The report describes the increased use of Brazil as a transshipment center for cocaine destined for United States and European markets. It also examines drug trafficking operations while addressing sociopolitical facets of the Brazilian marijuana and cocaine trade. Expanded activity by the Colombian drug mafia and smaller, independent cocaine trafficking groups during the last decade has strained Brazil's already hard-pressed federal, state, and local police. Confronted with federal budget shortfalls and the resulting lack of resources, Brazilian drug law enforcement authorities face an uphill battle in their effort to combat drug trafficking and large quantities of cocaine continue to filter through Brazil. Cocaine hydrochloride, cocaine base, cocaine essential chemicals, and heroin essential chemicals are either produced in Brazil or transported through the country. There is also evidence of a serious drug abuse problem in Brazil, as coca derivative products become more readily available. In addition to inhalants and marijuana, crack cocaine and bazuco, a highly impure solid by-product created during the cocaine conversion process, increasingly are being consumed primarily by low-income Brazilians. An equally disturbing drug problem in Brazil is the emergence and use of combination and hybrid drugs like merla, a mixture of cocaine base and marijuana, and skank, a crossbreed of Afghan, Moroccan, and Thai cannabis. Figures