Cocaine Production in Bolivia (1984)

The cocaine industry had a generally deleterious effect on the Bolivian economy. The cocaine trade greatly accelerated the predominance of the United States dollar in the economy and the large black market for currency, thereby helping to fuel inflation in the 1980s. The escalation of coca cultivation also damaged the output of fruits and coffee, which were mostly destined for local consumption. Coca’s high prices, besides being generally inflationary, also distorted other sectors, especially labor markets. Manufacturers in the Cochabamba area during the 1980s found it impossible to match the wages workers could gain in coca, making their supply of labor unreliable and thus hurting the formal economy.