Essay illicit economy - colombia

1. Universidad Militar Nueva Granada
Mechatronics engineering Department
Economy
“Illicit economy - Colombia”
By:
Orlando A. Fajardo Tejata Cod. 1800990
Bogotá, Colombia. April 10th of 2015

2. Introduction
In this essay i’m goin to talk about severals sectors that had been affected by the
illicit economies in Colombia, starting with one of the most importat as the drug
trafficking, but also talk about petroleoum contraband, human trafficking and
mining.
To assess the impact that drug trafficking has on economic activity, in terms of
price distortions in the drug farming areas, money laundering, and to learn about
the violence, corruption. The idea is to analyze the economic, social, and
institutional aspects of the impact of the illicits economies in Colombia in the last
two decades.
Drug Trafficking
During the 1970s and 1980s the drug business generated big inpacts in several
regions, revalued the Colombian peso and encouraged contraband importatios and
exportations.
In the short term drug revenues even help to boost the construction sector and
becouse of that, created more jobs.
During the 1990s, the negative effects became show when illegal drugs became
the main funding source for left-wing guerrilla and right-wing paramilitary groups.
Currently, the impact of the illegal drug business can be felt all over the country; in
employment, income inequality and money laundering.
Despite the high income the drug business generates, it doesn’t encourage
economic development.
The illicit drug business in many ways even has a negative and destabilizing
impact on the economy as it reduces investments and the investments that are
made by drug-traffickers typically are in non-productive sectors.
Money laundering is one example for how drug money has a negative impact on
the economy. Contraband is widely used to launder drug money. Consumer goods
such as household appliances, clothes, textiles, footwear, liquor and cigarettes are
purchased abroad, smuggled into Colombia and sold under market price. This
undercuts legitimate businesses who produce or import the same goods, but
cannot compete with the low prices.

3. As much as approximately 30 percent of Colombia’s agricultural land is owned by
persons affiliated with drug cartels.
The large drug-related crime rate, violence and corruption the illicit drug industry
engenders, along with the deterioration of political stability and security.
In general, these results show that, when reducing the illegal economy, an effort is
necessary to stimulate other production activities, to compensate for the cutback
and to absorb the labor that is released from illegal farming so the economy as a
whole will not suffer. Although the impact of reducing illegal farming is small at the
national level, the economic activity of some regions may be significantly affected.
Apart from these effects, a reduction in the illegal economy would improve the
investment climate, because it would cut down the criminality rate and thus have a
positive effect on GDP. Recent studies show that, from a purely economic
standpoint, reestablishing social and economic conditions would generate a better
investment climate—taking into account only one factor, such as the homicide
rate—so that it can be predicted that a reduction of 7.5 percent in criminality would
increase private investment by 4 percent.
Because cocaine and heroin production is destined for international markets, drug
trafficking profits were estimated based on international prices. It is estimated that,
in 2003, about 350 tons of cocaine and 1.2 tons of heroin were exported. After
subtracting the amounts seized and the cost of placing the drug in international
markets, such exports amounted to nearly $1.3 billion (valued at U.S. wholesale
market prices), representing approximately 1.7 percent of GDP.
Illicit drug activities generate higher returns in each production and sales phase (for
coca leaf/cocaine base/cocaine and opium poppy/opium-latex/heroin) and a higher
annual income flow than that of licit agricultural or agro-industrial activities that can
be carried out in the drug producing areas.
Illicit mining
Illegal mining in Colombia is emerging as one of the topics on the agenda of
government in the coming years.
Not only for the impact it may have in relation to the internal armed conflict but also
the impact on the national economy and relations Colombian social.
The main questins in this topic appear to be releated to the actual size of illegal
mining, the causes were having originated or at least driven, and the causal
relationship can be established on the basis of illegal violence in Colombia.
According to a report by the Attorney General's Office, there is a misconception

