The economics of the drug trade

via Boing Boing

The economics of the drug trade are laid bare:

The profits were astronomical at every step. In 1978 each kilo probably cost Escobar $2,000 but sold to Lehder and Jung for $22,000, clearing Escobar $20,000 per kilo. In the next stage they transported an average of 400 kilos to south Florida (incurring some additional expenses in hush money for local airport authorities) where mid-level dealers paid a wholesale price of $60,000 per kilo; thus in 1978 each 400-kilo load earned Escobar $8 million and Lehder, Ochoa, and Jung $5 million each in profits. Of course the mid-level dealers did just fine: after cutting the drug with baking soda each shipment retailed on the street for $210 million, almost ten times what they paid for it.

Soon Lehder was hiring American pilots to fly a steady stream of cocaine into the U.S., paying them $400,000 per trip. At one trip per week, in 1978 this translated into wholesale revenues of $1.3 billion and profits of $1 billion.

The revenues of the whole enterprise are staggering:

In fact from 1982-1984 shipments jumped from 80 tons to 145 tons, flooding the U.S. market and causing wholesale prices to drop from $60,000 per kilo to $16,000. But cash flow remained absurd, with revenues of $3 billion in 1983 and $2.3 billion in 1984, netting Escobar alone at least $1.3 billion in profit.

Around this time he bought a Learjet to fly cash out of the U.S., and the Cartel’s expenses included $2,500 per month for rubber bands for bricks of cash.

Escobar employed a team of 10 full-time accountants to keep track of it all, but could also be surprisingly relaxed: he shrugged when $5 million was loaded on the wrong boat — “you win some, you lose some” — and accepted the regular loss of 10% of his income to “spoilage,” as up to $500 million per year was eaten by rats or rotted due to improper storage.

Escobar’s personal fortune was estimated at $7-$10 billion in 1985, of which perhaps $3 billion was in Colombia, with the rest spread out in countless foreign bank accounts and investments, including apartments in Miami, hotels in Venezuela, and up to one million hectares of land in Colombia (about 3,900 square miles, or 1% of the country’s land area).

That is a staggering amount of rubberbands!

  • Anonymous

    Absolutely mind-boggling, it really is. 

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