How much is crime costing Latin America?

Violence is Latin Americans’ main concern

Latin America is the most violent region on the planet. The World Health Organization (WHO) believes that crime and violence are at epidemic levels, and despite the region’s recent robust economic growth, crime has continued to grow. This should be Latin Americans’ main concern, more than unemployment or the economic situation, yet the economic costs of crime and violence have thus far not received sufficient attention.

Despite the heterogeneity of crime in the region, it costs the countries of Latin America 3% of GDP on average, according to the report “The costs of crime and violence: New evidence and findings in Latin America and the Caribbean”, recently published by the Inter-American Development Bank (IDB). Comparatively, the cost of crime in Latin America is double that of developed countries due to higher social costs and the enormous amount spent on private security.

This generates multiple economic distortions that are classified in direct costs as injuries, damages and losses; costs in anticipation of delinquency, such as public and private expenditure on security; costs in response to crime, such as the criminal justice system; and indirect costs such as changes in the behavior of families or companies. Of total expenditure, when broken down by sector, 37% is spent in the private sector, 42% in the public sector and 21% corresponds to social costs, such as victimization.

According to the study, of the 17 Latin American countries analyzed, the cost of crime is equivalent to about USD 300 per person. However, higher spending tends to be concentrated in the Northern Triangle region of Central America, and in some countries crime costs are double the regional average. In Honduras, the country with the highest homicide rate in the world in 2014, crime-related expenses have reached 6.51% of GDP, and in El Salvador, spending reached 6.16%. At the other extreme, Mexico is the country with the lowest expenditure of 1.92%, followed by Uruguay with 2.23% of GDP, which is about USD 460 per person per year.

Despite the enormous expense that crime commands in Latin America, it is questionable how efficient spending actually is. While investment in education and health appear to be correlated and may in some cases lead to declining crime, investment in citizen security is not associated with improvements in human security indices—countries with similar levels of spending may face very different homicide rates. In this sense, the absense of human security, in addition to the social damage it generates, is a challenge for Latin American development from the economic point of view. Therefore, according to the report, the region needs as soon as possible to obtain, "knowledge that allows it to apply public policies based on the evidence when it comes to the security of its citizens," to avoid potential inefficiencies in public spending.

*Guest blog post from Latinoamerica21. 

Jeronimo Giorgi, a Uruguayan journalist dedicated to international issues, is pursuing a master's degree in Latin American Studies. He has collaborated with various media outlets in Latin America and Europe, and has received distinctions such as the Premio Rey de España for Journalism.

Latinoamerica21 is a blog about current economic, political and social topics in Latin America that is currently published within the newspaper El Observador de Uruguay and will soon be published in other media outlets within the region. The original version of this blog post is available in Spanish: ¿Cuánto nos cuesta el crimen en América Latina?

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*Guest blog posts do not reflect the views of FocusEconomics. 

Date: March 27, 2017