Chemicals and technology fuel the drug trade

Rafael is a small-scale farmer in Peru’s Apurímac, Ene, and Mantaro River Valley (VRAEM), one of the main drug-producing areas in the world. He is fully aware that the coca he produces goes to maceration pits, small labs where “narcos” transform the leaves into cocaine paste. Rafael claims that, through coca leaf production, he was able to send his kids to university in Lima, a goal impossible to reach by just producing cacao or coffee. His story is similar to that of many small-scale farmers in the Peruvian Amazon, the centre for coca cultivation and cocaine paste production. They navigate uncertainty by participating in an illegal market.

To manufacture drugs, a lot of chemicals are required, most of which are legally imported. Once cocaine paste is produced, planes, small boats and people on foot transport it to key points, such as the Chapare in Bolivia, where the chemicals required to refine it into cocaine hydrochloride are cheaper and easier to acquire. Then via Brazil and the main ports along the Atlantic route, most of the powder is shipped to Europe. A small percentage supplies major South American markets like Buenos Aires, São Paulo or Montevideo.

Drugs flow both ways

Over the last decades, urban drug markets in South America have been growing. Although they are still dominated by cocaine and marihuana, synthetic drugs are gaining ground, opening routes and barter exchanges, and reaching different milieus. Contrary to the mainstream narrative that portrays South American countries as “producers” and Europeans as “consumers”, synthetic drugs go in the opposite direction: from Western Europe to South America. Unlike cocaine, synthetic drugs are not dependent on plants and agrarian labour forces; hence, they are not geographically confined and can be manufactured practically anywhere by using widely available chemicals or pharmaceuticals. Substances such as MDA – the main precursor of MDMA, or “tusi” (pink cocaine), a polydrug composed of MDMA, ketamine and caffeine, have been commercialised across Latin America in the last years.

Most public attention and state enforcement priorities tend to go to the most visible elements of the drug economies, such as criminal organizations, clandestine laboratories, “narco-submarines”, raids, military operations, and drug-related violence. Although these elements are crucial, they are only half of the story. Behind each kilogram of cocaine or MDMA, there are less visible but equally relevant infrastructures and networks, most of which come from legitimate markets. Illegal economies and the actors involved do not exist in isolation in a “shadow economy”; contrary, they are deeply intertwined and grow in tandem with legal mechanisms, infrastructures, and regulatory gaps.

Chemicals as enablers

Chemical and pharmaceutical industries are unwitting partners in large-scale illicit drug production. Despite enormous efforts to control the chemicals used in drug manufacturing, these industries have grown without clear regulations across states. Each government establishes its own control measures, but they are ineffective. For drug markets, that means a massive pool of legally manufactured chemicals that can be diverted, substituted or rerouted into clandestine uses. Reports have identified that drug markets are highly dynamic and innovative, adapting fast to new regulations. Once a chemical is strictly controlled, it is replaced with less-controlled ones, or other substances. For instance, evidence in Brazil shows that helional, a non-internationally regulated chemical, is being used in the local production of MDA and MDMA. Helional is mainly used as a perfume in soap and laundry detergent. Considering this, the project “Illegal synthetic drugs in Europe and Latin America: regulation of precursor chemicals and online market dynamics”, carried out by the Centro Latinoamericano-Suizo at the University of St.Gallen in collaboration with the Université de Lille, explores the regulations and trade of chemicals used for synthetic drugs and cocaine production. How do production or trade companies prevent the illegal use of their chemicals? How should they collaborate with state agencies to enforce control? How do criminal actors acquire chemicals through legal sources for drug manufacturing? Answering these questions will allow a multi-scalar analysis of the challenges of states in managing the complex interfaces between legal and illegal economies, as well as the implications for the global private sector and transnational enforcement.

Drug trafficking and digital platforms  

At the other end of the chain, in retail, technology plays a fundamental role. People like Lisa, a 20-year-old veterinary student in Argentina, operate a thriving side business. She focuses on selling ecstasy pills to women, using two digital tools: Telegram and Mercado Pago. Through private Telegram communities, she promotes products and arranges transactions. Mercado Pago, a widely used digital payment platform in Latin America, allows her to process payments quickly and securely. This is how Lisa manages an illicit drug trade that runs continuously.

Current research shows that digital media dramatically expands the accessibility to any type of drugs. While some studies show how crypto markets — eBay-style marketplaces on the dark web — allow drugs to be purchased from anywhere in the world and delivered by regular mail, other studies show that there are more easily accessible digital platforms for drug trade: social media. Notably those offering encrypted messaging, facilitate rapid, safe, and comfortable access. On these discreet meeting places, sellers and buyers can agree on product, delivery method, timing and payment. But the benefits of technology do not end there. After making a deal, buyers can usually pay for illegal substances digitally. Contrary to the idea that it is better not to pay with credit cards or virtual wallets because they leave traces, research shows that the opposite is true: payment with legal virtual wallets (think of the best-known ones!) is widespread.

In light of this, the SNF project “Illegal transactions in the digital age: emerging practices and regulatory intermediaries in Latin America” explores the role of regulatory intermediaries. What practices are emerging in relation to the purchase and sale of illegal products with platforms and digital payment methods? What causes the perception that law enforcement is unlikely to be effective there? These questions are not trivial, as they expose a reality that was unthinkable until recently. They also highlight the regulatory challenges faced by communities and states in relation to powerful tech companies.

Stirring up the debate 

Illegal markets, especially the drug economy, are entirely dependent on and exploit legal infrastructures and markets. The same markets that supply the necessary chemicals to manufacture medicines or cleaning products are also used to make drugs. Likewise, everyday technologies like smartphones, apps and the internet, greatly facilitate drug trafficking. This situation poses a series of challenges, two of which are interrelated: Firstly, the role of technology in promoting illegal markets must be at the centre of public conversation. Our fascination with the latest technologies must give rise to reflection on their consequences, including easy access to problematic or morally reprehensible products and services. The regulation of technology companies must occupy a prominent place in this reflection. In this regard, Australia and Denmark's bans on social media use by minors are worthy of consideration. Secondly, the regulatory impetus must also extend to anti-money laundering regulations, since large sectors of the unbanked population have been incorporated on the condition that banks or fintech companies carry out “light onboardings”, i.e. obtain less information about customers. Consequently, millions of transactions are executed daily without the possibility to ascertain the purpose of transactions or the origin of funds. Finally, regulation becomes abstract and not credible without effective state enforcement. Rapid technological advances create complex scenarios that require adequate state capacity. This involves specific knowledge, expertise, and technical resources.