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THE INDEX — June 29, 2010

Most of the wealth generated by the Latin American narcotics trade stays in the country of final distribution, says Antonio Luigi Mazzitelli, the UN's expert on drugs and crime for Mexico and Central America, adding that the majority of the profits from the $35 billion cocaine business between South America and North America goes to final distribution in the United States.

Some 85% of total profit, or $29.5 billion dollars, stays with dealers in the United States while the Andean farmers who grow the coca leaves get around $500 million, the Colombian middlemen who transport the leaves earn another $400 million, and the powerful Mexican drug cartels that ship the final product take about $4.6 billion.

“The main profit from the drug business remains at the end market, the closest possible to the final distributor and consumer,” says Mazzitelli. He emphasizes that these figures, published in the 2010 World Drug Report, demystify the notion that Latin American drug traffickers are the most powerful and wealthy beneficiaries of the chain.

Nestor Bailly

 

Dominique Strauss-Kahn, Managing Director of the IMF, announced Monday that the institution expects India's growth rate to close on China's over the next several years, amid fresh fears of a Chinese slowdown that turned out to overshadow the projection.  "We expect Indian growth to accelerate and be very close, closer than the past, to the Chinese rate of growth," Strauss-Kahn told Asian reporters following G20 talks this weekend in Toronto.

The prediction came just before The Conference Board, a non-profit business organization that publishes annual market indices, revised its estimate of Chinese growth in April downwards from 1.7% to 0.3% and noted a sharp fall in the US consumer confidence index from 62.7 to 52.9. The news sent jitters across markets worldwide, which are heavily dependent on global growth based on a decade of prodigious Chinese industrial output fueled by American consumer spending.  Chinese stock markets were hit particularly hard, with the FTSE Xinhua 200 plunging 4.34% to a 52-week low.  The fear is ascribed by some economists to a growing perception of China as, "a classic emerging market story of overinvestment, particularly in property." Growth projections are expected to be revised substantially downward in coming weeks.

Meanwhile, the IMF's most recent projection revised India's growth rate upwards from 8% to 8.8% for the fiscal year 2010-2011, and reports particular strength in the mining, telecommunications, tourism, and financial services industries.  Having "a huge part of the public debt… financed by Indian savings,” Strauss-Kahn said, “makes Indian public financing immune to the increasing risk created by inflows.” Concerns still remain over inflation, especially food prices, to be sure.  But India is profiting from pro-market and increasingly export-oriented policies that, unlike China’s, are highly diversified – and whose success is not dependent on the sustained spending of U.S. consumers. 

David Black

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