Let me thank you for this invitation to deliver a Report that was called for by the Presidents and Heads of State and Government of the Americas at the Cartagena Summit in April last year, as was noted before. This Report was in some way intended to get a needed discussion going about reviewing a long-standing policy on the issue of drugs, and I think it did succeed. I'm talking about the so-called "war on drugs," declared 40 years ago. The Presidents and Heads of State and Government felt it needed to be reviewed.

The reasons it needs reviewing are familiar, simple, and compelling. About 45 percent of all the cocaine, half of the heroin, and a quarter of the marijuana trafficked around the world is used in the Americas. Furthermore, according to recent studies, the use of coca paste, crack, inhalants, and amphetamines, as well as abuse of illegal drugs, is on the rise.

We know that using these drugs usually carries a broad range of adverse short-term and long-term health effects, but I won’t get into the details right now: the Report does that. It is also a well-known fact that illegal drug trafficking has given rise to a significant number of economic groups and criminal organizations that profit from this activity.

Faced with this evidence, the leaders were particularly concerned about two issues: public health in the Americas; and organized crime, including other areas of crime, the core, finances, and financing of which are based on the huge amount of money made from drug trafficking.

Given those conditions, the mandate we were given was two-fold: on the one hand we are asked for an objective report about the drug problem in the Americas, in all its facets. We were also asked not to provide policy conclusions, since that would be the purview of the Heads of State and Government, who had called for the Report, but rather to present a variety of scenarios pointing to the roots of the problem, based on the decisions taken.

This is why the document I am presenting today–which is available on our website and has been seen by many of the authorities–is a two-part report. One Report deals with the drugs problem in the Americas, as it stands today, while a second volume contains a Report we entitled "Scenarios for the Drug Problem in the Americas." And, for those interested in a particular aspect of this problem, might I explain that the first Report is a summary of a series of studies that are also available on the OAS website.

I'd say the main problem we face is what Senator Cuevas sort of touched on: the drug problem in the Americas being a hemispheric problem, with no country that is spared or that could claim not to feel it in some way, although it certainly manifests itself differently from country to country.

There are countries where drug use is high, and I don't mean just the United States, which certainly is still the biggest consumer of drugs in the Hemisphere; there are other countries in South America, my own country– Chile–included, where drug use is rather high. There are other countries where drug use is low but which are still seriously affected by violence stemming from drug trafficking. I'm referring, of course, to classic examples like certain Central American countries where drug use is very low, yet they are the links in the chain with most crime.

This, then, is one problem with different facets that affect countries differently. The dilemma we faced was therefore to produce a Report covering all these issues while allowing us to draw conclusions that were probably going to be different from country to country. We did this by following the course of drug trafficking, analyzing each stage from production–practically all known drugs are produced in our Hemisphere, which is the exclusive source of one of them, cocaine–to sale and consumption. At each of these stages we tried to ascertain how drug trafficking is done, but also the people who do it, how much money is involved in each case, and how much violence accompanies it.

We opened the Report with an analysis of the serious health problem that stems from the drug problem and, as I've noted before, this is something of which the leaders are very mindful. We then looked at cultivation. Cultivation, as you know, takes place in South American countries, but to some extent as well, in Central America and Mexico.

The truth is that market trends, which our Report covers as well, are much more segmented than they seem to be. Take cocaine, for instance. What is marketed in the United States comes almost entirely out of Colombia. Cocaine derived from coca grown and then produced in countries like Bolivia usually end up in the other countries of South America or cross directly into Europe through 32 circuits.

These two tracks create peculiar trafficking patterns and leave their own trail of money and violence. The money trail, interestingly, is not the same as the trail of violence. Let me stick to my notes so as to provide a clearer picture of the drug business. In the case of cocaine, the business to which we're referring originated in some South American jungle. One kilo of cocaine hydrochloride paste requires between 450 and 500 kilo of coca leaves. This costs about $1.30 per kilo. One kilo of coca paste in the Colombian, Peruvian, or Bolivian jungle is worth somewhere between $585 and $780–good profit for a peasant. It is not the main return from this lucrative market, as we'll see later on, but bringing in $750 per kilo of coca paste that is produced is quite a significant figure that is hard for any other crop to replace.

