one-quarter in Peru and one-half or more in Bolivia. As many as 500,000 Bolivians, nearly one-third of the labor force, are involved in the drug trade. Little wonder that former Bolivian Finance Minister Flavio Machicado has said: “If narcotics were to disappear overnight, we would have rampant unemployment. There would be open protest and violence.”

The “debt-for-drug swaps” that I propose are modeled on debt-for-nature-preservation exchanges that have already been successfully negotiated in Latin America. Under this plan, the United States, with the help of our European and Japanese allies, would create an international fund to acquire a portion of the external debt of the Andean nations at discounted rates. The fund would then forgive the interest payments--and ultimately the principal--on this debt in return for the successful implementation of anti-narcotics programs.

Swapping debt for drugs would give the economies of the Andes room to breathe and provide increased resources for the war on drugs. Debt relief, which would still be contingent on continued economic reforms, can leverage more money than foreign aid, because the debt of the countries involved--Bolivia, Colombia and Peru--has already been discounted from face value by lender banks. Governments can also use local currency to implement new anti-drug programs, rather than the precious foreign reserves that must go to debt service.

This approach will fail unless we alter our current strategy of forcibly eradicating coca fields in South America, which by all measures has been self-defeating. The Andes are awash in coca. Forced eradication, especially in Peru, has alienated peasant farmers, driving them into the arms of anti-government insurgents.

Why this failure? One reason is that forced eradication temporarily raises the price of the coca leaf, as less raw material is available to suppliers. The higher price attracts more farmers, who plant new coca crops in the warm ashes of recently eradicated fields.

Instead of destroying their fields, we should offer farmers an economic alternative to coca cultivation while continuing vigorous enforcement against the traffickers. Prices for coca leaf fall when such enforcement is sustained. Fearing that prices may bottom out, farmers become desperate to unload their coca and would switch to other crops if they could find help to weather the transition. Debt-for-drug swaps would make more funds available for such economic alternatives.

These debt swaps have other benefits. The Andean nations would invest in their own rural economies instead of using foreign exchange to pay creditors. Economic-development programs would drive a wedge between the cartels and the growers, giving governments more freedom to take on the traffickers. Just as important, the legitimacy of the fledgling democracies in Bolivia and Peru--and a longstanding democracy in Colombia--would be greatly enhanced.

Like the ghettos of our nation’s cities, the jungles of South America are the front line of the drug war. But just as tough law enforcement on the street is doomed unless accompanied by treatment and education, the best eradication programs will fail if they leave only burned and fallow fields. Indeed, coca and cocaine will spring endlessly from the ruins of debt-ridden and drug-dependent Andean economies unless we help them rebuild their legal sectors.

The drug menace terrorizes all the nations of the Americas with a vengeance, corroding our families, our institutions and our societies. We must work together to attack this problem, or together we will continue to suffer the consequences. Swapping debt for drugs is one way for all Americans--North and South--to make common cause against the blight on our Hemisphere.