THE GROWTH OF THE CARIBBEAN NARCOECONOMY:

IMPLICATIONS FOR TOURISM

Jerome L. McElroy

Professor of Economics

Department of Business and Economics

Fellow, Center for Women’s Intercultural Leadership

Saint Mary’s College

Notre Dame, IN 46556

Learning Objectives

In this chapter students will learn:

1. What factors make the Caribbean an ideal trafficking corridor

2. What macroeconomic problems nourish drug-trafficking

3. What research says about island crime patterns

4. What the evidence is for the spread of the narcoeconomy

5. What the long-run implications are for tourism

Abstract

After colonial monoculture and the postwar growth of tourism, a third wave of globalization is washing across the Caribbean. It is the spread of the global narcoeconomy that threatens tourism, the region’s engine of growth. Successful joint US efforts to staunch the flow of Colombian drugs across the Mexican border have deflected trafficking across the islands from Aruba to Bahamas. Roughly half of all cocaine consumed in the U.S. crisscrosses the area, and money-laundering of drug profits has infested the region’s offshore financial sector. This narcoeconomy has been nourished by strategic geography, vast unguarded coastlines and inaccessible mountainous interiors, a historical network of trade permitting a variety of air and sea routes and methods of conveyance, plus the anonymity afforded by the presence of tourists.

To aggravate matters, in the past two decades the region’s economy has been shocked by destructive hurricanes, the sharp drop in sugar exports from consumer taste shifts toward artificial sweeteners, the deflection of textile investment and employment to Mexico via NAFTA, and the loss of banana export preferences through European economic consolidation. Since the demise of Communism, the diplomatic downgrading of the Caribbean (the Cuban threat in particular) has resulted in an 80 percent cutback in U.S. aid.

Evidence of the spread of the narcoeconomy is mounting. Police report sharp increases in property-related crime, that most serious crimes are drug-related, involve violence and firearms, and frequently, addicted youthful perpetrators. They note the rising prominence of home-grown gangs in organized crime (trafficking, arms smuggling, money-laundering, prostitution) and the problem of thousands of returning felons deported from the U.S. who are sophisticated drug and gun traffickers with stateside narcotics experience. The highest crime rates are also associated with the most tourism-penetrated islands. These casual observations are partially corroborated by a cross-sectional analysis linking rising drug offenses with visitor density levels, and other factors.

The short-run impact is substantial. The value of drugs in transit routinely dwarfs the GDPs and budgets of most islands. At the micro level, it involves a steady payroll that sustains many local livelihoods and businesses. In the longer run, the narcoeconomy severely threatens tourism. Research shows rising crime and harassment associated with drug-peddling are linked to falling visitation, rising vacation costs for security, a deteriorating investment climate, and (if sustained) the emigration of middle-class professionals and entrepreneurs. The large-scale scope of the traffic and money-laundering also tarnish the legitimacy of offshore finance, reduce the credibility of government through creeping corruption, and weaken respect for law and honest work among youth. Unless more innovative ways are developed (1) in the North to reduce demand, and (2) in the South to reduce supply through more effective joint US-Caribbean cooperation, and (3) in the islands to integrate all segments of the population into the fabric of the tourism economy, the narcoeconomy will continue to flourish.

Introduction: Three Waves of Globalization

“All these people, these diversities of cultures, have been concentrated in that

archipelago. You are very conscious of the ocean as a gateway out to other worlds.

… Caribbean society was perhaps the first global experiment in human history.”

(George Lamming in E.J. Waters, 1999:201)

The distinguishing feature of small island economies is their relative powerlessness in the global marketplace. They are so-called price-takers and simulate the behavior of the atomistic firm in the classical economist’s theoretical model of perfect competition. Their small size at the macro-social scale suggests that they are ipso facto vulnerable to policy initiatives originating in core economies. This is graphically illustrated in the profound impact which European imperialism, the first wave of globalization, had on the insular Caribbean in the post-Columbian era (Richardson, 1992). These external imprints include the stamp of dependent export monoculture on island economy, i.e. a high-volume low value-added production structure geared to foreign demand in the global network of center-periphery trade. In addition, monoculture has had damaging effects on insular ecology and biodiversity, and its demand for cheap slave labor resulted in the creation of multi-ethnic societies of transplanted peoples. Unable to sustain population growth, the post-emancipation period saw widespread livelihood mobility/migration which has continued through the twentieth century. Since the 1950s the islands of the region have struggled to reduce dependence and achieve political and economic autonomy.

Although the Caribbean has experienced repeated rounds of externally imposed laissez-faire capitalism (Klak, 1998), the second epochal wave of globalization has been the sustained growth and worldwide spread of tourism in the post-World War II era. International visitor arrivals have increased at a robust rate above 5 percent per year since 1950 (Vellas & Becherel, 1996). Today tourism is the world’s largest industry accounting for over10 percent of global GDP and trade, and 8 and 9 percent of world employment and new capital formation respectively (WTTC, 2004a). In part, this growth has been facilitated by the IMF-World Bank structural adjustment program favoring tourism as a lucrative export strategy for debt-burdened LDCs to improve loan repayment performance.

