How are legal businesses suffering due to the supply of illegal drugs in South and Central America?

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There are many ways that the illegal drug trade can negatively impact the legal businesses in areas where this trade predominates (chiefly Central and South America). The first (and most pronounced) effect of the illegal drug trade is that there is simply less money to circulate in the economy of the legal market. Put another way, the illegal market tends to cultivate monopolies that are dangerous both because prices can inflate in a way over which the consumer has little control (up to a 2,000% markup in the case of cocaine and heroin) and because the consumer has no legal or medical recourse against the supplier of illegal substances.

As to the effect on legal businesses, illegal substances tend to be marked up extremely highly; by comparison, the markup for coffee is about 70%, and even items in a hotel minibar tend to be marked up by only 400%, which is modest when compared with illegal drugs' markup. Because these illicit substances tend to be addictive, consumers are willing to pay these exorbitant prices and have little to spend in the legal market for things like, for example, technology, automobiles, or entertainment. The result is that these industries are all affected.

The other way in which these businesses can be affected is by absenteeism of addicts. Consumers of illegal substances are often unable to function optimally at work, resulting in lost productivity and ultimately a smaller workforce. These effects contribute to a shrinking of the larger economy in countries where illicit trade operates.

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