In the same Colombian jungle, one kilo of finished product sells for $2,700; whereas at country-of-origin ports the price was already between $5,500 and $7,000. In Central America the same kilo fetches around $10,000; on Mexico's northern border the price can be as much as $15,000; and just beyond the border, it fetches $27,000 or more, wholesale.

These are virtual figures because somewhere along the line this kilo of raw plant was processed and, therefore, became two kilos of cocaine for consumption. But, continuing on the value of one kilo of substance and considering that one gram of refined cocaine could fetch up to $165, the total sale price of a processed kilo of the original coming out of the jungle at around $700 per kilo became $33,000 wholesale. The original value has thus been multiplied 50 times. The obvious question is, who stands to profit from this; or, better yet, who profits most and who profits least–for everyone profits.

The cost to produce the drug is low, which explains why the market is regulated a particular way, because the more is seized, the more is produced as there is no cost to produce it. What does cost, in terms of risk, is to transport it, and the entire corruption chain this process entails along the way, around the Hemisphere.

Where is the biggest profit made? The biggest profit is at the last stage, at the wholesale product stage–that is, from wholesaler to drug user. This stage accounts for roughly two thirds, or nearly two thirds, of the total value of the product.

Where does violence occur? There are certainly problems of violence where the drug is being cultivated. These problems are also found where drugs are trafficked and on the streets of consumer countries. But most of the violence occurs in countries where there is drug trafficking, where drug traffickers battle for turf, traffic, and opportunity to get their product to end market.

This is a seemingly endless cycle, particularly if we only focus on fighting supply because the reality criminals come up against is that for every kilo of their product that is confiscated, they produce another kilo; and if this is taken away from them, they produce another kilo. Cost will always be minimal in this process, because farmers who cultivate coca leaves are well-paid, their cost is very low compared to the total amount they will earn. That is why the illegal business keeps on reproducing itself despite significant seizures. And here we must remember that the drug trade has been dealt severe blows: we saw our highest figures for seizures in 2010 when, according to estimates, almost half of all cocaine produced was seized.

Furthermore, while the war on drugs in the Americas results in 3.6 million people being put in prison, nearly 2 million are there for drug-related crimes. If war is what we are talking about and–forgive me for being sarcastic–if we are talking about war, we've been very successful at taking away the adversary's property and have been very successful at taking the adversary to prison, but have not been successful at fulfilling the objective of the war, which is to reduce the drug problem. That's why the Report was commissioned. That's why it underscores the need to find alternative scenarios, which certainly are not easy to find because, contrary to popular opinion, drugs do not harm all the countries alike, neither are the markets necessarily the same. In short, countries experience the problem differently.

For instance, much of what we were saying here does not apply to marijuana, of which a lot has been said. In most countries where it is used, the source is usually local or next door; from one country to another. What is produced in Mexico is usually sold on the American market, and there is a similar experience with US states, whereas the economic chain for cocaine is much more complex.

According to our records, heroin is produced mainly in Latin America, primarily Mexico and Colombia, and marketed mainly in the North; although there has been some increase in drug use in the South.

In terms of drugs from South America, you do know that there are lower quality drugs that are cheaper. Use of coca paste is significant in some South American countries, as is the use of so-called crack. A very interesting study released in Brazil recently contained a pretty in-depth look at the crack phenomenon, which is really an epidemic in that country and is currently the subject of in-depth examination.

There is certainly an important background to the issue of money laundering. The business generates a total of $154 billion a year, at least half of which is laundered through our financial system. And when I say financial system, I don't mean the financial system in the strictest sense, but property and professional studies brokerage firms as well; and money laundering also includes a number of economic activities in society beyond the financial system itself. All these issues are discussed and identified in our study. In the second part of the Report we examined how this issue could be tackled, or examined, or addressed and what alternative responses exist.

And by alternative responses, we of course mean alternative responses that were not invented in our own offices at the OAS. They were mainly drawn from studies conducted by our Inter-American Drug Abuse Control Commission and by specialists that usually lend it their assistance; and it is also based on a large number of questions put to other specialists who participated in this process.

Regarding this point, most emphasis was placed on so-called actors. What we did was to bring together a large group of specialists, and by specialists I mean people who in one way or another have something to do with the issue. These were specialists who brought a medical perspective, or individuals who have had responsibility for or have been in charge of national organizations engaged on the issue of drugs or who have studied it at universities. And we also had a large number of people who were on the front lines in the battle against drugs in communities, in the favelas of Rio de Janeiro and São Paulo, in some parts of the region, and individuals who also shared their views.

