The Huge — and Often Hidden — Costs of Criminality in Latin America

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Last December, as Rio de Janeiro was busily preparing to host both the 2014 World Cup and the 2016 Summer Olympics, Brazilian sports minister Aldo Rebelo sparked controversy by stating that Brazil was not adequately equipped to address the country’s high rates of rape, robbery and murder, especially during such a demanding series of public events. Despite Rio’s picturesque scenery, vibrant culture and lively nightlife, the U.S. State Department has consistently rated the city’s crime rate as “critical” for the past 25 years. In 2012, there were 4,041 homicides in Rio de Janeiro state and 1,209 homicides in its capital city of Rio de Janeiro. Many crimes went unreported, and only a small percentage of major crimes that were reported wound up being solved. “We are trying to contain this violence,” said Rebelo. “We know our country may be harmed when this violence is seen by the world, as would any country where violence exists.”

Among Latin American countries, it’s not just Brazil that is suffering from a high incidence of criminality, despite the region’s recent pattern of higher economic growth. And the region is paying a very high price for that criminality, according to a recent report by the United Nations Development Programme (UNDP), titled “Citizen Security with a Human Face: Diagnostics and Proposals for Latin America.” The UNDP report, which examines the economic costs of violence in 18 countries in the region, provides some eye-opening data. In 2010, for example, crime and violence cost Honduras 10.5% of its Gross Domestic Product (GDP); Paraguay, 8.7% of its GDP; Chile, 3.3% its GDP, and Uruguay 3% of its GDP. In the case of Chile, that percentage translated into a loss of $6.5 billion, according to the data, compiled jointly by the UNDP and the Inter-American Development Bank.

When presenting the report in Santiago, Chile, last November, Heraldo Muñoz, assistant secretary general responsible for UNDP operations in Latin America, said that “the great Latin America paradox is that the exceptional economic growth [in recent times] has eliminated poverty but has increased violence and insecurity at the very same time.” The reason for that paradox, he argued, is that this is a “low-quality period of economic growth, based on consumption. Access to social mobility continues to be very low, thus generating a segment of people who want their piece of the pie” even if they have to resort to illegal means, such violent crime.

According to the UNDP report, there are several reasons why crime has been growing despite economic growth. The report analyzes the four principal dimensions of this phenomenon. The first dimension is economic-structural, involving low quality jobs and insufficient social mobility, which in the context of consumer-driven economic growth has generated “aspirational crimes,” the report notes. The second, the social dimension, reflects recent “structural changes in families,” including a significant increase in single-parent households, higher dropout rates and “accelerated urban growth that erodes the social fabric.” The third dimension is “crime-drivers, such as weapons, alcohol and drugs.” Finally, the fourth dimension is “the lack of capacity of the State — police forces, judges, prosecutors and prisons — to adequately address security challenges.”

According to Jason Jackson, a Wharton management lecturer and senior fellow, there is no contradiction between the higher incidence of crime and the high growth rates of emerging economies such as Brazil. In a 2013 report by the Lauder Institute, entitled “Poverty & Inequality: Persistent Challenges and New Solutions,” Jackson noted that high levels of crime and violence in many urban centers of Latin America are manifestations of “the socio-political effects of inequality across the developing world, including high growth emerging markets.” He added that these crime levels are manifestations of “asymmetric distributional outcomes that are often lost in the wider positive growth stories” about the region.

In 2010, crime and violence cost Honduras 10.5% of its Gross Domestic Product.

The UNDP study notes that the rising incidence of crime has multiple impacts. One out of every three people has changed the location where he or she goes shopping or goes in search of entertainment. Depending on their location, up to 65% of those people who have been victimized by a crime have stopped going out at night altogether. Moreover, 13% of these victims have even felt the need to change their residences because they are afraid of being victimized by crime.

The most serious consequence is that violence has claimed the lives of a million Latin Americans over the past decade. In fact, the murder rate in the region now exceeds more than 10 victims for each 100,000 inhabitants, which the World Health Organization considers the upper limit beyond which murder becomes an epidemic.

High Costs

For Julio Guzmán, research professor in the school of government at the Adolfo Ibáñez University in Chile, these findings “reflect the fact that crime and violence lead to a loss of wealth. These are things that not only have a direct impact on inequality — by taking away opportunities from poor people who are always over-represented when it comes to crime — but they also lead to a waste of resources and a loss of efficiency for the economies as a whole.”

“All categories of violence involve high economic and social costs because they thwart development,” notes Carlos Manuel Rodríguez Arechavaleta, a professor and researcher at Mexico City’s Universidad Iberoamericana (IBERO). When it comes to microeconomic impact, he adds, criminality “reduces the formation of human capital because it encourages some individuals to develop their criminal skills rather than [develop] educational skills. It also dissuades some people from studying at night because they are afraid of violent crime.” As for its macroeconomic impact, crime “reduces foreign and domestic investment, and it can reduce the national savings rate if people have less confidence in the country’s prospects for growth in the future,” he states.

