The Consumers Union Report on Licit and Illicit Drugs

by Edward M. Brecher and the Editors of Consumer Reports Magazine, 1972

Chapter 41. Back to cocaine again

By the mid-1960s, as we have shown, the market for amphetamines and related stimulants was being supplied in at least four ways: (1) physicians were prescribing these drugs for patients; (2) domestic supplies of legal stimulants were being diverted to the black market; (3) legal stimulants were being exported from the United States to Mexico and smuggled back into the United States; (4) speed labs were manufacturing illicit stimulants.

As the 1960s drew to a close, however, all four of these sources of supply were under increasing pressure. The medical journals carried papers warning physicians not to overprescribe stimulants. The United States Bureau of Customs was on guard against stimulant smuggling, The Bureau of Narcotics and Dangerous Drugs, the Food and Drug Administration, and state and local police agencies battled against both the diversion of legal stimulants and the illicit speed labs. Securing the precursor chemicals for speed manufacture became increasingly risky. The net effect was a notable expansion of a fifth source of supply of stimulants–– a boom in  cocaine smuggling.

"More and more cocaine, worth millions of dollars," correspondent George Volsky reported from Miami in the  New York Times for February 1, 1970, "is being smuggled into the United States from Latin America, much of it through this area, according to Federal law enforcement officials and narcotics agents." ¹

Volsky then went on to quote Dennis Dayle, supervisory agent of the Federal Bureau of Narcotics and Dangerous Drugs in Miami, as saying: "The traffic of cocaine is growing by leaps and bounds. It was insignificant only a few years ago, but now it has become a significant problem." ²

Agent Dayle failed to link the revival of cocaine smuggling with the efforts his bureau was making to curtail the availability of speed. But John J. Bellizzi, director of the New York State Bureau of Narcotics in Albany, explained to Volsky why cocaine smuggling was on the increase–– because younger drug users are finding out about it. The kids are beginning to learn that it's pretty much like speed." ³

Nationally, Volsky reporters Bureau of Customs cocaine seizures rose from 22 kilograms in 1967 to 90 kilograms in 1969. * And he quoted a rule-of-thumb estimate that for every kilogram seized, ten kilograms get through–– or an estimated 900 kilograms successfully imported during 1969. (Nine hundred kilograms is enough to provide from 18,000,000 to 27,000,000 cocaine doses of the size Sigmund Freud took during the 1880s.)

* Seizures increased markedly in 1970; indeed, 200 kilograms were seized in New York and Miami during the last three months of 1970.  The New York Times, however, commented: few of the men involved in this dangerous work have any illusions about reducing the flow." ⁴ As in the case of heroin, the arrest of a courier does not close off a conduit.

Volsky added details concerning the economics of cocaine smuggling–– details reminiscent of the heroin smuggling market described in Part I. Pure cocaine, he was informed by Wilbur Underwood of the Bureau of Customs, can be purchased in Latin America for $3,000 to $5,000 per kilogram (2.2 pounds). After importation, it is diluted or cut so that one gram of pure cocaine produces 16 kilograms of "street" cocaine. The street cocaine, Underwood told Volsky, is sold at $50 a gram. Thus the 900 kilograms of pure cocaine supposed to have been smuggled into the United States in 1969 represented 14,400 kilograms of street cocaine worth $50,000 per kilogram, or–– if those Bureau of Customs figures are to be believed * –– $720,000,000.

* One observer has suggested that the law-enforcement practice of "attributing retail" value to bulk merchandise [such as cocaine] is similar to attributing the value of 100 Christian Dior dresses to a bale of cotton." ⁵

With so vast a total markup, it is easy to see why smugglers who lost $495,000 worth of cocaine (at South American prices) to the Bureau of Customs in 1969 continued to smuggle cocaine in 1970 and 1971. Even if the Bureau of Customs retail price estimates are divided by ten, the loss due to interception of smuggled consignments remains trivial in comparison to the total markup.

On the basis of data supplied by Bureau of Narcotics supervisory agent Dayle, Volsky described a typical smuggling operation in these terms:

There are two principal partners, one controlling operations in South and Central America and the other in Miami.

The syndicate boss abroad, through a number of subordinates, buys coca leaves, sets up laboratories, maintains contact with local officials, arranges for payoffs, and recruits and dispatches local couriers with cocaine to the United States, mostly by plane.

The Miami boss, like a head of a large commercial corporation, has deputies in charge of travel, transportation, personnel, security, accounting, and quality control–– "cutting" pure cocaine for wholesale and retail trade.