We asked all these people to first of all tell us what they thought about the issue of drugs. And we found that there were in fact very different views, as was the case in terms of the possibility of changing what was happening.

We therefore divided up the possible courses of action into four groups and asked people to say what, in their opinion, should be done under each course of action.

I should note that the four scenarios outlined in the Report are read vertically–that is, what the problem is; how you would tackle the problem; and what do you expect to happen if that action were to be taken. But they can be read horizontally as well, for the scenarios are not necessarily at variance with one another.

The first scenario is entitled "Together" and is based on the drug issue being a problem of generalized insecurity; a problem of public security, violence, and crime. The persons asked to develop this scenario suggested that we have not sufficiently nor properly fought crime; that we have weak institutions that have not been able to keep crime in check.

Proposed action must therefore relate to strengthening these institutions. I would say that what is most important about the presentation of this scenario is what was said by one specialist who suggests we not discuss the failure of the anti-drugs policy when we have police forces not up to the task, courts that are less than satisfactory, prisons mixing with one another, etc. The "Together" scenario therefore basically proposes institutional strengthening as a centerpiece of the anti-drugs policy.

The second scenario is called "Pathways." It is based on the notion that if the strategy is not working it is because the strategy itself is bad. This does not gainsay the reality of violence and crime, but rather asserts that we do not solve these problems by continuing to deal with the drug issue using repressive means. The use of these means, according to this scenario, is at the heart of the problem itself and not only does not solve it but in fact worsens it. It proposes instead alternative approaches that take into consideration alternative legal and regulatory regimes. I want to talk about that at the end, about decriminalizing use and also legalizing certain products, which is what is being discussed in this forum.

The third scenario is complementary. It is called "Resilience" and proposes that if we can make our institutions stronger, we can bring about reform; but the drug problem stems basically from social and economic dysfunction and, therefore, requires a much more active involvement of organized community. The drug problem must be tackled through community action with local governments, the private sector, and nongovernmental organizations as intermediaries because they are the ones with real access to the primary victim–the addict–and they can build confidence in that segment and, therefore, can much more effectively tackle drug use and demand.

With respect to the fourth scenario, I must say that I wasn’t quite sure whether or not to include it. But I think that when a bunch of specialists believe a particular scenario can occur, it should be included, whether or not one likes it. Entitled "Disruption," this scenario describes a situation in which we suddenly stop cooperating with one another and it becomes as case of each to his own, trying to tackle his own problem. This is not the same as saying that each country must make hopefully similar decisions, within a certain framework, because the problem manifests itself differently from country to country. What the scenario describes is, strictly speaking, a break-up, which means that there would be no more basis for continuing to act on the drug issue together; that some countries no longer want to continue to bear the social cost this entails; that they decide they have more important things to pursue; and that the drug problem is therefore no longer their problem and they then leave it up to the rest of the countries to decide what to do within their own context. You may not believe this, but some countries of our region–which are especially affected–suddenly don’t find this view to be completely negative, and even see it as a viable means of surmounting the problem.

I will conclude by sharing some ideas I believe are important to consider. The report includes them as conclusions.

First of all, I think it is quite clear that, although manifesting itself as a single process, although we surely are all in the same boat, the problem allows for different approaches at each stage and in the countries where it exists.

The health problem shows up in all countries, that's for sure; but in terms of the number of people affected compared to other health problems affecting the population, there is no doubt it is greater in some countries than in others.

Meanwhile, there is a much stronger impact on the economy, on social relations, on security, and on democratic governance in producer and transit countries in South America, Central America, Mexico, and the Caribbean and a lesser impact in countries where most drugs are used.

Some Central American countries are already spending a substantial portion of their gross domestic product to deal with the drug problem. I'm not going to name countries, but one particular country spends a lot of money which, relative to its gross domestic product, would be roughly equivalent to the total US defense budget. The United States certainly doesn't spend that amount to fight drug trafficking–they spend a lot less because they have a smaller violence problem. There are therefore opportunities to come up with an agreement based on shared responsibility under which countries can adopt their own measures based on their own views. We all have a responsibility in this; but these are differentiated responsibilities.

