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U.S. Department of State
1997 International Narcotics Control Strategy Report, March 1998

Released by the Bureau for International Narcotics and Law Enforcement Affairs, U.S. Department of State
Washington, DC, March 1998


Policy and Program Overview for 1997

For the Western Hemisphere's anti-drug effort, 1997 was a good year. We made appreciable gains in crop reduction, in interdiction, in weakening trafficking syndicates, strengthening law enforcement, and in targeting drug money laundering. The year's best news came from Peru, for years the world's largest coca growing country and source of much of the semi-processed cocaine base that feeds the Colombian cocaine industry. Three-plus years of joint efforts by US, Peruvian and Colombian forces to choke off the "air bridge" that carries Peruvian cocaine base to Colombia for processing paid off handsomely. The operation simultaneously deprived the Colombian cocaine trade of critical basic materials and drove down the price of coca leaf in Peru below the break-even point. Disillusioned Peruvian growers abandoned fields to take advantage of alternative development opportunities. As a result of the exodus, in 1997 Peruvian coca cultivation dropped 27 percent, an extraordinary decline that occurred on top of last year's 18 percent reduction. The USG estimates that Peru now cultivates 68,800 hectares of coca, just slightly more than half of the estimated 129,100 hectares identified in the peak year of 1992. In fact, Peru's coca cultivation is now at its lowest level since we began systematically estimating cultivation in 1986.

Crop control efforts in Bolivia and Colombia, the other two principal coca producers, brought both good news and bad. The Bolivian Government's program of voluntary and involuntary eradication, enhanced by USG assistance and alternative development incentives, brought down estimated cultivation by a little over five percent in 1997. Though this was a relatively modest decline, it was significant since at 45,800 hectares, Bolivia's 1997 coca crop was also the smallest in ten years. Colombia was a different story, since successful coca control operations also spurred new planting. Colombian traffickers accelerated their campaign to plant new coca outside the traditional growing areas, both to offset heavy losses from government eradication missions and to replace cocaine supplies cut off by the "air bridge" denial. The Colombian syndicates unquestionably are feeling the impact of crop destruction campaigns, since they have raised the eradication stakes by bringing in better weaponry and shifting cultivation to Colombian's southwest provinces of Caqueta and Putumayo, where a strong guerrilla presence makes eradication more difficult. Despite these hindrances, crop-spraying operations destroyed more than 19,000 hectares of coca in 1997. With 79,500 hectares under cultivation at year's end, Colombia is now the largest coca cultivating country, though in actual leaf production it still ranks behind Peru and Bolivia. Still, even taking into account the expansion in Colombia, this year's Andean coca cultivation total of 194,100 hectares was the lowest in a decade-proof that persistence pays.

We faced a different set of challenges in trying to limit the cultivation of opium poppy, the source of heroin. As we note below in the section on heroin, this heavily addictive drug is gradually staging a comeback among a new generation of users in the United States. Unlike coca, which currently grows in only three Andean countries, opium poppy grows in nearly every region of the world. Because it is an annual crop with as many as three harvests per year, it is much harder to eliminate, especially since nearly 90 percent of the world's estimated opium gum production (3,630 out of 4,137 metric tons) is produced in Burma and Afghanistan, countries where we have limited influence. An increasing amount of the heroin entering the United States, however, comes from Colombia and Mexico, where we assist the governments in opium poppy eradication campaigns. Since cultivation is relatively limited--between them both countries account for less than four percent of the world's estimated production--eradication programs can have an appreciable impact. In 1997, the USG estimates that Mexico eradicated 8,000 hectares, three quarters of its opium poppy cultivation, leaving 4,000 hectares for opium production. Despite a major effort by the Colombian drug syndicates to increase production, Colombian authorities kept the opium poppy crop to 6,600 hectares, approximately the same year-end level as in previous years. Eradication sorties destroyed an estimated 7,000 hectares, slightly more than half of the poppy under cultivation earlier in the year. The eradication results in Colombia and Mexico translate into a potential 150 metric tons of opium--15 metric tons of heroin--that were not available to the US market.

Trafficker Woes. For a number of important Western Hemisphere drug trafficking organizations, 1997 was not a good year. The Mexican drug rings suffered the most, as the Juarez Cartel lost its boss, the Gulf Cartel its operations manager, and the major methamphetamine smuggling ring one of its leaders. The sudden death in July of the Juarez Cartel 's Amado Carrillo Fuentes (following plastic surgery intended to disguise his identity) reportedly has both weakened and triggered a war of succession in that organization. The powerful Gulf Cartel fared scarcely better. With its boss, Juan Garcia Abrego, already in jail in the US in 1996, it suffered another blow when Mexican police collared Operations Chief, Oscar Malherbe de Leon and Adan Amezcua Contreras, one of three brothers said to be responsible for much of the methamphetamine flowing into the US.

In South America, a joint Peruvian-Colombian operation captured Waldo Simeon Vargas Arias, ("El Ministro") in Bogota. Colombian and Peruvian authorities believe El Ministro was responsible for supplying over half the cocaine base refined by the Colombian cartels. He also appears to have been a major figure in the Colombian heroin trade. Peruvian antidrug forces caught up with long-sought drug chief Luis Molqui ("Lucho Mosca"), while Bolivian authorities extradited another important trafficker, Miguel Angel Seleme Rodriguez, to the US to stand trial. Although the position of cartel boss never remains vacant for long, losing a leader inevitably hurts a drug syndicate's effectiveness. More importantly, capturing key traffickers demonstratesto the criminals and to the governments fighting them alikethat the syndicates are highly vulnerable to coordinated international pressure sustained over time.

Other Advances. A long-standing element of our international drug control policy has been to encourage and assist governments to strengthen their judicial and banking systems to narrow the opportunities for their manipulation by the drug trade. In drug source and transit countries, law enforcement agencies have jailed prominent traffickers, only to see them walk free following a seemingly frivolous or inexplicable decision by a single judge. But the situation is gradually changing. In 1997, several countries continued the process of modernizing their laws and professionalizing their court systems through reforms ranging from installing more modern equipment to major changes in the way judges are appointed. Though there are still instances of judges arbitrarily dismissing evidence against or releasing well known drug traffickers, the number of such cases is declining, as governments make basic reforms such as giving judges better pay and greater personal protection.

Extradition. In 1997, we maintained pressure on governments to pass or amend laws and to enter into agreements to make possible the sanction drug lords fear most--extradition to the United States. The long sentences meted out to notorious drug criminals in the US are stark reminders of what can happen to even the most powerful cartel leaders when they are subject to the US justice system and can no longer manipulate their environment through bribes and intimidation. Several countries still prohibit the extradition of their nationals. As we approach the twenty-first century, we believe that such agreements can be made acceptable to most governments, as long as treaty provisions are reciprocal and balanced. In 1997, Paraguay and Peru agreed to negotiate new extradition treaties with the US. We are currently working with countries important to the anti-drug effort, such as the Dominican Republic and Venezuela, to adopt extradition procedures along the lines of the bilateral extradition treaty signed with Argentina in 1997 and Bolivia in 1996.

Money Laundering. We devoted considerable effort in 1997 to constricting the drug trade's access to international banking and financial systems. Since drug money is potentially worthless until it can be laundered and moved into legitimate financial and commercial channels, we have been working with our partners in the Financial Action and Caribbean Financial Action Task Forces to make it as difficult as possible for the drug trade to legitimize its fortune. While several countries' financial institutions regrettably are still willing to accept--or even solicit--funds of questionable provenance, we have seen important progress over the past year. Venezuela, for example, adopted new currency transaction reporting requirements by all financial institutions; Panama established "due diligence" or "banker negligence" laws to hold individual bankers accountable for laundered funds; and Mexico published new anti-money laundering regulations to require the reporting of large currency and suspicious transactions. Such measures move us closer to a common goal of eventually shutting drug money out of the international financial system.

