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Title:

Colombia and the Drug Trade

Description:

... Operations Drug Cartels Corporations Government Revolutionaries Rivalry Among Competitors Cali/Medellin Cartels ELN/FARC Oligopolistic power Farmers ... – PowerPoint PPT presentation

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Title: Colombia and the Drug Trade


1
Colombia and the Drug Trade
  • Keith Keiderling
  • Renata Sheyner

2
Agenda...
Macroeconomic Overview
Industry Analysis
Business Operations
Business Risk
3
Investors taking long-term approach as result of
macroeconomic stability.
  • Economic indicators-1980s
  • avg. GNP growth 14
  • avg. GDP growth 3.5
  • Economic reforms-1990
  • Privatization program
  • Trade reform program
  • Tariff reduction 44 (1983) to 12 (1993)

4
The reasons for Colombias economic stability
have been
Investment Opportunities
Stable currency
Diversified Economy
Cartel Influence
5
Agenda...
Macroeconomic Overview
Drug Trade Industry Analysis
Colombian Business Environment
Implications on Business Operations
6
Interdependent relationships exist between the
players.
Drug Cartels
Government
Revolutionaries
Corporations
7
Competition is driven by relationship among
forces.
Suppliers
Barriers to Entry
  • Violent anti-competition
  • tactics
  • ? High
  • Farmers
  • Multiple sources
  • ? Low

Rivalry Among Competitors
  • Cali/Medellin Cartels
  • ELN/FARC
  • ? Oligopolistic power

Substitutes
Buyers
  • Increase marijuana use
  • Other drugs
  • ? High
  • Inelastic demand
  • Addictive illegal product
  • 70 of world supply
  • ? Low

8
Agenda...
Macroeconomic Overview
Industry Analysis
Business Operations
Business Risk
9
Cartels behave like corporations.
Centralized Industry
Drug Trade
Value Chain
Business Operations
10
Cartels excel in value chain management.
Cartel Influence
Local Network
Farmers
Drug Cartels
Cartel Network
End user
Refining of paste
Point of sale
Growth of coca paste
Distribution
11
Drug Cartels compete as global businesses.
  • True business organization
  • Law and business professionals
  • Usage of technology to gain competitive advantage
  • Influential salesforce
  • Decentralization of operations
  • Reduce risk exposure

12
Agenda...
Macroeconomic Overview
Industry Analysis
Business Operations
Business Risk
13
Negative impacts...
  • Dutch disease
  • Repatriation- 2 billion/yr.
  • Return in form of foreign exchange, contraband
    and legal imports
  • ? ? P ? overvalued peso
  • ? ? competitiveness of exports
  • Dollarization
  • Short-term investments
  • ? Inefficient allocation of resources

14
and positive
  • Barriers against recessionary pressure
  • Capital inflow
  • ? Demand
  • Farm equipment, chemicals,
  • Social development
  • Reinvestment into community-services, wages,
    protection
  • Construction boom

15
Cartels influence government behavior and
international perceptions.
  • Policies
  • Extradition (1991 and 1997)
  • US Decertification
  • Muddling through
  • Apertura
  • Government expenditures
  • Military
  • Social opportunity costs
  • Government
  • 40 Congress connected to Cartels ? corruption
  • Samper
  • Future issue-privatization?

16
Agenda...
Macroeconomic Overview
Industry Analysis
Business Operations
Business Risk
17
Environment forces corporations to behave as
mini-governments.
Corporation
  • Political Risk
  • Weak government
  • Elections
  • Dignity of Colombia
  • Continuity of reforms
  • Security
  • Financial Risk
  • Sustenance programs
  • Exchange rates
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