Latin America and the Caribbean can structurally boost economic growth by reducing crime and insecurity levels
The International Monetary Fund (IMF) analyses the negative effects of high crime rates in Latin America and the Caribbean (LAC) on productivity, capital accumulation and economic growth. In its view, more effective crime-fighting strategies in the region could significantly strengthen economic growth and free up public resources to be used for other public priorities. According to its estimates, reducing the level of crime in Latin America to the level of the world average would increase the region's annual economic growth by 0.5 percentage points.
Highlights of the report:
- The insecurity associated with crime and violence affects economic growth, in addition to generating huge social costs and jeopardizing the strength of the rule of law: According to the IMF, crime hinders capital accumulation, because it drives investment away to safer destinations with lower levels of theft and violence, and reduces productivity, as it tends to divert resources to less productive investments, such as housing security or public order.
- Previous IMF studies estimated that a 30% increase in homicide rates in LAC (equivalent to one historical standard deviation) reduced economic growth by 0.14 percentage points.
- Previous IMF studies estimated that a 30% increase in homicide rates in LAC (equivalent to one historical standard deviation) reduced economic growth by 0.14 percentage points.
- Reducing Latin America's violence and crime rates to the level of the global average would significantly boost economic growth: It would be very positive for governments in the region to adopt more effective strategies to combat crime, given that levels of spending on law and order and security as a percentage of GDP are already high.
- According to the report, reducing the level of crime in Latin America to the level of the world average would increase the region's annual economic growth by 0.5 percentage points, which is equivalent to approximately one-third of the growth registered in Latin America between 2017 and 2019. Rationalizing security spending and making it more efficient would not only attract more investment, but also allocate public resources to other spending priorities.
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