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6: The Impact of the INT on Colombian Economic Institutions

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The Colombian cocaine cartels have diversified and expanded their operations from a national organization to a regional one to a transnational one. With this expansion, they have increasingly taken on the structure and strategy of a transnational corporation (TNC). By doing so, they have unalterably changed the balance of power between themselves and the governments of the countries in which they operate. In Gramscian parlance they have become a counter-hegemonic group challenging the current hegemonic power.

Explanations for the explosive growth in drug trafficking and its effects upon the producing and consuming societies have, until recently, been limited and continue to evolve.(1) The earliest studies at the beginning of this century focused on the criminal nature of the activity. By the 1960s the focus changed to narcotics abuse as a public health issue. Presently studies on illegal narcotics trafficking have a strong policy focus, concern for the stability of political institutions being at the heart of these studies.(2)

Few studies have attempted to deal with the illegal narcotics trade as a multinational Corporation (MNC) or, preferably, a transnational corporation (TNC). Part of the reason for this is that early models of MNCs assumed a coherence and logic not readily apparent in enterprises such as the INT. Moreover there was not space within these models to deal with an illegal activity. Another important difficulty in conceptualizing the INT as an MNC is the very amorphousness of the INT concept which defies the precision required in analysis. To speak of the INT is to speak of a drug production chain which begins in the producer countries where the coca leaf is grown (principally Bolivia and Peru) and ends in the consumer countries, principally the U.S. and Europe. (See appendix). In actuality there are many MNCs along the drug production chain. The most clearly defined TNC to emerge is the Colombian cocaine cartels (see endnote).(3) Though these loosely coordinated groups located in Colombia are not cartels in an orthodox economic sense, they do exhibit certain characteristics consistent with cartel behavior in their attempts to set price and production level.

By examining the INT and Colombian cocaine cartels as businesses (or more correctly firms), it becomes clear they exhibit the characteristics of a transnational corporation (TNC). Examination of their history and structure suggests they parallel that of other TNCs.

The known structure and strategy of the cartels are examined within the literature of two different yet complementary fields, international management and international political economy. The international management strategy literature on the structuring of TNCs demonstrates that the cartels have adopted the same structure which is normally associated with a network organization with many characteristics of quasi-vertically integrated TNC. Insights from this literature help explain the persistence of such organizations in the face of efforts by a wide range of law enforcement agencies to dismantle them. It also provides insights in INT/government relationships, based on previous analyses, of the balance of power between MNCs and host governments. Within the discipline of political science, such organizations are generally grouped within the umbrella of transnational organizations (TNCs). In this chapter, I adopt the convention of referring to such organizations as transnational corporations (TNCs) in so far as I am able.

The purpose of this chapter is to assess the impact of the INT on Colombia's economic and financial institutions. I hypothesize that the illegal narcotics trade has negatively affected the capacity of the Colombian state to consolidate and increase its control over an effective economic program. Growing evidence suggests that the emerging organizational structure among TNCs is that of the network organization.(4) This type of organization is characterized as much by a set of relationships as by a formal structure. Indeed, many of the component parts are outside of the legal TNC structure as suppliers and other firms with mutual interests. Rather than relying on hierarchical power, network organizations allocate power, in part, by the degree of point centrality.(5) That is to say, power within the network is partially dependent upon the number of linkages controlled by any one portion of the network. If the parent organization continues to control critical linkages, it will retain centrality. Such would be the case when coordination continues to be exercised primarily by the parent organization, or it is the decision-point for resource allocation (i.e., it controls investment decisions).

What is important to remember, however, is that members of the network need not be "owned " by the parent, only that they are bound by contracts or by mutual purpose or advantage to the network. This in contrast to the more traditional mechanisms such as vertical integration. Earlier research by McRae and Ackerman attempted to conceptualize the Colombian cocaine cartels as vertically integrated corporations, but found that many of the necessary components of the production and transportation chain were not owned by the cartels. By considering all parts of the system as parts of a network with a common purpose of maximizing the return on illegal narcotics, this factor becomes unimportant.

In the case of the INT networks, component parts are allied in a common mission, the production and distribution of illegal drugs. The network has expanded to encompass all phases of the operation, from coca leaf gathering to "retail" sales. Because of their involvement in critical phases of the operation, the Colombian cocaine cartels have managed to maintain a high degree of centrality to the overall network and thus provide strategic direction. Specialized functions within the network, on the other hand, are performed by allied organizations which occupy comparatively weaker positions within the network and whose relationship with the coordinating center (the Colombian cocaine cartels) is often a function of their criticality to the overall operation.

Many factors identified in the international business literature could be applied to Colombia. In 1977 the successful spraying of Mexican marijuana fields with the herbicide parquet shifted the source for marijuana from Mexico to Colombia. "Colombian gold", a particularly potent form of marijuana known as sinsemilla (seedless), gained rapid popularity among drug users. Although cocaine developed rapidly as the drug of choice, marijuana was first to generate such enormous monies for Colombian dealers. Research by the Internal Revenue Service in the United States estimates income from illegal drugs (principally marijuana) tripled in growth rate from 5.1% of all income to 16.5% in 1979 and 23.4% in 1981.(6) When criticized for its methodology, another research study using currency generated at Federal Reserve offices across the nation was conducted. It found that "Florida alone had consistently received more currency in deposits than the Federal Reserve had placed in circulation. Surplus currency had grown from $921 million in 1974 to $3.3 billion in 1978."(7) Robert E. Powis notes the Banco de la Republica estimates the marijuana boom was responsible for bringing in U.S. $400 million in hard currency during 1977.(8)

By the end of 1977, however, cocaine dominated the illegal narcotics trade thanks to Carlos Lehder's technologically sophisticated transportation network using small airplanes and clandestine landing strips. Foreign exchange grew so rapidly that year, President Lopez Michelsen ordered the "side window" of the Central Bank opened where dollars could be purchased without demanding certification of origin. In an interview years later Lopez Michelsen denied the purpose of his decision was to facilitate laundering of drug monies yet never explains why he pursued such a policy decision.(9) We shall see that the policy behavior of the Colombian government was already forming a dialectic with the nascent INT.

Modifying Stopford and Wells' model of firm evolution in my earlier research, I developed an organizational typology set within a historical chronology for the INT in Colombia. The historical chronology traces three phases of INT evolution and demonstrates that the INT, like any other TNC, developed competencies and adjusted its organizational structure to deal with multiple political environments and obstructions to markets imposed by a variety of governments within which it conducts its business. As such, it developed multiple points of access, created alliances, and developed an articulate constituency that aided its development as a significant power challenge to the Colombian state.

In the following sections I assess the INT's impact on Colombia's financial and monetary institutions.

Phase ONE: 1974-1981

At the beginning of Phase One the INT, essentially a regional phenomenon, was dominated by decentralized local operations wherein decision-making power was dispersed and poorly coordinated. By the end of Phase One a more centralized structure permitting a monopoly over supply and distributions systems achieving economies of scale was needed to respond a more global demand for the product [narcotics]. Achieving economies of scale meant the cocaine cartels incurred cheaper costs as volume increased. This also reduced risk when single shipments were inevitably lost on occasion.

