Cocaine and Microfinance

By Suzy Marinkovich, KF9

“Coca is green, not white like cocaine.” – Evo Morales

The Chapare, the Yungas, the DEA, USAID, cocaine, drug trafficking, alternative crops, forced eradication, Evo Morales.

These are the buzz words constantly attached to Bolivian articles on the both domestic and foreign-aided drug war against cocaine production. While tough to get the facts on cocaine production by country, suffice it to say Bolivia is one of the world’s biggest cocaine producers along with the likes of Peru and Colombia. To put it in perspective, Bolivian police discovered one cocaine lab this year that, by itself, was capable of producing 220 pounds of cocaine a day. In the US, the street value of that amount equals approximately five million dollars.

When I arrived at my first Kiva placement in Ayacucho, Peru, the region where the vast majority of Peruvian cocaine is produced, I learned about the ancient cultural ties between the Andean people and the coca leaf. It’s a part of everyday Andean life and the leaf itself is considered sacred; it is most often chewed and used in tea. There is something so strange about juxtaposing the image of an elderly Ayacuchan beggar chewing coca leaves against the image of a rich 20-something snorting lines of cocaine inside a VIP section in a Los Angeles club. I realize that sentence is very blunt, but it helps to highlight the reality that coca and cocaine are definitively worlds apart despite being of the same root.

The trade will continue to exist and will continue to cause bloody conflict because it will continue to be profitable, whether it is illicit or not. Initially, I fully sympathized with the movement in favor of protecting the sacred coca leaf for the indigenous. It simply seemed unfair and even imperialistic to barge into a civilization that has chewed coca leaves for centuries and tell them to burn all of their crops because US citizens were getting too addicted to the powder form.

But I have since learned more about the trade: in the region of Ayacucho, the ratio of coca for coca leaves to coca for cocaine is astonishing. Ninety-five percent of coca production goes directly to cocaine. At best, a meager 5% is used locally in coca leaf-based products. The demand simply isn’t as high for coca leaves as cocaine, yes – but the issue isn’t simply that. The issue is that if a farmer chooses to produce coca for cocaine instead of coca leaves, he will see his earnings multiply by the dozens.

While we throw around all the buzzwords above and try to see things from a macro lens, it’s easy to forget that it all boils down to poverty. It all boils down to one couple, their four children, their small home, and their ability to put food on the table. It all boils down to the micro-level. This, in CIDRE’s opinion, is why it all boils down to microfinance.

Coca production in Bolivia comes from two areas of the country: the Yungas in the north and Chapare in Cochabamba department. The Yungas coca leaves are primarily used for coca tea as the climate produces better quality leaves. That leaves hot, humid Chapare – a region hidden in cloud forest and jungle – as the prime location for producing coca for cocaine.

Chapare, to Bolivians and perhaps US citizens who’ve followed the drug war, has been a major point of pressure from the DEA (the acronym for the US Drug Enforcement Agency, pronounced by Bolivians as “day-ah”).

When the DEA entered Chapare in the 1980s, coca plantations were set ablaze and the farmers were given next to nothing to begin their rebuilding. Over the years, and in an effort to create a more sustainable form of “eradication,” USAID began implementing alternative-to-coca programs which offered alternative seeds and funding for establishing alternative crops in the tropical region. However, much of this was a bureaucratic failure and proved catastrophic for local farmers. For example, coca farmers would stop their coca crop, and then were given seeds for orange trees. It takes years for orange trees to reach the size needed to begin producing oranges, and in those years, the former coca farmers were destined to have zero income. This was very problematic, and even disastrous.

So last year, USAID was kicked out of Chapare. Emboldened by Evo Morales, the country’s first fully-ingidenous President in over 500 years and a coca farmer himself, the citizens of Chapare had had enough of the failed policies and strategies of USAID interfering with their lives. Evo Morales, in November of 2008, kicked DEA out of Bolivia, believing the solutions could be much better coming from home.

Since Evo Morales became president, cocaine production has climbed over 60% above its previous threshold in Bolivia. The answer from USAID hasn’t worked, and neither has Evo Morales’s strategy of pushing coca farmers to create other products from coca leaves, such as traditional medicine, coca-scented products, and the like. Many critics of the drug war offer the answer that Bolivia, and the US for that matter, should just “legalize cocaine.” To put it simply, that is not going to happen anytime soon. These farmers deserve solutions now.

So, looking forward, what IS the answer?

Kiva’s newest partner in Bolivia, CIDRE, believes the answer is microfinance.

CIDRE’s office in Chimore, the middle of Chapare’s coca-producing zone, offers significantly lower interest loans to farmers who pledge to forfeit their coca crop. Other incentives are thrown in: cheap or even free seeds for growing alternatives. But they aren’t handing out seeds for a crop that will give returns in several years; CIDRE’s loan officers grew up in Chapare and have learned what works and what doesn’t. They incentivize farmers with these low-interest, rewards-abundant loans from a perspective that they know is sustainable because they work in one-on-one relationships with the farmers to make it so. They want these farmers to be a part of a legal market; one that doesn’t risk being burned to the ground in an instant by the government or DEA. The loan officers also personally travel to these farms and walk around the hectares to ensure that there is no longer any evidence of coca production once the loan has been disbursed.

So far, CIDRE has had one such loan on Kiva. You, like I am, might be thinking, “they should post more of these loans on Kiva!”

That is precisely my plea. As a farmer in Chapare, in order to completely eradicate your coca crop and replace it with a new one, the typical loan size has to be between $4,000 and $5,000. As you can imagine, completely changing what you farm is a huge endeavor and requires both CIDRE and Kiva lenders to entrust the farmer with a much larger loan. But CIDRE’s individual loan size limit on Kiva is $1,200, so they are reduced to posting different, non-Chapare farmers as their Kiva loans.

I’ve always loved the view that the purpose of microfinance is to reach out and include individuals that have been traditionally left out of the financial sector.

Well, we are doing that, and they are repaying at over 98%.

So, what’s the next step? I say we start trusting them with more money.

Suzy Marinkovich was a Kiva Fellow at new Kiva partner CIDRE in Cochabamba, Bolivia, and before that, at FINCA Peru in Ayacucho, Peru. She has a wholehearted passion for microfinance, social justice, and poverty alleviation. Suzy is on her way to Chile to help train a new partner for her final month as a Kiva Fellow.

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