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Narcoterrorism is a term coined by former President Fernando Belaúnde Terry of Peru in 1983 when describing terrorist-type attacks against his nation's anti-narcotics police. In the original context, narcoterrorism is understood to mean the attempts of narcotics traffickers to influence the policies of a government or a society through violence and intimidation, and to hinder the enforcement of the law and the administration of justice by the systematic threat or use of such violence. Pablo Escobar's ruthless violence in his dealings with the Colombian and Peruvian government is probably one of the best known and best documented examples of narcoterrorism.

The term has become a subject of controversy, largely due to its use in discussing violent opposition to the US Government's War on Drugs.

The term is being increasingly used for known terrorist organizations that engage in drug trafficking activity to fund their operations and gain recruits and expertise. Such organizations include FARC, ELN, and AUC in Colombia and PCP-SL in Peru.

In 2000 the U.S. began funding, continued under the U.S. Bush administration, of Plan Colombia, intending to eradicate drug crops and to act against drug lords accused of engaging in narcoterrorism, including among them the leaders of the marxist FARC and the AUC paramilitary forces, groups which have also committed numerous crimes. The U.S. government is funding large-scale drug eradication campaigns and supporting Colombian military operations, seeking the extradition of notorious commanders such as late Manuel Marulanda Velez, among others.

Although Al Qaeda is often said to finance its activities through drug trafficking, the 9/11 Commission Report notes that "while the drug trade was a source of income for the Taliban, it did not serve the same purpose for al Qaeda, and there is no reliable evidence that bin Laden was involved in or made his money through drug trafficking." The organization gains most of its finances through donations, particularly those by "wealthy Saudi individuals".

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