Dru McInerney
Final research paper
Government 490
Char Miller
Monetary value of laundered cocaine
narco-dollars creating successful Latino community in the United States.
Outline
Overview
A: Beginnings and rise of cocaine smuggling from South
America
B: Evolution of Cocaine Money laundering
C: Effects of Laundered Narco-Dollars on Miami’s economy
D: Prospering Latino Community
Conclusion
Overview
When you talk
about laundered drug money, you often think of the violence of the drug trade.
The violence associated with drug cartels from South and Central America. The
money made and laundered from drug trade (narco-dollars) is considered blood
money. However, if looked at more closely could these narco-dollars have a positive
effect when they are being pumped back into local economies?
Lets take Miami,
Florida in the 1980’s for example. Miami pre 1980’s was a small quaint city
that was known for vacationing. Enter into the early 1990’s Miami is a booming
economic city. This can be accredited to large amounts of narco-dollars coming
from the cocaine trade with Colombia. When these cocaine dealers from Colombia
began to traffic cocaine through Miami, they started to make small fortunes in
narco-dollars. Narco-dollars are a monetary spending that is technically legal
in the United States. There is no proof that the money is from illegal entities.
So as most drug dealers tend to do, they spend their narco-dollars as fast as
they made them. This doesn’t just stimulate the luxury car and jewelry
businesses but a large majority of this money is going to real estate. As
cocaine became the largest business in Miami behind tourism in the 1980’s [i]the
skyline began to rise in the city. With the real estate boom you began to see
more Latino’s moving to the city. Most notably more jobs were being made behind
the sponsorship of narco-dollars.
You also see a
large development of Latino community in Miami as these narco-dollars are being
spent. Many people are coming from Southern and Central America to be part of
the booming economy. This begins to turn Miami into the hub of Latino culture
in North America. This can be compared to the use of religion to bring the
Ancient Greek community together. The sponsorship of narco-dollars was able to develop
a hub for the Latino community to gather and begin to live the American dream.
To support my
argument I have developed four different sections to help the reader understand
the dimensions that go into this process. I will first begin with a history of
the Cocaine trade. Specifically, I will highlight Cocaine being produced and
smuggled from South America to the United States. Secondly, I will explain the
history and the process of money being laundered from illegal narco-dollars to
legal liquid assets. Third, I will discuss the effects of these narco-dollars
and the economies they surround. Finally, I will discuss the Latino communities
and how they form a place of communal belonging in this economy.
A: The
Rise of Cocaine Production and Smuggling from South America
In the year 1996
the Colombian Government Estimated a total of 67,000 hectares of the coca plant
were produced. To put this into perspective, one coca plant can be produced in
to 800 grams of cocaine.[ii] The process
consists of a large majority of raw product being transferred to a refinery and
then converted to paste. From there it is sent to a factory be converted to a
final product. The current statistics on Cocaine production are daunting.
However, Cocaine comes from relatively modest production, stemming from the
turn of 19th century.
Pre
1940’s, cocaine was a small business that was mostly run in the Andean mountain
region. The country that produced the most coca leaf product was Peru. The
Peruvian government of that time allowed small factories to produce this
product. Cocaine had a limited usage in wealthy countries so it did not have a
high demand. In 1950, Peruvian government would make the manufacturing of
cocaine illegal. This would not stop the small factories and the several smugglers
from operating. [iii]
Pre
World War 2 cocaine was generally an accepted drug in South America. This would
all change post World War 2 when the spread of American influence would arrive
in South American Countries. During the late 1940’s and early 1950’s Cuba
specifically became a hotspot for cocaine usage and smuggling. There was a
culture spreading in Havana. Havana was place of freedom and fun. Havana would consume large amounts of
cocaine and even experiment in growing it. By the time of the Cuban revolution
Havana had become the hub of cocaine culture. During the Cuban revolution when
Fidel Castro came to power most of the Cubans involved in the cocaine smuggling
migrated to South America where the product was originating.
