This state of affairs further devastates employment, bringing in unemployment. Likewise, money laundering investments always effect the crowding out of the legitimate businesses in order to make money. The situation is made worse since the manufacturing and retail sectors are also affected through money laundering. Drug trade also brings in another problem in the sense that it affects land ownership. It was in the wake of the 1980 Land Counter Reforms that drug traffickers (especially the ones who engaged in narcotics) bought massive tracts of land as legal forms of investments.
This development led to increased concentration of land ownership and the entrenchment of the labor saving techniques. There are approximations that revenues ranging from 8% – 23% were used to buy 5% of the arable land in Antioquia, Cauca, Meta and the Caribbean coast (Baranyi and Deere, 2004 pp. 89). Most of these parcels of land have low productivity due to its low labor intensity, and are therefore used as cattle and horse ranches. Interestingly, these purchases actualized in ares with dominance in guerrilla activities.
These places were populated with drug entrepreneurs who took an active part in the formation of the military rag tag bandits. Consequently, more peasants were conscripted into these militant groups or were pushed into adopting illegal drug cultivation. It is on this premise that a huge portion of the rural areas in Colombia have since the 1990s, undergone misery, while the government has ceded control over 40% of the total area of Colombian land (Berquist, et al, 2001 pp. 139). These prospects have only ushered in increased coca production and a decrease in the production of the legal crops.
Unequal distribution of resources. The effect of illegal drug trade in Colombia also proves to be a hydra headed affair in the sense that it poses more problems than the ones already listed down and discussed above. For instance, coca cultivation and production on the issue of land ownership disturbs an already inegalitarian income distribution of income in Colombia. According to the 2001 report by the International Monetary Fund (the IMF), only 20% got as much as 60% of the country’s income while the lowest 20% of the Colombian population accessed 2% of the Colombian income (Clutterbuck, 1990 pp.
78). Since farmers in the lower bracket or quartile function under competitive conditions, to ensure minimal profit margins, the same group tend not to accrue anything from the illegal drugs. The illegal drug trade works insidiously against the Colombian economy due to the fact that it ensures only short term financial benefits to the peasants and other small scale farmers in the rural areas, while in the long run, it facilitates the economic gap between the rich and the poor in Colombia.
This case is evidently seen in the sense that about 30% of the Colombian wealth were in the hands of cartels in the 1980s and 1990s (Heiberg, 2008 pp. 75). However, the illegal drug industry has totally continued to restructure the economic power and wealth distribution of Colombia. Over 55% of the country’s wealth are presently in the hands of the cartels (Helms, 1999 pp. 178). Drug trade and application of the contraband. Apart from this, the illegal drugs trade affects the macro economy, the business and the non business environment through the effects of the application of contraband.
These Macroeconomic imbalances come in when there is the overestimation of the value of the peso and when there is a high influx of foreign exchange. The high influx instead harbor economic crisis. These effects are still far fetched in the sense that the consequences touch on the botching of the essential tropical forest, plant and animal life biodiversity and the contamination of the water catchment areas and the supplies. These, together with other health hazards occur from aerial spraying. Both legal exports and imports are always limited by the contraband.