By the Blouin News Business staff

FEATURE: Sky high costs from illegal drugs for Brazil

by in Americas.

Police special unit (CHOQUE) stand guard at a shantytown of the Alemao complex in Rio de Janeiro, Brazil, on April 8, 2015. YASUYOSHI CHIBA/AFP/Getty Images

A police special unit in a favela outside of Rio de Janeiro, Brazil, April 8, 2015. YASUYOSHI CHIBA/AFP/Getty Images

The director of Russia’s drug control agency said on Wednesday that the global illegal drug market will soon be bigger than the world’s $3.7 trillion oil and gas market. The problem is particularly acute in Brazil, where the annual toll from drug trafficking is 57 billion reais ($18.7 billion), according to government data. Brazil is a major transit route for cocaine coming from Bolivia, Colombia, and Peru, with most of it destined for the domestic market and Europe. A staggering one million Brazilians use crack, among the highest per-capita uses in the world. In 2013, Brazil’s federal police seized 36,000kg (79,000 pounds) of cocaine and arrested more than 11,700 people on drug-related charges.

A new high-tech component has recently been added to Brazil’s counter-narcotics efforts. Brazilian defense firm Embraer is conducting a $271 million pilot program to use radars, drones, and communications systems to help stem the flow of illegal drugs into the country. The trial phase began in 2013 and covers 650 kilometers (404 miles) of Brazil’s boundaries, which total almost 17,000km. The program is taking place in Mato Grosso do Sul state, and other governors are pressing for it to be extended to their states that also border other countries. Embraer hopes to win the next round of the project in 2017, but recently Brazil’s austerity policies are causing doubt about whether the program can continue to be funded even currently.

Discontinuing the program would be a major setback for Embraer, as it looks to sell border-security gear abroad in the future and could use more demonstrated successes. Bloomberg reported that while defense went from 17% of Embraer’s revenue in 2012 to 23% in 2014, Itau analysts predict defense sales will shrink by 30% in 2015 to $1 billion. (Brazil’s government is already in arrears for payments for Embraer’s development of the KC-390 military transport aircraft.)

The Brazilian army, which estimates that the annual cost of violence resulting from drug trafficking is over $13 billion, wants the pilot program extended too. “If the border patrol program is effective in reducing 3 percent of the violence, that would be sufficient to justify annual investments of up to 1.2 billion reais [$404 million] in this project,” it wrote. In mid-April the army acknowledged that there was no forecast regarding future budgeting, which “provokes great difficulties in the planning and execution of the project.”

Meanwhile the drug situation is getting worse. This year alone, the Brazilian Federal Highway Police in Foz do Iguaçu seized 182.4 kg of crack smuggled from Paraguay, much more than the 110 kg confiscated in 2013 and the 139 kg in 2014. And the cost to society — the squandered potential of the population involved in any way in the drug trade — is enormous and growing. Brazil’s severely overcrowded prisons have over 550,000 inmates, the world’s fourth-largest amount, and more than 40% of those incarcerated are still awaiting trial. Gangs continue to operate from prisons, using smuggled cellphones to coordinate operations, including murders.

Hardline measures to crack down on the drug trade and its associated violence are now gaining broad support.  The “Bancada BBB,” or the Bullets, Beef, and Bible Caucus, has proposed lowering the criminal age of responsibility from 18 to 16. A Datafolha opinion poll published on April 15 showed that 87% of Brazilians are in favor of the bill. Jair Bolsonaro, a six-time federal deputy who won more votes than any other congressman in Rio de Janeiro in the 2014 elections, said “As soon as the law is passed, I will put forward another constitutional amendment, to lower the age to 14.”

Violence is the most appalling effect of the drug trade, and curbing it deserves to be the top priority of anti-drug policy. But drug-fueled corruption in all levels of government is also debilitating for the country’s institutions. Even if drug cartel foot soldiers are arrested en masse, the well-connected higher-ups and their corrupt accomplices often evade detention and maintain the overall rotten system. While the Petrobras corruption scandal has shocked Brazil and the world by its sheer scale (it cost the company $17 billion), drug corruption is far more ubiquitous although precise amounts are not known.

When police are able to take down a cartel, it provides a rare glimpse into the incredibly ambitious and lucrative operations of the drug traffickers. Last May, federal police dismantled a huge drug cartel in the state of Goias, which had operations in 30 countries and sales of at least $2.5 million a week. Following a two-and-a-half-year investigation, the police issued 85 arrest warrants, seized 46 buildings worth an estimated $38.9 million, and frozen several suspects’ bank accounts, AFP reported. Officers said the cartel had been working on building a submarine and creating an airline to transport the narcotics internationally. The suspected leader was not present, however, and remains at large.

There are no easy or quick feasible solutions to curb Brazil’s illegal drug trade. Continued pressure on all sides may rein in the worst excesses and gradually chip away at the cartels’ power, but it will be a long, costly, and always controversial path.