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The Economics of Cocaine: Bolivia
as a Case Study
• Introduction to Bolivia
– One of the poorest countries in South America –
Haiti is considered the poorest
– 9.77 million people
– Landlocked
– Very unstable politically – new leaders very often
GDP - per capita (PPP): note: data are in 2009 US
dollars
Bolivia
Brazil
Afghanistan
Norway
USA
$4,600 (2009 est.)
Rank 145
$10,200 (2009 est.)
Rank 104
$800 (2009 est.)
Rank 219
$59,300 (2009 est.)
Rank 5
$46,400 (2009 est.)
Rank 11
Other data:
Population below poverty - 60%
Household income distribution:
-Lowest 10% -
0.5%
-Highest 10% -
44.1%
Coca leaf
•Around since 3,000 BC
•Increases productivity
•Used for medicine – tea for altitude
sickness
•Ceremonies – coca offerings/readings
•After Peru – Bolivia is the largest producer
Economists’ advice for Less
Developing Countries:
•Crops that are labor intensive
•Decentralized – infrastructure is very poor
•Cottage Industry promoting
•Earn foreign exchange
Cocaine market
Demandfor
for Coke
coke keeps
Demand
increasing
http://www.youtube.com/watch?v=LvPCrywyTQA
http://www.youtube.com/watch?v=E0HKSYEPwV8&feature=related
Supply is stopped at
the
border
;)
Supply
stopped
at the
border 
A Demand Schedule and Curve
LO-2
The Market Supply Curve
LO-2
New Supply
Price
$160
Supply
$140
$100
New Demand
Demand
1 gram
2 grams
Quantity
Problems created by cocaine:
•Cocaine Republic
•Deforestation
•Corruption – high and low levels of
government
•Communities are uprooted
•Import chemicals – dump them in nature
Alternatives
Other cash crops for Bolivia
•Coffee
•Rice
•Citrus
•Corn