Nowhere has this process been more visible than in the island periphery. In addition to the pull of tourism opportunity, island decision-makers have been pushed to alter reliance on traditional staples because of falling terms-of-trade, the dismantling of traditional colonial preferences, the worldwide expansion of staple supply, and the development of synthetic substitutes in the North. In the past generation, because of deliberate restructuring away from colonial crops like sugar and copra, island economies have diversified toward tourism, related construction and offshore financial services. The intersection of this restructuring with multinational hotel/airline investment, the advent of low-cost jet travel and the creation of aid-financed transport infrastructure has connected northern demand with southern supply and created the so-called “pleasure periphery”: the insular and coastal Mediterranean for Northern Europe, the island Caribbean for North America and Europe, and North (Hawaii, Guam, Marianas) and South Pacific for Japanese and other affluent Asian travelers.

This internationalization has especially intensified in the small-island Caribbean where neoliberal free-market policies favoring exports, deregulation, foreign direct investment and

political stability have long dominated the political economy (Gayle, 1998). As a result, the Caribbean has become the most tourism-intensive region in the world. According to 2004 estimates, tourism accounts for 15 percent of regional GDP and employment and roughly 20 percent of exports and investment (WTTC, 2004b). Landscapes from Bahamas to Aruba are visibly altered by ubiquitous hotel and condominium clusters and connecting road arteries, sunlust visitors, rental cars and touring vans. Establishing the infrastructure to support the mass tourism visitor industry has altered insular coastlines and mountain faces, commercialized and quickened the once quiet pace of island life, and damaged the operation of natural terrestrial-marine weather and water buffering systems (McElroy & de Albuquerque, 1998). Such widespread socio-environmental changes have raised questions whether tourism is a sustainable economic base or just another short-run chapter in a long-period history of shifting export specializations and boom-bust economic and parallel demographic cycles.

Island tourism is also threatened by a third epochal wave encompassing the globalization of organized crime in general and the international restructuring of the production and distribution of illegal drugs (mainly cocaine and heroin) in particular. According to Pearson and Payaslian (1999, p. 427), “while prior to the 1960s the Italian and French ‘connections’, extending from Palermo to New York, were the primary networks for smuggling drugs, during the past three decades Asian and Latin American drug production and smuggling have emerged as major competitors.” This increasing cross-border traffic has led to the dollarization of some hinterland South American producers, the alleged decline of the Cosa Nostra in the United States and, some argue, the increasing informalization of the traditional financial sector through growing money laundering of drug profits. The spread of narcotrafficking across the Caribbean has created a cocaine corridor from Aruba to the Bahamas that threatens to overwhelm insular law enforcement and to destabilize the region’s postwar economy. According to the West Indian Commission (1992, p. 343): “Nothing poses greater threats to civil society in CARICOM countries than the drug problem and nothing exemplifies the powerlessness of regional governments more.”

Scope

This chapter focuses on the geographic and institutional infiltration of the global narcoeconomy across the insular Caribbean. It has six sections. The first reviews patterns of serious crime in the region that suggest the escalating presence of narco activity. The second presents some provisional new research. The third indirectly links these phenomena to the expansion of the archipelago as a corridor for South-to-North drug transit and money laundering and reviews the internal and external forces that have nourished the growth of narcoeconomy. The fourth describes the specific mechanics of the illicit trade routes and methods of conveyance through the region, while the fifth discusses implications for tourism and related activities. The conclusion broadly assesses the future.

Island Crime Patterns

It is clear that there is a different threat to island tourism other than natural amenity destruction and loss of cultural capital. Serious crime rates have risen in the region since 1970 in tandem with the globalization of Caribbean tourism and the rise of the region as a node in the global drug trade. Some trends illustrate this danger. Since 1970 there have been “significant increases in the rate of violent crimes in every Caribbean country for which data is available” (Harriott, 2002, p. 4). The most dramatic increases have involved theft/robbery, homicide, and serious assault, “…precisely the crimes associated with drugs” (Griffith, 2003, p. 394). Islands which have experienced either an acceleration or high levels of such criminality tend to be both highly tourism penetrated and major destinations for narco traffic: Bahamas, Dominican Republic, Jamaica, Puerto Rico and the U.S. Virgin Islands (USVI). In the special case of Jamaica, according to Harriott (2003), the growth of the narcoeconomy since 1980 has been associated with a rapid escalation in murder, the shift from dominantly property to dominantly violent crime, increasing gang warfare, multiple murders and the killing of innocent bystanders.

