This is the original of an article by Joseph Hanlon, published in Portuguese by metical.
[Click here to read the Portuguese version]

(Maputo) Drug trafficking is now Mozambique's biggest business. The value of illegal drugs passing through Mozambique is probably more than all legal foreign trade combined, according to international experts. Income from this industry must be having a major, albeit unrecorded, impact on the Mozambican economy. Indeed, drug money must be one factor in Mozambique's record growth in recent years.

Mozambique is still only a tiny player on the international drugs scene, but because it is so poor, these relatively small amounts of money must be having a major social and economic impact. Experts estimate that more than one tonne per month of cocaine and heroin are now passing through Mozambique. Both have a retail value of about $50 million per tonne. Some of this money, perhaps $2-5 million per tonne, must be going to drug dealers inside Mozambique.

This trade is only possible with the agreement of the Mozambican police and very senior Mozambican officials. The London Guardian reported that the former governor of a Mexican province was receiving $500,000 for each large shipment of cocaine which passed through his province. If senior Mozambicans are not receiving similar payments, then they should re-negotiate their agreements with the drug dealers.

The drug trade became important in Mozambique only in the late 1990s as major drug dealers began to look for alternative routes which were less easy for the international agencies to control. Mozambique was attractive at the end of the war, once movement throughout the country was re-established. The long coastline with many islands and no navy makes it easy to move drugs. Low salaries and climate of corruption make it easy to corrupt police and other officials.

International experts claim that the Mozambican police are now almost totally corrupted, and that Maputo airport is seen as "open" and easy for drug couriers to come and go. The result is that Mozambique is not simply a transit country, but also a warehousing centre. Like any other business, drug dealers need to build up stocks. In most countries, this is dangerous because of the risk of raids on warehouses -- but there is little risk of that in Mozambique. Thus dealers can import drugs and store them in Mozambique until they have an order to fill.

Two drug routes seem important. Heroin moves from Pakistan to Dubai to Tanzania and Mozambique and then on to Europe. Cocaine goes from Columbia to Brazil to Mozambique and on to Europe and East Asia.

For a long time, Mozambique has also been a major transit centre for cannabis resin (hashish). International drug control authorities consider this a "soft drug" and do not pay much attention to this trade, but it must add millions of dollars to the earnings of the dealers.

Nearly all drugs are shipped out of southern Africa, but supply to South Africa is growing and Mozambican traders are establishing a presence in South Africa. This trade must be worth millions of dollars a year.

Finally, there is mandrax (methaqualone), which is a drug consumed almost only in South Africa. Much of the mandrax transits Mozambique (or is made here), but drug experts say that consumption is declining as users switch to cocaine.

The profits to the Mozambicans involved in the drugs trade must be in the tens of millions of dollars a year. Of course some of this will be deposited in foreign bank accounts and used for foreign investments -- which means Mozambican banks, foreign exchange houses and casinos are probably being used for money laundering.

Mozambique now has 10 banks and 36 foreign exchange houses [casas de cambio], more than can possibly be justified by the size of the legal economy. Several of the banks seem to have little link to the domestic economy and make their profit from the foreign exchange transactions, particularly for the aid industry. It would not be surprising if they also did money laundering.

But a significant portion of this money must be staying in Mozambique. Where is it?

Some is being used for consumption -- luxury houses, fancy cars, elaborate parties, etc.

But dealers will be trying to convert a substantial amount of drug money into legal assets which can be cashed in or sold later without questions being asked. This drug money is probably helping to fuel the building boom in Maputo (and perhaps Nampula and Pemba). This would involve not just luxury houses, but also investment projects such as new prédios and hotels.

Tourist investment is useful because it is possible to claim more patronage than actually occurs, for example at a hotel, and use this to hide future drug profits. Hotels also provide a safe base for drug couriers.

Tourism and banking represented 18 per cent of total investment during the 1990s, according to a study by Carlos Nuno Castel-Branco. This is not surprising, and a significant amount of this is probably drug money.

An important investment area for drug money is stocks and bonds -- the buyer can pay cash with few questions asked, but then when the shares or bonds are sold the proceeds are treated as legitimate money.

The chairman of the Mozambican Stock Exchange (BVM), Jussub Nurmamade, said on 7 June that the rapid growth of the BVM was "unique". "We started with US$3 million, and that's hardly two years ago", he told journalists. Today the value of the five companies listed on the stock exchange plus government treasury bonds and bank bonds amounts to $60 million, and Nurmamade predicted it would rise to $100 million by October. Last year, BIM became the first Mozambican private company to issue its own bonds, which are now traded on the Mozambican stock exchange. The bond issue was for 80 billion meticais (then more than $5 million), maturing over five years.

How can an economy as small as Mozambique's find $100 million in such a short time? What makes Mozambique "unique" must be drug money.

Thus, looking at the very rapid expansion of banking and the stock exchange, the construction boom, the growth in tourism investment, and finally the growth of luxury consumption, we can probably account for a significant portion of the tens of millions of dollars a year of drug profits.
(Joseph Hanlon)
 

metical - archives 2001