Crime Hinders Latin American Development

Sources: International Herald Tribune, Latin American Crime is Crimping Growth; Financial Times, Violent Crime Called Threat to Latin America; USAID/Guatemala News, Ten Young Former Gangsters Start Businesses on Reality T.V. Show; Inter-American Development Bank, Experts Debate Prevention of Youth Violence.

The World Bank confirmed on October 16 that one of the biggest development challenges that Latin American and the Caribbean still currently face is violent crime. Due to a homicide rate more than twice the world average, the United States Agency for International Development (USAID) claims that business associations have identified crime as the largest deterrent to private investment in Latin America. Instead of focusing on conducting normal business operations, companies are forced to spend additional money and resources on security for both their employees and their property. These expenditures can dramatically increase the overall costs of doing business. The Vice-President of Colombia, Francisco Santos, recently called crime “the biggest problem of the next decade . . . [i]t will hinder tourism, investment and threaten democracy.” Since 2002, Colombia has seen a decrease in the homicide rate by forty-three percent. Many economists believe that the nation's increase in private sector investment is a direct result of that recent decline.

Crime does not only inhibit private investment in the region, however. Economists and World Bank officials agree that it has also retarded national economic growth by more than eight percent. For example, according to a report that the World Bank issued to the Brazilian government last month, if Brazil’s homicide rate in the late 1990s had been as low as Costa Rica’s, per capita income in Brazil would have been approximately $200 higher. In other words, each person could have been approximately $200 richer. Additionally, with a lower homicide rate, the gross domestic product (GDP), or the size of the economy, would have been 3.2 to 8.4 percent higher in the second half of the decade.

Issues of youth violence have also worked their way into the development debate. In early October, the Inter-American Development Bank (IDB) specifically addressed the ways in which youth crime is financially draining countries throughout the region. During an IDB forum, experts from Colombia, Argentina, Panama, and El Salvador discussed the ways in which violence has affected those nations economically and culturally. Their testimony confirmed the findings of a 2005 IDB report that stated that preventing youth violence can cost between 5 and 25 percent of a country’s GDP.

Sensing the economic and social strain, Guatemala has taken a novel approach in its attempt to deter youth crime. Last March, private businesses and USAID funded the reality television show Challenge 10: Peace for the Ex where ten ex-gang members were provided with job training in order to open up small businesses. By turning former criminals’ rehabilitation into a television show, the private sector and the government hoped to demonstrate alternatives to crime. As José Garzon, an officer with USAID in Guatemala stated, “When you have 150,000 gang members in a country with only about 8,000 jail spaces, you have to figure out how to deal with the rest.”

Questions:

(1) Policies to deter crime in Latin America have historically focused on law enforcement. Are alternative approaches such as Guatemala's television show realistic alternatives? What are the benefits of a more holistic approach to decreasing crime? In what ways would they have a greater (or lesser) impact on encouraging development?

(2) Should more attention be paid to non-violent crime? What are the development implications of corruption, government-sponsored or otherwise? Is it fair to say that this type of crime poses an equally strong barrier to development in the region?