Elsewhere patterns have been similar. Since1970 murder and rape rates have risen 50 percent in the USVI while robbery has tripled (de Albuquerque & McElroy, 1999b). Between 1985-1996, robbery rates doubled in Barbados and rape rates doubled in St. Kitts-Nevis. Similar sharp increases have been recorded for burglary and larceny over the same period for Antigua, Barbados, Dominica and St. Kitts-Nevis (de Albuquerque & McElroy, 1999b). The presence of visitors also seems to be implicated in rising island crime. Similar to the experience of Hawaii (Chesney-Lind & Lind, 1986; Fuji & Mak, 1980), a case study of Barbados (de Albuquerque & McElroy, 1999a) revealed that visitors were much more vulnerable to property crime: triple the resident rate for robbery and for larceny. Residents were much more likely to be victims of violent crime: murder, rape and major assault. These regional crime trends have also been associated with rising levels of drug addiction and a sharp increase in juvenile offenders. On the other hand, Harriott (2002) notes Caribbean rates are highly volatile and have shown some declines very recently, although this may be partly due to increased underreporting. In developing countries worldwide, only 50 percent of serious crimes are reported (Alvazzi del Frate, 2000).

The expanding literature on the determinants of crime in LDCs suggests that development is positively associated with property crime (notably theft). Various explanations are proffered including Durkheim’s anomie theory which posits that rapid societal change produces new forms of wealth and the breakdown of traditional moral norms (Leggett, 2000). A variant, the subculture of violence, is based on blocked opportunity for marginalized urban youth who resort to criminality to survive. An increasingly important formulation is the opportunity cost or Chicago-school model associated with the work of Becker (1968). It argues that development alters the benefit-cost calculus of traditionally illicit activity. The combination of new wealth and the anonymity afforded by rural-urban migration produces rising benefits for crime and falling costs of detection/incarceration. This model seems especially suitable for the Caribbean which has undergone a major postwar restructuring toward mass tourism. Visitors present lucrative targets because they tend to carry much portable wealth, ignore normal precautions, are unfamiliar with their surroundings, and less likely to report crimes, correctly identify assailants or return as witnesses at trial.

Caribbean research has suggested many of these same determinants. De Albuquerque and McElroy (1999b) have emphasized the link between the presence of visitors and property crime. In the same context, King (1997, p. 34) has touted relative deprivation, i.e. “the sense of entitlement” among disenfranchised youth “because Americans have so much.” Headley (1996) has stressed blocked opportunity and argued for the drug-and-guns subculture of violence. Bonnick (1994) believes a major conditioning variable is the “bad guy” image so appealing to marginalized youth portrayed by powerful American cinema and television in this most mass media penetrated sub-region in the world. Robotham (2003) emphasizes the rising proportion of youth in the population and their falling labor force participation because of a failing macroeconomy. Finally, Rushton and Whitney (2002) have implicated rooted cultural values and family cultures as crimogenic in both African and Black Caribbean societies. However, rigorous empirical testing of these theories has been either lacking or inconclusive perhaps partly because of the imperfect quality/quantity of the data, the complexity of the crime phenomenon (Harriott, 2002), and/or the clandestine operation of an expanding narcoeconomy (Forst & Bennett, 1998).

This last conclusion is based on the following evidence: (1) police reports across the Caribbean that most serious crimes are drug-related (de Albuquerque, 1996a); (2) a noticeable change in the pattern of violent crime from domestic disputes to gang feuds and robbery (Harriott, 2003); (3) the increasing use of firearms (Harriott, 2002); (4) the increasing role of hard-core marginalized youthful offenders (Harriott, 1996); (5) the increasing number of apprehended perpetrators who are addicts (de Albuquerque & McElroy, 1999b); (6) the rising prominence of home-grown posses in organized crime; (7) and the increasing menace of returning felons deported from the U.S. and elsewhere (8,000 between 1993-2000; see Griffith, 2003) who are known to be engaged in narcotics and firearms importation.

Some Preliminary Evidence

As a preliminary test of some of the major determinants and to indirectly measure the presence of the narcoeconomy, a limited cross-sectional analysis was performed on 16 Caribbean countries for which complete data were available. The dependent variables were taken from uniform Interpol crime rates (per 100,000 population): murder and theft to represent violent and property crime respectively and the number of drug offenses to capture the influence of the narcoeconomy. The independent variables included: population density to represent anonymity, average daily visitor density (per 1,000 population) to represent visitor presence, the unemployment rate to measure macroeconomic conditions, the percent of the population 0-14 years as a surrogate indicator for the presence of juvenile offenders, and political status (independent = 1, dependent = 0) as a proxy for crime enforcement capacity. Independent countries were assumed to have more resources and stronger capabilities. All these data were taken from the CIA World Factbook except visitor density (see Padilla & McElroy, 2004). To avoid possible distortions introduced by the 2001 terrorist attacks, since U.S. visitors dominate the tourist economy, years chosen ranged from 1995-2000 based on data available for each individual country.

(Table 1 about here)

Regression results showed none of the determinants influenced either murder or theft rates. Two factors had a statistically significant influence on drug offenses. According to Table One, drug offences were positively related to both visitor and population densities. According to Equation 2, these two variables “explain” over 70 percent of drug offenses in the 16 islands. This may suggest that developed tourism destinations provide both anonymity and opportunity conducive to drug activity. Such a view corresponds to the increasing harassment and drug peddling observed across the region (WTTC, 2004b). On the other hand, neither local economic conditions—as measured by unemployment—nor varying levels of enforcement (as measured by political status) had any impact on drug offenses. Although quite modest, these limited results indirectly point to the presence of the narcoeconomy and the value of more extensive systematic empirical study.

