The following article was written by Jeffrey McDermott and originally published by InSight Crime this fall. It is the final entry of a three-part series on the FARC‘s wealth and criminal economies. You can click to read the first and second articles. This article has been republished with permission.
The former rebels of what was once Latin America’s oldest insurgency, the FARC, continually claimed to have barely any money. And while they did have a lot of expenses, they also have traditionally sat astride territories that generate well over $1 billion USD in criminal revenue every year. This last installment on the FARC‘s riches attempts to quantify the lucrative economies they used to control — ones that Colombia‘s other criminal actors now wish to possess.
The finances of the now-demobilized Revolutionary Armed Forces of Colombia (FARC) have historically been built on three pillars: the drug trade, kidnapping, and extortion. In 2012, as a precondition for peace talks with the Colombian government, the FARC abandoned kidnapping, but the shortfall in rebel income was made up with more involvement in illegal gold mining, as gold prices spiked in 2011, and the mining sector grew exponentially.
The following are InSight Crime estimates of the FARC‘s riches for 2015-2016, the last period in which the guerrillas were active as an organization.
While the FARC always denied direct involvement in drug trafficking, it has been the financial bedrock of their revolution. The growth of the FARC and the growth of coca crops in Colombia during the 1990s and into the 2000s follow remarkably parallel lines. It is the cocaine trade, in which the FARC came to be perhaps the single most important players in the world, that provides the biggest criminal booty for other illegal actors today.
Before disarming, the FARC held control of around 70% of Colombia’s coca crops, the raw material for cocaine.
The rebels admit to charging a tax on coca growers and coca base production, called the gramaje. These taxes netted the rebels about $150 USD per kilogram of coca base. According to the rather conservative estimates of cocaine production by the United Nations Office on Drugs and Crime (UNODC) for 2015, Colombia produced 646,000 kilograms of cocaine every year. (A decent chemist can get a kilogram of crystalized cocaine from a kilogram of quality coca base.)
That means that if the FARC controlled 70% of drug crops, then they could charge taxes on 452,000 kilograms of coca base which, at $150 USD a kilogram in gramaje, would have made them around $67.9 million USD a year.
On the other hand, the potential earnings for cocaine, which is worth around $2,500 USD a kilogram in Colombia, would be $1.13 billion USD on those 452,000 kilograms. Yet the FARC did not process much of the coca base into cocaine; most of that work is done by groups known as bandas criminales (criminal bands) or BACRIM for short. InSight Crime has tracked but seven FARC units, or “fronts” as they are known, involved in the cocaine trade (the 33rd, 10th, 16th, 48th, 29th, 30th, and 57th Fronts).
These fronts also moved drugs across borders into neighboring Panama, Venezuela, Brazil, and Ecuador. It is not unreasonable to think that the FARC were processing 15% of the coca base passing through their hands into cocaine and selling it for $2,500 USD per kilogram. In sum, that would have netted them $169.5 million USD a year.
The FARC also charged taxes for drug shipments passing through their territory, the drug laboratories they protected and every drug-laden plane leaving their zones of influence. These earnings likely generated at least $30 million USD a year.
If one adds the money from the gramaje ($67.9 million USD) to estimated earnings on cocaine production ($169.5 million USD) and other “taxes” on the drug trade ($30 million USD), the FARC would have been earning $267 million USD a year from the cocaine trade. The sums are rough, but InSight Crime has spoken to a broad range of experts on the drug trade who believe that this figure is actually on the low side.
But the FARC were not just involved in the cocaine trade. There are also significant opium poppy crops in their traditional areas of influence. The U.S. Drug Enforcement Administration (DEA) estimates that Colombia produces up to two tons of heroin every year. Unlike Mexican brown “tar” heroin, which traditionally has been around 40% pure, Colombian heroin undergoes sophisticated processing and reaches purity in excess of 90%. Each kilogram of Colombian heroin is worth up to $100,000 USD in the United States, meaning that the market is worth up to $200 million USD.
While the system of “taxes” by the illegal actors on heroin is not as standardized as those levied on cocaine, sources in Tolima, where poppy is grown, told InSight Crime that rebel taxes were levied on fields of poppy or opium gum harvested. Looking at the map of FARC territory and poppy crops, it would be odd if the FARC were not profiting from this industry as well, at least in the range of $5 million USD a year.
In the last decade, the FARC also became involved in the marijuana business in the department of Cauca. The 6th Front and the Jacobo Arenas Mobile Column have established a near monopoly over marijuana production in the Cauca highlands. Here, the country’s highest quality marijuana, known as “creepy,” is produced. A hectare of marijuana can produce 2,000 kilograms of the drug a year. A kilogram of high-quality marijuana is worth an average of $170 USD.
There are no reliable statistics for the number of hectares under cultivation, but sources in Cauca told InSight Crime it was likely in excess of 1,000 hectares. By our rough estimates, 1,000 hectares producing 2,000 kilograms at a price of $170 USD a kilogram could generate over $300 million USD a year. It would be surprising if the FARC were not getting $30 million USD from these and other marijuana plantations in their areas of influence.
