Although the high-calcium, vitamin-rich coca has been chewed for centuries in Bolivia to relieve altitude sickness, toothaches and exhaustion, Ticona and his three brothers are commercializing the leaf in products they claim treat rheumatism, diabetes, muscular pains and asthma.

After nearly 20 years in business, Ingacoca eked out only $4,000 in 2006. But if Bolivia President Evo Morales has his way, the Ticona brothers and others could find lucrative markets overseas. Morales has long lobbied to overturn the 1961 U.N. Convention on Narcotics that allows the industrialization of coca only for domestic use and outlaws its production, manufacture and trade for export. The ban places coca leaf in the same category as cocaine and heroin.

Morales envisions an international market for coca's many legal products used in Bolivia now, including toothpaste, tea, cosmetics, gum, soft drinks, wine and even cookies. He has asked the European Union to gauge the size of the legal coca market and Cuban scientists to study the leaf's pharmaceutical value.

Morales, a former coca farmer and union leader, hopes the EU study, which will begin this month and end 18 months later, will vindicate his decision to increase this year's coca leaf production from 29,652 acres to 49,421 acres. Because there are thousands of Bolivian farmers who make their living growing coca, he says commercializing coca is a necessity.

"We were accused of being drug traffickers and cocaine dealers; we put up with a lot, but … now we are defending coca," Morales told The Chronicle.

But the new policy worries U.S. officials, who argue Morales is undermining Washington's war on drugs. Bolivian coca production is still well below its mid-1990s peak but has rebounded in recent years. Bolivia remains the world's third-largest producer of cocaine after Colombia and Peru.

"Anyone who has worked in Latin America remembers the problems in Bolivia in the '80s when it was virtually a narco state. And no one wants to see Bolivia return to that because it took years and years to roll it back," said Anne Patterson, U.S. assistant secretary for international narcotics, at a press briefing in March.

The increasing influence of Venezuelan President Hugo Chavez is another factor that worries U.S. policymakers. Chavez has financed three factories that will produce coca tea and coca baking flour for the Venezuelan market.

But the EU study is key. Even the Morales government concedes that it will be forced to eradicate the added acreage if the report negates coca's commercial potential.

Morales has also shifted the war on drugs away from poor coca farmers, whose crops were forcibly removed by soldiers. Between 1997 and 2006, there were 64 deaths and 840 injuries during past eradication programs sponsored by U.S. aid.

Now, the emphasis is on drug traffickers and their laboratories, chemicals and processing pits. In the primary coca growing area called the Chapare, the government now allows farmers to grow coca on one cato, or about one-third the size of a football field. To keep farmers from going over the limit, the state offers economic incentives and free medicines, threatens crop and land confiscation, and exerts military pressure to seize cocaine and eradicate illegal coca fields. The one cato, Morales claims, ensures farmers of a steady income and has lessened violence against security forces. Only two farmers have been killed – both outside the Chapare area – since Morales assumed the presidency in January 2006.

"The Bolivian approach is not perfect, but it does present an alternative," said John Walsh, senior associate at the Washington Office on Latin America. "They (coca farmers) are not being treated as criminals but as people who want to make a legal living, and so they are cooperating."

But behind the public squabble, the United States and Bolivia have found some common ground. Officials on both sides point to significant improvement combatting drug trafficking. Bolivian police seized 12 tons of cocaine in 2006 in contrast to just 3 tons in 2005, approximately 26 percent more cocaine base and cocaine hydrochloride than during the first nine months of 2005.

Last month, the State Department determined Bolivia has taken adequate steps against the production and sale of cocaine to stave off economic sanctions. Under U.S. law, countries that have "demonstrably failed" in efforts to combat the spread of illicit narcotics may be punished with cutoffs in aid. In 2007, U.S. aid to Bolivia reached $90 million.

But the State Department report noted discrepancies between the government's stated anti-drug policies and tolerance of coca production.

"We strongly encourage the government of Bolivia to make its No. 1 priority the reduction and eventual elimination of excess coca crops," it said. "We urge the government of Bolivia to revamp its national drug control strategy to eliminate permissiveness in licit production."

In the meantime, some analysts say Morales should be concentrating his efforts on convincing the United Nations to end the ban on legal coca products. In a typical speech, he points to the ban's exception for Coca-Cola, which has long used the non-drug alkaloids in coca leaf as a flavoring agent. The exemption rankles Morales.

"How is it that coca leaf is legal for Coca-Cola but industrialization for Bolivia and the coca leaf itself are penalized?" he said.

"Morales knows the coca issue well, but I don't think he has developed a lobbying strategy at the U.N. level and has been surprised at how difficult it is, and how little understanding there is of coca," said Kathryn Ledebur, director of the Andean Information Network, a nonprofit group that monitors drug operations in Bolivia. "Developing an effective lobby strategy should be a key objective."

Meanwhile, Prudencio Ticona is hoping the ban will eventually be overturned so he can expand his business, which now has only 10 employees.

"Coca in its natural state is good for your health," he said. "It is a long way from the chemical form of cocaine."