The Caribbean Narcoeconomy

The global drug trade is fostered by the general tendencies of globalization to reduce restraints on cross-border trade and capital flows and to uphold private property and bank secrecy. It thrives in an environment of secrecy, trade intensity, sophisticated finance and communications, anonymity, lax regulation, and external and internal economic vulnerability. The Caribbean closely fits this profile. The insular Caribbean lies between the Andean region of South America where close to 90 percent of world cocaine is produced and the major market of the United States where most cocaine is consumed. Proximity to South America plus a long history of British, Dutch, French and Spanish commerce make the islands a natural corridor for supplying cocaine to Europe and for re-exporting heroin produced in the Far East, and Ecstasy produced in Europe (UNODC, 2004). The geography of the region is conducive to the large scale movement of drugs. The larger islands and mainland countries (Belize, Jamaica, Guyana, Dominican Republic and Haiti) provide remote hinterlands to shelter trafficking. Many others are archipelagic states (Bahamas, Grenada, USVI, Turks and Caicos, St. Vincent and Grenadines) with numerous unguarded points of entry and exit for transporting narcotics. The more remote outposts lack resources for either monitoring, much less intercepting contraband.

As a result, presently the value of narco traffic through the archipelago approaches $5 billion (UNODC, 2003). This exceeds the GDP levels of three-fourths of the islands and the tourism impact of all but Cuba, Dominican Republic and Puerto Rico. It also exceeds the value of all merchandise exports (petroleum, aluminum ore, run etc.) of all Caribbean islands. By value cocaine is the most significant (85%) followed by ganja (cannabis 13%), and heroin and amphetamines (2%) (Harriott, 2002). Two thirds of the cocaine flowing through the corridor is smuggled into the U.S. where it comprises nearly 50 percent of all cocaine imports, with the balance mainly from Mexico. The other third, accounting financially for a quarter of the market, is destined for Europe (UNODC, 2003). It is no wonder that island officials decry the drug menace as “an overwhelming phenomenon” (Sanders, 2003, p. 377).

The highly open character of insular economies structure is also a narco asset. Intense dependence on export-import trade provides traffickers with a wide array of air and sea transit opportunities. The burgeoning tourism industry based on on-site consumption of environmental amenities and imported goods significantly expands the menu for shipping contraband inter-continentally by freight as well as by courier because of the increasing anonymity created by busy docks and airports in the many popular tourist destinations across the region.

Money-laundering – the conversion of drug profits into legal assets that cannot easily be traced to their illegal roots – is a third ingredient in the narco-triad along with drug transit and arms traffic. It likely exceeds $500 billion worldwide (Bryan, 2000) and is principally driven by the large 300-500 percent retail-over-wholesale price mark-ups common for illicit drugs. It thrives under the same conditions that have shaped the Caribbean’s successful offshore financial sector: proximity to markets, good communications systems, political stability, transactions secrecy, low taxation, exchange stability and a competent cadre of local lawyers, bankers and accountants. The islands (with Latin America) contain roughly 40 percent of the world’s offshore banks and international business corporations (DEA, 2003). In some small islands like Bermuda, offshore finance is the dominant sector and accounts for half of all economic activity. In the Caymans and British Virgin Islands, roughly one third of GDP is sourced in offshore services (Griffith, 1997). A number of islands where trafficking is on the rise are now considered top-tier money-laundering states. The U.S. Drug Enforcement Administration estimates that some $60 billion in organized crime proceeds are laundered through the islands every year (DEA, 2003, p. 4).

The narcoeconomy is especially nourished by a climate of economic instability and uncertainty. During the past decade, the Caribbean has been buffeted by a series of external forces that have weakened traditional sectors, clouded the investment climate, and reduced the opportunity cost of trafficking. In recent years the region has become “increasingly irrelevant in economic and political terms” (Klak, 1998, p.12). As a result of the diplomatic downgrading of the Caribbean (the Cuban threat in particular) with the demise of Communism, U.S. aid to the region has declined over 80 percent. Export preferences for traditional staples like sugar and bananas have shrunk in the face of shifting U.S. tastes toward artificial sweeteners and the consolidation of the European Union and World Trade Organization regulation.

Moreover, the islanders’ attempts to diversify toward light industrial exports (textiles, assembly, manufactures) have been thwarted on two broad fronts. On the external side, the heavy impact of NAFTA has resulted in the relocation of over 120 apparel plants to Mexico since the mid-1990s (Rohter, 1997). On the internal side, a host of domestic structural constraints continue to hinder viability. These include mineral scarcity, fragmented transport systems, and relatively expensive (by LDC standards) labor and utility costs. Even tourism has been damaged in some destinations in recent years because the strength of the U.S. dollar--to which their currencies are tied--has discouraged long-staying, high-spending European visitors (Watson, 1997). In some islands, chronic emigration has spawned demographic imbalances (surpluses of old and young and deficits of technicians and innovators) that disfavor the skills and entrepreneurial talent required to prosper in a global economy (Conway, 1998). In others problems have been further compounded by natural disasters.

