The Economics of Cocaine: Bolivia as a Case Study Introduction to Bolivia – One of the poorest countries in South America – Haiti is considered the poorest – 9.77 million people – Landlocked – Very unstable politically – new leaders very often

Bolivia $4,600 (2009 est.) Rank 145 Brazil $10,200 (2009 est.) Rank 104 Afghanistan $800 (2009 est.) Rank 219 Norway $59,300 (2009 est.) Rank 5 USA$46,400 (2009 est.) Rank 11 GDP - per capita (PPP) GDP - per capita (PPP): note: data are in 2009 US dollars

Other data: Population below poverty - 60% Household income distribution: -Lowest 10% - 0.5% -Highest 10% %

Coca leaf Around since 3,000 BC Increases productivity Used for medicine – tea for altitude sickness Ceremonies – coca offerings/readings After Peru – Bolivia is the largest producer

Economists’ advice for Less Developing Countries: Crops that are labor intensive Decentralized – infrastructure is very poor Cottage Industry promoting Earn foreign exchange

Cocaine market Demand for coke Demand for Coke keeps increasing Supply is stopped at the border ;) Supply stopped at the border

A Demand Schedule and Curve LO-2

The Market Supply Curve LO-2

Supply Demand Quantity Price $100 2 grams1 gram $140 New Supply New Demand $160

Problems created by cocaine: Cocaine Republic Deforestation Corruption – high and low levels of government Communities are uprooted Import chemicals – dump them in nature

Alternatives

Other cash crops for Bolivia Coffee Rice Citrus Corn