## Reducing crime could significantly boost investment, productivity, and GDP growth in Latin America and the Caribbean

_IMF Blog, December 18, 2023_

## Source details

**Canonical URL:** [Reducing crime could significantly boost investment, productivity, and GDP growth in Latin America and the Caribbean](https://www.imf.org/en/blogs/articles/2023/12/18/latin-america-can-boost-economic-growth-by-reducing-crime)

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## Bibliographic details
- Authors: Rafael Machado Parente, Rodrigo Valdes
- Published: December 18, 2023

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### Key findings on crime and economic impact
- The region accounts for nearly half of the world's intentional homicide victims, despite representing just over 8 percent of the global population.
- The average homicide rate in the region is 10 times that of other emerging markets and developing economies and twice as high as sub-Saharan Africa.
- Central America and the Caribbean have experienced annual increases in homicide rates of about 4 percent in the last two decades.
- A 30 percent increase in homicide rates (equivalent to a historical 1 standard deviation) is estimated to reduce growth by 0.14 percentage points in Latin America.
- Bringing the crime level in Latin America down to the world average would increase the region’s annual economic growth by 0.5 percentage points, about a third of Latin America’s growth between 2017-19.
- Fully closing the crime gap in countries with the highest homicide rates could elevate their gross domestic product growth by around 0.8 percentage points.

### Channels through which insecurity affects growth
- Crime hampers capital accumulation, possibly deterring investors who fear theft and violence.
- Crime decreases productivity, likely diverting resources toward less productive investments such as home security.
- The analysis leverages data on criminal deportations from the US to help identify causal effects of crime on economic activity.

### Fiscal and policy context
- Governments in Latin America are already allocating a considerable share of resources to public order and safety.
- Countries with higher crime rates tend to have higher public-order spending; for example, El Salvador and Jamaica already spend more than 2 percent of their GDP on this matter.
- Large security budgets suggest that more effective strategies could free up significant resources for other spending priorities.

### Evidence on interventions and priorities
- The IADB’s Security and Justice Evidence-based Platform provides scientific evidence on effectiveness of security and justice solutions.
- The platform highlights that there is little evidence that vehicular license plate recognition technologies reduce transportation-related violence.
- Alcohol tax and price policies are found to effectively reduce violence in some cases.
- Prioritizing more effective crime-fighting strategies would enhance public safety and improve the region’s economic potential.
- Collaboration among policymakers, international financing institutions, academia, non-governmental organizations, and the private sector is important to address crime as an obstacle to growth.

*Rafael Machado Parente and Rodrigo Valdés, December 18, 2023*

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## References

- [recent study](https://www.imf.org/en/Publications/REO/WH/Issues/2023/10/13/regional-economic-outlook-western-hemisphere-october-2023)
- [IMF work](https://www.elibrary.imf.org/display/book/9781484353844/ch06.xml)

_Source: https://www.imf.org/en/blogs/articles/2023/12/18/latin-america-can-boost-economic-growth-by-reducing-crime_