Medellin-based multinational cement/concrete giant Cementos Argos announced May 9 that its first quarter (1Q) net income dropped 60.6% year-on-year, to COP$55 billion (US$13.46 million).

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) also dipped 17.8%, to COP$437 billion (US$107 million), but gross revenues actually increased 11.2% year-on-year, to COP$2.57 trillion (US$629 million), according to the company.

Cementos Argos produces cement and ready-mix concrete (RMC) in 16 countries including the U.S., Colombia, and Caribbean-Central America (CCA) region, with total annual capacity of 23.1 million tons of cement and 14.7 million cubic meters of concrete.

Explaining the profits dip, Argos cited cost increases of COP$395 billion (US96.7 million), whereas price increases didn’t keep pace, at COP$330 billion (US$80.7 million).

“Cost increases were mainly related to raw materials and energy, which had a consolidated negative impact of COP$120 billion [US$29 million] and COP$80 billion [US$19.5 million] respectively. Other costs associated with freight, distribution, maintenance and labor also impacted the cost of sales,” according to the company.

On the upside, “dynamic conditions in our key markets have led to the continuation of a solid volume performance and the highest sequential cement price increase in the last seven years, allowing us to achieve all-time high quarterly revenues,” according to the company.

“Cement dispatches decreased 1%, while ready mix volumes increased 6.3% on a comparable basis year over year,” the company added.

U.S. Volumes Rise

In its U.S. operations, Cementos Argos realized “annual increases in cement and ready-mix volumes of 7.3% and 2.6%, respectively on a comparable basis. Prices across the region were increased in January and generated a 9% increase in the cement business and 9.5% in ready-mix,” according to the company.

“We remain optimistic regarding the willingness of the current [U.S.] government to close the gap of underinvestment in infrastructure, through the approved bipartisan infrastructure bill that will come into effect in the mid to long term,” according to the company.

Colombia Exports Rise 31%

In Colombia operations, cement volumes were flat year-on-year, but exports rose 32.3%. Ready-mix concrete sales also rose 13.4% year-on-year, but adjusted EBITDA fell 18%, according to the company.

“The solid demand conditions in Colombia continued during the first three months of the year, driven by the retail segment, residential construction and infrastructure projects,” according to Argos.

“Despite lower-than-expected volumes during the first few weeks of the year, we evidenced a strong recovery, which led to reaching in March the highest figure of monthly cement dispatches for Cementos Argos during the past five years.

“The residential segment in Colombia continues delivering positive signals. During the quarter, social and non-social housing sales grew 6.4% and 5.5% respectively year-over-year, despite a challenging comparison base. Additionally, housing starts grew 11% and remain on the highest level in seven years.

“On infrastructure projects, we remain optimistic due to the positive advances being made on ‘fourth-generation’ [4G] projects, 5G projects that are expected to begin their construction phase by 2023, the Bogota Metro which is underway and is projected to generate an important demand during the next three to four years, and other projects such as Puerto Antioquia, a port located in the Uraba region with an estimated investment of US$700 million, that is currently set to begin its construction phase and its contract is in the process of being awarded to bidders,” the company added.

Caribbean-Central America Region Prices Rise

“Positive market conditions in the [Caribbean-Central America] region continued, leading to the continuation of solid pricing dynamics. Cement prices increased double-digit sequentially and 6% year over year,” according to Argos.

However, “cement dispatches decreased 11% compared to the same period of last year, due to operational difficulties in Haiti and Dominican Republic, the government transition in Honduras and lower trading volumes.

“In Honduras, cement dispatches for the quarter were 9% lower versus the same period of last year as self-construction remained strong but the transition to a new government slowed down demand in public infrastructure construction.

“In Dominican Republic we evidenced solid demand conditions but mechanical difficulties in our cement mill resulted in a 5% decrease in cement dispatches.

“Haiti experienced lower volumes during the quarter due to technical challenges at the plant and social unrest in the country combined with complications in fuel supply. Additionally, trading volumes decreased 11% during the quarter, mainly due to the increase in exports, which allowed us to supply our Puerto Rico operation from Cartagena, but we postponed two shipments due to high FOB prices,” the company added.

A sometimes-popular belief that just legalizing cocaine would eliminate Colombia’s bloody wars among violent gangs (and their left-wing or right-wing extremist allies) – while providing a policy alternative to the Colombian government’s flawed attempts to corral the trade -- is pure nonsense, according to a remarkable Brookings Institution publication quoting Colombian experts.