In the larger heavily indebted countries like Jamaica, Trinidad, Guyana and Antigua, some authors have argued that the IMF-designed structural adjustment programs (SAPs) to ensure loan repayment have weakened macroeconomic conditions particularly for the poor and indirectly nourished the narcoeconomy. Although no clear empirical links are established between debt burdens, SAPs and the drug trade, there is a preponderance of coincident evidence. For example, Ghai (1991) associates substantial declines in Caribbean GDP with rises in debt repayment outflows. In Jamaica, Guyana and Trinidad, Grant-Wisdom (1994) suggests that SAPs have coincided with infrastructure deterioration because of capital budget cutbacks, the contraction of public employment, and the proliferation of self-employment “indicative of the growth of the informal sector” (p. 171). Both Bernal (1992) and Phillips (1994) find SAPs have negatively affected the delivery of basic services, and the latter concludes (pp. 147-148) SAPs “…are associated with the worsening of the health status of the people of the Caribbean.”

These deteriorating conditions have combined with other internal problems, notably the growth of a subculture of violent youth, daily aware of the “good life” from the tourist hordes but lacking the education, skills, and motivation to participate in the mainstream. The drug trade worldwide flourishes in such urban areas with an underclass of unemployed youth (UNDP, 1999). Their ranks are increasingly led by the organized posses that originated in the 1970s in Jamaica, local gangs in West Kingston trafficking in the domestic and regional marijuana trade. At roughly the same time, rival political parties began arming ghetto youth and pitting poor urban communities against one another (Stone, 1983). These “garrison” constituencies were largely responsible for the rise in violent crime in Jamaica culminating in 889 killings during the 1980 electoral campaign (deAlbuquerque, 1996c). In the late 1970s, they came under the control of ganja gangs sustained by marijuana exports to the U.S. and led by posse “Dons” who were responsible for internationalizing the ganja economy.

Fragments of these Jamaican style posses have become embedded in other Eastern Caribbean societies like Antigua and St. Kitts and are responsible for escalating violence and setting up overseas branches of the narcoeconomy across the island chain. Dominican gangs in the north and Arubans in the east have also become involved (UNODC, 2003). They are heavily engaged in arms and drug running as well as “...money laundering, fraud, kidnapping, robbery, burglary, prostitution, document forgery and murder” (Griffith, 1997, p. 124). Their increasing responsibility for narco trafficking is a decentralization strategy employed by the Colombian-based crime organizations that dominate the regional drug trade (DEA, 1998). Local gangs are swollen annually by drug felons from North America and elsewhere. These sophisticated criminals with extensive experience in the U.S. cocaine trade are notorious for introducing American-style drive-by executions, the recruitment of juvenile runners, lookouts (Harriott, 1996), and a whole range of semiautomatic weapons in Jamaica and elsewhere. According to the Commonwealth Secretariat (1997, p. 105): “They leave our islands as high school criminals and return to us as post graduates.”

Mechanics

The mechanics of drug transit including both routes and modes of conveyance shift continually according to national, regional and international counter enforcement measures (de Albuquerque, 1996b) as dealers display remarkable ingenuity keeping one step ahead of detection. During the 1970s and 1980s most cocaine was air-lifted in small planes from Colombia either directly to the Bahamas (or indirectly through Jamaica) where air-dropped cargo was loaded onto high-speed “go-fast” boats for a final run to the U.S. mainland. Because of increased air and sea anti-drug enforcement, now most cocaine is shipped in bulk cargo freighters along more circuitous routes: through Jamaica to Haiti, Dominican Republic and Puerto Rico, then on to the U.S.; or through South America to the Eastern Caribbean, and on to the U.S. and Europe (DEA, 2003). In addition, small amounts of cocaine and heroin are transported by courier in commercial aircraft at busy tourist airports.

As an example of the ubiquity of trafficking activity, the Leeward Islands of the Eastern Caribbean have provided a new corridor to North America. The new routes include Puerto Rico, the “new Miami,” and the USVI where shipments arrive by sea and air, are repackaged as domestic freight, and are transported north by cargo or courier taking advantage of the anonymity created by large-scale tourist traffic and perfunctory customs checks through these U.S. territories. Today about a third of cocaine in transit winds up in Puerto Rico (USODC, 2003). Sophisticated satellite positioning systems are often employed by traffickers to coordinate drops in the least policed waters (DEA, 1998). To elude U.S. radar, traffickers often use “stealth boats” made entirely from wood and fiberglass as well as semi-submersible vessels (de Albuquerque, 1996b).