Several years ago, modest Latin-American women were usually employed as "body carriers," smuggling into Miami from two to four kilograms of pure cocaine.... Some women carriers posed as being pregnant. . . . After passing through Customs at the Miami International Airport, these couriers–– who were given precise but simple instructions and who had little information about the syndicate usually proceeded to a downtown hotel where cocaine and cash transportation payment changed hands." ⁶

Once federal agents learned of these procedures, of course, it was easy to keep an eye open for modest Latin American women–– especially the ones who looked pregnant. After a few of them had been arrested, however, the syndicates simply changed the style of their couriers. Subsequent reports indicated that couriers looked like businessmen or college students.

As noted in Part I, the United States law-enforcement system tends to catch price-cutting newcomers to the black market rather than established syndicates; law enforcement thus tends to perpetuate these syndicates and to keep prices high. A United States narcotics agent stationed in South America explained to a  New York Times reporter in some detail just how this happens in the case of cocaine.

The narcotics agent, "who cannot be named," told of a small-time procurer of prostitutes in New York City who became interested in the high prices paid by his girls for cocaine, and decided to get in on the racket. "When he learned that the stuff came from Chile, he bought a $550 roundtrip airline ticket and came down, ⁷ the  Times reported on January 25, 1971. Cocaine is readily available in kilo lots in Chile and other Latin American countries. The New York procurer bought a kilo for $1,800. "An experienced buyer could have gotten the cocaine for about $900," the United States narcotics agent commented.

The procurer safely returned to New York with his kilo, adulterated it to make two kilos, and sold them for $15,000 each to the dealer who had been supplying cocaine to his girls. This was price-cutting, and horning in on the trade of the established importer who had previously supplied the same dealer. Following a second trip to South America, the procurer cut prices even lower-selling 75 percent pure cocaine for $18,000 to $20,000 a kilo.

Retribution swiftly followed. "A member of an organized drug-peddling group informed on the independent operator and he was seized [by the authorities] upon returning from his third trip to Chile." ⁸ It would be hard to find a clearer example of how vigorous United States law enforcement buttresses the monopoly of the established distributors of illicit drugs–– and thus keeps both consumer prices and the profits of established traffickers exorbitantly high.

The flooding of the market with cocaine after 1968 represented a threat to the established black-market amphetamine interests. But the United States Bureau of Narcotics and Dangerous Drugs, which in 1968 bad from four to seven agents in its Miami office, increased its Miami staff to over thirty agents early in 1970–– and more were being trained. ⁹ To the extent that such increased cocaine policing is effective, of course, it will protect the illicit speed market from too much cocaine competition.

The developments of the 1960s can now be summed up. The decade began with almost all stimulants being supplied by reputable manufacturers; their low-cost amphetamines had almost driven cocaine off the market. The withdrawal of intravenous amphetamines from the legal market opened the door for the illicit speed labs. The Drug Abuse Control Amendments of 1965 curbed the direct diversion of legal amphetamines to the black market; this opened the door for the smuggling of exported amphetamines back into the United States. By 1969, law-enforcement efforts had raised black-market amphetamine prices and curbed amphetamine supplies sufficiently to open the door for renewed cocaine smuggling. All of these modes of supplying the black market shared the benefits of vigorous law enforcement, for it was law enforcement that prevented the flooding of the market with excess supplies of both cocaine and amphetamines that might threaten the price structure. If the various black-market suppliers had conspired among themselves to limit production and imports, they would have been in violation of the antitrust laws. But no conspiracy was necessary; law enforcement limited supplies, thus playing the role that is ordinarily played by conspiracies in restraint of trade.

Viewed from this perspective, the proposals current in 1971 to ban (with certain minor exceptions) the legal use of amphetamines, even on a doctor's prescription, seem less persuasive. Such a measure, it is true, would promptly curb the use of these drugs, by patients  under medical supervision; but there is not the slightest reason to expect that it would significantly curtail the overall consumption of amphetamines, cocaine, and other stimulants. On the contrary, it would deliver over to the cocaine smugglers, illicit speed labs, and other black-market suppliers at least some of the millions of users who now secure their euphoriants and central nervous system stimulants on a doctor's prescription–– and it would thus protect the black market from the last remaining vestiges of low priced legal competition. This, of course, was precisely what the Harrison Narcotic Act had accomplished for the morphine and heroin black market back in 1914 (see Part I).