Peru is a priority in the U.S. war against drugs because it produces more coca for export to the United States than any other Latin American country. The Upper Huallaga Valley, about 200 miles northeast of Lima, is one of the world's most fertile coca-growing regions. Peruvians supply coca leaves and coca paste to Colombians who then process and distribute cocaine. The number of peasant families who grow coca is estimated at 70,000 to 320,000. The coca grower earns $4,000 to $20,000 annually from the cultivation of one hectare and is unlikely to accept a smaller amount from the Peruvian government to cultivate another crop. The U.S. State Department estimates that Peru's drug exports generate about $700 million annually, roughly half of which is returned to Peru. Close collaboration in counternarcotics programs has occurred between the United States and Peru in recent years. An important question raised by the Peruvian case, however, is whether the United States should give higher priority to counternarcotics or counterinsurgency. Although Peru has taken the lead in promoting regional cooperation against illegal drug processing and trafficking, data indicate that U.S. assistance to help Peru fight the drug war is insufficient, compared to revenues generated by the cultivation, manufacture, and distribution of cocaine. It is suggested that U.S. policy toward the drug war in Peru and other countries consider social, economic, and political conditions within those countries. 36 references.