“Legalizing Drugs and Illegal Economies is No Panacea for Latin America and the Rest of the World” is the title of the report, by Colombian drug-policy experts Vanda Felbab-Brown and Catalina Niño (see: https://www.brookings.edu/on-the-record/legalizing-drugs-and-illegal-economies-is-no-panacea-for-latin-america-and-the-rest-of-the-world/).

Felbab-Brown and Niño -- both experts at the Friedrich-Ebert-Stiftung Foundation here in Colombia (FESCOL) -- originally published their findings (in Spanish) in Colombia’s intellectual magazine, “El Malpensante.”

Fortunately, the Washington, DC-based Brookings Institution – one of North America’s leading independent think-tanks – has since translated that report to English, enabling a much-wider global audience to understand why hard-drug legalization in Colombia (or elsewhere) is no panacea.

The experts instead offer alternative -- but not simple -- solutions for Colombia’s (and the world’s) chronic drug-trade problems.

The report is a fair warning to those who look for an “easy way out” to Colombia’s problematic drug wars -- and the massive social violence and population displacements that result.

One such nebulous proposal is the recent “amnesty” scheme that socialist-populist Colombian presidential candidate Gustavo Petro has proposed for Colombia’s drug kingpins and their affiliated corrupt politicians.

Such a scheme would merely institutionalize and further incentivize violent drug gangs and their political pals in Bogota and elsewhere, the report finds.

Below we summarize and highlight the remarkable findings of this report, now freely available on the Brookings Institution web-site:

“Organized crime and illicit economies are enormously varied and diverse, highly dynamic and adaptive and innovative, with innovation often emerging in response to law enforcement actions,” Felbab-Brown explains in the report, presented in question-and-answer format.

“The illicit economies involve a wide scope of commodities and services, with some of the most iconic ones including drug trafficking, human smuggling and trafficking, illegal logging and mining, poaching and wildlife trafficking, smuggling in counterfeiting of goods, cybercrime, gun smuggling and money laundering.

“Illicit economies and organized crime groups pose a wide variety of threats to states and societies, but they also bring various socio-economic and semi-public-goods services to vast segments of marginalized populations around the world.

“Hundreds of millions of people are dependent on illicit economies for basic livelihoods, social mobility, and access to public goods, such as street security [like protection rackets], and thus the sponsors of illicit economies – criminal and militant groups or corrupt states and politicians – derive vast political capital from sponsoring them,” she explains.

While mass imprisonment of ordinary drug users has to date proved ineffective and wasteful, “with the exception of cannabis, I do not support drug legalization,” she explains.

The rationale: “Drugs such as cocaine, heroin, synthetic opioids, and methamphetamine are highly addictive and the substance-use disorder can destroy the lives of users, their families, and communities as much as imprisonment can.

“The United States has been going through the most devastating drug epidemic ever in U.S. history – the opioid epidemic. It started with legal prescription drugs and eventually mutated into heroin and then synthetic opioids,” she explains.

“Those who believe that legalization will solve problems of drug policy should learn from the U.S. disaster, and its equivalent in Canada where extensive harm-reduction approaches almost melted underneath the onslaught of commercialized legal prescription opioids.

“Those very same companies and their international branches that unleashed the opioid epidemic in the United States are actively promoting the same disastrous and nefarious policies abroad, including in Latin America, in places such as Brazil and Mexico.

“On the supply side, I warn of premature and highly counterproductive eradication of drug crops without alternative legal livelihoods being in place. Such policies strengthen the political capital of criminal and militant groups.

“But that doesn’t mean, once again, that I believe drug trafficking should be legalized. Instead, I often urge prioritizing in targeting the non-intensive-labor-side of drug trafficking, such as by targeting trafficking. Creating legal jobs on a sufficient scale should be a critical element of most strategies for dealing with drug economies . . .

“Legalization will merely allow criminals to operate in a newly legal economy, often with the same violent practices as they practiced in the illegal space. Thus, avocado farming in Mexico is dominated by extortion by violent criminal groups, and fights over land and territorial control among them are as much about access to legal economies as to local drug retail markets or drug routes.”

Felbab-Brown then specifically cites historic problems of the war on drug trafficking in Colombia.

“Colombia is unique in the Andean region in how its political leaders and government officials are wedded to the so-called zero-coca policy – namely, that all coca needs to be eliminated in a particular area or community before the community receives any kind of socio-economic, alternative livelihoods, support from the state,” she explains.

