Geographical Location: Bolivia, Colombia, and Peru, 1998
Chronicle of the event: Coca, the raw material for cocaine, is grown in the countries
of Bolivia, Colombia and Peru. Efforts to eradicate cultivation of this crop
have been successful in the following three years. Despite the increasing
demand of cocaine and coca, the governments successfully reduced the supply on
a large scale.
Breakdown of the event: Most of the coca cultivation in Colombia is in
remote regions outside authorities control and often under the influence of
guerrilla and paramilitary forces. This makes eradication and prohibition
operations difficult. Moreover, without the promise of security in the
countryside, the government is unable to deliver adequate advancement programs
to provide legit source of income to growers who abandon coca cultivation. The expansion
of Colombian drug cultivation has added substantial power to the guerrilla and
paramilitary groups, who protect and control various facets of drug trade.
Despite these challenges, the Colombian Police reported that they destroyed
more than 60,000 hectares of illicit crops in 1998. The Colombian authorities
has formed a joint task force with people from all the military services and
the police to escalate operations in guerrilla-controlled regions. The CNP also
inducted an aircraft control system, which resulted in the seizure of 54
trafficker aircrafts in 1998.
4) Consequences of the event: Coca cultivation in Peru decreased by 56 percent from
115,300 hectares in 1995 to 51,000 hectares in 1998. Cocaine production
declined from 460 MT to 240 MT over the same period in Peru while in Bolivia production
declined from 255 MT in 1994 to 150 MT in 1998.
Policy Remedy: Governments of these countries actually tried to secure
such a state of demand and supply. This success is due to many factors,
including political will to counter illicit drug trade, the regional air prohibition
campaign that targeted aircraft loaded with drugs flying between Peru and Colombia,
and alternate crop programs. The fact that coca leaf prices dropped more than 40
percent in Peru over the past three years indicates that the operation was successful.
Comment: By increasing competencies of judicial systems,
law-enforcement agencies, security forces and encouraging greater regional
cooperation, enforcement of policies can curb illicit coca cultivation is possible.
Geographical Location: World,
Chronicle of the event: While gold prices hit record highs during 2012,
the world unfortunately experienced a sharp decline in 2013. Despite the fact
that gold demand was relatively strong, supported
by increase in demand for jewelry, especially from India and China.
Breakdown of the event: Drop in gold recycling and limited production growth were
the main contributors to the decrease in supply of the precious
metal during 2013. Building a new mine requires significant capital
in startup stage and is a demanding, 5 to 10-year process. Reductions in explorations have resulted in fewer new discoveries, which impacts
on the replacement of gold reserves and resources by mining companies.
Consequence of the event: With gold reserves slowly depleting, the cost of
replacing gold mines is increasing and the effects of
ageing infrastructure are becoming noticeable. However, where
planned development has taken place, mining companies have been able to deal
with these issues.
Policy remedy: The South
African gold sector offers a hedge
against gold price fluctuation. But mining companies need to be more
flexible and be able to adjust cost structures quickly in response to the
fluctuating gold price. By delivering
consistent returns and showing value generation, the gold sector will eventually restore investor
confidence. This has to be further supported by the sensible use of available
funds, conservative capital expenditure outlays and an increased focus on free
cash flow generation. Governments
additionally have a part to play in collaborating with mining organizations and
giving a level of assurance about administrative consistence, tax regimes, the
administration of mining licenses and social
Comment: Productivity levels affect the supply of commodities in the market. By understanding its role and engagement
with employers, productivity levels can improve and costs can be reduced. This
will attract producers for increasing the supply with an increase in demand.