Formidable Opposition. Though we can take pride in these accomplishments, we are still a long way from permanently crippling the drug trade. As one of the pillars of international organized crime, it remains a formidable enemy. Well before transnational crime had become recognized as one of the principal threats to international stability, the drug syndicates already had in place an impressive network of supply centers, distribution networks, foreign bases and reliable entree into the governments of source and transit countries. They pioneered many of today's sophisticated money laundering techniques, hiring first-rate accountants, and investing in state-of-the-art technology. And when the former Soviet Union collapsed, the drug syndicates were quick to recruit Eastern European chemists and other technical specialists left unemployed by the change in political systems. Even after suffering considerable losses, the drug trade's wealth, power, and organization equal or even exceed the resources of many governments.

Despite our collective efforts to cut drug traffic in 1997, hundreds of tons of cocaine flowed not only to the United States and Western Europe, but to markets in Latin America, Asia, Africa, and the countries of the former Soviet Union. Colombian cocaine syndicates have established distribution centers on every continent, as international drug trafficking becomes more sophisticated every year. Now Italian, Turkish, Russian, and Nigerian crime syndicates, to name but a few, vie for a share of the business. The relatively straightforward flow-charts of trafficking routes of a decade ago have been replaced by a complex web of nodes and lines linking virtually every country in the world to the main drug production and trafficking centers.

The drug trade is adept at searching out and adapting to new opportunities. It is taking advantage of shifts in enforcement initiatives, along with trafficking and consumption patterns, as the lines blur between cocaine and heroin-consuming countries. We are now observing more dual drug use, with addicts combining cocaine and heroin to offset each drug's respective stimulant and depressant effects. National tastes are also changing. Europe, once the preserve of the heroin trade, has developed an unhealthy and growing appetite for cocaine. This is especially true for Eastern Europe and Russia, where cocaine sells for up to $300 per gram, three times the average cost in the US. North America, in turn, has rediscovered heroin, as cocaine use has declined sharply. (Between 1985 and 1996, the number of cocaine users dropped 70 percent, from 5.7 million to 1.7 million estimated users.) Although heroin use has not been rising proportionately, the Colombian drug syndicates' major investment in heroin production indicates that they foresee an important market for heroin in the US, most likely by promoting dual use of cocaine and heroin by consumers. Given the drug trade's past successes in anticipating trends, this is a disturbing development.

We have also witnessed an evolutionary process in the way drug syndicates are conducting their international operations. In the 1980's, Mexican trafficking organizations provided the Colombian trafficking syndicates with drug transportation services from Mexico to the Southwest region of the United States. The Colombians paid the Mexican trafficking organizations from $1,500 to $2,000 for each kilogram of cocaine smuggled into the United States. During the 1990's, the Colombian and Mexican trafficking organizations established a new arrangement allowing the Mexican organizations to receive a percentage of the cocaine in each shipment as payment for their transportation services. The "payment-in-product" agreement enabled the organizations to become involved in the wholesale distribution of cocaine in the United States through their own distribution cells composed primarily of Mexicans. Prior to this, the US wholesale cocaine trade was controlled exclusively by the Colombians. This new ethnic cohesion makes penetration more difficult and gives the syndicates leverage over family members in Mexico.

The Threat of Synthetics: Methamphetamine. The demand for methamphetamine and other synthetic stimulants, including amphetamines and MDMA ("Ecstasy") has been increasing not only in the industrialized nations, but in most of the countries of the developing world. Methamphetamine, a hybrid relative of the "speed" of the 1960's, continues to rival cocaine as the stimulant of choice in many parts of the globe. The relative ease of manufacturing methamphetamine from readily available chemicals appeals as much to small drug entrepreneurs as to the large international syndicates, since neither has to rely on vulnerable crops, such as coca or opium poppy. Synthetics allow individual trafficking organizations to control the whole process, from manufacture to sale on the street. Synthetics also have large profit margins and can be made anywhere. Mexico is the principal foreign supplier of methamphetamine and precursors for the United States, but there are centers of methamphetamine production in countries as far apart as Poland, Japan, the Philippines, Burma, and Vietnam. We also have our own domestic methamphetamine production, as demonstrated by DEA's seizure of over 1,000 methamphetamine laboratories in 1997. State authorities seized hundreds more.

Amphetamines. In Europe, the last few years have been marked by an unprecedented demand for amphetamines and MDMA, or Ecstasy. Clandestine laboratories in the Netherlands and Poland are the primary suppliers of amphetamines to the European market, with the United Kingdom and the Nordic countries being the heaviest consumers. Amphetamine and MDMA production have taken a quantum leap fueled by the need for increased supply.

MDMA (Ecstasy). The pervasive spread of MDMA, an amphetamine derivative, throughout Europe is linked closely to the so-called "rave culture" that has swept up the Continent's young people. This "culture" has its own trendy life-style, complete with unique preferences in music and fashion. The association of Ecstasy with this faddish "techno-scene" is an added boon to suppliers. They count on lucrative returns by marketing the drug within the context of this popular movement. Ecstasy has developed an international cult following, to the point that there are Internet sites giving detailed instructions on how to make and use MDMA "safely." Most of the MDMA available on the European drug market is manufactured in clandestine laboratories in the Netherlands. It is too soon to tell whether methamphetamine and MDMA use is merely a transient but dangerous fad or whether it will become firmly rooted in the culture of urban youth. Left unchecked, however, it might well become the drug-control nightmare of the next century.

Precursor Chemicals. Traffickers who manufacture stimulants and other synthetic drugs have a vulnerable point-the need for precursor chemicals. Whereas opiates and cocaine require widely available and relatively substitutable "essential chemicals," stimulant production requires "precursor chemicals", such as ephedrine, pseudoephedrine or phenylpropanolamine. These chemicals have important but fewer legitimate uses and are commercially traded in smaller quantities to discrete users. It is crucial to chemical control that each country have an effective, flexible system that regulates the flow of key precursor chemicals, without undue burdens on legitimate commerce. For that reason, the United States, the European Commission, and the UN's International Narcotics Control Board worked in 1997 with other states to establish an informal multilateral system of information exchange on chemicals.

Long Term Progress. The drug trade, while powerful, is far from omnipotent. It is vulnerable on many fronts. It needs raw materials to produce drugs, complex logistic arrangements to move them to their destination, cadres of professionals to run the technical and financial aspects of its operations, and some means of making its profits legitimate. Above all, it needs the protection of a reliable core of corrupt officials in all the countries along its distribution chain. Repeated attacks on every front, even if seemingly insignificant by themselves, cumulatively are responsible for keeping the drug trade in check. Viewed out of context, the many achievements of individual countries may seem insignificant. Many never come to the attention of the press. The routine drug seizures, the jungle drug labs or airstrips destroyed every day, the arrests of corrupt officials, or the improved performance of police and judicial authorities benefiting from USG assistance receive at best only fragmentary coverage in world media. Yet, as we have seen, cumulative effort and cooperation pay off. Ultimately it will be the sum of these small steps that will allow us to make lasting gains at the drug trade's expense.

Controlling Supply. Since our mandate is to stem the flow of illegal drugs to the US, our success depends on how effectively we attack drug supply beyond the country's borders. For the drugs that threaten us most directlycocaine and heroinwe treat the process as a five-stage, grower-to-user chain linking the drug producer abroad with the consumer in the United States. At one end is the farmer growing coca or opium poppies in the Andes or Burma; at the other is the cocaine or heroin user in a US town or city. In between lie the processing (drug refining), transit (shipping), and wholesale distribution links. We cannot expect to reduce the flow of drugs to the United States significantly unless we strike as close as possible to the source.

