As most of the world worries about capital flight, a small corner of its poorest region has enjoyed an unexpected surge in foreign exchange reserves. Guinea-Bissau and its West African neighbour Guinea have recorded sharp rises in foreign direct investment (FDI) in recent years even as investors in more prosperous countries are running for cover. FDI in Guinea-Bissau rose from a meagre $20m to $120m between 2004 and 2006, while Guinea has seen a tenfold increase since 2000. In the last five years, Guinea-Bissau’s foreign reserves have more than tripled.
What accounts for the sudden popularity of these countries, which according to the latest United Nations Human Development Index are the ninth and thirteenth poorest in the world? The UN Office on Drugs and Crime believes drug money is to blame. Its director, Antonio Maria Costa, says that the influx of cash is “a form of money laundering, it comes in as foreign direct investment, it goes into rural real estate, purchase of land, hotels, tourism.” Antonio Mazzitelli, head of the UNODC’s regional office for West Africa, explains how it works: “If you want to launder money, you can declare full occupancy in a hotel for one year after opening it even if it’s empty. If you look at the occupancy rate of hotels, it’s not increasing.”
Drugs are a growth industry in West Africa. Colombian and other South American dealers, dislodged from their traditional channels by stricter US law enforcement and lured across the Atlantic by the strong euro, have adopted countries like Guinea-Bissau, Guinea and Sierra Leone as staging posts on the cocaine route. They fly or ship in large consignments of the drug, break it up into smaller packages, and dispatch it north across the Sahara to Western Europe.
West Africa’s governments are powerless to stop the trade. Guinea-Bissau’s police force has no handcuffs or vehicles, its air force no aircraft, its navy no ships. There are no prisons, and officials’ paltry salaries, which often go unpaid, give them little incentive to turn down Colombian bribes. Few observers doubt that senior figures are involved. In the recent general election campaign the opposition leader described President Joao Bernardo Vieira as the country’s top drug trafficker. In Sierra Leone, meanwhile, the chief of the airport police was arrested last July while allegedly assisting in the delivery of 600 kilos of cocaine to Freetown’s main airport.
The military futurist John Robb, author of ‘Brave New War,’ believes the Colombians’ wealth and weapons mean they can more or less do as they please. “When a transnational criminal organisation that has guerrilla warfare capability penetrates an easily corruptible country, you end up with a hollow state,” he says. “They have financial resources far in excess of what’s available internally within that state and the ability to put in more money and more resources than the international community. If the Colombians have found a hole in West Africa, there are no barriers to their expansion.”
An uncertain future
Some West Africans will benefit from the drug trade, at least in the short-term. Politicians, police and army officials paid by the Colombians to provide security or help them elude arrest are reaping rich rewards. Some ordinary citizens are also doing well. Drug ‘mules’ who make it to Europe send back some of their profits to relatives back home. Remittances to Guinea-Bissau were negligible throughout the 1990s but increased from $2 million in 2000 to over $28 million in 2006. Families can use these funds to feed themselves or invest in businesses (perhaps providing services to the drug barons).
The risks, however, are manifold. Numerous African countries have already suffered terribly as a result of the “resource curse,” and cocaine, like diamonds, gold and oil, is a commodity whose immense value can distort economies and societies with devastating effects.
Some of the effects are common to all such commodities. The disproportionate profits from the drug trade (or diamonds, gold or oil) discourage investment in other activities. Guinea-Bissau’s main exports are unprocessed cashew nuts, Senegal’s peanuts and fish. It is not difficult to see the allure of cocaine, a couple of tons of which are worth more than the Guinea-Bissau government’s entire annual budget. As drug exports push up the value of local currencies, moreover, other products become less competitive in international markets. Legal exports from much of West Africa have declined in recent years and may suffer further as the drug trade grows. With agriculture and manufacturing withering, the masses who are excluded from the cocaine windfall will sink deeper into poverty.
Political instability is also common to resource-cursed countries. The contest for diamonds in Sierra Leone led to one of Africa’s bloodiest wars. Oil has made Nigeria’s delta region a no-go zone. Battles over cocaine have torn apart Colombia and rocked northern Mexico. West Africa, as Mazzitelli warns, is much less equipped than Mexico to deal with the problem. “Mexico is big,” he says, “the state can respond, the economic structures can cope with illicit and criminal activity. In Africa, the overall state structure is much more defenceless to this kind of push. There are weaknesses all over the region that leave it exposed.”
In the last few months these weaknesses have become increasingly apparent. In November 2008, a group of soldiers attacked the President’s palace in Bissau with machine guns and rocket-propelled grenades, killing a guard but failing to reach the head of state himself, who was cowering inside. Two months later, the head of the armed forces was shot at by presidential guards. A recent feud between rival police factions left two senior counternarcotics officers dead. And in neighbouring Guinea, a group of young soldiers staged a successful coup d’état at Christmas. The coup leaders promised to wipe out corruption and stage democratic elections, but Guineans have heard such promises before – former president Lansana Conté, whose death precipitated the Christmas putsch, had himself come to power in a coup before proceeding to turn his country into a cesspit of corruption.
Although there is as yet no clear evidence that the above events were linked to the drug trade, that the sudden increase in instability has occurred just as the profits from cocaine are soaring has not escaped the notice of observers. Discussing the attempted coup in Guinea-Bissau, Antonio Mazzitelli commented that “control of drugs is becoming as contested as the control of diamonds was in Liberia and Sierra Leone. It’s a major source of income, and different providers of services will start fighting each other for control of the source of income.”
Political instability and damage to manufacturing and agriculture are the lot of many resource-cursed nations, but some impacts of the curse are unique to the drug trade. First, cocaine addiction is spreading through the affected countries. Second, money laundering requires the complicity of those working in the financial sector. Banking in the region is booming, with Gambia emerging as a key financial hub and banks opening up even in dirt-poor Guinea-Bissau. Once corrupted, says the UN, financial professionals “can be used for concealing all manner of criminal proceeds,” and financial institutions, crucial for promoting development, will be undermined.
Finally, the global illegality of drugs means that, unlike with diamonds or oil, foreign countries are likely to try to snuff out the industry, cutting off the supply of remittances and starving new businesses of funds. The European Union has provided aid and technical assistance to help West Africa’s governments tackle the problem. Military intervention may soon follow if the region becomes a stopping point on the heroin route from Central Asia to the US. If the Colombians leave, foreign investment will dry up, and West Africans, forced to rebuild agriculture and manufacturing from scratch, will have taken a step backwards on the long road out of poverty.