How large were INT profits and how can that be measured? While difficult to obtain exact amounts, there are studies which attempt to do this. Gunter's study on mis-invoicing as a means of calculating repatriated capital into Colombia shows "an average of $141 million per year (of capital coming) into the country, with a maximum of $465 million in 1979."(10) Exports of goods and services during phase one of the INT, despite the short-lived boom in minor exports at the beginning of the 1970s and the coffee bonanza of 1976, do not begin to account for this level of capital repatriation to Colombia.(11) Additionally, net factor income abroad did not increase significantly until the economy began to slow and repression by the Turbay regime escalated in 1979-1980.

Between March and October of 1978 the Cali coalitions(12) are reported to have sold U.S. $26 million dollars (wholesale) worth of cocaine in New York City. Carlos Lehder, working with Pablo Escobar and the Ochoa family, transported approximately $150 million of wholesale cocaine to the U.S between May and December. This raises the question: how were such large amounts of money returned to Colombia and reintegrated into the economy?

As discussed in the chapter on the evolution of the INT mulas or mules, those who carried cocaine strapped to their bodies, were initially used for transport. The same mechanism could also be used to return money. As the volume of money generated grew, this became impractical both for logistical and confidence reasons. Logistically the sums simply became too large for any one human to carry. Moreover, as the sums of transaction grew, confidence in mulas to not skim from the amounts decreased. Coordination problems grew as decision-making remained concentrated at the local units.

Looking to the future, Gilberto Rodriguez Orejuela began diversifying his interests and organized the conglomerate Grupo Radial Colombiano.(13) In addition to this conglomerate were chains of drug stores, soccer teams, periodicals as well as Corporacíon Financiera de Boyacá, controlling interest in Banco de los Trabajadores in Colombia and ownership of the First Interamericas Bank in Panama.(14)

As the logistical problems of humans carrying money back to Colombia grew, it became apparent it would be better if narco-dollars could be deposited in the U.S. and moved through the financial system. However, banking laws required that deposits of $10,000 or more be reported via Currency Transfer Report. Thus to deposit narco-dollars required using persons paid .05-1.5% of $9,999 to make the deposits at selected banks. "Smurfing", as a mechanism to launder money, developed seemingly overnight.

A smurf could dispose of between $50,000 and $100,000 in cash each day...A smurf who disposed of $100,000 would be paid somewhere between $500 and $1,000 for a day's work. The individual in charge of a road trip would get about 1.5% of all the money laundered. In addition, he would get .05% of all currency that he personally laundered at banks.(15)

Clearly the increase of narco-dollars and additional humans needed to launder the money added a layer of security risk detection. It also increased the cartels' vulnerability to theft by the smurfs.

The net emigration Colombia has had for at least the past forty years was also a factor in moving and repatriating INT profits. Elizabeth de G.R.Hansen's study shows that by the mid-1970s "an estimated 250,000 Colombians or more had legally emigrated to Venezuela, the United States, Ecuador, and Panama."(16) By the end of the 1970s, an estimated 250,000 to 400,000 illegal Colombians resided in the United States alone.(17)

Emigration enabled another level of sophisticated money laundering to occur. Hernan Botero, a captured money-launderer for narcotraficantes, describes how, in 1978, he bought a home in suburban Miami and opened an account in the name of his currency exchange business, Cia Rodnan, S.A. at the Landmark First National City Bank of Fort Lauderdale. He deposited checks payable to the firm, wrote checks on the account to purchase Certificates of Exchange from the Banco de Colombia and issued by the BdeR and payable in pesos. These Certificates of Exchange were then sold at a profit and the checks deposited in the bank from which the cycle would start again.(18) Between 1979-1980 most of the cashier's checks drawn on the Cia Rodnan account were mailed to the Pan American Bank of Miami and were payable to a specific account number of Banco de Trabjadores of Bogotá.(19)

In order to obtain a clearer sense of narcodollars' impact on Colombian economic institutions, it is worthwhile to understand Botero's explanation of how one deals with the "dollar black market" or parallel market in Colombia. Certificate of Exchanges are sold in the amount purchased at the rate of exchange for that day. The peso was constantly diminishing against the dollar in value, the purchaser would receive more pesos in 120 days. More often than not, however, the increase was offset by a steady rise in inflation. Botero describes another option: selling the certificates to a brokerage house or commercial bank within a few days and obtaining the additional pesos then. "Such a sale would be at the official rate of exchange which was at a price per dollar higher than the black market price."(20) The pesos check is then taken to a black market exchange house where a check in dollars is purchased. "Since the black market prices were lower than the official rate, he would be able to buy more dollars with his peso check than he had originally spent for the profits."(21) Although the profit was small, high trading volume could make the transaction valuable as the dollar checks would then be shipped overnight to the Landmark Bank for deposit to the Cia Rodnan account. Thus not only are narco-dollars being effectively laundered and finding their way back into the Colombian economy, the narco-entrepreneur established a legitimate business which generated profits on its own.

Eduardo Orozco, partner of Colombian coffee businessman Alberto Duque, presented himself in the late 1970s as a coffee importer and managed in the following five years to launder approximately $U.S.151 million across eighteen banks in the U.S.(22) Orozco testified that while 60% of the monies he laundered were narco-dollars, the remaining monies came from Colombian cafeteros seeking to evade taxes in Colombia.(23) Thus we see alliances beginning to form domestically between the cartels and subnational actors operating in the national and international arena.

The economic bonanza was well into a decline when Turbay assumed the presidency in 1978. By 1980 the GDP, which had experienced a steady growth average of 5% per annum, dropped to 4%. Colombia's textile industry which had experienced a steady growth in the beginning of the decade registered a negative growth of 12 percent in 1979 as inflation averaged 25 percent a year.(24) Contractionary economic policies were implemented to control inflation and Turbay continued to invest in infrastructure as revenues fell. Alberto Supelano notes that investment in industry was held back despite increases in financial savings forcing companies to resort to high interest loans.(25) Former narcotrafficker, Max Mermelstein notes that the

...cartel also acted as a bank for legitimate Colombian corporations [which] had chief tellers and even officers at select banks in Miami on the cartel payroll who would accept large cash deposits without reporting them. When the coffee or sugar or cement company needed more than the paltry $25,000 they were allowed to spend in dollars outside Colombia, they could go to one of the cartel's banks in Miami and negotiate whatever size narcodollar checks they wanted--in the millions if they needed it--to buy plant equipment.(26)

Cali money launderer, Beno Ghetis, testified his currency exchange business, SONAL, sold "dollars [in checks] mostly to businesses that needed to import goods to Colombia. The dollars were sold in checks that were needed to import goods to Colombia."(27) The checks, drawn, on SONAL's account in the U.S., were payable in dollars when presented. Powis notes that the seizure of almost $8 million dollars from Ghetis ' and the SONAL accounts at the Capital Bank in August 1981 represents the end of an era. Large currency deposits paid directly into bank accounts, bank accounts in fictitious names, fees paid bankers for not filing CTRs, or young Hispanic males lugging cardboard boxes and suitcases filled with cash into banks no longer dominated money laundering.(28)

A cartel accountant, Fernandez Espina, received approximately U.S. $12 million from accounts of Panamanian branches of the Colombian bank, Banco Santander to the accounts of Banco Santander de Gujon in Colombia. Those doing the remitting were Pablo Escobar's cousin, Gustavo de Jesus Gaviria Rivero and Juan Ramon Matta Ballesteros, a key figure in opening the market in Spain and nurturing the relationship between the Colombian and Mexican mafiosas. (29) This suggests that local banks performed a bridge role between the over and underground economies. The growth of a specialized organization as part of a network organizational form helps us understand how local banks were able to perform their role. As pieces of the network they could be moved into and out of the network as new opportunities presented themselves or as new threats prevailed.