Further to the north, cocaine traffic has been deflected toward Haiti and the Dominican Republic--states ideally suited because of their location, poorly monitored coasts, mountainous and under populated interiors, significant poverty, and poorly paid and under-equipped security forces. Cocaine shipped to Haiti quickly finds its way to the Dominican Republic, and then by “go-fast” or fishing boats to Puerto Rico or the Bahamas. The Dutch Antillean islands of Aruba, Curacao and St. Maarten have also become prominent transit routes to the U.S. and Europe for heroin and cocaine smuggled by passenger and cargo flights as well as on cargo vessels and cruise ships. Their main attraction is that they function as free-trade zones that allow containerized contraband to escape inspection before re-export (DEA, 2003). Grenada and St. Vincent and the Grenadines also function as break-bulk pipelines for drugs en route north via the American and the French territories (Guadeloupe and Martinique) while St. Lucia and St. Kitts-Nevis have become staging and stockpiling points for cocaine to be on-loaded into “go-fast”or fishing boats to Puerto Rico and the USVI.

These drug flows are facilitated in part by the lack of drug-sniffing dogs at Caribbean airports and sophisticated concealment methods. In addition to hidden compartments and fuel tanks in maritime vessels, drugs have been stashed in every possible human orifice, especially the swallowing of cocaine sealed in condoms and heroin in latex-wrapped pellets. They have been hidden in every type of clothing,footwear, fruits, vegetables, furniture, appliances, vehicles, cigarette cartons, false amputee limbs, bibles, surf boards, live and dead animals, and even a “ganja guitar” fashioned completely of compressed marijuana (Griffith, 1997, p. 82). Lax customs inspection and local corruption facilitate the lucrative trade. The former is particularly true of cruise ship passengers and crew as they disembark in Puerto Rico or Florida ports. Couriers are often women recruited for up to $3,000 per trip, cruise ship crewmembers, or older couples on a cruise. Jamaica is the major source of air couriers. Over one third of these so-called “mules” arrested in the U.S. are from Jamaica (Economist, 1999) while British authorities claim one in ten passengers flying Air Jamaica (so-called “Cocaine Air”) to Great Britain are transporting cocaine (UNODC, 2003, p. 15).

Short Run Impacts

The success of transshipment across the region directed by experienced traffickers using sophisticated networks and methods suggest the Caribbean narcoeconomy—along with its associated evils of violence, drug abuse, corruption and money laundering—is increasingly embedded in the insular political economy. This is evident in the rise in criminality across the region reviewed above, and the incidence of high-powered firearms and American style tactics: gang warfare, drive-by shootings, home invasions (de Albuquerque & McElroy, 1999b). It is suggested by the rise in citizen gun purchases, the spread of private security agencies and high-tech alarm systems, and the proliferation of guard dogs, high-wire fencing and grilled windows. Griffith (1997, p. 123) reports the telling example of former Governor Roy Schneider of the USVI who carried “a Glock semiautomatic pistol when he did not have his official security detail.”

Few segments of island life have gone untouched. The grim realities include: (1) the growing presence of drug-addicted youth in low-income urban areas and around resorts; (2) the active daily complicity of some local police, shipping and customs officials and airline personnel; (3) collusion at the highest levels implicating law enforcement and elected officials in what one regional writer calls “massive public corruption” (Reese, 1997) in nearly a dozen nations; (4) prison overcrowding primarily because of drug-related offenses; (5) the clogging of over-taxed court dockets and resources plus the associated problems of evidence tampering and witness and jury intimidation . In this last regard, one of the more celebrated examples is the case of Charles “Little Nut” Miller, a deportee, who is alleged to have successfully avoided extradition from St. Kitts to face narcotics violations in the U.S. by threatening American students at the island’s offshore veterinary school (Larmer, 1998).

Certainly the most palpable evidence of narco traffic’s role in island society is the daily economic impact. As the region’s second largest export sector behind tourism, the narcoeconomy is “one of the few areas where global profits continue to flow from the developed to the developing world” (Leggett, 2000, p. 143). In the private sector, the infusion includes the substantial payroll to the drug workforce: growers (marijuana), pilots, boat captains, engineers, shippers, baggage handlers, couriers, lawyers, accountants, street pushers and enforcers. Given the risks, these employees are paid above the going local wage, and their spending supports a diverse array of local businesses. In the public sector, clandestine payoffs to compliant police, customs and other officials is quite substantial. According to Harriott, (2002, p. 12), public corruption provides “Caribbean civil servants with some US$320 million in income annually.”

These infusions circulate through the insular economy in a number of ways. They are fed by rising addiction which is partly due to the Colombian cartel’s practice of paying traffickers in kind to avoid money laundering (DEA, 1998). They are also fed by protection and extortion rackets which recently have become a major source of gang income (Robotham, 2003). On the other hand, drug profits are invested in legitimate enterprises serving residents and laundered into hotel facilities and casinos etc. catering to visitors. As an illustration of the embeddedness of drug activity, marijuana’s financial significance was exemplified by the December, 1998 uproar in St. Vincent, the second largest Caribbean producer after Jamaica, when U.S. troops helped destroy over one million plants; and growers began “a petition drive to ask President Clinton for damages” (Navarro, 1998, p. 4). The footprint of the narco dollar is deep.

