By Nathalie Alvarado and Ana María Ibáñez
WASHINGTON, DC – Violent crime in Latin America and the Caribbean (LAC) has for decades taken a steep toll on lives and livelihoods. Outside of areas impacted by wars, the region is the world’s most violent, leading in murder rates, armed robberies, and other violent crimes. But the economic consequences are equally devastating. Understanding how crime acts as a tax on development – one that the region can no longer afford to pay – could help LAC governments devise their policy responses.
Our recent study of 22 LAC countries puts a price tag on the region’s criminal violence: 3.4% of GDP, or $192 billion, is lost every year to crime-related costs. That is equivalent to 78% of the region’s education expenditure, and double what it spends on social-assistance programs. Such waste represents many lost opportunities for growth and development. Worse, this figure is consistent with our findings from 2017, highlighting the persistent nature of the crime crisis.
Homicides cost the region 0.45% of GDP, with the Caribbean bearing the heaviest burden, at 0.71%. The machinery of law enforcement – police, courts, and prisons – consumes another 1.08%. Beyond the direct costs of construction and maintenance of prison complexes, incarceration creates a ripple effect of lost productivity that spreads across generations. Perhaps most worrying is the tax on entrepreneurship: businesses spend 1.6% of GDP on security measures.
But these numbers barely scratch the surface of the true cost of crime for LAC economies. Foreign investors, particularly in vital sectors such as finance and agriculture, shy away from the region. Women drop out of the workforce, exacerbating existing gender inequalities. Educational outcomes suffer as schools in high-crime areas struggle to maintain attendance and provide quality instruction. Trust – the invisible infrastructure of a functioning economy – erodes, not only in institutions but between citizens. Even the environment pays a price, with the exploitation of natural resources and the degradation of ecosystems by criminal organizations going unchecked.
Overcoming the crime crisis would be a boon for LAC economies. Our study found that by bringing its crime rate down to the average level of six European countries – the Czech Republic, Ireland, the Netherlands, Poland, Portugal, and Sweden – the region could unlock the equivalent of roughly 1% of GDP, or $57 billion. These resources could be redirected toward measures that build stronger communities and foster sustainable growth. A study by the International Monetary Fund suggests that reducing homicide rates in LAC countries to the global average could boost annual economic growth by 0.5 percentage points – about one-third of the region’s growth between 2017 and 2019.
The Inter-American Development Bank (IDB, where we both work) has compiled a database of proven anti-crime interventions. The findings suggest that reducing violence requires a multipronged approach. LAC policymakers must implement institutional reforms to improve the efficiency of security spending and the effectiveness and equity of justice systems. Equally important are targeted social programs that address the root causes of crime and foster job creation in vulnerable communities.
For example, when Brazil implemented data-driven, results-based policing strategies, homicides fell by up to 17%. This shows that change is possible where there is political will to adopt evidence-based reforms.
But today’s challenges demand a regionally coordinated response. Criminal networks are increasingly transnational and interconnected, and have become more sophisticated at avoiding detection, while efforts to combat them remain fragmented. To improve regional cooperation, the IDB teamed up with 18 countries to launch the Alliance for Security, Justice, and Development. The alliance will enable governments to develop evidence-based anti-crime policies and coordinate their implementation. The World Bank, Interpol, and the Organization of American States (OAS) are among the 11 organizations that joined the initiative.
LAC countries possess extraordinary potential: they are rich in biodiversity and the minerals that will power the global economy’s shift toward green energy, and have the agricultural resources to feed the world. While violence has hindered the region’s growth, it need not define its future. By encouraging collaborative efforts to strengthen public institutions and implement evidence-based anti-crime policies, we can ensure that LAC countries make headlines not for rising violence, but for rising living standards.
Copyright: Project Syndicate, 2024