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Crime and Impoverishment By: Jaime Daremblum
The Weekly Standard | Thursday, July 24, 2008

ON JULY 14, Guatemalan state prosecutor Juan Carlos Martinez was murdered in a suburb of Guatemala City. Suspicion immediately fell on the narcotics gangs that continue to fuel violence in Guatemala and throughout the region. As Reuters reported, Martinez had been "investigating the murder of three Salvadoran deputies to the Central American parliament." The Salvadoran politicians, members of the ruling center-right ARENA party, were assassinated 17 months ago in Guatemala. After Martinez was killed, Reuters quoted El Salvador's president, Antonio Saca, as saying, "We are talking about the big league, powerful drug cartels that are doing everything possible to keep people from knowing the truth."

The Martinez murder offers a grisly reminder of Latin America's crime problem, which is especially bad in Central American countries like Guatemala, El Salvador, and Honduras. That problem must be addressed if the region is to fulfill its economic potential.

To be sure, Latin America has experienced several years of strong growth, thanks to high commodity prices and prudent economic management. The region's recent progress is worth celebrating. "Thanks to a newfound economic stability and vitality," the New York Times reported in late May, "Latin America is looking less chained to the fortunes of the United States." That is good news at a time when the U.S. economy has slowed and may be entering a recession.

However, crime and violence constrain Latin American growth and continue to cloud the business climate. In an October 2006 paper, the World Bank's Alessandra Heinemann and Dorte Verner estimated that the economic toll associated with crime and violence in Latin America is "14.2 percent of the regional GDP. In terms of human capital, 1.9 percent of GDP is lost annually, which is equivalent to the region's spending on primary education. Over the past 15 years, the net accumulation of human capital has been cut in half due to the increase in crime and violence."

That same month, the New York Times publicized a separate World Bank study that had been issued to the Brazilian government. As the Times summarized, if Brazil's "homicide rate in the early 1990s had been as low as Costa Rica's, which has one of the lowest in the region at one-sixth Brazil's rate, per capita income would have been about $200 higher and the gross domestic product 3.2 to 8.4 percent higher in the late 1990s."

As Lorraine Orlandi wrote in the Fall 2007 issue of the journal Americas Quarterly, "Across Latin America, steep security budgets are now part of the cost of doing business. Estimates provided by private security advisors in Mexico alone range from 3 to 6 percent of a company's total spending." Orlandi observed that crime has taken a particularly harsh toll on Guatemala and El Salvador. "In Guatemala," she wrote, "the cost of violence in 2005 reached about $2.4 billion, or 7.3 percent of GDP," according to a 2006 United Nations Development Program report. "That was more than double the cost of damage caused by Hurricane Stan that year and twice the 2006 budget for health, education and agriculture combined. A 2000 World Bank study found violent deaths in El Salvador had reached the same level as at the height of that country's civil war."

There are no simple answers to the crime problem. Politicians on the left tend to blame economic and social inequality, while politicians on the right tend to focus on inadequate policing and call for a more muscular law-and-order agenda. There seems little doubt that successful anti-poverty initiatives can help dissuade Latin America's urban poor from pursuing a life of crime. However, the importance of innovative policing and improved security--not to mention broader legal and judicial reforms--cannot be overstated.

Just look at Colombia. In the late 1990s and early 2000s, its economy was devastated by rampant violence. Drug traffickers, paramilitaries, and guerrillas were running wild. But under the administration of President Alvaro Uribe (who was first elected in 2002), Colombian security forces have cleaned up the cities and reestablished a presence in every single town across the country. This has led to robust economic growth and increased foreign investment.

As Colombia demonstrates, Latin America's battle against violent criminal activity is not hopeless. Solving the problem won't be easy. But it must be a top priority of governments across the region.

Jaime Daremblum is director of the Center for Latin American Studies at the Hudson Institute.

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