On the other hand, controlling violence requires the use of a large volume of resources, including spending on the services of the police, the legal system and social services, funds which could be used to meet other needs. According to Rodríguez Arechavaleta, “the costs of violence are generally divided into two categories: the direct costs, which stem from acts of violence and efforts to prevent them, and the indirect costs, which include pain and suffering, and the loss of productivity and quality of life.”

The murder rate in the region now exceeds more than 10 victims for each 100,000 inhabitants, which the World Health Organization considers the upper limit beyond which murder becomes an epidemic.

Rodríguez Arechavaleta notes that the direct costs include the value of the goods and services used in the prevention of violence, the treatment for victims and the means required to capture, punish and house perpetrators, including medical care for the latter. Beyond that, there are expenses for social services related to crime. This includes job training for criminals, services related to conditional release programs (parole), as well as programs for education about domestic violence.

Aligning Efforts

Beyond identifying these problems, the UNDP report provides ideas for addressing them. One suggestion is to align various domestic efforts in Latin American countries in order to reduce criminality and violence throughout the region. Strategies include creating a nationwide agreement about citizen security and making it national policy; setting up public policies aimed at protecting those people who are most affected by violence and crime; preventing crime and violence by promoting economic growth that is both more balanced from a social viewpoint and strengthening institutions that are related to security and human rights, as well as strengthening social activities, especially in local communities, in an effort to construct “citizen security.”

“The judicial systems’ inability to adequately deliver justice has reinforced the public perception that the laws are not strict enough,” the report states. “Of particular concern is the growing demand to reduce the age of criminal responsibility, following the general perception of increased violent acts carried out by minors.”

However, the UNDP report notes that there is no substitute for the role of government. “Some years ago, the prevailing doctrine was that of the minimal state,” said the UNDP’s Muñoz during his presentation on the report. “Now, people are not only counting on a government that is bigger, but [also] one that is more vigorous. Fortunately, many governments are already aware of this.”

María Isabel Retamal, a professor of government at Adolfo Ibáñez University in Chile, says that the first step that countries must take to resolve the problem of violence is “to recognize that this is an area in which there aren’t any ‘silver bullets’ or short-term fixes.” The second step is to “avoid measures that are populist or pompous, but which have little proven effectiveness. A third step is to establish the foundations for public policies on the basis of evidence about what is most effective. The fourth step is to tackle the issue as a nationwide topic, without specific political agendas.”

“All categories of violence involve high economic and social costs because they thwart development.” –Carlos Manuel Rodríguez Arechavaleta

Along the same lines, Rodriguez Arechavaleta advocates more investment in high quality education that is free and universal. He also suggests increased investment in preventive and health care education, “especially in peripheral regions, where there is a high concentration of indicators of violence,” as well as the development of educational initiatives and media campaigns that publicize the negative effects of violence.

Not Black and White

But will Latin American governments actually make moves to take such measures to reduce crime and insecurity?

“When it comes to public policy, these issues are not black and white,” and the solutions can take time to materialize, Guzmán notes. “There have been attempts in several Latin American countries to make serious progress in this area. A good example is Chile, which has carried out policies in various aspects of control and prevention, with more specialized and integral programs for juvenile delinquents.” (In that country, one out of every two jail inmates abandons his or her family residence before reaching the age of 15.) Chile also has developed programs geared toward integrating individuals back into the workforce after serving time in prison, Guzmán adds.

During election campaigns, Latin American politicians often “suggest measures that are expensive yet have not proven to be effective,” Retamal says. Such measures include using “a hard hand against crime” and employing additional police — but results for these tactics have been limited so far. Public policy is often poorly informed, he notes, because “effective policies for dealing with these issues are not necessarily in line with conventional wisdom.”

Meanwhile, the UNDP report notes that in some cases, the trend is looking more positive: “Although the homicide rate is still high in most countries [in the region], during the last three or four years it has stabilized and has even decreased in some countries…. Among the countries with the most significant decrease in homicide rates are those that experienced armed conflicts or severe security crises. Colombia reduced its homicide rate almost by half in 10 years. Recently, homicide rates in Guatemala (since 2009) and El Salvador (since March, 2012) have shown substantial drops. In Costa Rica, a country with low levels of murder, the homicide rate decreased by almost 15% between 2011 and 2012.”

Still, analysts contend, it is too soon to conclude that any decrease will continue. “I don’t think that [governments in Latin America] are taking adequate measures,” says Rodriguez Arechavaleta. “From the looks of things, in some countries of the region — such as those in Central America — it is not a priority for governments” despite the fact that “the problem has reached alarming levels.”

 

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