The Colombian economic situation during Phase One of the INT suffered from the Dutch Disease or domestic financial disequilibrium.(30) The financial sector and its institutions were considered weak meaning since financial institutions were only superficially integrated into most Colombians lives. There was broad state intervention in interest rates, a high concentration of assets, low competition and the absence of a simple money market.(31) The financial sector had been shaken by reckless lending habits exacerbated by a lack of effective supervision and control.

The decentralization and democratic character of the INT during Phase One made it an appealing alternative to those seeking wealth and initial capitalization of legal enterprises. The lack of vertical organization made it easier for those, including the Colombian government, who wanted to take advantage of the drug bonanza. The Colombian government's efforts to participate in the bonanza were limited to already existing strategies to reshape Colombian economic institutions. The opening of the side window at the central bank suggests a tacit acceptance of a dual economy and a dual state apparatus. It also suggests that the high concentration of financial assets described by Clavijo was inefficient to capture narcoprofits, the management of which was itself still in a very crude stage of development. On the one hand this confirms a portion of my hypothesis, that the INT did affect Colombian monetary institutions, but it is not clear that this impact negatively affected the Colombian government's capacity to manage its economic policy. It also supports our schema of firm development. Since the INT was dominated by local unit decision-making, there was very little the GOC could do beyond opening the side window to accommodate the increasing money supply. The larger impact on Colombian financial institutions, during this phase, is seen on local banks and the bridge role they played between the dual economies.

While the coffee bonanza could be negotiated with FEDECAFE, the drug bonanza, which grew from one-third of coffee exports in 1977 to 126% of coffee exports in 1978(32), could not be negotiated directly. Supelano notes economic policies adopted are more the "product of choices made to provide a temporary balance between power groups or the product of short-lived cultural influences."(33) Financial institutions altered their structure in an attempt to stabilize and strengthen these institutions. This occurred through increased measures designed capture the small saver and producer, characteristic of both coffee and narcotics producers, as well as decrease liquidity risks.(34)

Such strategies, however, raise the question of how and when do such negotiations either increase or decrease (neutralize) the emergence of a significant power challenger to the Colombian state. State intervention during this period focused on more macroeconomic approaches in the form of a restricted credit market, forced investments, and increased reserve requirements for banks. This did not necessarily increase the oversight of the banking superintendency. Subsequent events suggest that reassertion of stricter state control on the economy did not improve the situation.

Intersections of vulnerability and access between the Colombian economy and narcodollars on a microeconomic level are easily identified. Consistent with the government's decision to incorporate narcoprofits into the financial system we see an explosion of U.S. branches of Colombian exchange houses where dollars were accepted in exchange for equivalent pesos in Colombia at the black market rate. The role of local banks as bridges between the two separate areas of the economy is fairly well documented.

Less clear is the intersection of the Colombian economy and narcodollars on a macroeconomic level. Obviously the decision to reopen the "side window" of the BdeR represents an effort by the Colombian state to capture narcoprofits as part of a macroeconomic policy. Less obvious are smaller economic decisions made by the state. Naylor suggests that during Phase Two capitulation to hot money occurred as the Colombian government was forced into an arrangement of gold-washing in order to bolster international reserves.(35) Only the Colombian government may legally purchase gold. Despite nearly constant exports by the Colombian government, Colombian gold reserves nearly doubled between 1978-1979. Gold mining and/or excavation of historical gold artifacts does not appear to have increased during this period, leaving the source of gold the government bought and exported unexplained. One answer may be that, at the least, an embryonic money-laundering scheme was in place prior to the more overt arrangements of a few years later suggested by Naylor.

The Colombian economic situation continued to deteriorate in terms of its international financial condition as part of the general flight from lending to Latin American countries occurred. Between 1980 and 1981, during the Turbay administration, there was such an influx of foreign capital that the black market exchange rate was below the official exchange rate (meaning the dollar was at a discount) and, according to Rudolf Hommes who later became finance minister,

"probably reflect(ing) an excess supply of illegal foreign exchange. Five percent differential at the end of 1981 disappeared during the first quarter of 1982. Beginning in June of 1982 a premium over the official exchange rate was paid for in dollars sold in the parallel market reaching a premium peak of 35% in June of 1983."(36)

This was Colombia's economic situation as Phase Two of the INT began and which newly elected President Belisario Betancur encountered when he assumed office in 1982.

Phase Two: The Golden Years, 1981-1986

Phase Two is characterized by the centralized coordination of dispersed portions of the INT into specialized competencies. During this period the original social network, which consisted of relatives and childhood friends, expanded to meet growing needs of the organization for handling large sums of cash via money-laundering. Spin-off enterprises developed and the need for increased security resulted in downstreaming control at the consumer level and upstreaming control via laboratory production of coca leaves and cocaine base. This means cartel leaders sought to control some of their risk at the consumer level by setting up Colombian immigrants in consumer countries where safe houses for transporting narcoprofits could be established. Attempts to "upstream" involved the cartels setting up their own labs rather than rely on "mom and pop" labs.

The major crime families stratified into two different market structures. One level was a stratum of oligopolistic market behavior which coexisted with a second stratum of more competitive sectors. These developed as conscious efforts toward increased centralization dominated organizational restructurings.(37) This represents continuing efforts from the end of Phase One to consolidate economic, political and military resources. In response to market demands for drugs, the organizations' need for increasely sophisticated money laundering grew. This growth forced a change in organizational structure from predominantly clan and kinship organizations to an enlarging network allowing the entry of other legal and illegal actors. Spin-off enterprises of both legitimate and illegitimate varieties proliferated.

One theoretical framework upon which this study draws is the work of Antonio Gramsci. The INT, during Phase Two, emerged as a major power challenger and a cultural counter-hegemonic force. It could not do so, however, had it not developed an articulate constituency. As the INT expanded and centrally organized the variety, levels, and numbers of constituents grew. Constituents, as part of the network, often owned businesses in their own rights. Therefore they could offer their services outside the networks, increasing their profits. During Phase Two the INT began appropriating and developing constituents in various branches within the formal institutional structure of the Colombian state. The constituency existed external to and as a part of the Colombian state. Colombian researchers Krauthausen and Sarmiento note that the "absence of order and a formal legal apparatus makes impossible the formal institutionalization of commercial practices."(38) The impossibility of formal institutionalization of commercial practices does not obviate the need for such. The INT's broadening of its constituency highlights the dynamism of the network in overcoming limitations imposed by its illegality.

