Crime costs Latin America and the Caribbean almost as much as the region spends on education, says IDB of Reuters

By Rodrigo Campos

NEW YORK (Reuters) – Violence and crime are consuming nearly 3.5% of Latin America and the Caribbean’s (LAC) economic output and depleting resources that could be used for education and support for the vulnerable, an Inter-American Development Bank (IDB) report showed.

Aside from human casualties, the cost of crime amounts to nearly 80% of the region’s public education budget, twice as much as social welfare spending and 12 times as much as the research and development budget, the study found using data from the year 2022 and published on Monday (NASDAQ:), shown.

Crime “limits growth, drives inequality and diverts private and public investment. We must combine and redouble our efforts to change this reality,” IDB President Ilan Goldfajn said in a statement.

The study calculates the direct costs of crime in three areas: loss of human capital in the form of productive time, corporate crime control spending, and public spending on crime prevention and criminal justice. In 2022, security spending by private companies accounted for 47% of the total cost of crime, while government spending on crime prevention accounted for 31% and loss of human capital accounted for 22%.

For comparison, a range of data from Poland, Ireland, Czech Republic, Portugal, Netherlands and Sweden showed that their costs are 42% lower than LAC. If the region were to reach the level of its European counterparts, it would have almost 1% of GDP available to invest in social assistance and other programs, according to the IDB.

According to a parallel study by the International Monetary Fund, Latin America accounts for a third of all murders worldwide, despite having less than 10% of the world’s population, with organized crime being particularly costly.

“The presence of gangs and drug trafficking increases the cost of doing business,” the IMF report said. “A novel analysis of Mexican firms suggests that the cost of damage from crime is four times higher for firms that report gangs operating in their area.”

The fiscal costs for governments are also significant, according to the IMF, which says spending on public order and security in the region averages about 1.9% of GDP and over 7% of total spending.

“While spending more on security and deploying more police appear to help reduce crime, other factors are likely to be more important in LAC, with spending efficiency playing a crucial role. For example, despite a high proportion of spending on the judiciary, the ability to punish crime remains weak.”

Among the IMF’s policy proposals is that LAC should establish a “regional knowledge platform” to collect, share and analyze data and disseminate best practices for effective economic and security policy responses.