Long Run Implications

Evidence is mounting that the narcoeconomy will continue to grow and pose increasing threats to tourism and offshore finance. In the first case, Caribbean history has largely been the creation of global capitalism. In the same way the narco trade has been accelerated by the worldwide forces of globalization unleashed by the fall of Communism and nourished by the region’s economic uncertainty, withering exports, and limited enforcement capability. The crime syndicates that control drug activity represent an almost intractable mega-multinational threat to local authorities because of their criminal sophistication, adaptability, financial power and increasing political influence.

Second, the effectiveness of U.S. led counter narcotics activities in the region, which have not materially reduced drug availability over the past decade, has been hampered by fluctuating funding levels, conflicting objectives, and lack of operational coordination (GAO, 1997). Specifically, it has been significantly blunted by the recent closure of Howard Air Force Base, the center of U.S. anti-drug operations, as part of the Panama Canal Treaty, and will suffer further weakening with the proposed closure of the Roosevelt Roads Naval Base in Puerto Rico. Moreover, very recently the U.S. has diverted significant Coast Guard resources from drug interdiction efforts and patrolling Caribbean waters to shore up the Mexican border and bolster homeland security (UNODC, 2003, p. 22). As a result, today the U.S. has likely less than a third of the personnel and equipment it employed before 1990 (Abel, 1999). There has been a similar scaling back of European anti-narcotics efforts in the region (Sanders, 2003), the Caribbean has witnessed a concomitant rise in trafficking.

A third complication is coordination friction. Local autonomy is threatened by the perceived aggressive hegemony of the U.S. unilaterally implementing anti-drug countermeasures “in her backyard.” These include sending in Marines to destroy marijuana plants at remote island outposts, as well as the recent Ship Rider Agreement that allows U. S. incursions into Caribbean territory and waters “in hot pursuit” of traffickers (de Albuquerque, 1997). The sacrifices of local sovereignty caused by these U.S. pressures to stanch narcotics trade have been difficult to swallow for Caribbean leaders who perceive the underlying problem to be primarily North American addiction. Moreover, the climate of cooperation has obviously been weakened since the 1990s by declining U.S. aid to the region and by the deportation of known drug felons from overcrowded U.S. prisons. For all these reasons, it is plausible to assume the narcoeconomy will continue to grow in a “business as usual” climate, absent any sharp drop in North American drug consumption and/or dramatic success in enforcement and interdiction.

In the second case, the narcoeconomy with its violence, addiction and corruption will undoubtedly pose the greatest threat to the sustainability of tourism. The paramount prerequisite of visitors spending their hard-earned income on holiday is safety and freedom from fear of victimization. Given the importance of visitor security as a condition for industry success, it is no wonder that crime, along with its drug-trafficking undercurrents, is considered the “most systemic internal threat to Caribbean tourism” (McElroy, 2004, p. 53).

This conclusion is evident from a variety of sources. First, even the perception of danger or irritation can tarnish a destination’s reputation. In a survey of major U.S. tour operators, King (2003) found the two most important factors deflecting visitors away from the Caribbean were fear of crime and harassment. Second, there is some reality to these fears since research has consistently shown that (1) visitors are more likely than residents to be victims of crime (larceny, theft, robbery), and (2) disproportionately targeted in “hot spot” locations they are most likely to frequent (Harper, 2001). Third, there are numerous anecdotes documenting the links between major and widely publicized crimes and negative visitor fallout. One of the most notorious was the so-called “Fountain Valley Massacre” in 1972 in St. Croix, USVI. Eight tourists were gunned down by local thugs during a robbery. It took the island over ten years to fully recover (de Albuquerque & McElroy, 1999a).

Fourth, academic research both on cross-national patterns and case studies covering long-term trends underline the negative impact of crime on visitor flows. In a multi-island study, Levantis and Gani (2000) found a one percent increase in crime rates was associated with a half percent decline in visitation in the Caribbean. In a longitudinal study of Jamaica, Alleyne and Boxill (2003) found a weak negative link between crime and U.S. arrivals but a stronger relationship with Europeans, who tend to stay longer and spend more. The authors further argued that some of the negative fallout on tourism from the rising crime wave was likely offset by heavy promotional advertising as well as substantial hotel/airline discount packages, not sustainable practices in the long run.

Fifth, in a host of other less obvious ways, the narcoeconomy is impacting tourism throughout the region. It is no mystery that visitor harassment is more widespread in the Caribbean than in any other region across the globe, and that drug peddling is a major aspect of the problem (McElroy, 2003). Such behavior is fueled partly by local drug pushers seeking sales as well as by addicts needing income to satisfy their own habit. In destinations like Jamaica and St. Croix, USVI, harassment and theft against cruise passengers have become so dangerous that cruise lines have dropped such stops off their itinerary costing the islands millions in lost revenue. Even attempts to control such problems may be somewhat unnerving for unsuspecting visitors. The presence of uniformed police patrolling beaches, docks and resort properties and guard dogs sniffing for narcotics at air and seaports may seem incongruous with typical vacationers’ paradise image, and may negatively affect their word-of-mouth recommendations and preference for a return visit.