At each successive stage, the odds against stopping the flow increase markedly. Our international counter-drug programs therefore target the first three links of the chain: cultivation, processing, and transit. For drugs that are not completely synthetic, we stand our best chance if we can eliminate the first stage, cultivation, altogether. When crops are destroyed or left unharvested, no drugs can enter the system. It is akin to removing a malignant tumor before it can spread. Eradication is by far the most cost-effective means, but large scale eradication may not be politically or socially feasible in many countries. Moreover, by itself eradication is not a panacea. As our recent experience in Peru has shown, the right combination of effective law enforcement actions and alternative development programs can also produce remarkable results. The USG therefore has worked closely with the governments of the coca growing countries to find the best way to eliminate illegal coca in any given national context.

Coca Reduction. The coca crop offers the best prospect for dramatic reductions. Currently, significant coca cultivation takes place in only three countries-Peru, Bolivia, and Colombia. Current studies indicate that in Bolivia and Peru, where alkaloid content is high, every 200 hectares of coca eradicated deprives the drug trade on average of a metric ton of refined cocaine. (The ratio is higher for Colombia, where alkaloid content has traditionally been lower, though there are indications that yields may have increased considerably in recent years.) Unlike a load of finished cocaine distributed among trucks, boats, and aircraft, a coca field is a large, stationary target. So even manual eradication can make a difference. But we have better means available, high-speed spray aircraft. If permitted to do so, these planes could destroy a large percentage of the coca crop in a matter of months using environmentally safe herbicides. Since it takes between eighteen months and two years for a coca bush to become fully productive, intensive aerial spraying campaigns could create serious cocaine shortages, at least for two years.

Political and economic conditions in some countries make eradication impractical. The USG has therefore concentrated on working with each Andean government to find the best way to eliminate illegal coca in the light of prevailing local conditions. Though all three Andean governments agree in principle that coca cultivation must be reduced, only Colombia permits aerial eradication. Bolivia, where some coca is reserved for traditional uses (e.g., chewing), will only allow manual eradication, a process that is slow as well as dangerous to eradication personnel. Peru, until this year the largest cultivator, has been ambivalent, because it also produces some coca leaf for traditional purposes. In the past, its government would destroy seedbeds, but was not prepared to risk the political and economic consequences of eradication without assured, long-term compensation from abroad for displaced farmers. That situation, however, is changing.

The success of the "airbridge" denial in Peru has opened a new range of possibilities for crop control beyond just eradication. It has shown that a crop control strategy combining interdiction, enforcement and alternative development incentives can also be highly effective. It may even prove transferable to other countries-provided that there is necessary patience, determination, and political will to carry out close, sustained cooperation.

Political Will. The most powerful weapon in fighting the drug trade is an intangible: political will. A first-class anti-drug force, equipped with state-of-the-art police and military hardware, cannot succeed without the full commitment of the country's political leadership. Where political leaders have had the courage to sacrifice short-term economic and political considerations in favor of the long-term national interest, we have seen the drug trade weaken. And where they have succumbed to the lure of ready cash, the drug syndicates have prospered accordingly.

Contrary to the image that the large drug syndicates cultivate, they are far from invincible. The syndicates' prosperity hinges on establishing a modus vivendi with a weak or complacent government. In exchange for the short-term benefits of large infusions of drug money into the economy (or into their personal or political treasuries), corrupt government officials can limit counternarcotics operations to those sectors least likely to harm trafficking interests. For example, the government of a major drug cultivation country can focus on interdiction rather than eradication. In a major drug refining country government forces may eradicate some crops while allowing drug syndicates to exploit corrupt enforcement and timid judicial systems. In offshore financial centers, officials may launch anti-trafficking campaigns, while promoting bank secrecy and lax incorporation laws that facilitate money laundering. In every instance, the price of these short-term gains is the long-term entrenchment of drug interests. Consequently, a basic objective of US antidrug policy is to prevent drug interests from becoming entrenched by strengthening political will in the key source and transit countries. For where political will is weak, corruption sets in, vitiates the rule of law, and puts democratic government at risk.

Corruption. When we fight the drug trade we are also fighting political corruption. The drug trade feeds upon the social, economic, and moral decay that corruption fuels. Drug syndicates wield a powerful instrument for subverting even relatively strong societies: a money machine. Like modern-day Midases, they transform an intrinsically cheap and available commodity (e.g., coca leaves) into an almost inconceivably remunerative product. In terms of weight and availability, there is currently no commodity more lucrative than drugs. They are relatively cheap to produce and offer enormous profit margins that allow the drug trade to generate criminal revenues on a scale without historic precedent. Assuming an average retail street price of one hundred dollars a gram, a metric ton of pure cocaine has a retail value of $100 million on the streets of a US city-two or three times as much, if the drug is cut with adulterants. By this measure, the 100 or so metric tons of cocaine that the USG typically seizes each year are theoretically worth as much as $10 billion to the drug trademore than the gross domestic product of many countries. Even if only a portion of these profits returns directly to the drug syndicates, we are still speaking of hundreds of millions, if not billions, of dollars. To put these sums into perspective, in FY 1998 the overseas component of the USG's budget for international drug control operations is approximately one and a half billion dollars. In dollar terms, that equates to approximately 15 metric tons of cocaine; the Mexican drug cartels have lost that much in a shipment or two and barely felt the loss.

Such inordinate wealth gives the large trafficking organizations an almost unlimited capacity to corrupt. In many ways, they are a less obvious threat to democratic government than many insurgent movements. Guerrilla armies or terrorist organizations openly seek to topple and replace governments through overt violence. The drug syndicates only want to manipulate governments to their advantage and guarantee themselves a secure operating environment. They do so by co-opting key officials. A real fear of democratic leaders should be that one day the drug trade might take de facto control of a country by putting a majority of elected officials, including the president, directly or indirectly on its payroll. Though it has yet to happen, there have been some disquieting near-misses. By keeping the focus on eliminating corruption, we can prevent the specter of a government manipulated by drug lords from becoming a reality.

A Weapon Against Corruption. Drug corruption relies on the low visibility of its operations. Since it shuns the light, the best way to attack drug corruption is to expose it regularly to public scrutiny. The drug certification process is one way of attacking such corruption. It gives the US government the legislative equivalent of an international spotlight to shine on corruption. Section 490 of the Foreign Assistance Act requires the President to certify annually that each major drug producing or transit country has cooperated fully or has taken adequate steps on its own to meet the goals and objectives of the 1988 UN Convention, including rooting out public corruption. Governments that do not meet the standard lose eligibility for most forms of US military and development assistance; they also face a mandatory "no" vote by the USG on loans in six multilateral development banks.

Controversial, But Effective. The certification process has proved to be an unusually effective, if controversial, instrument of public diplomacy. In contrast to the confidentiality inherent in traditional bilateral diplomacy, public diplomacy stresses openness and transparency. By now, most governments are aware that US law requires the President to provide an annual assessment of counternarcotics cooperation based on objective information. By regular and sustained collaboration throughout the year, we work with most of the governments concerned to establish realistic, mutually acceptable goals for certification evaluation purposes. The value of the drug certification process is that every government concerned is publicly accountable for its actions, including the United States. While the USG obviously cannot certify itself, most governments recognize that the President of the United States cannot make such an important public declaration without being certain of-and accountable for-his facts. Thus in the certification process, the United States is opening itself up to the same public scrutiny by the international community. This is a healthy process. The purpose of the law is not to punish; it is to hold all countries to a minimum acceptable international standard of cooperation, either by meeting the goals and objectives of the 1988 UN Drug Convention in cooperation with the US or through their own efforts. We know that some governments face greater obstacles than others and we take that into account. We do not ask any country to do more than we are asking of ourselves.

Next Steps

The results suggest that we are on the right path. In the year ahead, we will build upon our gains by pressing the drug trade at every point-targeting drug syndicates, reducing drug cultivation, destroying labs, disrupting the flow of the necessary processing chemicals, interdicting large drug shipments; and attacking drug money flows. Though we cannot neglect any stage in the process, we know that we can inflict the most lasting damage at the crop cultivation and financial operations stages. We have seen this year how cooperative ventures can pay off in reducing drug crop cultivation and we will strengthen these programs. Now we need to beef up our collective efforts to obtain comparable gains against the illegal drug conglomerates' financial operations.

