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The Economics of Cocaine: Bolivia as a Case Study

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.

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The Economics of Cocaine: Bolivia as a Case Study

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  1. 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

  2. GDP - per capita (PPP): note: data are in 2009 US dollars

  3. Other data: Population below poverty - 60% Household income distribution: -Lowest 10% - 0.5% -Highest 10% - 44.1%

  4. 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

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

  6. Cocaine market Demand for Coke keeps increasing Demand for coke http://www.youtube.com/watch?v=LvPCrywyTQA http://www.youtube.com/watch?v=E0HKSYEPwV8&feature=related Supply is stopped at the border ;) Supply stopped at the border 

  7. A Demand Schedule and Curve LO-2

  8. The Market Supply Curve LO-2

  9. New Supply Price $160 Supply $140 $100 New Demand Demand Quantity 1 gram 2 grams

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

  11. Alternatives

  12. Other cash crops for Bolivia • Coffee • Rice • Citrus • Corn

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