The skyline of Bolivia’s Andean capital is being transformed by construction, reflecting not only general economic growth, but also a less savory fact — an influx of cocaine money to one of South America’s poorest nations.
The mountainous view from La Paz, nestled in a valley 3,600m above sea level, is gradually vanishing behind new apartment blocks, a trend seen in other cities such as Santa Cruz, Cochabamba, Sucre and Tarija.
Cement sales grew 12 percent in 2008 and 13 percent in 2009, according to industry figures, while construction has increased 10 percent a year on average, double the country’s growth rate.
“It comes from exports, helped by the spectacular price of raw materials,” as well as remittances from Bolivians living abroad and favorable credit, according to economist Alberto Bonadana, of the University of San Andres.
The exports include minerals and hydrocarbons, but also cocaine, of which Bolivia has emerged as the world’s third-largest producer, with the area under cultivation increasing by 31,000 hectares a year.
“In countries with a lot of drug trafficking, one of the methods for laundering dollars is real estate,” said economist Napoleon Pacheco, of the Fundacion Milenio think tank. “It is possible that this factor is affecting the current boom.”
There are no studies conclusively linking the real-estate expansion to drug smuggling, but the last major surge in construction, in the 1980s, also coincided with a peak in drug activity.
“For every US$8 of legal exports, there is a US$1 that is illegal,” Bonadana said.
The UN Office on Drugs and Crime estimates that between US$500 million and US$750 million of drug money is laundered through the country each year, accounting for 3 percent to 5 percent of the Bolivian economy.
The housing boom in La Paz in part reflects the city’s topography, as the valley walls channel growth upward. In the eastern residential neighborhood Miraflores, houses have been razed in favor of five-story complexes.
City figures indicate that 70 percent of La Paz’s 200,000 properties have been built without permission, often on fragile soil, and about 1,500 homes were destroyed in February landslides.
Alvaro Cortez, of the Miraflores Residents’ Association, pointed to a home he says has sunk 5cm to 6cm.
“This is what happens to the majority of homes that have the misfortune of being next to buildings under construction,” he said.
City officials also worry that the speed of growth is outpacing any increase in the level of services for the population.
The new construction “requires the expansion of basic services, including transport. But given the topography of La Paz, this is extremely complicated,” said architect Javier Crespo, a consultant for the city.
“We are limited in the extension of the urban fabric,” he added.
Bonadana echoes those fears, saying a “housing bubble” is emerging that could eventually pop, leading many Bolivians into a new era of falling prices and deepening debt.