Colombia faces $17bn laundry bill: Smuggling, drug trafficking and their profits are warping an entire economy

view gallery VIEW GALLERY

 

Puerto Nuevo

Rotting wooden planks heave as dozens of barefoot Wayuu people carry washing machines, fans and stereos on their backs from the hull of a cargo ship docked on the tip of northern Colombia. Throughout the night, they unload thousands of boxes piled 30ft high, and haul them down the battered ramp to waiting trucks. By torchlight, a customs official at the makeshift wharf at Puerto Nuevo on the La Guajira peninsula is checking the contents against documents supplied by the ship.

Contraband smuggled into Colombia is part of multibillion-dollar money laundering operations that damage legitimate businesses, undermining Colombia's effort to reinvent itself as a thriving economy after decades of political and drugs-related violence.

In complicated schemes, Colombian traffickers receive drug money from overseas dealers in the form of goods, often shipped along with legitimate merchandise. Once the goods are sold and a sales receipt given, the drug money is clean.

The amount of money laundered from the trafficking of drugs, arms and human beings in Colombia is estimated by experts to be as much as $17bn (£11bn) a year – more than 5 per cent of the economy's total value and more than total foreign direct investment last year. Much of the merchandise unloaded – the bulk of it legitimate – will make its way to the desert town of Maicao, a Wild West type of place that sells cheap designer perfumes and whiskey at half the retail price. "That goods are sold at lower prices than they are produced in the factory says it all," said the head of the national tax agency, Juan Ricardo Ortega.

Last year, as much as $128m (£84m) worth of contraband was seized by authorities, less than 10 per cent of the amount estimated to come into Colombia. "It's an impossible task," said Luis Carlos Canas, head of the tax office in northern Maicao, as he inspected ingots of aluminium on an 18-wheeler lorry crossing the border from Venezuela. "We just don't have the human resources to check everything."

Exports also are part of the laundering business. Fake paperwork is created for overseas sales that do not exist. Once the paperwork is filed at the customs office, cash from international drug deals can enter without raising suspicion. Colombia's official annual gold exports are reported to be as much as 70 tons, although the industry produces only 15 tons. While there is a considerable amount of artisanal gold that could account for some of the extra, Mr Ortega suspects the bulk is fictitious sales.

So while Colombia continues to transform its image from a violence-plagued nation to an investment magnet with booming oil and mining industries, the economy is skewed by the money laundering of traffickers' cocaine sales abroad. Colombia has for decades struggled to reduce crime linked to the drug trade, waging a US-backed war against Marxist rebels, right-wing paramilitary groups and cocaine cartels. But crime gangs have become more wily in duping authorities. Back in the days of Colombia's best-known drug lord, Pablo Escobar, in the 1980s, so much laundered cash simply came in by plane from the United States that dealers buried it around their homes. Now things are far more sophisticated.

There are three main ways the gangs clean their money: smuggling undeclared physical cash across the border; through the financial system; and via contraband.

It is not just the proceeds from drug trafficking – about $8.8bn (£5.7bn) a year – that gets laundered. Money earned from corruption, gun running, prostitution and illegal gold mining also needs to be cleaned. Once it makes it into Colombia's $330bn (£217bn) economy, it can inflate economic growth numbers by several points. And a large range of official data from inflation to real estate, retail, exports, imports and agricultural output may be different than reported due to fake or overstated sales from laundering.

The problem for ordinary Colombians, Mr Ortega says, is that laundered goods are mostly sold at below-market prices, which elbows out competitors.

Conversely, it can create price bubbles in certain sectors when criminals pay excessive amounts for land or property, or bill extra through restaurants and shops.

Cattle ranching, for example, is a common financing vehicle along with drugs for left-wing rebels of the Revolutionary Armed Forces of Colombia, known as Farc, as well as for drug cartels. They often pay above value for cattle farms and that in turn pushes up prices for neighbouring property. Then they liquidate assets, the cattle, to receive quick cash, cutting the price of livestock in the area.

