This article has been accepted for publication in Adelante. Copyright (c) 2000 by Adelante. All rights reserved, worldwide.

National Security Exercises

in Latin America: Bolivia 1999

— by —

Loren Cobb, PhD.
Mike Gonzalez, PhD.
Robert Hannan, PhD.



Events and conditions that can threaten the national security and socio-economic well-being of a developing country are far different from those in the industrialized world. Bolivia, in particular, has special problems associated with its illegal cocaine export industry. As a measure of the severity of this threat, consider this fact: in the early 1980s, during a time of hyperinflation and collapse of the formal economy, the illegal cocaine industry of Bolivia comprised, by some estimates, as much as 40% of Gross Domestic Product (GDP). Hidden behind this extraordinary figure lay a story of worsening poverty and human suffering, of corruption in all sectors causing extreme stress to governmental institutions, of foreign capital flight and business bankruptcies. Today the picture is vastly improved, and the cocaine industry represents well under 5% of GDP, but the threat of a repeat disaster remains as troubling as ever. In addition, the challenges presented by the globalization of finance and investment are rapidly evolving, creating new problems and opportunities for the government and people of Bolivia.

The central problem facing governments of developing countries like Bolivia is this: how can we best anticipate and prepare for future threats to national security, when these threats are deeply entangled social, political, and economic processes rather than hostile acts of neighboring countries? The answer developed by this collaborative Bolivian-US project is a national security exercise that uses role-playing groups arbitrated by a computer simulation model. This model dynamically simulates the key social, political, and economic processes that have ensnared the country in an endless cycle of poverty and social dysfunction. Actions and policy changes made by role-players during the exercise are implemented as changes in the model’s corresponding variables. These changes ripple through the cause-and-effect network of the model, allowing observers to see the ultimate effects of the actions, reactions, and counter-actions of role-players.

In 1997 the EAEN identified the primary threat to Bolivian national security to be a self-perpetuating "vicious cycle" among three factors: poverty, corruption, and Narcotrafficking. As a part of a year-long school-wide comprehensive effort to analyze this cycle, the leadership of the EAEN requested that the US Southern Command Deputy Directorate for Analysis and Simulation (SCJ5-DDAS) develop a new simulation model of Bolivian society. This model was intended to be used to experiment with different courses of action and policy initiatives. The first author (Dr. Cobb) wrote the initial draft of this simulation model, named NationLab 98. It was used extensively during the first exercise at the EAEN in La Paz, over a five-day period in November of 1998.

The 1998 exercise was played 25 years into the future, five years per iteration. Courses of action within each five-year iteration were proposed by six teams, respectively representing the national government, the ministry of finance, the ministries of health and education, the military and national police, the coca farmers and cocaine trafficking industry, and a cabal of corrupt public officials. A small committee working in tandem with NationLab 98, the computer simulation model, performed adjudication of the teams’ actions, reactions, and counteractions.

After digesting the many lessons learned in the 1998 exercise, both the simulation model and the mechanics of the exercise were thoroughly revised for a second round of national security exercises in November of 1999. The NationLab 99 simulation used in this exercise was composed of seven tightly integrated modules. These accounted for the formal economy of Bolivia, the structure of the labor force (including the informal and agricultural sectors of the economy) the demographic and educational structure of the population, the coca farmers and the supply-and-demand context in which they work, the coca processing and trafficking industry, and the public health system.

The theme for the 1999 exercise was "Bolivia into the 21st Century." This exercise was repeated twice, once in La Paz and once in Santa Cruz, Bolivia. The players were students of the EAEN, all with current positions in government, the military, the national police, and the private sector.


The primary objective of this exercise was to test possible national strategies designed to overcome the cycle of interactions among poverty, corruption, and narcotrafficking, under both optimistic and pessimistic assumptions about the future.

Although the primary objective of this exercise was focused on the actual subject matter of the exercise, an important set of secondary objectives concerned the use of computer simulation models in adjudicating the outcomes of social, political, economic, and military policies in the context of developing countries. Thus, this project had both substantive and methodological objectives.

The secondary objective of the exercise was to obtain answers to several methodological questions concerning the use of computer simulation models for adjudication:

Structure of the Exercise

Temporal structure

In order to attain a more fine-grained view of the interactions between proposed courses of action from the various participants, the time span of the 1999 exercise was reduced to eight years. The first three years of this span was played under optimistic conditions, the following five years under pessimistic conditions. The optimistic and pessimistic scenarios are described below.