Amidst hotly debated allegations of hot money, in August 1982, Belisario Betancur was elected president. Betancur offered an amnesty for the "hot money" or black dollars provided it was invested in legal enterprise. The first voices of opposition were local banks, "presumably because legalization of the money would force them to pay higher interest on any of these funds deposited with them."(39) Moreover, the Colombian Supreme Court ruled the amnesty offer unconstitutional.

Increasingly unstable in response to internal problems, the Colombian economy began to feel the effects of a global recession in progress. On October 8, 1982, President Belisario Betancur decreed an economic state of siege. Its goals were to strengthen financial institutions and provide liquidity for those in trouble.(40) Reserve requirements and banking regulations were relaxed. Measures were taken to restore public confidence in the financial sector. Intense discussions about nationalization, what it meant, and what legal proceedings were necessary should the GOC decide to implement such a policy abounded. Maintaining confidence in the financial system was a third goal as decisions about what exactly constituted a financial institution took place.

The financial conglomerates continued to grow through financial speculation and concentration of ownership even as they were the cause of a widening crisis. "Eighty percent (80%) of all external private debt was owed by the four largest (financial) groups: The Ardila Lulle, the Santodomingo, Banco de Bogotá, and Banco de Colombia."(41) Additionally, a cornerstone of state and parastate relationships, the Banco Cafetero (bank of the coffee producers) accepted so many deposits that it grew at a rate exceeding its capacity. The resultant inefficiency became entangled in credits to businesses resulting in financial difficulties for large corporations such as Inversiones Samper and the Fundacíon de Santa Fe. More importantly there developed a lack of confidence in Banco Cafetero secondary to its dealings with private credit entities that did not uphold its state image.(42)

Consequently the Colombian government was forced to nationalize five bankrupt banks(43) and provide huge issues of currency to prevent some of the larger businesses from closing. Capital flight between 1982-1983 increased, according to Morgan Guaranty estimates, to $U.S. 0.7 billion compared to negligible amounts between 1976-1982.(44) The peso remained overvalued by 35.9% in 1983 and was not corrected until 1985.(45) The net international reserves had dwindled from U.S. $5.6 billion in 1981 to U.S. $4.9 billion in 1982 to U.S. $3.1 billion in 1983 to $U.S. 1.8 billion in 1984. Estimates of foreign bank deposits by Colombian residents by the end of 1985 amounted to approximately U.S. $2.6 billion of which U.S. $1.8 billion was deposited in U.S. banks. Hommes notes this was not an inconsequential amount inasmuch as U.S. $2.6 billion amounted to 19.8% of Colombia's total recorded foreign debt and 37.7% of registered private foreign debt.(46) Moreover, the external debt grew even faster in the face of a recession which, fueled by the relaxed import policy of previous governments, prohibited increased tax revenue thus requiring further foreign debt.

Cartel money launderer, Ramon Milian Rodriguez, testified before the Kerry Commission that, in 1983, he laundered and managed assets for the cartels worth between U.S. $10 and U.S. $11 billion.(47) Each returning drug flight by Air America pilots during this period carried between one and six million dollars in cash and averaged 3-4 trips a month.(48) However, Peru's expansion of leaf production combined with the successful breeding of new strains of coca in the Amazon of Brazil contributed to the collapse of cocaine prices from U.S. $20,000 per kilo (wholesale) in 1982 to U.S. $4,000 in 1984(49). The precipitous fall is reported to have nearly caused an international drug war until agreement on the division of the market was reached by major international traffickers meeting at the Vitoshi Hotel in Sofia, Bulgaria.(50) The major traffickers agreed to hold back supplies of cocaine until the price rose again and introduced "crack" into the market.

In the meantime BCCI (Bank of Credit and Commerce International) had developed a strong Panamanian operation in conjunction with Manuel Noriega. Recall Noriega negotiated the ransom demand in the 1981 kidnapping of Marta Ochoa, sister of Medellín cartel capos, Jorge and Fabio Ochoa. BCCI acted as broker for many money-launderers with much of the money going into smaller banks, while taking a substantial fee for itself. In an attempt to strengthen its mainland connections, BCCI of Luxembourg with a capital investment of U.S. $15 million from Arab bankers purchased Banco Mercantil, a Colombian bank with branches in Medellín and Cali.(51) The sale was quite unusual despite praise in the Colombian press for helping the struggling bank. Recall earlier legislation prevented foreigners from owning more than 49% of a single Colombian financial institution. In this case the rules were bent via Decision 24 of the Cartagena Agreement which permitted foreign investments as a means of avoiding bankruptcy.(52) Hernando Pryor Varon, a key negotiator in the purchase of the bank, was later implicated in the 1987 scandal of contracting bribes paid for the construction of Colombia's Pacific Naval base. Renamed the Banco del Credito y Comercio de Colombia (BCCC), the bank's management was fined for violation of currency laws in 1989 and in 1991.

An exchange crisis loomed in 1984 as international reserves fell further deteriorating Colombia's international financial position. International monies became unavailable for lending. Moreover gold reserves fell by more than 50% between 1983 and 1984. Naylor argues that the Colombian government's capitulation to hot money came in two stages. In February 1984 the Colombian government was forced into a bizarre arrangement for the purchase and sale of gold. Gold-washing, as an embryonic form of money-laundering, had begun a few years earlier. In the current scheme the GOC bought gold domestically for pesos at nearly U.S. $100 above world market price and no inquiry concerning the origin of the gold.(53) Subsequently, the gold was sold abroad at world market prices. This benefitted underworld financiers who used dollars earned abroad by cocaine exports to purchase gold which was imported into Colombia and sold to the BdeR at a 30% mark-up in pesos.

The second way in which the government capitulated was more political in the sense that elements in the military and the old oligarchy cooperated with narco-financieras to spirit what they could out of the country. This cooperative venture had two objectives: 1) personal gain and 2) an attempt to undermine Betancur's proposed guerilla amnesty. Naylor suggests, if true, flight capitalists would had to have some assistance from abroad(54). He notes that in May 1992 the Colombian minister of defense arranged for a U.S. $47 million loan with the London Branch of Chase Manhattan Bank to purchase imported military equipment. A year later U.S. $13.5 million of the loan remained unspent. However, a telex (later proven fraudulent) was sent to Chase in NY requesting the remaining loan monies transferred to Morgan Guaranty were funds were distributed among the Zurich branches of the Israeli Hapoalim Bank.

The theft remained undiscovered till September 1983 when the GOC, apparently in conjunction with a planned offensive against the narcotraficante, attempted to draw on the funds to cover the purchases of aircrafts. Subsequent assassinations of those involved, including the chief investigator of the minister of finance, an important witness and lawyer for the BdeR, hardly encouraged investigation. Seven members of the investigation were dead and no trace of the money was ever found.

