draining development.pdf - Khazar University

Illicit Capital Flows and Money Laundering in Colombia 163port, for consumption in Colombia, thereby evading import and incometaxes in Colombia.During the 1990s, the illegal drug industry evolved substantially. Thearea under cultivation with illegal crops grew dramatically. The governmentsucceeded in destroying the Medellín cartel. The Cali cartel expanded,but was then also destroyed by the government. Trafficking organizationsbecame smaller, and their armed branches became weaker. The paramilitaryorganizations that had developed through links with the illegal industrygained ascendancy over the traditional traffickers because they gainedcontrol of areas in which cocaine was refined, as well as of trafficking corridors.They also controlled some coca- and poppy-growing regions.Another change in the industry was caused by the increased involvementof Mexican traffickers in cocaine distribution in the United States.The pressure exerted by the United States on the Caribbean routes beginningin the late 1980s led to the displacement of the traffic to Mexico andthe Pacific coast. Colombians started hiring Mexicans to smuggle cocaineinto the United States, but Mexicans soon realized that they could havetheir own distribution networks and the power to gain greater profit byselling directly in the U.S. market. Furthermore, as the large Colombiancartels weakened, the relative power of the Mexican organizations increased.As a result, a significant number of Colombian traffickers now sell theircocaine in Mexico or in Central America to the powerful Mexican cartels.This has lowered the revenues of the Colombian cocaine industry and thusalso the amount of money to be laundered in Colombia.The use of the illegal revenues has also evolved. The early traffickersinvested in real estate and some businesses. During the surge in themarket for marijuana in the early 1970s, there was a real estate boom inBarranquilla and Santa Marta, the two cities closest to the marijuanagrowingregion in the Sierra Nevada de Santa Marta. When the Caliand Medellín cartels gained prominence, the cities experienced anotherreal estate boom. Traffickers, mainly from the Medellín cartel, investedheavily in rural land, while traffickers from Cali appeared to prefer urbanreal estate and investments in various industries and services. 29 The concentrationof rural land among armed groups has been substantial.Reyes Posada (1997) estimates that, by 1995, drug traffickers alreadycontrolled over 4 million hectares. This process has continued as the territorialcontrol by armed groups strengthened (Reyes Posada 2009).