Pros and Cons of Drug Money in Latin Developing Economies

Paper instructions:

Many Latin American countries are currently affected by the drug enterprise. Countries are either producers, bridges (used as a transit point for a further destination) or final market places. Authorities worldwide have been constantly fighting a war against the cartels not only for their illegal activities but for promoting massive amounts of violence, addiction and corruption. Latin America has become the perfect arena for this industry due to its many developing countries. The developing countries are much easier to exploit when it comes to labor, production and distribution because of the poverty level and the inevitable need for money.

This description basically tackles all of the common conceptions of the issues regarding the current drug situation. I want to go beyond these common interpretations and use a more functionalist approach when analyzing the industry. Specifically how it affects the economies it encounters throughout Latin America. Regardless of the obvious negative effects although they are important to mention, Drug money has had its positive effects on developing economies. For instance, in attempts to launder money drug cartels open businesses such as tanning salons, bodegas and markets which employ people in usually poor areas. This behavior stimulates commerce and gives employment providing more disposable income for the people (short run benefit). Also, in more developed areas such as Panama and Miami, drug cartels have been known to be involved in construction and development highly affecting the real estate market. These are just a couple of benefits that have resulted of this drug industry.

On the other hand there are off-course negative effects such as violence, bribery and corruption but my main focus will be on the negative effects on the economys. The first example would be miss allocation of resources. The people involved in the cartel are deprived from the actual market. As they make part of the informal/illegal market they are not really contributing to their country’s economy (GDP). Economically speaking this is a great defect of this industry. Also as cartels usually run their areas by fear and gun power, they eliminate the fair market of that area and innovation. What I mean by this is, people are not motivated enough to excel at their best as they are scared to call too much attention and later be asked to pay high taxes to the cartel for œprotection. In some cases it results in the people either acknowledging the cartel as the ultimate power or just getting eliminated.

In my paper I want to explore these pros and cons of this highly controversial industry. I will use quantitative analytics involving GDP, inflation, unemployment rate, market volatility and tax evasion as well as adding a personal opinion in a more theoretical manner. I want to explore why the industry hasn’t been extinguished as well as what are the political ties and relationships that keep it alive. I believe that drug money has played and still plays a huge role both negative and positive in Latin America and my goal is to take an unbiased approach to see how these balance out and how they end up affecting the Latin population in the short and long run.

Some links that might help:

http://www.unodc.org/pdf/technical_series_1998-01-01_1.pdf

http://www.coss.fsu.edu/dmc/content/why-illegal-drug-money-doesnt-promote-economic-development

http://www.reuters.com/article/2010/01/22/us-drugs-mexico-economy-idUSTRE60L0X120100122

http://isreview.org/issue/90/consolidating-narco-economy

http://www.drugwarfacts.org/cms/Economics#sthash.ClhQG7TU.dpbs

http://www.worldpolicy.org/sites/default/files/uploaded/image/CPD-1997-Drug%20Money%20Runs%20Latin%20Economy.pdf

http://voiceofrussia.com/news/2013_09_02/US-Authorities-bring-back-to-life-stagnating-economy-through-drug-traffic-revenues-7334/

http://www.reuters.com/article/2007/12/31/us-panama-skyscrapers-idUSN2053334120071231

http://www.pbs.org/wgbh/pages/frontline/shows/drugs/special/math.html

http://www.stanford.edu/group/progressive/cgi-bin/?p=521

http://wap.npr.org/story/150433647

The paper needs to be revised because it has a lot of grammatical mistakes and some sentences don’t flow. Also citations need to be checked, as I read the paper some citations are not correct as they don’t match with the content being cited. That needs to be checked with the bibliography. Finally if you find you can add some supportive numerical data anywhere in the essay, that would also be greatly appreciated.

Here is the original proposal for the paper in case you need it:

Many Latin American countries are currently affected by the drug enterprise. Countries are either producers, bridges (used as a transit point for a further destination) or final market places. Authorities worldwide have been constantly fighting a war against the cartels not only for their illegal activities but for promoting massive amounts of violence, addiction and corruption. Latin America has become the perfect arena for this industry due to its many developing countries. The developing countries are much easier to exploit when it comes to labor, production and distribution because of the poverty level and the inevitable need for money.
This description basically tackles all of the common conceptions of the issues regarding the current drug situation. I want to go beyond these common interpretations and use a more functionalist approach when analyzing the industry. Specifically how it affects the economies it encounters throughout Latin America. Regardless of the obvious negative effects although they are important to mention, Drug money has had its positive effects on developing economies. For instance, in attempts to launder money drug cartels open businesses such as tanning salons, bodegas and markets which employ people in usually poor areas. This behavior stimulates commerce and gives employment providing more disposable income for the people. Also, in more developed areas such as Panama and Miami, drug cartels have been known to be involved in construction and development highly affecting the real estate market. These are just a couple of benefits that have resulted of this drug industry.
On the other hand there are off-course negative effects. Such as violence, bribery and corruption but also negative effects on the economy. The first example would be miss allocation of resources. The people involved in the cartel are deprived from the actual market. As they make part of the informal/illegal market they are not really contributing to their country’s economy (GDP). Economically speaking this is a great defect of this industry. Also as cartels usually run their areas by fear and gun power, they eliminate the fair market of that area and innovation. What I mean by this is, people are not motivated enough to excel at their best as they are scared to call too much attention and later be asked to pay high taxes to the cartel for “protection.” In some cases it results in the people either acknowledging the cartel as the ultimate power or just getting eliminated.
In my paper I want to explore these pros and cons of this highly controversial industry. I will use quantitative analytics involving GDP, inflation, unemployment rate and market volatility as well as adding a personal opinion in a more theoretical manner. I want to explore why the industry hasn’t been extinguished as well as what are the political ties and relationships that keep it alive. I believe that drug money has played and still plays a huge role both negative and positive in Latin America and my goal is to take an unbiased approach to see how these balance out and how they end up affecting the Latin population in the short and long run.