draining development.pdf - Khazar University

Illicit Capital Flows and Money Laundering in Colombia 161pate. 21 After the launch of Plan Colombia and after the guerrilla threat haddied down, Colombians began to regain confidence in the economy, and,in 2001, financial sector outward FDI was negative.After 2002, Colombian outward FDI shifted from the financial sectorto industry, mining, and public utilities. Colombian enterprises, likeother Latin American enterprises, tend to invest regionally, close to thehome country (Ecuador, Panama, Peru, República Bolivariana de Venezuela,and, most recently, Brazil, Chile, and Mexico). While in the 1990s,Colombian outward FDI could be characterized as typical capital flightexplained by a loss of confidence in the country, in the last decade bycontrast, it has been the result of economic growth and the internalizationstrategies of Colombian enterprises.Illegal capital flows associated with the illicit drug industryMost of the revenues of Colombian drug traffickers has come from foreignmarkets. A kilogram of cocaine sold per gram in Europe or the UnitedStates generates revenues 50 to 100 times the export value in Colombia.There are no data on the value of all domestic cash seizures, but mosthave been in U.S. dollars. Fiscalía staff describe a case of the seizure in2008 of US$3 million in cash. They found that the bills were soiled andsmelled of soil, which indicate that they had been stored underground.They interpret this as a sign that the dollars had been brought into thecountry and stashed away without any intention of sending them abroad.They also claim that, the few times the government has found stashes ofColombian pesos, these have belonged to the guerrillas. These pesos arelikely to be the product of kidnappings for ransom and extortions. Whenthe findings have been mixed, both pesos and dollars, the latter accountfor the vast majority of the find. 22 Remarkably, in Bogotá between Augustand October 2010, US$80 million and €17 million were found and seizedaltogether in five locations. These monies supposedly belonged to El LocoBarrera, a well-known trafficker. 23A main problem faced by traffickers is how to bring such resources intoColombia. 24 The traditional money laundering system of placing the cashin the financial sector, layering to hide the origin of the funds, and thenintegrating the resources into the legal economy is not necessarily desiredby these people. Drug revenues have been brought into the country inmany ways: physical cash, real sector contraband, underinvoicing imports