The drug trade's capacity for generating vast amounts of cash is both its strength and its weakness. It needs a steady flow of drugs to generate the money the drug syndicates require to stay in business, and it needs the steady flow of money to buy the drug. Since the drug trade, like a legitimate enterprise, partially finances future growth by borrowing against future earnings, every metric ton of drugs that does not make it to market represents a potential loss of tens of millions of dollars in essential revenue. On the revenue end of the process, cash proceeds are useless unless they can be reinvested in new drug crops, arms, bribes, etc. to keep the syndicates solvent. Choke off either the drugs or the money long enough, and the drug trade will suffer.

Our primary line of attack against domestic and international money laundering is to deny money launderers access to legitimate financial systems. Though drug syndicates are powerful in their own milieu, they lose their advantage when they have to operate in the legitimate world. Drug trafficking organizations generate their profits in cash-enormous amounts of cash. To be useful, that cash must at one time or another pass through legitimate international banking or commercial channels. The very magnitude of the sums that make drug trafficking so profitable, however, makes the profits difficult to conceal from vigilant banking systems. Therefore, when criminal enterprises surface to bank their profits, they make themselves vulnerable to law enforcement actions.

Since our own strong financial system is often a target for money laundering, the USG is working hard at home and abroad to prevent easy access directly into our banking and depository institutions. Other governments in increasing numbers are taking similar measures. While collectively we have made considerable progress, there are still nations that have not adequately addressed the need to take decisive action on this problem. Until they do, drug trafficking organizations will continue to take full advantage of these weak points to move their illicit money though legitimate financial channels.

We will work closely with other governments and encourage them to strengthen their oversight mechanisms, tighten regulations, and strictly enforce money laundering laws. We will also work with them to develop means of quickly identifying, freezing, and ultimately, forfeiting illegal drug proceeds before they can be invested. In our own case, we will continue to make full use of the International Economic Emergency Powers Act to prevent the drug trade and other branches of international organized crime from exploiting legitimate companies for criminal purposes.

The international antidrug effort has too much at stake to give up any of the precious gains we have made in the past few years. As one of the countries most affected by illegal drugs, the United States will continue to provide leadership and assistance to its partners in the global antidrug effort. We certainly have an important role to play. Yet ultimately the success of this effort will hinge not on us alone, but on the actions, commitment, and cooperation of the other major drug-affected governments. We will help where we can, but only they can muster the necessary political will to shield their national sovereignty from drug corruption by reforming and strengthening their anti-drug legislation, as well as their judicial, law enforcement, and banking institutions. In democracies, the drug trade flourishes only when it can divide the population and corrupt institutions. It cannot withstand a concerted, sustained attack by a coalition of nations individually committed to its annihilation. It is that coalition we are working to build.

Coca and Cocaine

Cocaine remains our most serious drug threat. Although surveys show a dramatic drop in cocaine use in the last decade-from 5.7 million users in 1985 to 1.7 million in 1992-another potential wave of addiction is never far away. Crack, the smokable variety of cocaine, is still one of the most immediately addictive drugs known. It is an euphoric stimulant that often provokes violent behavior in users. For the drug trade, it is an ideal drug: it is cheap, potent, addictive, widely available, and immensely profitable. Crack feeds much of the drug violence in America's largest cities, where gangs compete for lucrative sales territory while addicts steal to feed their habit. Hundreds of tons of cocaine enter the US every year by land, air, and sea, despite stringent USG control measures. Even the 200 metric tons or so of cocaine that the USG and its Western Hemisphere partners typically seize in a year have little discernible effect on price or availability. The combination of strong demand and extraordinary profits continue to make the United States the cocaine syndicates' foremost market.

But we may be losing that questionable distinction; Europe is catching up. This change is part of a trend we started observing a few years ago when the Colombian syndicates actively began promoting cocaine to a Europe-wide clientele. Although cocaine must compete with cheaper methamphetamine both in the US and Europe for its share of the market for addictive stimulants, in parts of Europe and Russia, cocaine use is on the rise. It now has the meretricious glamour it enjoyed in the United States in the 1980's, when it was the favorite of Wall Street overachievers, star athletes, and entertainment celebrities. The "gold rush" atmosphere of the post-Soviet era creates ideal conditions for cocaine use among risk-taking "high rollers," particularly when organized crime makes commerce in the drug relatively easy. The incentives are certainly there: with reports of cocaine selling at up to $300 dollars per gram in Russia, it is no wonder that the Colombian syndicates have spent considerable efforts to set up overseas branches in Europe. The level of seizures is a sign that large volumes of cocaine are now available in Western Europe.

Cocaine is now truly cosmopolitan. It can be found on every continent. For example, Nigerian organizations use air links from Brazil to African capitals to move large amounts of cocaine both for consumption in Africa and transshipment to Europe. Almost every African country now can report cocaine seizures, with Ghana and South Africa serving as important junctions for cocaine transiting Africa.

Source and Transit Country Highlights. We worked closely throughout 1997 with the governments of countries that have a role in cocaine flows to the United States. The most dramatic success, as we noted earlier, was the drop in Peru's coca crop. With only 68,800 hectares of coca estimated at the end of 1997, the crop was at its lowest point since 1986. This decline represents a remarkable degree of cooperation between the governments of Peru and the United States. Given the high yield of Peruvian coca, that drop deprived the drug trade-in particular the Colombian syndicates-of the equivalent of 110 metric tons of potential cocaine. The good news in Peru was partially offset by the 18 percent increase in Colombia's coca crop. For the past few years, the Colombian drug trade has been moving to consolidate and control all phases of the cocaine industry up to the moment the finished product can be delivered to the Mexican cartels for final distribution. The successful disruption of the "airbridge" may only have accelerated the move toward vertical integration of the industry.

The increase in Colombian coca adds both urgency and risk to US-Colombian eradication efforts. The cocaine syndicates are protecting these new fields with tighter security measures, including better weaponry for shooting down aircraft. This year the Thrush and OV-10 spray aircraft took frequent hits from small arms fire. The increased threat has brought about changes in tactics and in herbicide mixes to make eradication more effective without endangering personnel or the environment. Since the Colombian drug trade has been relocating coca fields to the southwestern provinces of Caqueta and Putumayo, areas of heavy guerrilla influence, antidrug tactics will have to be adjusted accordingly. In eradication sorties last year, spray aircraft destroyed 19,265 hectares. Bolivia, which only permits manual destruction of coca, reached its gross eradication goal of 7,000 hectares by the end of year. Although there was some new planting, at the end of the year there were an estimated 45,800 hectares under cultivation, a five percent drop from 1996. This decline, while small, continues to move Bolivia gradually toward the government's avowed goal of ridding the country of all illicit coca by the year 2002.

Drug seizures were up in many countries. In Colombia, the 44 metric tons of cocaine products seized were nearly double the 1996 figure. With 15.6 metric tons of cocaine HCl seized in 1997, Venezuela more than doubled its 1996 total of six metric tons. Bolivia seized over ten metric tons of cocaine base and HCl, while in the first six months of 1997, Argentina had seized 3.5 metric tons of cocaine HCl versus 2.3 metric tons in all of 1996.

Central American governments maintained active interdiction programs in 1997. In operations that suggest more cocaine is moving through Central America, Costa Rica seized just slightly less than eight metric tons of cocaine, more than the combined total of the previous seven years' seizures. In the first ten months of the year, Panama seized nearly eight metric tons of cocaine, as much as during the whole of the previous year, while Honduras by November had captured 2.3 metric tons of cocaine, five times the amount seized two years earlier. It is likely that most of the cocaine crossing through Central America was heading to the United States via Mexico.

