New Zealand police say they have seized a record $NZ14 million ($13 million) worth of cocaine hidden inside a large diamante-encrusted horse head from Mexico.

The largest-ever haul of the drug in New Zealand has been linked to the rebuild of the city of Christchurch, severely damaged in a 2011 earthquake, and the Australian market.

Detective Superintendent Virginia Le Bas, from the organised crime unit, said they were still working to establish the final destination of the haul.

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“This is a great success, we should be proud to have detected it at the earliest of stages.”

The 35-kilogram shipment had been air-freighted from Mexico to Auckland where it was detected in the bejewelled horse-head statue in May.

Following a six-week investigation, a Mexican and an American were arrested in Auckland over the weekend as they prepared to fly to Hawaii and another Mexican was detained in Christchurch.

Police believe at least some of the drug was destined for Christchurch which has attracted workers from around the world to get involved in the rebuild over recent years.

Detective Superintendent Le Bas said some people in Christchurch were using the drug and the rebuild had created a change in demand for some illicit substances.

Drug researcher Chris Wilkins, from Massey University, told reporters the drug may also have been destined for Australia where demand was high in cities like Sydney and Melbourne.