Each exercise was composed of four complete iterations, each lasting one day. The first iteration covered the first year, starting from December 1999. The second and third iterations covered two years each, while the fourth iteration covered three years, concluding in 2007. The fifth and final day of each exercise was dedicated to After Action Review and final ceremonies.

The structure of each day

Starting with the current national situation, each subsequent day of the exercise began with a presentation of the results of the previous day’s adjudicated actions, with supplementary graphs and charts from the NationLab 99 simulation software. After this the EAEN scenario designers presented the overall national situation for the next time period. After a short break, each team then prepared their proposed courses of action for the next time period. These proposed courses of action were briefed to the student and faculty body as a whole, with ample time for questions and clarifications. At this point the adjudication committee then met to reconcile the various conflicting actions and to determine their qualitative outcomes. The NationLab 99 simulation model determined quantitative outcomes, wherever possible. Finally, all outcomes were then collected together for presentation to the entire body at the beginning of the next day of the exercise.

Participant Groups or Teams

There were four Blue Cells representing executive councils of the government of Bolivia:

  1. CONAPO, the National Policy Council, the highest executive council of Bolivia.
  2. CONAPE, the National Economic Policy Council.
  3. CONAPSO, the National Social Policy Council.
  4. COSDENA, the National Defense Supreme Council, acting in close concert with CONALTID, the National Council Against Illicit Drug Traffic.

Acting against these four "Friendlies" was a single opposition Red Cell, or "Threat," that planned courses of action for the entire cocaine trafficking industry, including coca farmers, coca processors, cocaine exporters, insurers, suppliers, money launderers, foreign narcotics cartels, and cooperating corrupt public officials.
The NationLab 99 simulation software dynamically represented structural problems in Bolivian society, against which all four Blue Cells struggled. A partial list of these structural problems includes poverty, corruption, a huge informal economy, a lack of educated adults, high infant and maternal mortality, high international demand for cocaine, and volatile foreign investment and assistance.

Finally, the White Cell, or "Control," undertook the task of adjudicating the outcomes of all proposed courses of action. This team was composed of EAEN faculty and the SCJ5-DDAS representatives. In addition, the White Cell frequently invited members of the Red Cell and CONAPO to amplify and clarify the implications of their proposed actions.

Optimistic and Pessimistic Scenarios

These scenarios provided the broad economic and political context within which the role-playing cells made their plans and decisions. The first three years of the exercises were played out in a generally benign and optimistic context. The context in the last five years turned decidedly difficult and pessimistic.

First Optimistic Iteration: Dec 1999 – Dec 2000

With the gradual exodus of government involvement from public enterprises, the current administration of Bolivia continues its privatization initiatives. Through its Dignity Plan, the administration continues to focus on corruption and the narcotics industry, and the need for improving income distribution and maintaining inflation at an acceptable level. Bolivia seeks multilateral aid from international sources, including the Inter-American Development Bank, the World Bank, the Pan-American Health Organization, and responsible UN agencies as well as the United States and Europe.

Second Optimistic Iteration: Dec 2000 – Dec 2002

Bolivia continues its major policies in the areas of public health, education and corruption. However, a flow of illegal arms and foreign drug money begins to increase pressure on Bolivian institutions. The mere fact of the availability of these elements encourages domestic subversive groups to appear for the first time in Bolivia, especially in the Chapare region. The government is able to receive $100M aid package from the US and $20M and for the European Economic Community (EEC). This assistance is earmarked for its struggle against the narcotic industry, including the alternative crop program for former coca farmers. The economic growth rate improves, inflation is under control, contraband is reduced, and customs and anti-corruption laws are implemented. Widespread corruption remains the Achilles’ heel of the Bolivian government.

First Pessimistic Iteration: Dec 2002 – Dec 2004

An international economic crisis presents very serious problems for Bolivia’s economy, concurrent with national elections and a change of administration. This leads to a rapid deterioration in Bolivia’s political stability, with widespread social and labor unrest. Foreign investment is curtailed due to economic and political instability. All major infrastructure development initiatives to support the alternate crop program are reduced or eliminated for lack of economic aid. Unemployment rises to levels not seen since the closing of the tin mines in the late 1970s and early 1980s, and the country’s per capita income begins to decline. Economic policies required by Bolivia’s participation in the Southern Cone Common Market (MERCOSUR) cause further deterioration in the domestic economy. The new National Customs law, though fully implemented, provides only a small increase in revenues. The trade balance deteriorates, and explosive inflation threatens to reappear unless decisive governmental action is taken. Revenues from natural gas exports to Brazil are greatly reduced due to sabotage. The civil war in Colombia takes a turn for the worse, which adds to the political instability of all countries of the Andean Ridge. Worldwide demand for cocaine is on the increase. Many former coca farmers opt to return to illegal coca production, due to rising market prices for coca leaf and comparatively poor returns from alternative crops.