The FARC have been extremely inefficient in their handling of the drug trade. The ruling body, the Secretariat, has always kept its distance from drug trafficking on political grounds and devolved responsibility to individual fronts. So the trade has never been centrally controlled, nor the potential profits maximized. If, however, these crops and this territory were taken over by the BACRIM, which are extremely efficient at maximizing profit, they could generate over $1.2 billion USD a year in earnings.
After the drug trade, extortion has been the second most extensive and lucrative criminal economy run by the FARC. Again, estimates of potential earnings are hard to obtain as few victims report the activity. However, InSight Crime has managed to put together some figures from on-the-ground research.
Reports from many different parts of the country show that the FARC would charge ranchers a “tax” of $3.50 USD (10,000 Colombian pesos) per head of cattle per year. To give an idea of potential earnings, in the FARC-dominated department of Caquetá, where extortion is widespread, in 2014 there were 1,294,718 head of cattle registered. This could have generated an annual income of $4.5 million USD for the guerrillas.
Almost all businesses in FARC areas had to pay extortion. Transport companies were particularly vulnerable, paying between $10 USD and $70 USD per vehicle per month, but everything from oil companies to small shops also paid. Any public contracts to build roads, bridges or sewage infrastructure usually have to hand over between 10%-15% of the contract value to be allowed to work undisturbed in FARC areas.
Field research in the region known as Bajo Cauca (which sits astride both Antioquia and Córdoba departments) — where the FARC, the BACRIM and the country’s last remaining rebel group, the National Liberation Army (ELN), have been present — revealed that there were fixed rates of extortion. The small businesses paid between $24 USD (70,000 pesos) and $278 USD (800,000 pesos) a month, depending on their turnover. Medium businesses would pay between $350 USD (1 million pesos) and over $1,000 USD (3 million pesos) per month. Big businesses could pay up to $10,000 USD (30 million pesos) a month.
In the Bajo Cauca municipality of Tarazá, with 623 registered businesses, the total extortion value was believed to be just under $100,000 USD a month. Now, Tarazá is a municipality with a large number of businesses, while most municipalities where the FARC were present are rural and poor. But if the FARC had a presence in 265 municipalities of the country, and each one had generated even a quarter of that sum — roughly $25,000 USD a month — then their potential earnings from extortion could have exceeded $75 million USD a year ($25,000 USD x 12 months x 256 municipalities = $76.8 million USD).
From Kidnapping to Gold Mining
The guerrillas abandoned the practice of kidnapping in 2012, a criminal trade which earned them up to $300 million USD year at the height of the kidnapping plague in 2002. Nevertheless, this income was replaced by extorting the booming illegal gold mining sector, which grew enormously in 2010 as prices moved from $1,200 USD per ounce to over $1,800 USD by 2011.
Here again the FARC were systematic in their system of extortion. They charged for dredges and heavy machinery to move into their areas, up to $7,000 USD for the biggest diggers. For each machine, the owner paid a monthly tax of between $1,000 USD and $4,000 USD, depending on the amount of gold extracted. In nine municipalities of the aforementioned Bajo Cauca, InSight Crime registered over 1,000 diggers in operation in 2012, generating a monthly income averaging $3 million USD, or upwards of $36 million USD per year.
While this did not all go to the FARC, it gives a glimpse of their potential earnings from the gold industry in a single zone. Also in Bajo Cauca, there was evidence of artisanal miners, who work without heavy equipment, paying extortion fees of between $25 USD and $250 USD a month, depending on the amount of gold they each extracted.
Accurate figures for illegal gold production are hard to come by, although gold exports from Colombia are in excess of $2 billion USD a year and some 80% of that is illegally extracted. A mere 12% of gold extracted in the country is done in a fully legal way, according to the Colombian Mining Association (ACM).
It is not only gold mining from which the FARC drew earnings. There is evidence of the FARC taxing coal, silver, tungsten, and coltan. It is not surprising to find that the presence of illegal mining operations coincides with that of the rebels and the BACRIM. (See map above.)
Again, crude estimates, confirmed by official sources who spoke to InSight Crime anonymously, place FARC earnings from the mining sector at roughly $200 million USD a year.
If one adds all of these criminal economies together, the FARC could have earned $580 million USD in 2015. However, we believe that the movement itself received perhaps $300 million USD a year, most of which was plowed into national and international operating expenses. A good portion of the rest was pocketed by individual FARC commanders all the way up the chain. With commanders systematically robbing the guerrilla army for years, it is of little surprise that several factions have refused to give it all up and retire quietly from the business.
This article was written by Jeffrey McDermott and originally published by InSight Crime this fall. It is the final entry of a three-part series on the FARC‘s wealth and criminal economies. You can click to read the first and second articles. This article has been republished with permission.