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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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),
18. Powis, 50.
19. Ibid., 70.
22. Castillo, La Cosa Nostra..., 175.
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.,
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.
76. ..."Foreign Investment is Up 55% in 1993"
Latin American Research Report-Andean Group , December 16, 1993,
77. ..." Colombian Economic Statistics" American
Embassy, Bogotá: January 26, 1995. Email received from Walter Morales,
email@example.com 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,
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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