Second Pessimistic Iteration: Dec 2004 – Aug 2007

The deterioration of the country’s productive areas is aggravated by the national crisis. Foreign Narco-Terrorist elements have penetrated Bolivian coca farming areas, and are arming and training coca farmers and processors to defend themselves against government forces. With massive financial assistance from cocaine cartels, the insurgents have achieved some degree of influence over fully 80 percent of all labor unions. The GDP continues to drop at an alarming rate and the budget deficit soars. Illegal coca production in the Yungas region is on the increase, while government forces are preoccupied with suppressing production in the Chapare region. The US considers diplomatic sanctions and possible decertification, which influences the international community to reduce foreign aid.

The "NationLab 99" Simulation Model

The purpose of the NationLab 99 simulation model is to remove from the exercise adjudication process as much of the need for quantitative "guesstimates" of the social and economic outcomes of policy decisions as possible. At the end of every iteration of the exercise, the adjudication committee (the White cell) has the task of determining the outcomes of the conflicting plans and actions of the opposing teams (the Blue and Red cells). Many adjudication decisions require qualitative human judgements and are not appropriate for computer simulation; examples of such decisions include whether a policy is constitutional, or whether an action is humanly possible given the time and resources available. On the other hand, there are many quantitative adjudication decisions that are far more appropriate for computer simulation than human judgement; examples include the level of per capita income, the total tonnage of coca leaf processed into cocaine, and the percentage of adults who have at least a secondary education.

The 1999 edition of NationLab consists of seven tightly integrated dynamic models of key sectors of the Bolivian society. While most of these sector models would apply in general to almost any developing country (after appropriate changes in parameters and initial values), the two sectors that deal with coca farming and processing are unique to coca producing countries. Some of the causal relationships and many of the initial values for variables in the model derive from research conducted by current and past EAEN students. A careful review of the equations and variable relationships by a panel of EAEN faculty provided the means for assuring the validity and accreditation of the model for use in the exercise.

NationLab 99 was implemented using STELLA, a dynamic modeling software package published by High Performance Systems of Hanover, New Hampshire, USA. This software includes a facility for displaying sectors of the model in "wiring diagram" form, using a relatively common set of engineering symbols, as seen for example in Figure 1.

Figure 1: The "wiring diagram" for the narcotrafficking sector of NationLab 99. Each symbol in this diagram has a precise mathematical meaning.

Briefly described, the sectors of NationLab 99 are as follows:

    1. responsibility and accountability of civil servants;
    2. appointments based on professional qualities (rather than patronage);
    3. promotion based on merit (rather than political connections);
    4. adequacy of salaries in the civil service; and
    5. the size of the illegal cocaine industry.

Substantive Results

Although details and tactics differed substantially between the two repetitions of this exercise, the final outcomes were strikingly similar. Blue cells in both exercises found themselves seriously challenged by the sequence of crises in the pessimistic scenario, and fought back vigorously. They were most successful in suppressing the resurgent cocaine industry, and least successful in addressing poverty and corruption. The severity of the economic crisis provoked by the pessimistic scenario can be seen in Figure 2, which graphs four of the principle macro-economic indicators for the formal sector of the economy:

Figure 2: Macroeconomic indicators for growth rate, unemployment, inflation, and GDP per capita over the 8 years (32 quarters) of the La Paz exercise. Scales for each of the four variables are given on the left.

The economic crisis that began in the fourth year of the exercise is visible in the growth rate line, which plunged from +4% to about –10% (on an annual basis) over the course of the year. Using the time scale of the graph, which is measured in quarters (3-month intervals), the crisis began in the 17th quarter. The growth rate of the country began to improve by the fifth year, but the unemployment rate did not begin to recover until the sixth year. Income per capita was only just beginning to recover when the exercise stopped at the end of eight years of play. Inflation was held to a low level during the crisis due to difficult but effective fiscal and monetary policies undertaken by CONAPE (The National Economic Policy Council).

During the crisis period the number of people working in both agricultural and formal sectors fell, while the size of the informal economy soared. This result reflects the world-wide reality that the informal sector of an economy acts as the "employer of last resort" during times of economic crisis.

