Crime, Corruption Hurt Economic Competitiveness in LatAm: Report

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A new report ranking the economic competitiveness of countries around the world suggests crime and corruption are taking a toll on the economies of many of Latin America’s largest countries.

The 2016-2017 Global Competitiveness Report published recently by the World Economic Forum assigns countries scores for 12 “pillars” of economic competitiveness, with each pillar further divided into several subsections.

The first pillar, “institutions,” is comprised of five subsections, including two with a nexus to organized crime: “ethics and corruption” and “security.” The scores are based on a survey of business executives carried out from February to June 2016, and they are calculated on a scale from one to seven, with one being the worst and seven being the best.

Countries in Latin America vary widely in their scores for each subsection, but many nations in the region rank among the worst in the world in these categories.

Venezuela, for example, came in last of the 138 countries ranked globally for ethics and corruption, and second to last in terms of security.

Argentina, the Dominican Republic, Paraguay, Brazil and Bolivia all rank in the bottom ten in terms of ethics and corruption. (See InSight Crime’s graphic below)

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Mexico, Honduras, Guatemala, Colombia and El Salvador all fall in the bottom ten on security, with the latter ranking worst in the world. (See InSight Crime’s graphic below)

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On the other hand, some countries in the region score fairly well on these indicators. Costa Rica, Chile and Uruguay all earned ethics and corruption scores above the median 3.5, while Uruguay, Panama, Chile and Nicaragua all scored higher than five on the security indicator.

InSight Crime Analysis

It comes as little surprise that crime and corruption appear to be holding back economic competitiveness in Latin America. Previous reports have estimated that insecurity can cost crime-ridden countries like Honduras, El Salvador and Venezuela upwards of ten percent of gross domestic product when accounting for public and private security expenditures, the costs of incarceration and lost productivity due to violence. Other studies have estimated that even relatively safe countries in the region spend billions of dollars per year dealing with the effects of crime.

SEE ALSO: Coverage of Security Policy

Crime and corruption have both direct costs — in terms of money stolen from public coffers, extorted from business owners or paid in bribes — as well as indirect costs, like those incurred by discouraging legitimate investment. However, it is also important to note that crime can also be a significant generator of income in many countries in the region, and criminal enterprises often overlap in various ways with the legitimate economy. For this reason, many policy makers and experts have argued for a nuanced and holistic approach to tackling the economic impacts of illicit activities.

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