Pubdate: Thu, 30 Nov 2000
Source: Vancouver Sun (CN BC)
Copyright: The Vancouver Sun 2000
Contact:  200 Granville Street, Ste.#1, Vancouver BC V6C 3N3
Fax: (604) 605-2323
Website: http://www.vancouversun.com/
Author: Chad Skelton, Vancouver Sun
Series: Searching for solutions - Fix on the Downtown Eastside
http://www.mapinc.org/thefix.htm

THE BUSINESS PAGES

Green Revolution Sweeps Coca Fields. Marketing Innovations Remake Heroin's
Image For The Suburban Youth Market. Quality And Productivity Up, Prices
Down. Could Things Be Going Any Better For The Drug Industry?

Over the past decade, quality has improved even as prices have fallen.
Each year, manufacturers find ingenious new ways to make their product
better and cheaper. Entrepreneurial retailers set up just across the
street from each other advertising lower and lower prices, while
others explore new avenues of marketing and distribution.

In the new economy, these conditions are the business reality for
everything from laptop computers to microchips to cell phones. In
Vancouver, they are also the reality for merchants of heroin and cocaine.

It's a bit of a cliche to say that the international drug trade is a
big business. With an estimated $400 billion US a year in
international sales, the business is larger than the world's steel and
automobile industries combined. But the drug trade is also one of the
most innovative industries in the world.

 From cartels in Colombia that devise ways of getting more cocaine out
of each coca plant to the street-level dealers in Vancouver who
convince high-school students to try heroin by smoking it, the drug
industry does more than just passively supply addicts. It is, instead,
an aggressive commercial machine bent on expansion through increased
purity, lower prices and new products. In short, it is a a formidable,
perhaps even unbeatable, competitor.

Vancouver: Heroin's Factory Outlet

As Detective Rob McLaren of the Vancouver police drug squad begins to
explain the variation in Vancouver drug prices ("Heroin is a lot more
volatile than cocaine"), he stops himself in mid-sentence. "I sound
like a stockbroker."

McLaren, who has been an expert witness at hundreds of drug trials,
has kept track of this city's drug trade for close to a decade. During
that time, he has seen the street price of drugs -- especially heroin
- -- drop to be among the lowest in North America.

The RCMP's drug intelligence unit reports that the price of a gram of
heroin in Vancouver last year was about $180-$200. The price was
double in Toronto, at about $400 a gram. The price gap is smaller for
cocaine but still significant, at $80-$100 a gram in Vancouver
compared to $150 in Toronto. Why is heroin so much cheaper here?
"We're higher up in the supply chain," McLaren explains.

Traffickers based in Vancouver buy their heroin directly from
Southeast Asian producers in places like Myanmar (Burma). Traffickers
in Toronto, meanwhile, buy their heroin from Vancouver. "We're the
first step in the pipeline, so we get the best prices," McLaren says.

And since the early 1990s, Southeast Asia has been a strong and
growing source of high-grade heroin -- pushing purity up and prices
down. "Heroin started to drop in price dramatically and widened in
availability" during the past decade, McLaren says.

But reliable supply isn't the only reason for Vancouver's low drug
prices. The drug trade here is also remarkably competitive at the
retail level.

Dealing drugs has always been an attractive way to make fast cash. But
the criminal penalties for drug dealing in many North American cities
deter most from taking up the trade. Vancouver, meanwhile, is widely
believed to have some of the most lenient courts in the country. It
also has a large group of offenders -- Honduran refugee claimants --
who usually flee the country when released on bail, meaning no
criminal deterrent is likely to be very effective.

"We have an oversupply of dope and an oversupply of dealers," McLaren
said. "So the price is cheap." The increased purity of heroin, coupled
with its dropping price, is believed to be one of the main causes for
the rash of overdose deaths on the Downtown Eastside.

Other impacts are harder to determine. Some believe cheap prices
attract addicts from other parts of the country. Cheap heroin -- a
tenth of a gram can usually be bought for only $10 -- may also
encourage more users to try the drug.

The concentrated customer base on the Downtown Eastside also affects
the market. A marijuana dealer is likely to have a large number of
occasional customers who aren't very price sensitive because they use
the drug so rarely. But hard-core heroin or cocaine addicts purchase
so many hits in a given week, and the drugs comprise such a large
proportion of their budget, that price is far more important to them.

Their purchasing frequency -- often several hits a day -- also makes a
hard-core addict a cash cow for dealers. Street-level dealers can make
a healthy profit with only a dozen or so loyal hard-core customers,
McLaren says. And because each addict is a potential windfall,
competition for them is fierce.

Dial-a-dope operators who deliver cocaine or heroin to users downtown
hand out handwritten "business cards" with their name and phone number
to addicts while they badmouth the competition, McLaren says. Many
dealers will also allow a reliable customer to buy drugs on credit if
they're short of cash. "It's just good customer service," McLaren
says. "Sears does the same thing."

And like any good business, some dealers have tried to expand the
market. Just as crack lured new users to try cocaine, the purity of
heroin has increased so dramatically that many dealers have encouraged
their customers to try smoking it. As with crack, an addict who smokes
heroin tends to get a more intense, but briefer, high -- increasing
the number of fixes per day and the profits for dealers.

Dealers have also found that cheap, smokable heroin has opened up a
whole new market -- suburban teenagers -- who stayed away from heroin
because they associated it with downtown junkies. "There is no stigma
attached to [smokable heroin] because you're not using a needle,"
McLaren says. "They don't see it as addict behaviour."

