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The Maths of The Drugs Business

Globalization hit organized crime over the last decade and now is integral to its most profitable business — the international narcotics traffic. 

Once a regional problem involving a customer base of a few million, and barely a billion dollars in sales, the illegal drug industry is now a worldwide enterprise with tens of millions of hard core consumers spending hundreds of billions (see the chart) on opiates, cocaine and amphetamines and marijuana, as well as other drugs.

The single largest marketplace for illegal drugs continues to be the United States. Although the market has decreased dramatically since its heyday in the mid-80’s, close to thirteen million Americans still think nothing about occasionally buying a gram of cocaine, a few hits of ecstasy or a quarter ounce of weed to party with their friends on the weekends.

Imagine a typical weekend in New York City. Experts estimate that at least one percent of the population – 80,000 plus – spends $200 on illicit drugs. That alone would amount to $16 million dollars a week or $832 million a year. And that’s just New York.

When the drug money ultimately makes its way into the foreign economy, it is used to pay the salaries of shippers and processors, as well as 
the bribes that supplement the incomes of government officials on both sides of the border. What keeps the drug industry going is its huge profit margins. Producing drugs is a very cheap process. Like any commodities business the closer you are to the source the cheaper the product. 


Processed cocaine is available in Colombia for $1500 dollars per kilo and sold on the streets of America for as much as $66,000 a kilo (retail). The average drug trafficking organization, meaning from Medellin to the streets of New York, could afford to lose 90% of its profit and still be profitable,” says Robert Stutman, a former DEA Agent. “Now think of the analogy. GM builds a million Chevrolets a year. Doesn’t sell 
900,000 of them and still comes out profitable. That is a hell of a business, man. That is the dope business.”

Like any cash rich business, drug trafficking organizations invest in the legitimate economy of their own country and use investment advisers 
in financial instruments available in the international marketplace.


Just before sunset on April 10, 2006, a DC-9 jet landed at the international airport in the port city of Ciudad del Carmen, 500 miles east of Mexico City. As soldiers on the ground approached the plane, the crew tried to shoo them away, saying there was a dangerous oil leak. So the troops grew suspicious and searched the jet.

They found 128 black suitcases, packed with 5.7 tons of cocaine, valued at $100 million. The stash was supposed to have been delivered from 
Caracas to drug traffickers in Toluca, near Mexico City, Mexican prosecutors later found. Law enforcement officials also discovered something else.

The smugglers had bought the DC-9 with laundered funds they transferred through two of the biggest banks in the U.S.: Wachovia Corp. and Bank 
of America Corp., Bloomberg Markets magazine reports in its August 2010 issue.

This was no isolated incident. Wachovia, it turns out, had made a habit of helping move money for Mexican drug smugglers. Wells Fargo & Co., 
which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers – including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

The admission came in an agreement that Charlotte, North Carolina-based Wachovia struck with federal prosecutors in March, and it sheds light on the largely undocumented role of U.S. banks in contributing to the violent drug trade that has convulsed Mexico for the past four years.

Wachovia is just one of the U.S. and European banks that have been used for drug money laundering. For the past two decades, Latin American 
drug traffickers have gone to U.S. banks to cleanse their dirty cash, says Paul Campo, head of the U.S. Drug Enforcement Administration’s 
financial crimes unit.

Miami-based American Express Bank International paid fines in both 1994 and 2007 after admitting that it had failed to spot and report drug 
dealers laundering money through its accounts. Drug traffickers used accounts at Bank of America in Oklahoma City to buy three planes that 
carried 10 tons of cocaine, according to Mexican court filings.

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Categories: The Drugs Business
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