Three weeks following the assassination of Rodrigo Lara Bonilla in April 1985 former president Alfonso Lopez Michelsen traveled to Panama and met with three leaders of the major cocaine crime families. Reportedly, he offered a truce, a pardon, and/or opposition to extradition in exchange for the capos lending the Colombian government U.S. $3 billion to reactivate the economy.(55)

In 1985 institutional mechanisms providing policies for the repatriation of narcoprofits were put into place. The Colombian Congress authorized the government to issue special "bonds for the repatriation of capital" to be traded in the international market. These bonds could be redeemed at maturity or exchanged at any time for Central Bank paper and traded freely in the Colombian Stock market. The same law provided that when the holder of repatriated bonds agreed to trade them for Central Bank paper, there would be no investigations or sanctions related to the "implicit violation of the exchange-control regime derived from holding these bonds."(56) Proceeds from the conversion of these bonds to Central Bank paper also benefitted from tax-exemption or special tax treatment. Carlos Lehder took advantage of the general amnesty, repatriated his money, and returned to Colombia.

The above mechanisms are the first documented effect of the INT on Colombian economic institutions. Representing forward linkages to the international community through the Colombian stock market, these formal policies suggest a major capitulation beyond the usual "tax holidays" that each new regime offered when first taking power. It also permitted the Introduction of neoliberal heterodox approaches to gain acceptance while simultaneously refusing fiscal and currency adjustment measures demanded by the IMF. Neoliberal heterodox approaches gained strength through increasing the foreign debt to service existing loans rather than cover deficits; dismantlement of development lending systems, and indexing of all capital income, state revenue and public service tariffs.(57) Colombia was able, with the assistance of narcodollars, to avoid severe external debt problems while suffering a serious internal banking crisis.(58)

Problems plaguing the beleaguered financial sector had not disappeared by the time Vigilio Barco took office as president of Colombia in 1986. Banco de Trabajadores, with 70% of its ownership concentrated in the hands of Cali Cartel capo Gilberto Rodriquez Orejuela, was nationalized.(59) John Martz notes that subsequent tax evasion legislation cut many tax rates, thus reducing government revenue.(60) Barco had issued two resolutions designed to encourage repatriation of narcodollars and resorted to ordering bonds to cover governmental shortfalls.(61)

As organizations grow in size and complexity the demands of the communications systems to keep up with coordination needs can often halt growth. Even in the age of computer networks and instantaneous communications many organizations become hard pressed to sustain growth simply because coordination becomes too costly. The profits of the Colombian cocaine cartels required increased reliance on persons with expertise in money laundering who could insulate the leaders from the drug money. The cartels' vulnerability in its logistical inability to maintain strict oversight increased exponentially. Inclusion of additional layers of management and persons to oversee money laundering alters the centrality of leadership in two ways. First it permitted leadership to engage the GOC on a macro level suggesting that the INT was, in fact, having a significant effect on the Colombian government's economic institutions. Backward linkages took the form of fiscal and monetary policy choices aimed at stabilizing the exchange crisis and strengthening the financial sector which had proven particularly vulnerable.

The point at which the backward and forward linkages appear to merge is the Colombian government's refusal to renegotiate the national debt. Although debt service as a percentage of export increased from 13 percent in 1985 to 26.4% in 1987, many policy decisions suggest a deep conflict of interest between a government attempting to decentralize while not backing up such a decentralization with adequate funds. Thorp notes that

a sudden reduction of debt obligations would inject spending power at the decentralized level improving the budget position of local governments and state agencies in a way beyond the control of the central government, which is unacceptable to the traditions of tight management developed at the centre."(62)

It could be argued that, in a somewhat perverse manner, the INT and the Colombian government engaged each other in ways permitting both to deal with one another more directly without requiring the central government to give up much control at the periphery. This kept the periphery satisfied by bailing them out when the need arose while not overly interfering in their business affairs and clients. Secondly, organizational changes such as those occurring within the INT during Phase Two altered power relationships within the organizational network providing mechanisms for subsidiary components of the network to challenge the parent with renewed bouts of competition.

Phase Three: Cracks in the Firmament, 1987-Present

Beginning with Phase Three, the growing inflexibility imposed on local operations by centralization combined with a distancing of cartel capos generated more distrust. With the renewal of turf wars between the cartels, cooperation with the police by local operations increased in an effort to protect their own struggling enterprises.

Barco continued efforts to obtain financing for the social and economic policies considered crucial to Colombian development. Increased debt service rapidly decreased whatever gains in economic growth were achieved. Yesid Soler, Director of Economics at the Colombian national University asked, "What good is a 5% or 6% growth when 45% of Colombian workers' labor is owed to international creditors?"(63) Banks remained in trouble during 1987 as the government took over Banco de Colombia, Colombia's largest commercial bank and the financial cornerstone of the conglomerate Grupo GranColombiano.(64) By the end of 1987, loans remained elusive as Colombia's debt papers were traded on the secondary market at 72-76% of face value. Gold reserves dropped nearly 75% between 1986 and 1987 and Barco ordered another bond issue to cover a budget shortfall. Clearly bond issues became a quick method for repatriation of narcoprofits. In January 1989 Colombia suspended payments of principal to international commercial banks. By March negotiations for a jumbo loan, "Challenger", were completed with 25.8% provided by Japanese banks, 30.6% from U.S. banks and 43.6% from European entities.(65)

A report from the World Bank was leaked to the press. In its analysis of Colombia's economic woes, the bank points to an economy controlled by a few and which "has barred the door (of reaping benefits of various bonanzas) through legalistic maneuvers or through sheer physical intimidation."(66)This was not an easy time for either the cartels or the Colombian government as violence increased in response to power challenges within the cartels and international demands for improved and effective policing of the INT by the Colombian government.

The Gaviria Administration, which came to power in 1990, retained the neoliberal policies of the previous administration and adopted even more radical measures. Subsidies were eliminated, interest rates on development funds were now tied to an average of the commercial bank rates. Reduction of import tariffs did not immediately result in increased imports making monetary management more difficult. Inflation reached 32.4% amid increased austerity measures as public spending was cut, the money supply squeezed, and increased interest rates for open market operations ordered.(67) Gaviria's administration offered incentives for investment and export as the core of its program commitment to privatization and decentralization. Communications, rail, ports and five of the nation's banks were privatized. Official price supports enabled decentralization of economic agencies and released the agricultural sector from traditional regulation.(68)

Moreover, Law 9 of 1991 liberalized exchange controls permitting buying and selling of foreign exchange up to U.S. $20,000 in Colombia. Not everyone, however, was happy about such liberalization. Carlos Angel, chairman of the National Association of Industrialists (ANDI) charged that "the value of Colombian currency would now be set by money launderers."(69) By September 1991, after liberalization of the exchange rate, this charge appeared to have merit as an oversupply of dollars widened a gap between the free and official exchange rates.(70) Banks stopped buying dollar notes taking only checks or exchange certificates in an effort to improve their margin. The difference between exchange rates for the week ending August 23 was a free market rate 13% lower than the official rate and and 15% lower than the exchange house rate. How was Gaviria able to not only propose such sweeping policy changes, let alone achieve some of them?