Mexico now rivals Colombia as the center of the Western Hemisphere drug trade. Mexican drug syndicates have divided up the territory with the Colombian organizations, gradually assuming responsibility for the wholesale distribution of most of the cocaine moving to the United States. Mexican authorities inflicted some damage on the major cartels by arresting Oscar Malherbe de Leon, Operations Manager of the Gulf Cartel and several other important figures. In 1997, the government improved its conviction rate so that fewer traffickers were able to secure their releases by Mexican courts. Among those convicted was Hector ("El Guero") Palma Salazar, who had regularly succeeded in getting charges against him dismissed since his 1995 arrest. His appeal was rejected and he was sentenced to 19 and a half years in prison. Among other accomplishments, Mexican law enforcement agencies seized 34.4 metric tons of cocaine in 1997, a 45 percent increase over 1996.

There was evidence that the drug syndicates moved greater amounts of cocaine through the Caribbean, as interdiction operations in Central America and Mexico intensified. Seizures rose significantly in The Bahamas. Haiti's Coast Guard, funded largely by US assistance and working in cooperation with the US Coast Guard, seized 2.2 metric tons of cocaine. This represents a marked increase in seizures in previous years by Haitian authorities. The US Coast Guard reported the most dramatic rise in seizures in the waters around Puerto Rico.

Heroin and Opiates

Heroin, once discredited as the drug of "dead-end" addicts, has been creeping back onto the US drug scene. Used by itself, it can provide a mellow euphoria; taken along with cocaine, it can moderate cocaine's stimulant effects. Though just as deadly as cocaine, heroin, as an opiate, may be even more addictive. It has a special property that appeals to trafficker and addict alike: it allows many addicts to develop a long-term tolerance to the drug. While regular cocaine use may destroy an addict in five years, a heroin addiction can last a decade or more. Some prominent heroin addicts have been known to preserve the facade of a normal life for much of their lives. As long as addicts have access to a maintenance "fix," they can function. Some can even appear to function normally.

Heroin may be acquiring an upscale image in a new generation of potential users, ignorant of its devastating consequences. Gone are the days of the archetypal junkie shooting up heroin with a dirty needle. Today's high purity Colombian heroin can be sniffed like cocaine, sparing the user from both the need for syringes and the fear of contracting AIDS from infected needles. Estimates of the US heroin addict population, which for two decades had remained steady at 500,000 individuals, are being revised upwards; some experts believe it could be double that number. Evidence of combined drug use suggests that growing numbers of the US's 1.7 million cocaine addicts are using heroin to cushion the "crash" that follows the "rush" of using crack.

Heroin is the reigning hard drug of choice in much of the world. And there is no dearth of the drug, since opium poppies can grow in almost any country. According to USG estimates, potential world-wide opium production crossed the 4,000 metric ton threshold in 1995 and has stayed there since. The USG estimates for 1997 place potential opium gum production at nearly 4,100 metric tons, potentially yielding over 410 metric tons of heroin. Roughly 60 percent of that grows in Burma, which by itself probably could satisfy world heroin demand. A bumper crop in Afghanistan in 1997 bolstered Southwest Asian production, bad news for Europe, which gets most of its heroin from the region.

Heroin trafficking, availability, and addiction continue to grow unchecked throughout most of the world. Despite active enforcement programs in transit countries, high-quality Afghan heroin continues to move in large quantities along the Balkan Route's northern, central, and southern branches into every important market in Europe, Russia, and the other countries of the former Soviet Union. From the size of seizures, it appears that larger and larger amounts are entering the pipeline. In January 1998, Turkish authorities seized 480 kg of pure heroin in one shipment crossing from Azerbaijan, and that was only one of many large shipments intercepted. By comparison, the USG largest heroin seizure was 490 kg in 1991. Yet even losing these large shipments scarcely causes a hiccup in the traffickers' operations. With heroin demand seemingly open-ended and heroin availability unlikely to be seriously diminished, we can expect to see a continuing flow of the drug to nearly every country on the globe.

Source and Transit Country Highlights. Opium poppy cultivation marginally decreased in 1997 in Southeast Asia's Golden Triangle region, the world's opium-rich area. Total cultivation fell three percent from 190,520 hectares in 1996 to 184,950 hectares in 1997. As the bread-basket of the opium trade, Burma accounts for over 60 percent of world's opium poppy cultivation and opium gum production. Estimated production in Burma dropped by eight percent in 1997, for an estimated total of 2,365 metric tons, enough to produce 236 metric tons of heroin, probably more than enough to satisfy the world's heroin needs. Production in Laos increased by five percent, for an estimated total of 2l0 metric tons, or about nine percent of the Southeast Asian total. Already minimal production in Thailand, however, plummeted by seventeen percent in 1997. Thailand now accounts for only about one percent of Southeast Asian production. In Vietnam, the USG identified substantial new growth that nearly doubles our estimate of the country's opium poppy cultivation. By the end of 1997, there were 6,150 hectares under cultivation potentially yielding 45 metric tons of opium gum, compared to the 1996 totals of 3,150 hectares of opium poppy, potentially capable of yielding 25 metric tons of opium gum.

Opium poppy cultivation rose by five percent in Southwest Asia, after a nine percent drop the year before. Afghanistan remained the world's second largest opium producer in 1997, as poppy cultivation increased three percent to 39,150 hectares from 37,950 hectares the year before. As the main source of the heroin consumed in Europe, Afghanistan is in a key position to affect heroin supplies throughout the continent. Opium poppy is currently Afghanistan 's leading cash crop and the Taliban faction control an estimated 95 percent of the areas in which it is grown. In addition there are reports that the Taliban raise revenues by taxing opium production as part of their general agricultural tax.

Pakistan's opium poppy cultivation in 1997 rose by 21 percent to 4,100 hectares, despite broadened crop cultivation bans and assistance from the US and other donors. Estimated potential opium yield is 85 metric tons, up 13 percent from 1996. Based on available information, Pakistan failed to arrest or convict any major traffickers in 1997. Of the 23 persons whose narcotics-related extradition the US had requested, one was arrested and none were extradited during the year. The case of a Pakistani DEA employee arrested in April severely strained narcotics enforcement cooperation between the US and Pakistan. The employee, convicted of entrapping a Pakistani Air Force officer involved in smuggling heroin to the US, played a key role in helping DEA identify the drug smuggler.

Southwest Asian heroin continues to pour into Europe along the Balkan Route. With the branching of the route-northwards to Romania, Hungary, and the Czech and Slovak Republics; southwards through Croatia, Slovenia, the Former Yugoslav Republic of Macedonia, Greece and Albania-each of these countries now faces important domestic drug problems. Turkish trafficking groups, with distributors in ethnic enclaves in nearly all major European cities, control much of the Balkan Route heroin trade.

Russia is playing an increasingly pivotal role in drug trafficking in Europe and Central Asia. Criminal organizations that had successfully functioned under the Soviet regime entered the post-Cold War era with the necessary expertise, contacts, smuggling, and distribution networks already in place. Using heroin sources established originally during the Soviet Union's war with Afghanistan, ethnically based gangs-many from the Caucasus-have blossomed into major players in the European drug trade. They can use their networks to move Southwest Asian heroin through Central Asia to Russia and then onto destinations in the Baltics and Western Europe. Russian authorities noting a rampant increase in domestic drug use believe that there are now over 2 million drug users in Russia, with the numbers growing every year.

The Central Asian countries of Kazakstan, Kyrgyzstan, Tajikistan, and Uzbekistan, formerly important poppy growing regions for the Soviet Union are well placed to be conduits for much of this drug traffic. Kazakstan provides a bridge for Southeast Asian heroin to move to Europe and Russia from Asia. The other countries offer profitable access routes for Southwest Asian, primarily Afghan, heroin into Russia, the NIS and Europe. Heroin, which can fetch high prices in Russia and Europe, has been a tempting source of cash to finance the civil wars in Afghanistan and Tajikistan.

Nigeria has become pivotal to the heroin trade. Because of its size, geographical location, and political turbulence, Nigeria is Africa's most prominent transshipment point. Nigerians are all but ubiquitous in the heroin trade. They surface on virtually every continent. Although they are among the principal smugglers of heroin into the United States, Nigerians are frequently arrested in Bangkok, Rio de Janeiro, New York, Moscow, Riyadh, Mumbai (Bombay), etc. Unfortunately, endemic, rampant corruption at all levels of government in Nigeria virtually assures Nigerian trafficking organizations will continue to operate at will.

