… says crime exacting steep social, public and private costs for region
A study by the Inter-American Development Bank (IDB) estimates the direct annual cost of crime and violence in Latin America and the Caribbean at $261 billion or 3.55 percent of GDP – roughly what the region invests on infrastructure and double the average cost for developed countries.
IDB’s study, The Costs of Crime and Violence: New Evidence, New Revelations in Latin America and the Caribbean, compared the cost of crime for 17 countries in the region, benchmarking them against 6 developed countries and found that “crime and violence are at near crisis levels in Latin America and the Caribbean. The region accounts for 9% of the world’s population but contributes nearly one-third of its homicide victims, making it the most violent region outside of war zones. Six out of ten robberies in the region involve violence and 90% of murders go unresolved. Its prisons are the most overcrowded in the world.”
The IDB noted that while there has been positive developments for Latin America and the Caribbean (LAC) in terms of economic growth comparative to developed countries, crime in the region has increased.
According to the IDB “in the face of high crime rates, the costs of crime can be sizable: individuals change their behavior to avoid (or engage in) criminal activity, households and businesses spend to protect themselves from crime, firms reduce their levels of investment and incur productivity losses, and governments shift the allocation of resources to tackle the associated problems.”
The executive summary of the IDB study revealed that “crime costs LAC countries, on average, between 2.41 percent and 3.55 percent of their GDPs. This is equal to an amount for LAC between US$115 billion and US$170 billion (at 2014 exchange rates) or between US$175 billion and US$261 billion (adjusted for purchasing power parity). The size of crime-related costs in LAC is similar to what those countries spend on infrastructure and is roughly equal to the share of the region’s income that goes to the poorest 30 percent of the population. These cost estimations provide a clear picture of the impact of crime and violence in LAC and should foster improvements in public policies that can ultimately reduce them.”
The study also notes that countries that spend more on prisons do not necessarily reap the benefits of less violence. “The Bahamas and El Salvador, for instance, spend large sums (in terms of GDP) on their penitentiary systems but suffer from high crime rates. Argentina and Uruguay, on the other hand, have much lower incarceration costs and lower crime rates.”
IDB also found that high levels of incarceration rates were also exacting an economic toll on the region, more so Latin America. “For the 2010-2014 period, the region spent $6.5 billion per year to maintain and build prisons. On top of this, imprisoned individuals forgo an additional $7.3 billion annually in income. The two numbers together amount to 0.39 percent of GDP, more than the conditional cash transfers for the region’s poor.”