The second conclusion is that countries with greatest drug use, where most profit is generated, at the same time have the lowest rates of criminal violence associated with the drug problem. In our view, this has to do with institutional problems, the capacity of the State to–at the very least–contain the phenomenon in countries where criminal violence is steepest. The possibility of penalty must be sure, even if the penalty isn't necessarily very stiff. In a couple of studies a few years ago, Gary Becker showed that, in the area of crime, what mattered was certainty of punishment, not the amount of the punishment. The death penalty may be in place but if that penalty is invoked for 0.1 percent of the guilty then it is as if the penalty itself did not exist: it is totally lacking in credibility. But if a certain number of individuals are told they will be locked up for a number of years and this actually happens, it does serve to discourage wrongdoing. That's why we believe that, besides the flexibility aspect, the institutional issue must also be accentuated. Criminal violence is linked to the institutional problems that countries often experience; it is linked to institutions lacking capacity to reach all the corners of society where the trafficking problem takes place.

The countries with the highest levels of crime, or where crime inordinately affects small countries in particular, are the ones where greatest difficulty in enforcing the law can be observed. There is a certain culture of disrespect for the State, and it is probably linked to another set of social phenomena that should be examined in depth.

Thirdly: Drug use is a public health issue, according to all the Heads of State and Governments of our Hemisphere. A drug addict is a person with a disease. The Commission chair was recently telling us that there were about 234 million drug users in the world. That's quite a significant number of users. Only 7 percent of those users are really addicts. And they're considered an at-risk population–meaning they can become addicts, at twice that rate. The surest prescription for those at risk–or even not at risk but who occasionally do drugs, or become addicts, which is to say they develop health problems–is to put them in prison. I think there is absolutely no logic to saying that a drug addict or someone at risk of being one, who may be caught doing drugs and is at risk of being a drug addict, is going to be healed in prison. That kind of argument, which we do make, has been confused with a certain kind of benevolence, which it is not. We aren't necessarily saying addicts must remain free if they pose a risk to themselves or to society–in which case they may have to be confined, but confined where addictions are treated, not where they're put in with common criminals, where all that's going to happen is that their addiction will get worse.

This is what we call decriminalization of drug use. We have not argued for decriminalization of drugs, we are not into that discussion; it is not for us: we have argued for decriminalization of drug use. This does not mean granting immediate freedom; what it means is providing drug addicts treatment that they need to have. All across the Americas, our prisons are overcrowded and many people are probably there for drug use. That, of course, is an issue worth looking into.

By the way, it would be worth noting that the United Nations Conventions on Drugs tell us about use–they don't talk about consumption. The conventions, which use every possible word–from production, cultivation, manufacturing, trafficking– never refer to consumption. Discussing the issue of decriminalization of consumption is a valid issue that does not affect the current international legal status with respect to drugs. You can imagine that this will yield a lot of discussion, which is precisely the objective of this Report.

Finally, there is a multi-pronged approach to tackling the drug problem, as we've stated before, and we have to be very flexible in this regard. I think that just as rejecting any experience or any opportunity to change a priori policy is unacceptable, imposing change on everyone alike is not acceptable either. We need to allow those changes to be experienced and then draw conclusions and take whatever action each one wants to decide on.

There are US states in which drugs are legal; where marijuana is legal. There are a lot more than just a couple of states, and we'll see what happens in them. Some US states have marijuana and medical marijuana. California is the most notable example and you're all aware that anyone wanting to get medical marijuana will get it: by getting a prescription to legally purchase it.

We are right now seeing some interesting experiences with legalization or regulation or different kinds of regulation. What Uruguay is attempting is a different kind of marijuana regulation, a type of regulation that punishes neither addicts nor users but instead places punishment elsewhere–something akin to what happens to those who sell alcohol to minors, etc. I think we need to allow time for discussion.

Mr. Chairman, soon after the OAS was given the mandate to do this Report, one Colombian newspaper published a cartoon with me opening a refrigerator, a freezer, and putting a package labeled "drug problem" into it. I think they meant to say that, by giving it to the OAS, the issue was going to be put on ice. I believe what we've really done is not to freeze it, but precisely to open up a discussion because, after 40 years, we cannot keep on doing the same thing. We have to be able to come up with better solutions to this problem.