Recall the Barco regime was plagued by increased terror and violence as the cartels fought one another and anyone. Levels of violence escalated following the assassination of Luis Carlos Galan and renewed turf wars between the cartels in 1988. Exhausted by the violence the Colombian people were receptive to candidate Gaviria's promise that he would not renew the extradition treaty with the United States. While his election to the presidency decreased some levels of violence, it did little to stabilize the economy.

At a meeting of the National Exporter's Association, Carlos Ossa Escobar, a member of the BdeR's board of directors said that, "the constitution's ban on extradition had generated an indiscriminate influx of dollars into the country and warned that `measures should be taken to control money laundering in Colombia more strictly'. The exporters expressed their confusion over recent presidential decrees which grant amnesty for the importation of dollars but limit the exporters' dealings."(71) Two weeks later, Colombian Minister of Finance, Rudolf Hommes, announced drastic controls on Colombian banks abroad in order to detect tax evasion and money laundering. One of the measures announced included suspension of bank reserves and mandatory surrender of information on movements in suspicious accounts.(72)

The battle to curb the influx of dollars continued into January 1992 when the official exchange rate ceased to be used as a reference rate for exchange operations.(73) The new reference rate is set daily by averaging buying and selling rates on the market using certificates of exchange which cannot be exchanged for pesos for a year. In July a reported scarcity of U.S. dollars pushed the exchange rate on the parallel market to 650 pesos to the dollar by July 3.(74) Manager of the BdeR, Francisco Ortega explained the decrease in exchange operations at the Central Bank from an average of U.S. $60 million to U.S. $600,000 to the scarcity of dollars. Colombian economists, however, disagreed that there was a scarcity of dollars noting that the holders of dollar notes were exchanging them for checks in order to avoid the withholding charge of now 10%. These dollars were then used to purchase goods which re-enters the country as contraband.(75)

The economic policies of the Gaviria administration began to bear fruit in 1993 when inflation dropped to 22.6% and the growth rate reached 5.7%. Foreign investment grew by 55.4% compared with 1992.(76) Although energy and mining sectors were the top recipients of foreign investment, the banking and financial sector was the second largest recipient. Economic performance followed a similar path in 1994 with a growth rate of 5.7% again and inflation stable at 22.59%.(77) The J.P. Morgan Bank noted, however, that Colombia's stockmarket continues to be underdeveloped due to shares being out of favor since the financial crisis of 1982.(78) The report was quite skeptical, however, that selling off the national banks would serve any but a short-term interest. It added that development of a stockmarket as well as a significant money market in Colombia would ultimately require the development of domestic investing institutions.

Bonds and bills account for 95% of all securities traded. Banco de Colombia remained co-administered by the Colombian state when it entered the Eurobond market offering and receiving U.S. $50 million in bonds in June 1993.(79) That same month Standard and Poors bestowed an investment grade rating on Colombia's dollar-denominated debt. By February 1994, privatization of Banco de Colombia was complete as Bancol SA, a holding company owned by industrial and banking investors Isaac and Jaime Gilinski, completed purchasing 75% of the bank.(80) The same day Banco de Colombia offered another issue of Eurobonds worth U.S. $50 million. Two weeks later, thanks to high credit ratings and a favorable risk rating from the National Association of Insurance Commissioners, the Colombian government offered Yankee bonds in the amount of U.S. $250 million in an effort to discharge some of its foreign debt.(81) Clearly the forward linkages of Colombia's financial institutions seemed measurably improved.

As the Colombian government strove to strengthen the backward and forward linkages of its financial institutions, the narcotraficantes were undergoing yet another organizational restructuring. Colombian money brokers became major actors during this phase under a system Cali operatives call bajando el dolar.(82) Bringing down the dollar involves purchasing blocks of cash in safe houses and getting them to Colombia for amounts as high as 25% of the amount transported. A Colombian broker bids on a block of cash which he pays for with pesos. The broker then sells the dollars to a legitimate Colombian businessman who pays in pesos, getting the dollars at a better exchange rate.(83)

Using tourists to smurf dollars in Cali has become a major business. Long lines of tourists were found outside money exchange houses in Cali waiting to change U.S. $25,000, the legal limit permitted tourists under Colombian law. Further investigation revealed money laundering activities in Cali averaging U.S. $400,000 a day.(84) In his study of large scale cambistas, Grosse reports one interviewee as stating that the black market in dollars had an estimated volume of U.S. $25 million daily or about U.S. $6 billion for 1990.(85) Sixty percent of this supply, he estimated, came from narcotrafficking.


Osvaldo Sunkel, in his analysis of structuralism and institutionalism, observes that the power of an institutional approach is its proximity to cultural change.(86) "Technological change is...a transformation-inducing aspect of culture, deriving from the accumulation of knowledge and transcultural inducements; but cultural patterns,...define the extent and nature of its incorporation into cultural change."(87) An institutional approach does not mean individuals are inconsequential. To the contrary, individuals are relatively autonomous social and cultural entities who are "institutionally and structurally shaped and circumscribed as regards values, norms, behavior, forms of association, and organization."(88) Therefore an institutionalist approach is complementary rather than oppositional to the network organization theories used to understand the evolution of the INT in Colombia and its impact upon its economic and legal institutions.

My original hypothesis states that the INT has negatively affected the capacity of the Colombian state to consolidate and increase its control over an effective economic program. The evidence, however, suggests that the impact of the INT on the Colombian state is more complex and nuanced than originally conceived. During the first phase of the INT's evolution, the Colombian government's ability to consolidate and increase its control over an effective economic program was not negatively affected by the INT.

The poorly coordinated and decentralized decision-making of the INT that characterized Phase One occurred within a context of weak financial institutions and a government struggling to open its economy and political system following sixteen years of rather closed rule. The high concentration of assets in the Colombian banking and financial sector seemed organizationally inefficient, except in the crudest ways, to capture narcoprofits. The Colombian state, in terms of backward linkages regarding financial regulations, did not change appreciably until the GDP slowed in 1980 and the textile industry began free-falling into a recession from which it would never fully recover. Contractionary monetary policies were carried out to control inflation, forced savings were mandated by the government, and credit was restricted. The governments of Phase One refused to devalue the rapidly appreciating Colombian peso driving the economy toward crisis.

Eduardo Sarmiento Palacio notes that analyses of the drug trade often miss how the preexisting fragmented structure of the Colombian state prevented the INT from being either coopted or appropriated in the historical way power challenges had been met by the state.(89) The network organizational form of local banks and financial groups allowed them to nurture their personal relationships with the various criminal groups who had yet to coalesce. This represents a type of "parainstitutionalism" which has substantial roots in Colombian history and culture beginning with the establishment of FEDECAFE.(90) Botero notes that where there does not exist an hegemonic group who is willing to manage the state, then decision-making roles are performed by whomever can obtain them. Thus the Colombian state was not effective in capturing either the coffee bonanza, which went to FEDECAFE, nor savings generated from UPAC, which were channeled to the finance corporations rather than industry.

