In a study published in Nature titled “Understanding the illegal drug supply chain structure: a value chain analysis of the supply chain of hashish to Europe”, Sánchez-Pérez et al., take us on a journey through the intricate and often murky world of the illegal drug trade. This study, while focused on the Morroco to Europe supply chain, offers valuable insights that resonate globally, including here in Australia, where the debate on cannabis legalisation is heating up.
The Value Chain Approach
The study, published on the 1st of June 2023, stands out for its unique approach. It employs a value chain analysis, breaking down the supply chain into strategically important activities. This method provides a comprehensive view of the chain, revealing that about 80% of the raw production areas are involved in the supply chain.
The High Cost of the Illegal Trade
The Primary Activities
The cultivation stage involves various costs for the farmer, depending on the type of seed used. The study analyzes both the traditional beldiya plant, exclusive to the Rif Mountains, and the transgenic seed. The costs include the depreciation of materials used in cultivation, tillage, planting, and storage. The total costs assumed by the farmer at this stage per cultivated hectare amount to about US $2932.20.
The operations stage involves the transformation of raw hashish into a sellable product. The costs at this stage include the amortisation of materials used in processing and packaging, transportation from the farmers’ warehouses to the processing establishments, and storage. The total costs assumed by the transformer amount to about $8579.96 per hectare.
The Outbound Logistics
The outbound logistics stage involves the transport of the product from Morocco to Spain and other European territories. The costs at this stage include the purchase of hashish from Moroccan processors, transportation, and storage. The cost of transport increases from $51,840 in the Spanish market to $103,680 in the French market and to $188,956.80 for the rest of the European market.
The retailing stage involves the sale of the product to the final consumer. The drug runner acquires hashish at an average of $5400 per kg and sells it in small quantities to the final consumer. The purchase price varies depending on the market, with an average price of $11,420 per kg in Spain, $13,240 per kg in France, and $20,000 per kg in the rest of Europe.
Support Activities
In addition to the main activities, there are also support activities that contribute to the efficiency of the chain. These include travel expenses, hiring and remuneration of personnel. But perhaps the most shocking revelation is the cost of bribes paid to law enforcement officers and financial and haulage service employees. These bribes, according to the study, are a necessary evil to ensure that shipments are sent without setbacks.
“Bribes paid to law enforcement officers… should also be included,” the authors note. This revelation underscores the hidden costs of the illegal drug trade, which are often overlooked in discussions about cannabis prohibition.
Revenues and Contribution Margins
The study reveals that about 80% of the raw production is sold to the processor, while farmers reserve the remaining 20%, 10% being for their own consumption and the remaining 10% for processing and sale. The income is much higher for beldiya seed than other varieties ($324.00 vs. $61.69).
The commercialisation stages account for most of the final cost of the hashish. The first level includes the drug smugglers in charge of transporting the drug from Morocco to Spain and Portugal, with estimated earnings of about 12%. The wholesale distribution to Europe results in a remarkable increase in margins of up to more than 70%. This suggests a relationship pattern between seizure risk and the margin at each level of the value chain. The final sale stage accounts for a very significant quota of the final cost, with estimated earnings of about 60%. The price formation is determined, to a large extent, by the margins of these commersialisation intermediaries, leading to the multiplying of the initial production cost by up to 7000%.
The Power Dynamics
The study also highlights the power dynamics at play in the illegal drug trade. Dealers wield significant coercive power, and farmers bear most of the operational activities, with high variable costs and limited fixed costs.
This power imbalance, coupled with the high costs and risks associated with the illegal trade, could potentially strengthen the argument for ending cannabis prohibition. Legalisation could help to level the playing field, reduce costs, and eliminate the need for bribes.
Implications for Cannabis Legalisation
Understanding the mechanisms and magnitudes of the hashish supply chain could be useful for policymakers and advocates pushing for cannabis legalisation. It could help to identify practices that could be useful in the marketing of legal cannabis and highlight the potential benefits of legalization in reducing the costs and risks associated with the illegal trade.
“For managers, tax agencies, and public bodies, it would be useful to understand the mechanisms and magnitudes of the hashish supply chain,” The authors suggest.
Final Thoughts
This study is a stark reminder of the complexities and costs of the illegal drug trade. It underscores the need for a more nuanced and informed discussion about cannabis legalisation, one that takes into account the realities of the illegal trade and the potential benefits of a legal, regulated market.
“Knowledge about their operation, agents, and processes is extremely scant.” It’s time to change that.
The cost of the illegal drug trade goes beyond dollars and cents. It’s about power, risk, and human lives. Legalisation could be the game-changer we need.
Reference
Sánchez-Pérez, M., Marín-Carrillo, M.B., Illescas-Manzano, M.D. et al. Understanding the illegal drug supply chain structure: a value chain analysis of the supply of hashish to Europe. Humanit Soc Sci Commun 10, 276 (2023). https://doi.org/10.1057/s41599-023-01770-3
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