Colombia is the Western Hemisphere's largest grower of opium poppies, though it represents less than two percent world production. Increasing quantities of high purity Colombian heroin are entering the United States, distributed by organizations formerly devoted to cocaine smuggling. For 1997, USG estimates showed Colombian opium poppy cultivation essentially steady at 6,600 hectares and capable of yielding an estimated 66 metric tons of opium gum, or 6.3 tons of heroin, assuming no losses. Venezuela's border with Colombia has made it a potential poppy growing country. So far, however, USG-assisted eradication efforts have kept growth to insignificant levels. Over the past four years, the eradication program has destroyed over 3,000 hectares of opium poppy in the Sierra de Perija region along the Colombian border.

Mexico is Latin America's second largest cultivator of opium poppies. In Mexico, the 1997 crop was 22 percent smaller than the previous year's. After Mexican government eradication operations destroyed 8,000 hectares of poppy, there were 4,000 hectares available for exploitation by the drug syndicates, with an estimated potential yield of 46 metric tons of opium gum, or 4.6 metric tons of heroin. Though most of this heroin is destined for US markets, a USG-supported national drug use survey revealed a rise in intravenous heroin use in Mexican cities along the northern border with the US.

International Organizations

International organizational efforts continue to be a key component of the overall US counternarcotics strategy. Through multilateral organizations the United States has the opportunity to multiply contributions from other donors and decrease the perception that drugs are exclusively a US problem. The US participation in multilateral programs also supports indigenous capabilities in regions where the US is unable to operate bilaterally for political or logistical reasons. Moreover, the US contributions to UNDCP have had significant impact on the operations and expansion of UN counternarcotics programs and policy. In 1997, Austria, Benin, Iceland, Kazakstan, Singapore, and Vietnam became parties to the 1988 UN Convention.

The United Nations International Narcotics Control Board (INCB) has continued to provide invaluable support to initiatives to improve multilateral cooperation in chemical control. The INCB Secretariat provided expert advice to the two 1997 MCRI meetings and strong support for the concept of the initiative. It will have an important role in facilitating its implementation.

Chemical diversion training and technical assistance programs of the United Nations International Drug Control Program (UNDCP) are providing valuable assistance to Bolivia and the countries of South and Southwest Asia in establishing the legal and regulatory infrastructures required for chemical control and training the personnel to implement them.

The Inter­American Drug Abuse Control Commission (CICAD) of the Organization of American States (OAS) has developed a program ­ the "Monitoring System for the Control of Precursors and Other Chemical Substances Used in the Production of Illicit Drugs" ­ to assist countries in their implementation of national chemical control laws and regulations. Using mathematical models, the system can estimate the quantities of these chemicals that are required for domestic industrial use and, beyond these quantities, what portion of the excess is liable for diversion to the production of illicit drugs. The system has been used in one OAS Member State to positive reviews and will be used in others in the future.

Demand Reduction

Drug "demand reduction" refers to efforts to reduce world­wide use and abuse of, and demand for narcotic drugs and psychotropic substances. The need for demand reduction is obvious, since escalating drug use and abuse continue to take a devastating toll on the health, welfare, safety, security, and economic stability of all nations. Changing patterns of drug abuse, supply, and distribution compound the problem, at the same time as international drug syndicates and gangs are carrying out ever more ruthless, vigorous, and sophisticated marketing techniques and strategies. Our response has been a comprehensive, balanced, and coordinated approach in which supply control and demand reduction reinforce each other.

Our demand reduction strategy integrates a broad spectrum of initiatives. These include efforts to prevent the onset of use, intervention at "critical decision points" in the lives of vulnerable populations to prevent both first use and further use, and effective treatment programs for the afflicted and addicted. Other aspects encompass education and media campaigns to increase public awareness of the deleterious consequences of drug use/abuse and community coalition-building. Coalitions are necessary in order to mobilize public and private social institutions, the faith community, and law enforcement entities in targeted campaigns against drugs. The strategy also provides for evaluations of the effectiveness of these efforts and for research studies to find better ways of reducing demand.

In 1997, INL's efforts focused on preparation for the United States-Mexico Demand Reduction Conference, to be held in El Paso, Texas on March 19 and 20, 1998, and on forging regional and demand reduction coalitions in Latin America and Southeast Asia.

Chemical Control

The USG continued in 1997 to pursue informal and formal mechanisms to promote the information exchange necessary for chemical control, to support training and technical assistance programs to encourage and enable governments to establish national chemical control regimes, and to improve chemical diversion investigation cooperation with key chemical source and drug manufacturing countries.

The information exchange efforts are concentrated on the major chemical source countries, since stopping suspect shipments before they leave the exporting state is the best way to prevent subsequent diversion. Training and assistance is going to those who most need it, including drug­producing countries where diversion is occurring.

Multilateral Chemical Reporting Initiative (MCRI). Informal mechanisms have proven the best vehicle for the information exchange required for effective chemical control. Formal bilateral agreements normally cover only trade between the parties and frequently preclude information exchange beyond the parties. Informal mechanisms allow participation by more governments, to the extent that they are able and willing.

The MCRI is a USG initiative to promote that participation. It was launched in two 1997 meetings, co-hosted by DEA and the European Commission, and attended by officials of the most important chemical source countries. The objectives of the meetings were to gain agreement that information can be exchanged between enforcement and regulatory agencies on a voluntary, informal basis; that this is the best way to achieve the widespread participation effective international chemical control requires; and that exchanges in this manner will not jeopardize commercial confidentiality. The final objective of the meetings was to develop common procedures for the information exchange.

The outcome of the 1997 meetings was a strong consensus in support of the MCRI concept, but lingering concerns were voiced by some countries over the need for formal instruments to govern information exchange. Generally, countries in which chemical control is considered a law enforcement issue, and administered by law enforcement agencies, have been most supportive. Countries where chemical control is considered a regulatory issue, and administered by trade and commerce agencies, have been more cautious.

In 1998, DEA will be implementing the MCRI by providing and requesting information from meeting participants, and inviting them to cooperate to the extent their national law enforcement and commercial practices permit. We expect momentum to pick up as the valuable contribution of the system to the effective implementation of national chemical control regimes, and its ability to maintain the confidentiality of information exchanged solely for the purpose of enforcing national chemical control laws, are demonstrated.

US/EU Chemical Control Agreement. Chemical control within the European Union is a "Community" matter governed by two European Council regulations which Member States enforce through national laws and regulations. This provides a uniformity of chemical control procedures and made it advantageous for the USG to negotiate a formal chemical control agreement with the European Union that would facilitate chemical control cooperation with all Member States.

The agreement was signed on May 28, 1997. In the negotiations, we were able to agree on the key point that our joint chemical control problem is not diversion from trade between the US and EU Member States, but rather from our chemical trade with third countries. Therefore, the US/EU agreement contains important provisions for the sharing of information on proposed transactions with third countries to verify their legitimacy.

The agreement established a "Joint Follow-up Group" which met for the first time in Brussels in November 1997. At this meeting practical procedures were established for implementing the agreement. The second Follow-up Group meeting is scheduled for June 1998 in Washington to review and refine these procedures based on the experience that has been gained in their implementation.

Money Laundering and Financial Crimes

There were a number of positive developments in the money laundering arena in 1997 that have strengthened the global fight against the laundering of drug proceeds and the proceeds from organized criminal activity:

The Financial Action Task Force (FATF) continued to foster implementation of anti-money laundering measures worldwide. Perhaps the greatest achievement during 1997 was that all FATF member nations now have anti-money laundering legislation that comports with the FATF 40 Recommendations. The second round of mutual evaluations of member nations' progress in effectively implementing the Recommendations continued. During 1997, the FATF began discussion of its future, including possible expansion of its membership.

