By gathering and analyzing data, this paper offers a formal analysis of drug
trafficking in Honduras. The final purpose is to present an estimate of the economic
impact of the industry in the country; because data for the area is very difficult to
acquire, very few empirical studies of the topic in Honduras exist, making this one of
the first in its nature. The analysis measures the economic model of drug trafficking
as well as its position in the world’s market. It also analyzes the policy impacts and
the alternatives to the current war on drugs. Finally, the study presents the main
findings and impacts of the industry in Honduras. The author acknowledges that in
various parts of the country the drug-trafficking industry helps to relieve poverty and
underdevelopment, however it concludes that the negative impacts are much higher,
the intangible costs include the high violence, corruption and migration and the
tangible costs add up to US$ 796.5 million annually, such high value is definitely
preventing economic growth. Recommendations on policy changes are proposed.

ABSTRACT 2
ACKNOWLEDGEMENTS 3
TABLE OF FIGURES 5
TABLE OF TABLES 5
MOTIVATION AND FINDING OF NEED 7
PROBLEM STATEMENT 8
METHODOLOGY 9
1. ILLICIT DRUG MARKET OVERVIEW 10
1.1 Drug Classes 11
1.2 Global statistics, trends and analysis overview 14
2. ECONOMICS OF DRUG-TRAFFICKING 19
2.1 Market Value 19
2.2 Economic Model – The Supply Chain 20
2.3 Distribution of Illicit Drug Proceeds 25
2.4 Illicit Drug Proceeds and the Financial System 28
2.5 Market’s Demand 30
3. POLICY IMPACTS 32
3.1 The War on Drugs 32
3.2 Alternatives to illegality 35
3.3 Impacts of Legalization 38
4. IMPLICATIONS OF THE DRUG INDUSTRY IN HONDURAS 40
4.1 Scope of the Industry 40
Evolution of the Industry 44
4.2 Honduran Capacity on Fighting Drug Traffic 47
4.3 Honduras as a Key Player in the Drug Trafficking Scene 50
Drug Trafficking Routes and Logistics 51
Drug Trafficking Organizations 57
4.4 Economic Consequences of Drug Trafficking in Honduras 62
5. RECOMMENDATIONS 69
REFERENCES 70

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