How Bolivia Kicked Its Drug Habit

B.C. certainly has a significant homegrown narcotics industry.
Methamphetamine labs have sprouted up with increasing frequency, and
the province's marijuana industry is one of the largest in the world
- -- and one of the province's largest export industries. But when it
comes to the twin demons of the Downtown Eastside -- cocaine and
heroin -- traffickers must look far outside our borders for product.

That links Vancouver to a massive global narcotics industry. And just
as you can't explain rising gas prices at the pump down the street
without understanding how much oil Saudi Arabia is producing, the
heroin and cocaine markets on the Downtown Eastside are in many ways
dictated by what goes on in far-off places like Myanmar, Bolivia and
Peru.

Cultivation of the plants used to make hard drugs is concentrated in
remarkably few countries. The coca plant that serves as the base for
cocaine is essentially grown in only one geographic area: the Andes.
And only three countries account for virtually all cultivation:
Colombia, Bolivia and Peru.

Poppies for heroin can be grown in far more locations, and at least 13
countries have been source countries for the drug at one point or
another. But even heroin cultivation is heavily concentrated in just
two countries. Afghanistan and Myanmar accounted for 90 per cent of
the world's opium production in 1999, according to the U.S. state
department. The heroin in Vancouver comes primarily from Myanmar,
while inferior Afghan heroin feeds the European market.

With the production of drugs for the world market concentrated in so
few countries, narcotics has become an integral part of some small
nations' economies. In the late 1980s, for example, United Nations
drug experts estimated cocaine production in Bolivia accounted for as
much as 15 per cent of that country's gross domestic product and
employed up to 16.7 per cent of its work force. Cocaine, in other
words, was as important to the Bolivian economy as forestry is to
B.C.'s. (It employs 14 per cent of B.C. workers and accounts for 17
per cent of our GDP).

In the second poorest country in South America, it was hard to say no
to drug money. Jobs in cocaine cultivation and processing in Bolivia's
Chapare region absorbed many people who were thrown out of work by the
closing of the country's moribund mining industry in the 1980s, UN
drug reports indicate.

And there were additional jobs in supporting industries. Toilet-paper
production skyrocketed, for example. By the mid-1980s, more than half
the toilet paper produced in Bolivia was being used in Chapare as a
filtering agent for coca paste.

By 1994, tiny Bolivia (population eight million) was producing an
estimated 89,000 tonnes of coca leaf a year, supplying almost
one-third of the world cocaine market. Since then, however, production
has plummeted. Last year, only 23,000 tonnes of cocaine were produced
- -- a 74-per-cent drop in just five years. Cocaine now makes up only
two per cent of the nation's economy.

The sharp decline is due in large part to programs launched by the
U.S. government to destroy Bolivia's cocaine industry while paying
drug farmers to switch to legal crops like bananas or tangerines.
Unlike marijuana, which can be grown hydroponically indoors, coca
plants are farmed out in the open in the Andes. They provide a clear,
stationary target for U.S.-sponsored planes carrying biological agents
that destroy the plants.

The scenario looks much the same in Peru, which has also seen a
significant decline in cocaine production. In 1992, the country
produced 224,000 tonnes of coca -- about two-thirds of world
production. By 1999, thanks in large part to crop-eradication programs
launched by former President Alberto Fujimori, production had declined
some 70 per cent.

How To Build A Better Cocaine Plant

In the early 1990s, Peru and Bolivia accounted for the vast majority
of the world's cocaine supply -- by some estimates as much as 90 per
cent. But in the space of a decade, production in those two countries
dropped by more than 70 per cent. Tens of thousands of acres that used
to be full of coca plants have been destroyed or replaced by tropical
fruit. In response, cartels in Colombia have tripled cultivation, but
the end result would still seem to be bad news for the drug trade: The
amount of land growing coca in the Andes is down by about 13 per cent
since the early 1990s.

Yet, none of this has affected the supply of cocaine on the world
market. In fact, supply is steady, and prices have dropped. Crack is
now showing up in large quantities in both Canada and Europe.

So where is all that cocaine coming from? Aware of an impending
shortage in raw production, the drug syndicates of Colombia got to
work trying to find a better way of harvesting and refining cocaine.
They found one.

An undercover operation launched by the U.S. government known as
Operation Breakthrough concluded in 1999 that the cartels had
developed a new strain of coca with a higher potency and had come up
with new and better laboratory methods for processing coca leaf into
cocaine base. The result? While the availability of raw coca plant has
dropped dramatically, the cartels have been able to maintain the
supply of refined cocaine.

Colombia's Cartels Diversify

Still, the prospect of a coca plant shortage got nervous drug cartels
thinking about diversification. In the past few years, U.S. drug
reports indicate that Colombian and Mexican drug syndicates have made
major investments in heroin cultivation and production.

Most of that infrastructure is not yet in place, and heroin production
in Latin America is still minuscule compared to Southeast Asia. (Last
year only four per cent of world heroin came from Colombia and
Mexico.) But in the early 1990s there was no such thing as Colombian
heroin. U.S. drug agents are convinced criminal organizations in Latin
America see heroin as a lucrative new business for them and will ramp
up production soon.

While coca can grow in only specific geographic areas, the opium poppy
is fairly adaptable. And while it can take up to two years for a
perennial coca bush to be ready for harvest, opium gum can be
harvested as quickly as four months after planting.
- ---
MAP posted-by: Richard Lake