The Asia/Pacific Group on Money Laundering (APG), a new regional anti-money laundering body, was formally established in February 1997 at the Fourth Asia/Pacific Money Laundering Symposium. The first APG working party meeting, in July 1997, resulted in the development of a strategy for a work program and statement of principles for the organization. The APG has recognized in principle the FATF 40 Recommendations as the international standard.

The Caribbean Financial Action Task Force (CFATF) advanced its anti-money laundering agenda. During 1997, Venezuela, Jamaica, and Dominica subscribed to the CFATF Memorandum of Understanding, increasing CFATF's membership to 24 jurisdictions. CFATF initiated a five-phase typologies exercise to identify money laundering methods, trends and patterns, and to develop effective countermeasures. In July 1997, CFATF and FinCEN co-sponsored a Casino Regulatory Conference as phase two of the exercise, following a similar exercise focused on domestic financial institutions held earlier in the year.

During the past year, governments around the world increasingly have recognized the important role played by financial intelligence units (FIUs), both on the domestic and international levels. By definition, FIUs serve as a central point for the receipt, and as permitted, analysis and dissemination to competent authorities of suspicious activity report information. In many countries that have such units, they serve as a central coordinating point for information on money laundering and other financial crimes and thus facilitate the conduct of national investigations. In addition, FIUs serve to assist in the international exchange of financial intelligence that is often so critical to stopping money laundering on a global scale. Further to this evolution has been the growing visibility and recognition of the Egmont Group of FIUs. This unofficial organization of such agencies has grown from 14 just two years ago to 28 FIUs in 1997. This year's meeting of the Group resulted in the release of a Statement of Purpose for the organization that emphasizes the key roles FIUs play in national anti-money laundering programs and articulates the complementary role they can have in the exchange of financial information. To facilitate this exchange, the Group developed and implemented a "virtual private network" or web site that permits FIUs to communicate and exchange information securely over the Internet.

The United States continued to implement the Presidential Decision Directive announced in October 1995. Money laundering centers that have important implications for US national security and with whom expanded cooperation would significantly strengthen global anti-money laundering efforts have continued to work with US officials in an effort to increase bilateral and multilateral cooperation and to receive more targeted assistance and training.

The United States, through the Department of State's Bureau of International Narcotics and Law Enforcement Affairs (INL), continued to develop and support multi-agency programs for providing law enforcement, rule of law, and central bank training and assistance to a variety of countries, including emerging democracies. During 1997, INL developed and supported numerous anti-money laundering training sessions, money laundering assessments, and a variety of technical assistance missions throughout the world as part of a $36.2 million initiative. In addition, the US continues to focus on the success of the multi-agency approach by bringing together, where possible, law enforcement, judicial, and bank supervisory authorities in order to provide a complete and integrated anti-money laundering program.

In connection with drug money laundering countermeasures, two joint US Justice and Treasury Department national financial sector conferences were held in 1997 involving 21 districts and over 350 anti-money laundering law enforcement and regulatory officials. These conferences brought together the principal anti-money laundering investigators, prosecutors and regulators nationwide to familiarize them with new and evolving money laundering techniques, as well as with international developments. They specifically focused attention on certain financial sectors, such as money remitters, trade and businesses, and bulk cash shipping.

In 1997, the United States successfully employed a legal provision in the Bank Secrecy Act to impose stricter reporting requirements in order to reduce Colombian drug cartels' suspected use of certain money transmitters to repatriate proceeds of narcotics sales. Working closely with a multi-agency task force and federal prosecutors in the New York City area, the Treasury Department issued a Geographical Targeting Order (GTO) requiring New York area transmitters to report, for a limited period of time, certain information about the senders and recipients of all remittances to Colombia of $750 or more. The New York GTO caused an immediate and dramatic reduction in the flow of narcotics proceeds to Colombia through New York City money transmitters. US law enforcement observed a marked increase in interdiction and seizure activity of cash at east coast US border areas. The GTO also had a significant impact on money laundering activity among the targeted transmitters. Several transmitters stopped sending funds to Colombia or went out of business.

Also in August 1997, the United States issued two GTOs requiring certain money transmitters in Puerto Rico and the New York City area to report all money transfers of $750 or more to the Dominican Republic. Large and unbalanced currency flows to the Dominican Republic led the United States to scrutinize the transfers and issue the GTOs. The money remittance business had dramatically expanded to meet the needs of the large Dominican expatriate community which sends substantial amounts of funds home, but law enforcement was concerned that this expansion also reflected an abuse of the industry by narcotics traffickers. Initial reports indicate that the Dominican Republic GTOs have dramatically reduced the volume of cash remittances from Puerto Rico to the Dominican Republic.

Methodology For Estimating Illegal Drug Production

How Much Do We Know? This report contains tables showing a variety of illicit narcotics­related data. These numbers represent the USG's best effort to sketch the dimensions of the international drug problem at this time, but the picture is not as precise as we would like it to be. The numbers range from cultivation figures, relatively hard data derived by proven means, to crop production and drug yield estimates, figures that become softer as more variables come into play. We publish these numbers with an important caveat: the yield figures are potential, not final numbers. Although they are useful for determining trends, they are ultimately approximations.

Each year, as we get better data through field research, we revise our estimates. This kind of field research is far from easy, since the secretive and violent nature of the illegal drug trade makes it difficult to develop precise information. This is particularly relevant given the tremendous geographic areas that must be covered, and the difficulty of collecting reliable information in diverse and treacherous terrain.

What We Know With Reasonable Certainty. The most reliable information we have on illicit drugs is how many hectares are under cultivation during any given year. For more than a decade, the USG has estimated the extent of illicit cultivation in a dozen nations using proven statistical methods similar to those used to estimate the size of licit crops at home and abroad. We can thus estimate the area under cultivation with reasonable accuracy.

What We Know With Less Certainty. Where crop yields are concerned, the picture is less clear. How much of a finished product a given area will produce is difficult to estimate. Small changes in such factors as soil fertility, weather, farming techniques, and disease can produce widely varying results from year to year and place to place. In addition, most illicit drug crop areas are not easily accessible to the USG, making scientific information difficult to obtain. Again, we are estimating potential crop available for harvest. Not all of these estimates allow for losses, which could represent up to a third or more of a crop in some areas for some harvests. The value in estimating the size of the potential crop is to provide a consistent basis for a comparative analysis from year to year.

Since cocaine remains at the top of the USG's drug­control priority list, we have gradually improved our yield estimates. Our confidence in coca leaf yield estimates, as well as in the finished product, has risen in the past few years, based upon the results of field studies conducted in Latin America. Six years ago, after completing preliminary research, the USG for the first time began to make its own estimate of dry coca leaf yields for Bolivia and Peru instead of relying solely on reports from the governments of those countries. Additional research and field studies have helped refine these estimates and make similar improvements possible in estimates of other drug crops. In all cases, multiplying average yields times available hectarage indicates only the potential, not the actual final drug crop available for harvest.

Harvest Estimates. Estimating the quantities of coca leaf, opium gum, and cannabis actually harvested and available for processing into finished narcotics remains a major challenge. While we are making progress, at this time we cannot accurately estimate this amount with precision for any illicit crop in any nation.

While farmers naturally have strong incentives to maximize their harvests of what is almost always their most profitable cash crop, the harvest depends upon the efficiency of farming practices and the wastage caused by poor practices or difficult weather conditions during and after harvest. Up to a third or more of a crop may be lost in some areas during harvests.

In addition, mature coca (three to six years old), is more productive than immature or aging coca. Variations such as these can dramatically affect potential yield and production. Additional information and analysis should allow us to make adjustments for these factors in the future. Similar deductions for local consumption of unprocessed coca leaf and opium may be possible as well through the accumulation of additional information and research.

