Mexican officials have estimated violence costs the country up to 15 percent of its annual GDP, although it is unclear how this is balanced against the huge influx of foreign currency as a result of the drug trade that generates much of the violence.
Speaking in Mexico City at the World Health Organization’s conference for its Global Campaign for Violence Prevention, Secretary of Health Mercedes Juan Lopez declared that Mexico’s violence costs the country between 8 and 15 percent of GDP annually, reported Animal Politico.
According to Lopez, the losses come from a combination of factors, including physical damage, lost productivity, medical and disability care, the cost of security services and disinvestment.
Lopez said productive sectors were the area of the economy most affected by violence, and singled out homicides as a particular concern, reported Milenio.
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The economic impact highlighted by the minister is undoubtedly a major strain on both public resources and the private sector, which aside from the losses experienced in the areas mentioned, also suffers financially from criminal activities such as widespread and often large scale extortion. However, the booming drug trade in other respects has been a boon, not just a bane for Mexico’s economy.
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Estimates of the flow of drug profits into Mexico from the United States vary wildly but always run in to the billions every year — from the $4.7-8.1 billion calculated by analyst Alejandro Hope (pdf), to the $8-25 billion estimated by the US State Department. Much of this is laundered in Mexico through legitimate businesses, creating an investment boom in certain regions and sectors. In 2012, Mexico’s Ministry of Finance estimated that over $10 billion had been laundered in the country the previous year.
Added to this is the employment the drug trade provides, as cartels often recruit among the most economically excluded sectors for whom legitimate employment is difficult to find and poorly paid.
It is impossible to accurately balance the costs of the drug trade to the Mexican economy against the profits it brings in and its contribution to investment and employment. However, what is certain is that the brutal violence associated with the trade is not a price worth paying.