The Colombian government's ability to consolidate and increase its control over an effective economic program was, however, negatively affected by the INT during the second phase of its evolution. During Phase Two, organizational restructuring toward a more centralized decision-making framework and increased need for money laundering expertise shifted the clan/kinship network of Phase One into a more stratified structure. The strategic alliances between the INT and powerful figures moved beyond the clientelistic practices of Phase One. Lacking the means to institutionalize formal commercial practices, the narcotraficantes began appropriating existing institutions where and when they could. As money laundering became more central to the INT such appropriation was easier and, in many cases, legal.

Sarmiento observes that as surplus savings stimulates growth through capitalization, the question becomes: how is such surplus moved? Consistent with the findings of this study, Sarmiento concludes that such movement takes place in Colombia because of an "institutional structure that permits the movement of surplus that is inevitably destined to fortify the activity and remove all obstacles for its functioning."(91) Discussing the question of the international transfer of capital, Edgar Reveiz notes that the process by which capital is transferred is through international banks. That it occurs through international banks is not an independent creation, institutionalization, or evolution of planning in underdeveloped countries. Capital transfers are well determined and, occasionally,imposed.(92) In terms of forward linkages, the Colombian government's reliance on the bonanza of international reserves with few questions asked ultimately added to a damaged international financial profile when seeking additional credits to manage the growing foreign debt. Additionally, an agreement toward coordinated policing aimed at breaking the financial empire of the narcotraficantes only began to emerge in 1986 when the U.S. enacted severe penalties for money-laundering. Prior to this time, money-laundering was not a crime in the U.S.(93)

The nationalization of five major banks and permission of ownership of smaller provincial banks by narcotraficantes represents domestic economic policies designed and implemented in response to the INT. That the banks had to be nationalized suggests what Jonathan Aronson calls the ambivalence of bankers about the role of regulators as bankers strive to find every loophole while looking toward national authorities for protection when threatened.(94)

Moreover successful management by the Colombian state of the INT problem was confounded and complicated by "diplomacies" launched by such notables as ex-president Lopez Michelsen and the hotly debated propositions offered by gremios such as FENALCO that stopped just short of legalization. This represents a heightened level of parainstitutionalism within the government permitting its response to the "search for political expression of one new fraction of capital based in the international traffic of cocaine."(95) Moreover, it suggests that the Colombian state lacked the capability required to deal with a power challenger of this magnitude. Attempts to restore the extradition treaty occasioned not only renewed violence, but capital flight of such a level that the economy was seriously imperiled.

The Colombian government's ability to consolidate and increase its control over an effective economic program was both positively and negatively affected by the INT during the third phase of INT development. With Gaviria's election to the presidency on his campaign promise to not renew the extradition treaty, the Colombian government strengthened and regained some control . Gaviria, unlike Barco, was able to push through some quite radical economic measures that succeeded in the short term. Continued selling of bonds as a means to repatriate narcoprofits was successful to the point that Colombian bonds were given an investment grade rating. This allowed Colombia to successfully sell a portion of its foreign debt.

Moreover, the new Colombian constitution permitted dual citizenship for the first time. Two million Colombians living abroad, constituting almost 7% of the total population, are eligible to vote and hold office in Colombia's lower house. The role this group plays in the Colombian economy is best understood when one realizes that in 1992 private transfers from Colombians oversees amounted to U.S. $1.6 billion, an amount equivalent to 12% of 1992s total exports.(96) This combined with changes in macro-economic policies permitting currency exchange and dollar denominated accounts outside Colombia, is designed to aid the Colombian state in regaining control of its economic institutions while continuing to pursue its policy of economic and political apertura.

Thus, the INT negatively and positively influenced the Colombian government's ability to consolidate and increase its control over an effective economic program. In the following chapter the impact of the INT on Colombia's legal institutions is examined.  

1. For an excellent historical treatment of the evolution of drug policy in the United States, see William O. Walker III, Drug Control in the Americas , Revised Edition (Albuquerque: University of New Mexico Press, 1989)

2. Two excellent thematic issues concerning drug policy and drug trafficking have been published by the North/South Center, University of Miami in the Journal of InterAmerican Studies and World Affairs, Vol.30 Nos.2&3, Summer/Fall 1988 and Vol.34, No.3 Fall 1992.


4. Ghoshal, S. and Bartlett, C.A., "The Multinational Corporation as an Interorganizational Network" Academy of Management Review, 1990. 15 (4): 603-625.

5. Ghoshal, S. and Nohria, N., "Horses for Courses: Organizational Forms for Multinational Corporations". Sloan Management Review , 1993. 34(2):23-25.

6. ...Off the Books, 57.

7. U.S. Congress, Senate, Committee on Governmental Affairs, Permanent Subcommittee on Investigations, Illegal Narcotics Profits, Hearings held 7,11,12,13 and 14 December 1979, 118.

8. Robert E. Powis, The Money Launderers: Lessons from the Drug Wars-How Billions of Illegal Dollars are Washed Through Banks and Businesses (Chicago: Probus Publishing Company, 1992), 33.

9. Alfonso López-Michelsen, "Is Colombia to Blame?" Hemisphere, Fall 1988, 35-36.

10. Francisco Thoumi, "The Size of the Illegal Drugs Industry in Colombia" The North-South AGENDA Papers, Number three, July 1993, 11.

11. See statistical table for time period under study at the end of this chapter.

12. The crime organizations had not quite yet acquired a more cohesive organizational structure either individually or collectively.

13. Castillo, Jinetes de..., 129.

14. Castillo, Jinetes de..., 124. The graph of businesses of the Cali Cartel provided by Castillo is reproduced and included in the appendix.

15. Powis, 110.

16. Elizabeth de G.R. Hansen, "Let Them Eat Rice?", Bordering on Trouble: Resources and Politics in Latin America, eds. Andrew Maguire and Janet Welsh Brown (Bethesda: Adler & Adler, 1986), 107.

17. Ibid.

18. Powis, 50.

19. Ibid., 70.

20. Ibid.

21. Ibid.

22. Castillo, La Cosa Nostra..., 175.

23. Ibid.

24. ..."Colombia; Textile Crisis Set to Continue" LARR Andean Group RA-81-02, 27 February, 1981, 8.

25. Alberto Supelano, "The Political Economy of Latin America: The Colombian Experience During the 1980s" Journal of Economic Issues Vol. XXVI No.3 September 1992, 852.

26. Max Mermelstein, The Man Who Made It Snow (New York: Simon and Shuster, 1990), 105.

27. Powis, 87.

28. Ibid., 89.

29. Luis Canon M., El Patron: Vida y Muerte de Pablo Escobar (Bogtoá: Planeta Colombiana Editorial S.A., 1994), 101.

30. Sergio Clavijo, "Overcoming Financial Crisis During Transition from a Repressed to a Market-Based System: Colombia 1970-1989" Chapter Five in The Colombian Economy: Issues of Trade and Development eds Alvin Cohen and Frank Gunter (Boulder: Westview Press, 1992)

31. Ibid., 94-95.

32. Rosemary Thorp, Economic Management and Economic Development in Peru and Colombia (Pittsburgh: University of Pittsburgh Press, 1991), 169. These figures refer to total income, not value returned to Colombia, amounts which would have been much smaller.