Processing Estimates. The wide variation in processing efficiency achieved by traffickers complicates the task of estimating the quantity of cocaine or heroin that could be refined from a crop. These variations occur because of differences in the origin and quality of the raw material used, the technical processing method employed, the size and sophistication of laboratories, the skill and experience of local workers and chemists, and decisions made in response to enforcement pressures. (See Yield Estimates below.)

Figures Will Change as Techniques and Data Quality Improve. Additional research will produce revisions to USG estimates of potential drug production. This is typical of annualized figures for most other areas of statistical tracking-whether it be the size of the US wheat crop, population figures, or the unemployment rate-that must be revised year to year. For the present, however, these statistics represent the state of the art. As new information becomes available and as the art improves, so will the precision of the estimates.

Status of Potential Worldwide Production

In evaluating the figures below, one must bear in mind that they are theoretical. They represent estimates of potential production-the amounts that the USG estimates could have been produced if, and only if, all available crops were to be converted into finished drugs. Since these estimates make no allowance for losses, actual production is probably lower than our estimates. The figures shown are mean points in a statistical range.

Potential Opium Production. In Southeast Asia, estimated opium cultivation and production in the Golden Triangle countries fell in 1997. According to USG estimates, in 1997, growers in Burma, Laos, and Thailand cultivated an estimated 184,950 hectares of opium poppy, potentially producing 2,600 metric tons of opium. Burma's production accounts for 91 percent of this amount. There was a three percent drop in estimated cultivation, and a nine percent decline in production, from the 1996 estimate of 190,520 hectares of opium poppy, potentially yielding 2,790 metric tons of opium gum In Burma, estimated opium poppy cultivation fell by some five percent to 155,150 hectares from the 163,100 hectares reported for 1996. Estimated yield fell to 2,365 metric tons of opium gum for 1997, an eight percent drop from 2,560 metric tons in 1996. Weather conditions were largely responsible for the decrease in the crop. In Laos, however, estimated cultivation increased significantly by 12 percent to 28,150 hectares from the 1996 figure of 25,250 hectares; estimated production rose by five percent to 210 metric tons from the 1996 figure of 200 metric tons. Estimated opium poppy cultivation in Thailand fell dramatically by approximately 24 percent to 1,650 hectares from the 2,170 hectares observed last year. Thailand had an estimated potential production of 25 metric tons-17 percent less than the 30 metric tons estimated in 1996. In 1997, the USG's second survey of Vietnam identified significant new growth of 6,150 hectares of opium poppy cultivation yielding a potential 45 metric tons, almost double the 3,150 hectares yielding an estimated 25 metric tons of opium located last year. The USG did not conduct a survey in China's Yunnan Province in 1997.

Opium poppy cultivation in Southwest Asia increased by five percent in 1997. A 21 percent increase in opium poppy cultivation in Pakistan accounted for the much of the rise. Total hectarage for Afghanistan and Pakistan rose from 41,350 hectares in 1996 to 43,250 hectares in 1997. Total potential production for both countries rose from 1,305 metric tons to 1,350 metric tons. Afghan hectarage rose from 37,950 in 1996 to 39,150 hectares in 1997. The estimated yield rose by three percent from 1,230 metric tons in 1996 to 1,265 metric tons in 1997. Pakistan's hectarage increased from 3,400 hectares in 1996 to 4,100 hectares in 1997. Estimated yield rose 13 percent from 75 metric tons in 1996 to 85 metric tons in 1997. India's illicit cultivation declined from 3,100 hectares of opium poppy in 1996, with a potential yield of 47 metric tons of gum to 2,050 hectares potentially producing 30 metric tons of opium in 1997. We have no firm data about poppy cultivation or opium production in Iran. The USG last examined Iran's cultivation in 1992. At that time, we detected approximately 3,500 hectares of opium poppy with a potential yield of 35 metric tons to 70 metric tons. There has been no new information from USG sources in 1997.

The USG is still examining the illicit drug crop situation in Russia and the Central Asian countries formerly part of the Soviet Union. While some of these countries may be able to produce significant opium poppy harvests, the USG still lacks sufficient data to identify and measure all suspected cultivation areas.

In the Western Hemisphere, the opium poppy growing countries have maintained active crop control efforts despite continuing campaigns by criminal organizations to expand the areas under cultivation. In Colombia, USG estimates showed Colombian opium poppy cultivation at 6,600 hectares, five percent more than last year, enough to yield an estimated 66 metric tons of opium gum, or six tons of heroin, assuming no losses. In Mexico, the 1997 crop was 22 percent smaller than the previous year's. After Mexican government eradication operations destroyed 8,000 hectares of poppy, there were 4,000 hectares available for exploitation by the drug syndicates, with an estimated potential yield of 46 metric tons of opium gum, or 4.6 metric tons of heroin. Guatemala's poppy cultivation remains at minimal levels after government efforts.

Coca Cultivation. Worldwide coca cultivation dropped seven percent from last year's 209,700 hectares to 194,100 hectares in 1997. The most dramatic success, as we noted earlier, was the drop in Peru's coca crop. With only 68,800 hectares of coca estimated at the end of 1997, the crop was at its lowest point since 1986. Despite an active eradication program, Colombia experienced an increase in coca cultivation to 79,500 hectares at the end of 1997. This was an 18 percent increase over the 1996 total of 67,200 hectares. In Bolivia, government forces eradicated 7,000 hectares, leaving 45,800 hectares under cultivation. This is a five percent decrease from 1996's estimate of 48,100 hectares. Some coca is cultivated in inaccessible areas of Brazil, but its extent is unknown. Ecuador has only negligible amounts of coca.

Cocaine Yield Estimates

The cocaine yield figure is offered with the same caveat as the crop harvest yield data: it is a figure representing potential production. It is a theoretical number. It does not in every case allow for losses or the many other variables that one would encounter in a "real world" conversion from plant to finished drug. In fact, the amount of cocaine HCl actually produced is probably lower. A USG team that studied cocaine processing in Bolivia's Chapare region in 1993 found that in the laboratories under observation processing efficiency was lower than previously thought. The estimate for Bolivia was reduced accordingly and the figure published as a point estimate rather than as a range.

In 1997, taking into account estimates of local consumption and local seizures, the USG calculates that if virtually every coca leaf were converted into cocaine HCl, and there were no losses because of inefficiency, bad weather, disease, or the deterrent effects of law enforcement, 650 metric tons of cocaine HCl theoretically could have been available from Colombia, Bolivia, and Peru for worldwide export. This figure includes 325 metric tons potentially available from Peru, 200 metric tons potentially available from Bolivia, and approximately 125 metric tons potentially available from Colombia. In publishing these numbers, we repeat our caveat that these are theoretical numbers, useful for examining trends. Though every year research moves us closer to a more precise cocaine yield estimate for Latin America, we do not yet know for certain the actual amount available for distribution.

Consumption Data

Most of the chapters in this report contain some user or consumption data. For the most part, these are estimates provided by foreign governments or informal estimates by USG agencies. There is no way to vouch for their reliability. They are included because they are the only data available and give an approximation of how governments view their own drug abuse problems. They should not be considered as a source of data to develop any reliable consumption estimates.

Marijuana Production

Cannabis cultivation continued to decline in Mexico in 1997 to 4,800 hectares with a potential yield of 2,500 metric tons. This is a 68 percent drop from since 1992. Mexican law enforcement agencies eradicated, 10,500 hectares of cannabis in 1997. In Colombia's traditional cannabis growing zones, where intensive eradication in previous years had virtually destroyed the crop, there was a resurgence of cultivation in 1993 to an estimated 5,000 hectares. That estimate did not change in 1997. Jamaica's cannabis crop dropped to 317 hectares in 1997 from 527 hectares in 1996. The 1997 potential yield was down 40 percent to 214 metric tons from 356 metric tons in 1996. We recognize that there may be considerable undetected cannabis cultivation in Central and East Asia, and on the African continent, though there is no evidence that any of this cannabis significantly affects the United States. As we gather more accurate information, we will report significant findings in future INCSRs.


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