Progress in the fight against corruption in the civil service is depicted below in Figure 3. The NationLab 99 model assumes that five key variables increase the risk of corruption in a civil service:

  1. Adequate Compensation. If civil servants are not paid a living wage, then the temptation to extract bribes from citizens becomes overwhelming.
  2. Responsibility and Accountability. If civil servants are not held responsible for their actions and accountable for their finances, then the risk of corruption increases.
  3. Career Civil Service. A civil service in which appointments are made based on professional qualifications is far less corruptible than a patronage system in which political parties, powerful families, or large businesses control appointments to civil service jobs.
  4. Promotion by Merit. A civil service in which promotions are awarded for reasons other than meritorious performance is susceptible to corruption.
  5. Illegal Industry. The simple presence of a large illegal industry (e.g. narcotrafficking) in a country exposes its civil service to greatly increased risk of corruption.

NationLab 99 measures the "transparency" of a civil service by summing the first four of the above variables. As Figure 3 shows, the amount of corruption in the Bolivian civil service declined in response to improvements in transparency, but a great deal of progress still remained to be accomplished by the end of the exercise.

Figure 3: Progress in the fight against corruption in the civil service. The transparency index is a sum of four component measures: accountability, responsibility, professionalism, and compensation for civil servants.

Finally, progress in the fight against the narcotrafficking industry is depicted in Figure 4. The impact of the Pessimistic Scenario is clearly evident beginning in 2003 (Quarter 8 of the exercise).

Figure 4: Progress in the fight against the illegal coca industry. Three measures of the size of the industry are graphed here: hectares of planted coca fields, metric tons of dried coca leaf awaiting processing, and total exports in metric tons of coca base and pure cocaine.

We can summarize the many substantive results obtained in this exercise in a few brief points, as follows. The five executive councils of the government of Bolivia, as played in this exercise by the students of the EAEN:

Observations on Computer-Assisted National Security Exercises

The challenges facing the national security of developing countries in the future are at least as likely to come from within, in the form of social and economic crises, as they are from external sources. This creates a serious problem for adjudicating the actions taken in national security exercises, because social and economic systems are enormously complex, compared to military engagements. Actions taken in the social and economic arenas often have rippling secondary and tertiary effects for decades into the future, as well as immediate impacts that are multivariate in nature. In this context, an objective and politically neutral computer model of the social and economic mechanisms that are at work in a country is an invaluable tool for exercises at the highest policy levels of government.

Over the course of two repetitions of the exercises reported here, we have learned several important lessons with respect to the use of computer simulation models in NSS exercises:

This article began by asking the question, "By what means can a developing country best anticipate and prepare for the national security challenges that it will face in the future?" We recommend an approach based on the following steps:

  1. Design and conduct a series of focused national security strategy exercises, using as participants a mix of younger, forward-thinking members of the government, business, military, and police forces, and older, experienced individuals who have managed real crises in responsible positions both in and out of government.
  2. For social and economic aspects of the exercise, use the best simulation software available to provide objective and impartial assistance to the adjudication committee in its task of predicting the consequences of actions taken. The simulation software must represent within its model as closely as possible the actual mechanisms at work in society, at an appropriate level of abstraction, and must be initialized with the current conditions that prevail in the society that is to be simulated.
  3. Recruit the ablest individuals into "threat" roles, so that government role-players are challenged to the greatest extent possible. Without a talented and energetic opposition, an exercise is unlikely to test government policies adequately.

Our experience leads us to believe that the above steps will create lively and instructive exercises that reveal both strengths and hidden weaknesses in high-level policies and decision-making procedures.


  1. Loren Cobb is President of Ætheling International Consultants, Carbondale, Colorado. Please email reprint requests to:
  2. Mike Gonzalez is Senior Military Analyst, Logicon LISS, Inc., and J-5/DDAS, US Southern Command.
  3. Robert Hannan is Deputy Director for Analysis and Simulation, J-5/DDAS, US Southern Command, and the NationLab team leader. The email point of contact for inquiries concerning this project is:
  4. The EAEN is La Escuela de Altos Estudios Nacionales. As the Bolivian counterpart to the US National Defense University, the EAEN has a main facility in La Paz and a branch in Santa Cruz. The EAEN offers a Masters degree in Security, Defense and National Development to students who come from government, the military, the national police, and the private sector. The Director of the EAEN in 1999 was Vice Admiral Juan Carlos Andrade Mallea. Email:

Date of First Draft: 1 December 1999.

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