“The zero-coca policy was the hallmark of the [former President Alvaro] Uribe administration, and is again a key feature of [current President Ivan] Duque administration – such as in the way the administration ties titles to all coca being eradicated in a community. It was also a policy of prior governments, including that of the [former President Juan Manuel] Santos administration, and goes back to the 1980s. Yet this zero-coca approach in Colombia has failed over and over again, and it will continue to fail.

“Destroying all coca rapidly is easy. Bringing in adequate legal livelihoods is hard and takes many more years than eradicating a particular coca plot, which only takes days.

“I’ve often urged, and want to emphasize again, that Colombia would benefit enormously from moving away from the zero-coca mindset. It should learn from effective strategies in Thailand and policy experimentation in Bolivia — demanding, for example, that in a development area, such as a PDET [‘Programas de Desarrollo con Enfoque Territorial,’ or (in English) Territorial Development Programs], each family eliminates 30% of its coca fields to start with, and once certain development targets are reached, another 20% or 30%, for example, would be eliminated.

“Such a sequenced approach gives both the communities and the state a stake in working toward the establishment of viable legal economies and livelihoods without leaving farmers who agree to eradicating their drug crops high-and-dry and without income, thus making them sour on collaborating with the state. The community could also be informed that once certain development targets are reached and legal income reaches and stays at certain level, all coca will be eradicated, forcibly if necessary.

“Eliminating all coca without alternative livelihoods already being actually in place, not merely promised, also generates violence, alienates local communities from the state, and thrusts them into the hands of violent nonstate actors.

“The right response from the state instead would be to prioritize secure delivery of goods and services to communities selected for legal rural development efforts, and to minimize access by violent trafficking groups.”

While anti-drug policies in the U.S., Europe and elsewhere may change in future, “I am skeptical, however, that in the next 15 years we will see any equivalent effort to legalize cocaine, heroin, or synthetic drugs,” she added.

“A rogue regime like the [President Nicolas] Maduro regime of Venezuela could possibly fantasize about it – but even that is unlikely, given its dependence on Russia and China. China and Russia have emerged as determined drug cops, increasingly active in promoting rigid, doctrinaire, unreconstructed tough-on-drug policies like the United States embraced in the 1980s, not just in regional settings like East or Central Asia but also at global multilateral fora.

“Any Latin American government that would seek to legalize the drug trade beyond cannabis and beyond permitting personal use would end up contending with strong opposition from China and Russia as well as the United States.

“The more likely shock to the drug systems in Latin America, and one that is potentially transformational, is a wholesale switch away from plant-based drugs in the United States -- with the exception of cannabis -- toward synthetic drugs.

“Already, a significant reason why U.S. drug users are still interested in cocaine is that fentanyl is being mixed into cocaine quite frequently. That also means that cocaine users are encountering fentanyl and synthetic drugs.

“Traffickers, and even dealers, prefer highly potent synthetic drugs such as fentanyl that are much superior to cocaine or heroin: Smuggling those drugs is very easy and does not require the same territorial control, nor therefore as much violence or corruption.

“Thus, one can contemplate a world in which the U.S. drug market is predominantly not supplied either by cocaine or drugs from Latin America – with the exception of Mexico, where fentanyl smuggling is already strongly established and production can easily develop.

“In such a world, Latin America, particularly the Andes, would lose a lot of relevance to the U.S. in terms of anti-coca and cocaine policies.

“Latin America itself could easily become the principal consumer of cocaine produced there, surpassing the market in Europe.

“Pressures to reduce its supply and production may start coming strongly from within Latin America, with countries such as Brazil and Argentina demanding that the Andean countries crack down on production.

“Alternatively, or simultaneously, new cocaine markets in East Asia, such as in China -- the development of which Latin American criminal groups are actively promoting -- could reinforce China’s embrace of a new role for itself as an international drug cop.

“And if Latin American countries allow themselves to be entrapped in China’s debt diplomacy, particularly as a result of seeking Chinese financial flows with bad terms as a result of Covid, then China would have high influence in demanding doctrinaire drug policies,” Felbab-Brown explains.

“Latin America may thus finally see the de-narcoticization of U.S. policy toward Latin America, for which the region so often asks.

“But such a de-narcoticization of U.S. policy toward Latin America could also come with an undesirable reduction of U.S. interest in and resources for economic and rural development, law enforcement institutions, and rule of law.

“The United States should avoid such a flip: Even if Latin America stops being a large source of illegal drugs for the United States, the United States should still strongly want to promote multifaceted policies to reduce violence and all kinds of criminality in the region, and to foster effective law enforcement and public safety, equitable development, and expansion of justice and rule of law to all citizens of Latin America,” she concluded.