Two studies released in recent days seek to quantify the cost to societies of crime and insecurity in the Caribbean and Latin America (LAC). Although it is unclear how much Caribbean data was included in the studies (some “LAC-based” studies tend to be more about South America than the Caribbean at the end of the day) having some data and analysis is better than none at all.
The Inter-American Development Bank has updated some of its previous work and has found costs to be sisgnificant. .
Latin America and the Caribbean social and economic development remains heavily burdened by crime and violence, a new Inter-American Development Bank (IDB) study shows. The direct costs of crime and violence in Latin America reached 3.44% of the region’s Gross Domestic Product (GDP) in 2022, mostly unchanged from a previous IDB study published in 2017.
“Our study shows that crime is a significant burden on our societies and economic development. It limits growth, drives inequality, and diverts private and public investment. We must join and redouble efforts to change that reality,” said Ilan Goldfajn, IDB President. “Evidence shows that targeted prevention and effective security and justice systems are key to lasting change.
Source: High Crime Costs Burden Latin America and the Caribbean, IDB November 11, 2024
In a second study, the International Monetary Fund in a staff paper also finds costs to Latin America and the Caribbean are significant.
Violent crime and insecurity remain major barriers to prosperity in Latin America and the Caribbean (LAC). With just 8 percent of the global population, LAC accounts for a third of the world’s homicides. Building on the existing literature, this paper aims to support economic policymakers and development partners by exploring the interplay between insecurity and macroeconomic outcomes, with emphasis on the relationship between violent crime and growth, the business climate, and public finances. The analysis shows that national-level crime indicators mask huge internal disparities, and that municipalities with 10 percent higher homicide rates have lower economic activity by around 4 percent. The paper develops an innovative measure of insecurity—the share of crime-related news—and shows its association with lower industrial production. Using firm-level data, it also estimates that the direct costs of crime, for firms, are around 7 percent of annual sales, and these are much higher when gangs and drug-trafficking organizations are present. Violent crime rises with macroeconomic instability, inequality, and governance problems. Using a large cross-country panel, the analysis finds that homicides increase when a country is affected by negative growth, high inflation, or a worsening of inequality. Victimization surveys indicate that where populations are concerned with the rule of law—impunity and police corruption—only one in five victims file their case with the police. Lack of trust and crime can be mutually reinforcing. Finally, the paper documents the fiscal burden of security provision and finds that spending tends to be inelastic to crime and that spending efficiency could be improved. The paper concludes with policy lessons and areas for additional collaboration between national authorities, international partners, and key stakeholders. These focus on data collection and analysis, economic policies that may address the root causes and manifestations of crime, strengthening rule of law institutions, and intensifying regional exchanges on security and public finance issues.
Source: Violent Crime and Insecurity in Latin America and the Caribbean: A Macroeconomic Perspective International Monetary Fund, November 11, 2024
See the links above to read/download the full documents.