After
this migration of Cubans to the Andean region, cocaine production would start
to increase. The United States would take notice of this growth in production
of cocaine. In response to this growth, the United States would spread their
influence with anti-drug control in Bolivia. Bolivia at the time was the
largest producer of the coca leaf in the world. After the siege of many coca peasant-farming
villages, the peasants would flea to other Andean countries.
With the United
States new proactive stance they would confiscate 26 pounds of cocaine at the
border in 1967 and increase their findings to 52 pounds in 1969. Although the
United States was increasing there efforts on prevention it had become to late.
The demand for cocaine usage had increased and in 1971, 436 pounds of cocaine
were confiscated at the border[iv].
The
United States may have been able to prevent cocaine growth in Bolivia. However,
the migrations of peasants under the influence of Cubans lead to the growth and
manufacturing in other countries, primarily Colombia. Cocaine demand has only
increased since the 1970’s. The rise of coca leaf production can be seen as a
reflection of that. As I earlier noted in 1996 cocaine growth in Colombia had
hit an all time high[v].
2. Evolution of Cocaine Money Laundering.
It
has been measured that the international narcotics industry is the largest
growth industry in the world. It
has also been estimated that laundered money from the international narcotics
industry is the equivalent of more then three times the amount of money
circulating in the United States. [vi] When I am
discussing laundered money I am referring to money that is made from the
narcotics industry that is converted into legal unregulated liquid funds.
To
understand the laundering of narco-dollars in the United States, it is
important to understand the history of laundered money legislation in the
United States. The United States did not take any domestic action into
combating laundered money until 1970. In 1970 congress passed the Business
Secrecy Act (BSA). The main function of this act was to open information on
transactions in any bank under United States jurisdiction. The main clause in
this act was that banks had to disclose information to the IRS on any deposit
of $10,000 or more.[vii] The main
issue with the BSA was that there was no statute technically making the laundering
of money illegal.
Although
the BSA did not actually make the act of laundering illegal it helped expose
it. The next step for the United States government would take place in 1986.
Congress would pass the Money Laundering Control Act (MLCA); the main
supporting function of this act was to make the action of laundering itself
illegal. This gave way to new FBI task forces that were able to take down banks
and then ultimately take down the cartel members. This act deterred all banks
under American jurisdiction from participating in any sort of laundering
criminal activity.
Laundering
today still sees two main sources of productivity. The first being front
companies. Front companies act as businesses that sell legal product and
invest. When narcotics money is put into these businesses they are able to
purchase legal products and then sell them. Converting them into legal liquid
currency. The second popular way that money is laundered is through boutique
banks. Boutique banks are banks set up oversees in countries such as
Switzerland where there is no law allowing the United States to view the
deposits going in.
It
is important to understand the history of laundered money in America. You can understand
the internal struggle the United State has had with controlling laundered
narco-dollars. Most importantly you can see that whether the United State wants
laundered money going into its economy or not, is beyond their control.
Laundered narco-dollars are still a prevalent piece of infrastructure to many
economies throughout the United States, most notably Miami.
C: Effects of Laundered Narco-Dollars on Miami’s Economy
As
previously noted, during the Cuban revolution many big players in the cocaine
industry were forced to leave the country. While a large amount went to South
America, the others sought refuge in Miami. With connections in South America
where the production was taking place, the exiled Cubans began to make Miami,
Florida the vocal point of cocaine trafficking into America. From 1960-90 the
Miami, Florida economy would grow by over $56 billion[viii].
This economic growth can be directly attributed to laundered narco-dollars.
There
are several problems with measuring the amount of narco-dollars being put into
Miami’s economy. The biggest of which, there is no way to get exact figures.
The whole point of laundering money is so that it appears to be legal. The best
that can be done is to research some areas and make estimates in others. You can
take money transferred to Miami bank accounts from questionable offshore banks
that are notorious for laundering. The majority of this money may be laundered.
