South-Western College Publishing - Economics  

Cocaine High is Over: Farmers Have Withdrawal Pains
Subject Supply
Topic Supply and Demand
Key Words Supply, Drug Interdiction, Grants, Training
News Story

One-fourth of the world’s cocaine supply comes from the Chaparé region of Bolivia. The new Bolivian President is seeking to destroy all illegal coca plants--covering 90,000 acres--by 2002. In return, grants are being given to communities to improve roads, increase law enforcement, promote economic development, and to train farmers to grow legal crops like pineapples and bananas.

These efforts are being bolstered by Peru’s decision to shoot down cocaine flights, and the arrest of key Colombian drug lords. The smaller Colombian drug traffickers are therefore producing more of their own coca, rather than importing it from Bolivia.

The previous Bolivian policy involved paying coca farmers to eradicate their crops. However, coca production decreased little because farmers replaced their former fields with others deeper in the jungle.

There still remain concerns. Drug interdiction is limited due to inadequate patrols and police corruption. Violence sometimes greets the security forces who are charged with destroying coca plants. Some producers and police have been killed. Also, legal crops are harder to grow successfully and demand is more variable.
(Updated August 18, 1998)

Questions
  1. The new policy is attempting to affect the supply of coca. For each of the components of the policy cited below, draw a price-quantity diagram of the supply of coca, and illustrate the intended effects. Also state whether there is a change in supply or quantity supplied.
    1. the destruction of coca fields
    2. decreased demand from Colombian traffickers
    3. the killing of coca farmers

  2. The Bolivian President is encouraging the development of the pineapple market among others. For each of the following, draw what happens to the supply curve for pineapples and state whether there is a change in supply or quantity supplied:
    1. farmers receive training in how to grow pineapples
    2. better roads reduce the cost of transporting pineapples
    3. disease and floods destroy pineapple plants
    4. consumers want fewer pineapples
Source Clifford Krauss, “Bolivia’s Crackdown on Coca Growers Becomes Increasingly Deadly,” The New York Times, June 27, 1998.

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