4. that only impact that illegal mining has is in legal terms, since it has very
implications for environmental, economic sectors, State legitimacy and security. In
that sense it is evident that the lack of state control for the exploitation of resources
is an incentive for individuals not respect the law and try to maximize their profits
again violating the law.
In fact, some of the implications of illegal mining can be reflected in:
• Lack of control systems and protection of natural resources and the
environmental license.
• Tax evasion of mining activity and the impact this has on the royalties to the
regions.
• Difficulty generating the State to build public policies real positive impact on
mining.
• Environmental impact because being illegal does not respect areas of
sensitive ecosystems like moors.
• Difficulty to build efficient land management plans, they know land use and
soil.
• Ignorance of all labor protection mechanisms.
• Encouraging child labor.
• Have an impact on national security as resource becomes illegal groups.
Illegal mining has serious adverse impacts on the country's development to
accelerate, first, the illegal exploitation of mineral resources to a possible shortage,
hitting any attempt to sustainable development, in other words, the balance
between economic development and environmental supply spending is
unsustainable.
Simulates the informal economy hitting national taxation (resources, profits and
wages that are not reported in the national tax structure) and deteriorating working
conditions for those engaged in this activity.
The golden business is so strong that the machines are working 6:00 to 22:00 and
23:00 to 6:00 the next day. On average, as calculated by the buyer, leaving each
engage 4 kilos a day, each of which are valued in the legal market at $ 90 million.
If they sell at the Bank of the Republic of Cali, where not ask where is, or where he
comes and just want the ID would be 360 million pesos daily filed.
"For seven days, we're talking about 2,500 million pesos, and there are eleven
strike up; are on average more than 27 billion pesos weekly "makes the buyer
accounts.
According to Silvestre commander of the FARC's 29th Front, whom the buyer river
upstream of Timbiquí found, the guerrillas distributed gramitos. Mandan five or ten

5. people in the community, to each give 100 grams and they return with silver.
Of that money, 40% rightful owners, the other 40%, for the payment of other
vaccines illegal groups 10%, administrators take 6% and the community will
account for the remaining 4% is reflected in works.
On the social side, illegal mining is associated with other illicit activities such as
smuggling and other mafias as fuel and even with modern forms of slavery.
How exploiting gold in the Cauca Pacific Group Palenque community that has lived
artisanal mining, but is now enslaved in their own land from the masters of
backhoes and rifles.
Additionally, illegal mining can spend more unnoticed to other illegal activities such
as drug trafficking or abduction, and will generate equal or greater resources. In
other words, illegal mining, plus the State absence becomes an activity of great
interest to the illegal groups.
Illegal mining does not include mechanisms of control and security in the activity,
so fatal accidents and calamities for the miners are very high options.
Human trafficking
Colombia is a significant source of trafficking in persons, especially women and
children who are used for sexual exploitation. This serious evidence, citing
government reports, was contained in a diplomatic cable sent to Washington in
March 2007 with the label: "Seventh Report of Human Trafficking in Colombia". It is
an extensive report which was, moreover, that there is information that the country
is a transit region of victims from China, Ecuador and other Andean countries.
Trafficking is a crime that is increasing in the world and is affecting many nations
that are used by trafficking networks differently: as countries of origin, transit or
destination.
· According to research funded by the Government of the United States in the
2006, 800,000 people are trafficked across borders of countries. Figure not
including victims of trafficking interna.
· The ILO estimates that at least 12.3 million adults and children who are exploited
occupationally, sexually or is in any similar situation.
. In 2005 the ILO estimated that the crime of trafficking in persons had earnings
Economic approximately $ 31.6 billion annually.

6. · According to the Global Report on Trafficking in Persons 2009, UNODC, the
Sexual exploitation is a form of trafficking in persons best known and reported
79%, followed by forced (18%).
· The Dijin, for the years 2007 - 2008, cites the following research Colombia:
• 121 Trafficking Investigations
• 115 children identified as victims
• 5 Male identified as victims
• 87 women identified as victims
This is an important data to analyze since 12.3 million of adults and children are
sexually exploited or are in a similar situation and this is also liked to drug
trafficking.
In general, these results show that, when reducing the illegal economy, an effort is
necessary to stimulate other production activities, to compensate for the cutback
and to absorb the labor that is released from illegal farming so the economy as a
whole will not suffer. Although the impact of reducing illegal farming is small at the
national level, the economic activity of some regions may be significantly affected.