33. Supelano, 851.

34. Supelano, 823.

35. Naylor, 184-185.

36. Rudolf Hommes, "Colombia: A Case Study" in Capital Flight and Third World Debt eds. D.R. Lessard and J. Williamson (Washington, D.C.: Institute for International Economics, 1987), 170.

37. Krauthausen and Sarmiento, 31.

38. Ibid., 29.

39. Naylor, 181.

40. Manuel Jose Cepeda Espinosa, ed., Estado de Sitio y Emergencia Economica (Bogotá: Controlar General de la Republica, 1985), 35.

41. Gonzalo Jimeniz, Crisis Económica versus Apertura Democrática (Bogotá: Edita Libreria Sindical Colombiana--ISMAC, 1985), 56.

42. ..."Banco Cafetero: La llegada del Sherifo" Semana October 23, 1990, 18-20.

43. Banco del Estado, Banco de Colombia, Banco del Comercio, Banco Tequendama and Banco de Los Trabajadores. Colombia Hoy Vol. 25 No. 11 1991, 2.

44. Hommes, Capital Flight..., 169.

45. Ibid., 170.

46. Hommes, 169.

47. U.S. Congress. Senate. Subcommittee on Terrorism, Narcotics and International Communications of the Committee on Foreign Relations. Drugs, Law Enforcement and Foreign Policy: The Cartel, Haiti and Central America. 100th Congress, Second Session April 4, 5, 6, and 7 1988, 165.

48. Berkley Rice, Trafficking: The Boom and Bust of the Air America Cocaine Ring (New York: Charles Scribner's Sons, 1989), 85.

49. Naylor, 176.

50. Naylor, 171-179.

51. Mark Potts, Nicholas Kochan and Robert Whittington, Dirty Money: The Inside Story of BCCI, World's Sleaziest Bank (Washington, D.C.: National Press Books, 1992), 180-182.

52. ..."BCCI Transactions Begin to Unravel", Latin American Weekly Review, August 1991, 5.

53. Note: Colombia has a significant sub-culture of "grave-robbers" who excavate archeological sites illegally obtaining archeological and historical gold artifacts which are then sold to collectors.

54. Naylor, 184-157.

55. Naylor, 181.

56. Hommes, 173.

57. Supelano, 854.

58. Thorp, 181.

59. Castillo, Fabio Jinetes..., 128-129.

60. John D. Martz, "Colombia's Search For Peace" Current History, March 1989, 125.

61. Ibid., 248 and 250.

62. Thorp, 193.

63. ..."Barco Seeks U.S. $8 bn in New Credits" Latin American Weekly Review, October 8, 1987, 10.

64. ..."Colombia: Debt-for-Equity" Latin American Weekly Report, October 8, 1987, 7.

65. ..."Challenger Funds Expected in June" Latin American Weekly Report March 30, 1989, 10.

66. ..."Colombia: Closed Economy" Latin American Research Report-Andean Group, June 1989, 8.

67. Supelano, 855.

68. John D. Martz, "Colombia at the Crossroads" Current History February 1991, 69.

69. Croft, Adrian, "Colombia Reassures on Currency Market" American Banker Vol. CLVI No. 126 July 1991, 6.

70. ..."Colombia: Rate Gap Still Widening" Latin American Weekly Report, September 5, 1991, 6.

71. ..."Colombia: Dallas Morning News, Poppies and the DAS Report; Escobar and Quica Face Trials" Drug Trafficking Update Year #2 No.20, December 06, 1991, 1.

72. ..."Colombia, The Fight Against Drug Trafficking: A Balloon You Squeeze on One End and Swells on the Other" Drug Trafficking Update Year #2 No. 21, January 13, 1992, 3.

73. ..."Colombia; New Reference Rate" Latin America Research Report-Andean Group January 30, 1992, 5.

74. ..."Colombia; Unpopular Tax Reform" Latin America Research Report-Andean Group July 1992, 6 and 7.

75. Ibid.

76. ..."Foreign Investment is Up 55% in 1993" Latin American Research Report-Andean Group , December 16, 1993, 7.

77. ..." Colombian Economic Statistics" American Embassy, Bogotá: January 26, 1995. Email received from Walter Morales, February 5, 1995.

78. ..."Colombia's Financial Markets Opening at Last" The Economist December 18, 1993, 74-75.

79. ..."New Securities Issues" Wall Street Journal June 21, 1993. Sec. C pg. 17.

80. ..."Bancol SA Acquisition" Wall Street Journal Access No: 942010110 Proquest-The Wall Street Journal (r) Ondisc.

81. Thomas T. Vogel, Jr. and Thomas D. Lauricella, "Credit Markets: Colombia's Yankee Bonds Find Buyers Waiting for the Chance to Own Developing-Nation Debt" The Wall Street Journal, February 16, 1994, Sec. C pg. 20.

82. Douglas Farah and Steve Coll, "The Cocaine Money Market" The Washington Post Weekly Edition, November 8-14, 1993, 6-8.

83. Ibid.

84. Ibid.

85. Grosse, 1198.

86. Osvaldo Sunkel, "Institutionalism and Structuralism" CEPAL REVIEW No. 38, August 1989, 147-155.

87. Ibid., 151.

88. Ibid., 150.

89. Eduardo Sarmiento Palacio, "Economica del narcotrafico" in Narcotrafíco en Colombia: Dimensiones políticas, económics, juridcas e internacionales eds. Carlos Gustavo Arrieta, Luis Javier Orjuela, Eduardo Sarmiento Palacio and Juan Gabriel Tokátlian (Bogotá: Tercer Mundo Editores,

3rd edicíon, 1990), 18-72.

90. Botero, 267.

91. Ibid., 84.

92. Diaz Uribe, 60.

93. Although various financial regulations existed prior to 1986, it was only in 1986 that a specific statute dealing the revisions in the Bank Secrecy Act resulted in Money Laundering Control Act of 1986.

94. Aronson, 12.

95. German Palacio and Fernando Rojas, "Empresarios de la Cocaína, Parainstitutionalidad y Flexibilidad del Regimen Political Colombiano: Narcotrafico y Contrasinsurgencia en Colombia" in La irrupcion del paraestado: ensayos sobre la crisis Colombiana (Bogotá: CEREC, 1990) 72. Parainstitutionalism is defined as: A series of mechanisms of social regulation and conflict resolution that do not occur through the more formal paths of the constitutional or legal court, but which are governed by informal arrangements through ad hoc mechanisms; they can be legal or illegal; are alternative roads to institutions rigid and incapable of responding to the conjunctural challenges of social conflict or capital accumulation.

96. Ralph Schusler, "New Constitution Empowers Colombia's `Global' Population" South Florida Business Journal September 10-16, 1993, np.  

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