Cocaine will become Colombia’s top export, overtaking oil, as production of the narcotic continues to grow as the government adopts a more lenient policy on drugs, Bloomberg Economics estimates.
Oil exports fell 30% in the first half of the year and the cocaine trade trend has steadily increased, meaning the latter could be Colombia’s No. 1 export as early as this year, according to the economist by Bloomberg Felipe Hernandez.
“We estimate cocaine export earnings to increase to $18.2 billion by 2022, not far from oil exports of $19.1 billion last year,” Hernandez said in a note. “The government is destroying laboratories where coca leaves are transformed into cocaine, but this has not stopped production from growing.”
Colombia’s cocaine production rose to a record 1,738 tonnes last year, while the amount of land planted with coca, the raw material for making the drug, rose 13% to a record by 230,000 hectares (570,000 acres) by 2022 compared to the previous year, according to a report by the United Nations Office on Drugs and Crime released this week.
Hernandez said the increase in cocaine production has had a short-term effect on activity, domestic demand and external accounts, although it does not appear to be correlated with the performance of the Colombian peso.
President Gustavo Petro, Colombia’s first left-wing leader, has shifted the nation’s approach to drug trafficking, seeking to crack down on drug traffickers who profit more from selling narcotics abroad rather than targeting producers of coca leaf, which are the weakest link in the production chain. Petro is seeking talks with the country’s main drug-trafficking groups, hoping to end six decades of civil conflict through peace deals.
The new political approach to drugs is making it easier for illegal groups to increase cocaine production, Hernandez said.
Bloomberg Economics calculates export volume as the difference between production and seizures, meaning the figure could be lower as the calculation does not take into account domestic consumption and seizures in transit and destination countries, while estimating the export price by adjusting the average wholesale methodology. 2015-2018 prices and the cost, insurance and export price of goods calculated by Andres Arias (2019).
Bloomberg Economics is an arm of Bloomberg LP that provides a macroeconomic research service for Bloomberg Terminal subscribers and is independent of the newsroom.
