Even Costa Rica, long an enclave of democracy and stability in the region, has come under growing pressure. The drug trade there is more prominent than ever before, and, for the first time, the Obama administration put that country on the official list of “major drug transit or major illicit drug-producing countries.” Costa Rica’s security ministry contends that trafficking organizations are now storing large quantities of drugs in the country, converting Costa Rica from a “bridge” to a “warehouse,” a change that automatically entails a much larger ongoing presence of cartel operatives. Costa Rican authorities are sufficiently worried about the cartel menace that they implemented a Strategic Association Accord with Mexico, an agreement initially signed in 2009 to share intelligence and coordinate other measures to counteract the trafficking organizations.

Central American leaders are clearly agitated about the impact of the Mexican cartels on the security and stability of their countries. Even the leftist government of Nicaragua—governed in the 1980s by Washington’s archnemesis, the Sandinista National Liberation Front—seems not only receptive to aid from the United States to combat the traffickers but also eager for such assistance. Francisco Campbell, Nicaragua’s ambassador to Washington, states that “unlike the imaginary threats of the past, this one is real. This is the first time we can talk about an honest hemispheric threat.”

Guatemala’s Colom, a more moderate leader, expresses a similar view. “Fundamentally I think we made a mistake, a miscalculation, of the scale of the problem,” he concedes. “We are witnessing a very serious aggression, which is part of a regional phenomenon.” He attributes 42 percent of the crimes in his small country, which included six thousand murders in 2010, to the drug gangs. Highlighting the financial resources of those organizations, Colom notes that Guatemalan authorities have seized almost $12 billion in property, drugs and cash during his three and a half years in office. The comparable figure for the previous eight years was approximately $1.1 billion. That $12 billion, he emphasizes, is equal to almost two years of Guatemala’s state budget.

OF COURSE, Central American regimes have an incentive to exploit the threat to extract more financial aid from the United States. It has been a source of irritation to those governments that the bulk of Mérida Initiative funds have always gone to Mexico. In 2010, for example, Congress appropriated $1.3 billion for Mexico but only $248 million for all of Central America. Costa Rican president Laura Chinchilla expressed the frustration of her colleagues in the region when she stated: “We don’t want to be seen as an appendix of the Mérida Initiative. We want a plan for Central America.” And clearly she expected such a plan to be much larger than $248 million.

That is certainly true of Chinchilla’s fellow leaders in Central America. President Colom asserts that the United States and other drug-consumer countries owe significant financial support to “transit countries” in the battle against the cartels. He contends that Central American governments spent $4 billion on security measures in 2010 but that Washington and other international donors promised only $1 billion and delivered a paltry $140 million.

Colom implies that consumer countries ought at least to cover the region’s $4 billion in security expenditures. But his goal is modest compared to the comments of Mexico’s Felipe Calderón. Describing the trafficking route from South America through Central America and Mexico as “a highway of death,” Calderón argues that consumer countries (primarily the United States) should give the same amount to the governments of the transit countries as the drug cartels make from their illegal commerce—at least $35 billion a year.

The U.S. government is caught in a bind. Clearly, Washington does not want to see Central America become a region of narco-states in which the drug cartels are the political powers that really matter. And Central American leaders have a point when they argue that their countries are at risk largely because of their geographic location along the route between drug-source countries and the insatiable U.S. drug market. According to the 2011 United Nations World Drug Report, the U.S. market accounts for approximately 36 percent of world consumption of cocaine, and the figures for other drugs are similar.

At the same time, U.S. leaders need to guard against letting excessive guilt make them receptive to what amounts to a financial shakedown from Central American regimes. Murder rates in those countries were already among the highest in the world before the Mexican cartels moved in. The drug gangs have certainly exacerbated security problems in Central America, but they did not create them.

Moreover, pouring U.S. tax dollars into the police and militaries of Central American countries would likely have only a modest effect on the security situation. The root of the problem lies deeper than strengthening the forces of law and order or even helping to bolster the legal economies of those countries.

The primary reason the cartels are so powerful both in Mexico and Central America has to do with the fundamental principles of economics. There is a huge demand for drugs, especially in the United States but also in Europe and, increasingly, in other portions of the world. When such a robust demand for a product exists, it is an economic certainty that profit-seeking entities will try to fulfill that demand. Prohibiting commerce of a product does not negate that dynamic; it merely perverts it. Instead of legitimate businesses engaging in lawful competition, the trade falls into the hands of elements that don’t mind breaking the law and assuming all the other risks entailed in operating in a black market. Often, that means the most ruthless, violent individuals and organizations come to dominate the trade.

Because of the black-market risk premium, profit margins are far wider than normal, filling the coffers of illicit traffickers and giving them ample financial resources to challenge competitors and either corrupt or neutralize law-enforcement authorities. That is what happened in the United States during the Prohibition era, when the government tried to ban alcoholic beverages. That is what is happening today, especially in the Western Hemisphere, with the prohibition of marijuana, cocaine and other drugs. And the major beneficiaries are the Mexican cartels.

Washington can continue to pursue a prohibitionist policy regarding drugs, but the costs, already worrisome, are rising. The growing turmoil in Mexico indicates how severe those costs might become, but they could get even more painful in Central America, given the greater weakness and vulnerability of Mexico’s southern neighbors. Clinging to the current policy could lead to an entire region in which ruthless drug cartels become dominant political players. U.S. leaders need to ponder whether they really wish to risk having Central America turn into a collection of narco-states. If not, they need to reconsider the entire prohibition strategy. Providing more generous security and economic assistance to beleaguered Central American governments is merely putting a Band-Aid on a malignancy.

Ted Galen Carpenter, a contributing editor at The National Interest and senior fellow at the Cato Institute, is the author of eight books and more than 450 articles on international affairs. His latest book, The Fire Next Door: Mexico’s Drug Violence and the Danger to America, is forthcoming in September 2012.

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Image: Pullquote: What is so worrisome about the mounting presence of the drug cartels in Central America is the vulnerability and overall weakness of the region.Essay Types: Essay