Farmers are intimidated into selling their land and offered cash sums they can't refuse, according to a cattle rancher with land in Meta who requested anonymity for security reasons. "It's hard to refuse the drug dealers," the rancher said. "And we also face herds of cattle coming in illegally from Venezuela as contraband that slashes the price of the beef." The government says the Farc is among the biggest owners of cattle – assets that are easy to turn into cash to buy weapons or food and clothing for their 8,000-strong fighting force.

Colombia's financial system, surprisingly, is among the most rigid and successful in protecting against money launderers. Red flags go up with any unusual movement of cash. Banking clients complain about the charges levied each month and the mountain of paperwork needed to open an account, but Maria Mercedes Cuellar, head of the Asobancaria banking union, says that is what keeps the system safe. "Colombia has more controls in its system than most places in the world, even more than in the US," she said.

While detecting smuggled goods has proved tough, authorities have turned to accountants to catch the smugglers, just as US authorities did with the legendary gangster Al Capone in the 1930s. "If we can't pursue them for contraband or laundering, we'll pursue them for tax evasion," Claudia Rincon, head of the tax office's legal department, said. One of her agents was assassinated just weeks ago in connection with her work as a tax investigator.

The attorney general's office says that as the government gets tougher on launderers, the cases are piling up and the judiciary needs more personnel to take them to trial.

The lowly smugglers who do the leg work certainly do not see much of the profit, but they say there are few other ways to make a living. "How else can we feed our families?" Juancho said after being pulled from his car by police on a highway in La Guajira province. The police confiscated plastic jerry cans of fuel, part of a multimillion-dollar petrol-running business that thrives along the porous border with Venezuela.

Cheap fuel, at 2 cents a gallon, is smuggled over the border from Venezuela in cars outfitted with fake tanks, hollowed-out seats and double-panelled doors, and sold at $5 (£3.30) at lucrative pumping stations in Colombia. As Juancho was being questioned by police outside the car, his partner sped off in their red souped-up Renault 18, screeching over spiked barricades as police trained their rifles at it. Juancho was later released. He says he earns just $13 for risking the four-hour race south with the fuel but he has no intention of giving up. "We'll be back tomorrow," he said. "They won't stop us."

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Photographer / Floorplanner / Domestic Energy Assessor

£16000 - £25000 per annum: Recruitment Genius: A Photographer/ Floor planner /...

Ashdown Group: Front-End Developer - Surrey - £40,000

£30000 - £40000 per annum: Ashdown Group: Front-End Developer - Guildford/Craw...

Recruitment Genius: Customer Service Assistant

£13500 - £15000 per annum: Recruitment Genius: A Customer Service Assistant is...

Recruitment Genius: Sales Executive - OTE £35,000

£16000 - £35000 per annum: Recruitment Genius: An ambitious and motivated Sale...

Day In a Page

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

How a costume drama became a Sunday night staple
Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

Miliband promises no stamp duty for first-time buyers

Labour leader pushes Tories on housing
Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

Aviation history is littered with grand failures

But what went wrong with the SuperJumbo?
Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

Fortress Europe?

Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
Never mind what you're wearing, it's what you're reclining on

Never mind what you're wearing

It's what you're reclining on that matters
General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

Chuka Umunna: A virus of racism runs through Ukip

The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
Yemen crisis: This exotic war will soon become Europe's problem

Yemen's exotic war will soon affect Europe

Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
Marginal Streets project aims to document voters in the run-up to the General Election

Marginal Streets project documents voters

Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

The real-life kingdom of Westeros

Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
How to survive a social-media mauling, by the tough women of Twitter

How to survive a Twitter mauling

Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

At dawn, the young remember the young

A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

Follow the money as never before

Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

Samuel West interview

The actor and director on austerity, unionisation, and not mentioning his famous parents
General Election 2015: Imagine if the leading political parties were fashion labels

Imagine if the leading political parties were fashion labels

Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence