Bolivia and Peru are becoming a second, though compared to Colombia still relatively small-scale, pole of cocaine production in the Andes, feeding in particular a growing Latin American market in addition to the traditional U.S. and European markets. At least as significantly, the policies emphasised there in pursuit of the U.S.-led war on drugs are aggravating social tensions with potentially explosive results for the extremely fragile democratic institutions of both countries. If these trends are to be reversed, new and better funded policies are needed that put greater emphasis on alternative development and institution building, less on forced eradication, and that demonstrate more sensitivity to local culture. The proposed new U.S. budget, however, goes in the wrong direction.

Anti-drug, law enforcement and alternative development efforts in Bolivia and Peru over the last twenty years have not achieved a lasting reduction of illicit coca crops. Since the large-scale eradication campaigns in the second half of the 1990s, coca cultivation has again gained momentum in both countries, reaching 73,000 hectares at the end of 2003 when the UN Office on Drugs and Crime (UNODC) estimated combined annual cocaine production potential at 215 tons. Early indications are that there was another increase in 2004.

Counterdrug policies in Bolivia and Peru at the start of the 1990s produced the now generally accepted "balloon effect": coca cultivation squeezed at the mid-point of the Andes was shifted to Colombia at its northern end on a massive scale, transforming that country into the world's largest producer of coca leaf and cocaine. In 2000 and 2001, respectively, two U.S.-sponsored anti-drug strategies -- Plan Colombia and the Andean Counterdrug Initiative (ACI) -- were launched to counter drug production in Colombia and dam spillover effects but also to prevent re-emergence of major drug cultivation in Bolivia and Peru. Policy emphasis has clearly been on Colombia, where a massive aerial spraying campaign and strong interdiction and law enforcement measures produced a nearly 50 per cent reduction in coca crops -- to 86,000 hectares by late 2003 from the high of 163,000 hectares in 2000.

The ACI applies similar measures across the Andean region, in geographic and political settings that show marked differences to Colombia. However, U.S. counter-drug policies there also emphasise eradication and downplay the legitimacy of traditional coca production and have prompted mounting social protest by coca farmers, particularly in Bolivia but also in Peru.

There is no doubt that a large part of coca leaf grown today in the two countries is sold for processing into cocaine. The extremely weak governments and state institutions, which lack the capability to control their vast territories and enforce the law, have come under increasing pressure from social movements and populist opposition parties. The counterdrug policies impact on coca farmers from poor indigenous communities with historical grievances against the economic and political elites. The implementation and public perception of counterdrug policies add fuel to a political tinderbox that already has seen a president forced from office in Bolivia. Democratic governance, prospects for equitable socio-economic development and social peace in Bolivia and Peru are in serious jeopardy.

The potential to add to already considerable instability in the Andean region is compounded by links between parts of the Bolivian and Peruvian coca grower movements and international drug trafficking networks. The combination of expanded markets in Europe and South America, particularly Brazil, and the emergence of small drug trafficking networks in part linked to political cocalero movements has led to the expansion of Bolivian and Peruvian cultivation. Porous borders, corruption and a much less intensive interdiction effort compared to that in Colombia (where there has been a significant reduction in cultivation) make it relatively easy for both local and international drug networks to move their product.

Restructuring those counterdrug policies to focus more resources on alternative and rural development strategies, law enforcement and interdiction as opposed to forced eradication is likely to be more successful and to avoid negative impacts on Bolivian and Peruvian democratic institutions. Unfortunately, the U.S. budget for FY2006 just submitted by President Bush to the Congress proposes cuts in funding for alternative development and institution building of nearly 20 per cent for Peru and 10 per cent for Bolivia.

While it is unconstructive and unwise to brand the Bolivian and Peruvian social movements and their leaders as "narco-delinquents" or "narco-terrorists", the coca grower organisations in those countries will only gain greater international credibility if they sever all existing ties with drug trafficking networks and articulate democratically their legitimate demands for socio-economic change, including legal coca cultivation for traditional purposes. At the same time, the U.S., the European Union, Brazil, Argentina, Chile, the international financial institutions (IFI)s, the Organisation of American States (OAS) and the UN should strongly support alternative and rural development strategies there and provide, where possible, more aid also for programs to counter drug trafficking, money laundering and smuggling of chemical precursors.

Quito/Brussels, 3 March 2005