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Colombia's Contraband Culture, Drug Money Meet at San Andresitos

Latin America: At shady discount malls, smugglers can convert dollars and consumers don't pay retail. Skeptics doubt crackdown's worth.


BOGOTA, Colombia — Real Colombians don't pay retail.

Not when doing so, with sales taxes and import tariffs, would increase the price of a stereo by 25% or more.

Especially not when they can buy the same television or tennis shoes for U.S. prices--or lower--at the nearest San Andresito.

Bogota's three San Andresitos look like discount malls, but they are much more. As their name suggests, they are the capital city branches of San Andres Island--a spot known here for its duty-free stores, contraband and generally shady dealings. That makes them monuments to Colombians' lack of respect for their own laws, the epitome of a proud tradition of smuggling, and evidence that many Colombians are still willing to tolerate drug trafficking--if they can profit from the business.

The cameras and refrigerators sold here are not mere contraband, economists say: They are contraband financed with drug money. San Andresitos turn $1 billion a year from U.S. cocaine sales into pesos that pay for drug traffickers' Colombian operations, law enforcement officials and economists say.

"Contraband has become an instrument for money laundering and for introducing the ill-gotten gains from drug trafficking into our economy," said Gustavo Cote, director of customs and taxes.

'Contraband Part of Local Folklore'

Economists estimate that two-thirds of the drug money that returns to Colombia is funneled through smuggling, including merchandise sold at San Andresitos.

Customs officials are using a new, stiffer anti-smuggling law to try to halt the flow of drug-financed contraband.

Still, many Colombians are skeptical that the $4-billion-a-year smuggling industry can be stopped.

"Contraband is part of the local folklore," said economist Javier Hernandez Riva. "There are famous songs from 40 years ago about smuggling . . . especially on the Atlantic Coast," the traditional entry point to the mainland from San Andres.

Economist Ricardo Steiner recalls that childhood trips to the port of Cartagena were not complete without a stop to buy contraband Cheez Whiz.

Now Colombians buy contraband cigarettes hawked on street corners.

San Andresitos, thought to account for about one-fourth of total smuggling, are a clear example of how difficult halting contraband can be and how that tradition plays into the hands of drug traffickers. San Andresitos--housing dozens of tiny outlets--openly sell smuggled merchandise that is widely believed to be financed with drug money, but, except for an occasional raid, no one stops them.

Crackdowns Met With Violence

"This is a case of a business group that is outside the law but strong--very strong--and aggressive," said Dionisis Araujo, president of the Bogota section of the National Merchants' Federation, one of the groups that says it is most damaged by unfair competition from the San Andresitos. "So, every time [the government] has tried to resolve the problem of contraband with police action, the result has been violent confrontations."

Three years ago, a previous customs director took police to raid a San Andresito only to find the door blocked by a senator, who berated him for persecuting poor merchants.

When President Ernesto Samper began his political career as a Bogota city councilman a decade ago, he was supported openly by San Andresito merchants.

Nevertheless, Cote insisted, "the president has expressed his determination to struggle against all these conduits [for money laundering] that do so much harm to all the countries of the world."

Ricardo Silva, president of the Colombian San Andresito Federation, did not appear for either of two scheduled interviews. Retailers at San Andresitos readily express their objections to the new anti-smuggling law, which would punish them for disposing of contraband, they stiffen when asked about the wholesalers--the middlemen believed to have drug connections.

Economists and law enforcement officials believe that dollars from drug sales are used to buy merchandise in foreign duty-free zones, such as nearby Colon, Panama. Goods are smuggled into Colombia and sold in pesos, sometimes for less than they cost, economists believe.

The cheap prices are a subsidy from drug traffickers eager to convert their dollars to pesos. They will accept as little as 600 pesos per dollar, even though the official rate is 1,000 per dollar, economists believe.

"It is not exactly money laundering because the money is not clean," said Steiner. But dirty pesos are easier to spend in Colombia than dirty dollars.

One building contractor became convinced that currency conversion is the main purpose of the San Andresitos when he was taking bids to buy appliances for a new apartment building last year. A San Andresito wholesaler offered the cheapest price, but the deal fell through because he refused to accept payment in dollars. He would sell only in pesos.

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