Economic Analysis of Eradication and Alternative Crop Policies for Controlling Coca Supply in Colombia

Coca leaf is the primary input in cocaine production. Colombia is among the three largest coca producers and is the world’s main supplier of cocaine. This thesis examines the interplay between the policies for controlling coca supply in Colombia: eradication (aerial spraying of coca) and a price support for alternative crops (coffee and cocoa) that compete for land allocation with coca. The study calibrates a multi-market partial equilibrium model to simulate different eradication and price support scenarios in order to assess farmers’ response to policy changes. The results suggest that an alternative crops policy alone holds little promise to significantly reduce coca production. A price support on individual crops has little effect on coca cultivation and coca production. There is a small gain in reducing coca cultivation by providing a simultaneous price support to coffee and cocoa. However, if peasant farmers seek to maximize profits, they would be lured to substitute more land between coffee and cocoa rather than taking away land from coca production. Advisor: Azzeddine Azza