Sixth, the high cost of security, surveillance and insurance in the private sector adds to the already relatively steep price of a Caribbean vacation, especially in the context of expanding global travel markets and intensifying competition from Asia and Pacific destinations. In the public sector, substantial resources devoted to resident and visitor protection are diverted from more productive developmental uses: refurbishing the infrastructure, devising new attractions, human resource training, and tourism promotion. Harriott (2002, p. 5) estimates the overall cost of violent crime in Jamaica to be 6 percent of GDP per capita on an annual basis.

Seventh, a number of writers have argued that rising crime is particularly problematic for tourism since the industry is ultimately based on personal interaction and a welcoming experience (Dunn & Dunn, 2002). According to Harriott (2000, p. xv), a crimogenic environment breeds “insecurity among all segments of the population [including investors and developers]…declining public confidence in the criminal justice system, and growing cynicism among its functionaries,” i.e. a poor climate for business profitability and risk-taking. Sanders (2003, p. 384) cites anecdotal evidence that in the wake of a recent rash of kidnappings in Trinidad and Guyana “…investment and tourism have been badly affected, and even social life curtailed.” Sustained criminality also produces a loss of human capital through the emigration of middle-class professionals (accountants, bankers, realtors, planners, hotel managers etc.) and entrepreneurs who provide the skill base for the tourism economy. They have the most to lose in a deteriorating climate and the wherewithal to succeed elsewhere.

Eighth, the hotel sector’s principal response to shield visitors from potential harm has been the rapid expansion of all-inclusive resorts with their full complement of on-site gift shops, restaurants, night clubs, water sports etc. for the convenience of a fixed daily fee. While these popular “gated” properties protect tourists and generate high foreign exchange and year-round employment, they have also “triggered a new wave of resentment” (Pattullo, 1996, p. 74) among taxi-drivers, small shopkeepers and other vendors who feel shut out. Adding to the charge of enclavism and low local income circulation, critics argue all-inclusives reinforce the worst perceptions of socio-economic inequality attributed to third world tourism, justify harassment among excluded street vendors and hagglers, and weaken community support for an industry that “heavily depends on the consent of the host population” (Dunn & Dunn, 2000, p. 31). Such a strategy undermines sustainability because it fails to address the “daunting task of creating a more egalitarian tourism in which all social strata share a viable stake in and the motivation to sustain it” (McElroy, 2004, p. 53).

Ninth, all-inclusives can also symbolize for unemployed youth that they lack access to legitimate channels of mobility and are left “condemned…to an economically marginal existence” (Headley, 1996, p. 39). For many of these disenfranchised outsiders, according to Black and Klausner (1987, p. 99): “Prostitution and drug dealing have … become ‘the only viable equal opportunity enterprises’ for the lowest socioeconomic classes…” Another debilitation ripple, according to Griffith (2003)—fuelled in part by in-kind cocaine payments for trafficking—is the associated sharp rise in the HIV/AIDS epidemic. Although it is concentrated in Haiti and Dominican Republic, it is second only to Sub-Saharan Africa in prevalence. In the short run this trend will place increasing pressure on island health budgets, and in the long run it will further deplete the insular labor pool.

Finally, the volume of drug-related cash crisscrossing the region has become so large that money laundering threatens to undermine legitimate offshore activity. Over the past decade, most islands with an offshore sector have either been implicated or placed under serious scrutiny. The three major problems have been excessive bank secrecy, poor supervision and inhibiting international crimination investigations (Booth & Drummond, 1996). In response the OECD’s Financial Action Task Force black-listed a number of jurisdictions with the threat of sanctions until they agreed to adopt new anti-money laundering legislation created to tighten supervision and improve information exchange. All but one (Antigua) has complied. In the process, however, the international credibility of offshore banking was damaged (Bryan, 2000). According to Sanders (2003, p. 381), offshore banking in one jurisdiction has virtually collapsed and “there has been a significant reduction in the number of [offshore] businesses, revenue and employment.”

Conclusion

All three waves of Caribbean globalization were created by external capital and powered by foreign demand. As such they also share the same large intrusive scale that has left deep and lasting imprints on the fragile insular ecology and demography. Given this history, the highly lucrative nature of the drug transit trade, the durability of metropolitan consumer demand, the continuing problems of North-South cooperation and coordinated enforcement, and the ongoing American and European anti-trafficking retrenchment, the narcoeconomy should continue to flourish and weaken the region’s political economy. According to Richardson’s (1992: 131) ‘business as usual’ comment, the narco trade resembles an extension of the colonial economy: “In producing and transporting narcotics for metropolitan consumption, Caribbean peoples simply are providing tropical staples for external sources, just as they have for the past five centuries.”

Learning Objectives

Long Run Implications

Review Questions