Balloon Effect

The balloon effect is an often cited criticism of United States drug policy. This effect draws an analogy between efforts to eradicate the production of illegal drugs in South American countries and what happens to the air inside of a latex balloon when it is squeezed. The air is moved, but does not disappear. This displacement is also known as the "balloon effect"; pressure applied in one area pushes the air into another area of less resistance (Mora).

This effect happened:

• with fumigation of marijuana in Mexico, in which the drugs migrated to Colombia.
• with marijuana in the Sierra Nevada de Santa Marta, which migrated to Cauca.
• In the late 1990s coca was largely eradicated in Peru and Bolivia, only to be replaced by new crops in Colombia.
• Recently, with the intense spraying in the Colombian department (state) of Putumayo, coca has been planted in other departments including Arauca, Cauca, Caquetá, Guaviare, Huila, Meta, Nariño, and Santander.

A United Nations Development Programme Colombia described the balloon effect this way:

"The economic mechanism underlying the global effect is quite simple: the success of eradication in one area temporarily reduces the supply, and that translates into a price rise. Then, given that the supply function is fairly elastic, higher prices stimulate people to plant crops in other places." The costs to start planting are quite low "given that the majority of property rights on land planted with illicit crops are ill defined."

Brazil and the Southern Cone (Chile, Uruguay, Paraguay, Argentina) neglected their respective drug trafficking issues and due to the concentration on the Andean region, these were neglected by the U.S. as well. These nations ignored the problem primarily due to its slow introduction and penetration into their society, the insistence from the US that the sources of the drugs was the only problem and because the governments at the time were more concerned with foreign debt, inflation, economic growth, civil-military relations and political survival (Mora). The United States of America continued to increase their anti-drug operations in the Andean region resulting in displacement (Friesendorf). This means that the U.S. tactics forced the drug traffickers to search for safer areas with less government pressure to eliminate the flow of narcotics. The drug traffickers took advantage of the neglected Southern Cone and began shifting their routes, locations for cocaine laboratories and money laundering centres. These shifts have also created growing drug consumption issues among the Southern Cone countries. While the role of the Southern Cone had been that of a transhipment point for cocaine produced in the Andean region, further evidence appeared to indicate that in fact since 1984 the region had been used extensively by Colombian and Bolivian drug traffickers (Friesendorf). Cocaine labs were found in Northern and Western Brazil and in Argentina (Mora). It was also found that Uruguay and Chile had become major financial centres for money laundering after the invasion of Panama (Mora). Uruguay was particularly attractive as it has one of the most open banking systems in the Western hemisphere and the government has always put great emphasis on having tight bank secrecy laws (Friesendorf).