However, the margin of error may be large.
Regardless
of the challenges standing in the way, estimates where made in 1988. The total
amount of money transferred from Panama banks to Miami accounts was roughly $10
billion[ix].
A good amount of this money may come from legitimate business. 1988 it was
estimated that 400 metric tons of cocaine were manufactured and transported
across the border to Miami. 90 tons are on the books as being confiscated by
customs. This leaves 310 tons of cocaine successfully being smuggled across the
border[x].
310 tons of cocaine is estimated as being $4 billion dollars in laundered
narco-dollars.[xi]
With estimated $4
billion being put into the economy annually, Miami has prospered into the North
American hub of Latin culture. With this, many businesses desire to expand to
the Latino markets and have moved their headquarters down to Miami. There is
352 multinational companies based in Miami, 70% of the companies were started
after 1980[xii].
Additionally, with the large
amounts of money laundering, many banks have set up shop in Miami. Miami is
third to New York City and Los Angeles in number of international banks.[xiii]
With additions of
laundered narco-dollars and Latin culture Miami has become a model for an
international economic hub. In 1980 when America was at a low point for
unemployment, Miami was able to stay 2% under the national unemployment rate.[xiv]Since
the boom of cocaine and trafficking through Miami in the 1970’s the city has
steadily grown and prospered economically.
D: Prospering Latino Community
In the 1960’s
before Miami’s cocaine boom, the Latino population was at a mere 5%. Looking at
the most current United States census the Latino population of Miami stands at
66%[xv].
And over 50% of this Latino population was not born in the United States[xvi].
This large amount of growth can be attested to Latino immigrants seeking to
advance their economic worth.
With large
percentages of Latin Americans in Miami, a new cultural wave has set through
the city. Other Latino populations have struggled to find a home in the America
South. Many of the southern states are not welcoming to the Latino population
and there community. Southern states such as Georgia have attempted to pass
state legislation that would make children born in America with immigrant
parents unable to gain citizenship. Miami, unlike other southern American
cities has created a safe haven for there community. Currently many state and
federal representatives in the area are of Latino descent. Miami also has
increased numbers of state and federal employees in the area. Miami has truly
developed a strong Latino community.
Conclusion
Miami becoming the
hub of Latino culture in America can be attested to its economic prosperity.
Much of this economic prosperity is a result of the laundered narco-dollars
being put back into the economy. And finally the majority of these narco-dollars
are derived from cocaine production in Colombia and the Andean regions of South
America. Illegal cocaine production and smuggling through Miami has resulted in
a prosperous Latino community.
[i] Economist, "Foundations
For the Future."
[iii] Gootenburg,
Paul, THE
“PRE-COLOMBIAN” ERA OF DRUG TRAFFICKING
[iv] Gootenburg,
Paul, THE
“PRE-COLOMBIAN” ERA OF DRUG TRAFFICKING
[vii]
O'brian, Patrick, “Tracking Narco-Dollars: The Evolution of a Potent Weapon in
the Drug War“
[viii]
Nijman, Jan, “Globalization to a Latin Beat: The Miami Growth Machine”
[ix]
Grosse, Robert"The Economic Impact of Andean Cocaine Traffic on
Florida."
[x]
Grosse, Robert"The Economic Impact of Andean Cocaine Traffic on
Florida."
[xi]
Grosse, Robert"The Economic Impact of Andean Cocaine Traffic on
Florida."(
[xii] Nijman,
Jan, “Globalization to a Latin Beat: The Miami Growth Machine”
[xiii] Nijman,
Jan, “Globalization to a Latin Beat: The Miami Growth Machine”
[xiv] Economist,
"Foundations For the Future."
[xv] Miami City,
Florida." American Fact Finder. United States Census
[xvi] Miami
City, Florida." American Fact Finder. United States Census
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