The World Bank on Latin America and the Caribbean: Crime and Violence linked to Poor Economic Growth.

Introduction

Countries in the Latin American and the Caribbean region are among the most violent regions in the world today. Organised crime has impacted all facets of development and acts as a significant driver of insecurity and instability in the region. The “Latin America and the Caribbean Economic Review” for the year 2025 was released by the World Bank in a report titled “Organised Crime and Violence in Latin America and the Caribbean”. The report reviews the impact that organised crime and violence exerts on the region’s economic development and public health revealing several harsh truths. According to 2024 statistics, while a mere 9% of the global population resides in the region, it accounts for approximately one-third of global homicides. This alarming statistic shows that the region’s security is in dire straits and the huge economic cost and public health implications that violence has on its growth and development is negatively affecting everything from GDP growth to public health systems.

Historical Context

Organised crime has always cast a long shadow at the political, social, and economic landscapes of Latin America and the Caribbean (LAC) region. Decades of colonial control under European powers, particularly Spain and Portugal, in the 15th and 16th century created social divisions, inequalities and weakened the rule of law. Colonialism also gave shape to early forms of organised crime like smuggling and piracy because trade was restricted and economic opportunities were concentrated in the hands of few elites. Black markets, exploitation of indigenous labour and slave trade became rampant during this time as majority of the people were poor and impoverished. Since the very basis of the colonisation project was to subjugate colonies by force, using might to suppress uprisings and maintain control of territory was a common occurrence. This frequent resort to force normalised violence in the Latin American and Caribbean societies, and was responsible for sowing the seeds of organised crime networks. Even after independence, many Latin American countries inherited weak institutions and corrupt governments, which found themselves incapable of fighting organised crime.

At the present time, the international demand for narcotics has resulted in Latin America being reduced to a drug trafficking hotspot, especially for cocaine, marijuana, and heroin. Since the mid-1900s, illicit narcotics supplies have exchanged hands from the LAC region to North America and Europe. States that are involved in drug trafficking chain include those that cultivate coca (like Colombia, Peru and Bolivia), those states that offer ports and entry points to other countries and regions (like Mexico, Colombia and Ecuador), as well as countries that are on the drug routes and offer transit points for drug transfer to other routes or locations (like Panama and other Central American states).

Today Mexico and Colombia house some of the most powerful drug cartels. The infamous Medellín Cartel led by Pablo Escobar and the Cali Cartel rose to prominence in Colombia between the 1970s and 1990s. These cartels were particularly notorious because they established extensive networks that dominated every aspect of the cocaine supply chain, from the cultivation, refinement and global distribution of the finished product. At its peak, the Medellín Cartel exported hundreds of tons of cocaine annually and controlled around 80 percent of global cocaine trade, as well as almost all cocaine entering into the U.S. As the cartel amassed immense wealth and gained considerable political and social influence, their operations amped up extreme violence, corruption, and a systematic undermining of state institutions.

Vicious cycle of violence

In the 2000s, several big drug cartels in the region took a fall due to targeted law enforcement by states, international pressure by states like the U.S., and internal fragmentation. However, it did not end organised crime, rather proliferated from bigger into smaller, more fragmented criminal organisations. By the 2000s, crime-state nexus became commonplace as cartels got deeply embedded in the politics of several countries like Venezuela, Honduras and Guatemala where the government withdrew and crime cartels replaced them as de facto authorities.

Two U.S.-backed anti-drug policies aimed at cracking down the cartels in the region included Plan Colombia (1999–2015) and the Mexican War on Drugs (2016–present). These policies were aimed to demolish powerful drug cartels and to reinstate authorities of ruling governments. The U.S. provided financial aid as well as trained militaries and police forces to carry out internal security operations. These operations were partial successes as they did help in reduction of coca cultivation at existing sites but eventually new farms cropped up in other geographical areas. While some bigger cartels were weakened, they fragmented as smaller groups and involved themselves into new criminal activities like human trafficking, extortion, arms dealing, and illegal mining. Some organisations spread across borders and became transnational criminal organisations like the MS-13 (Mara Salvatrucha) and Barrio 18 (18th Street Gang) originating in Central America.

In terms of states’ response, hardline security measures to control drug racketeering have only exacerbated violence in the LAC region. The “Mano Dura” or the Iron Fist policy, implemented by El Salvador and Honduras in the early 2000s adopted aggressive tactics to carry out mass incarcerations of cartel members. The unintended result of this policy was severe prison overcrowding due to captured members, while gang leaders continued to maintain control of cartels from within prisons.

Current Situation

Organised crime and violence continue to pose significant challenges to the region. The World Bank report makes the following observations:

● The direct expenses to people and the economy affect the already disenfranchised population the most. Most recent estimate on the direct costs of crime is provided by the Inter-American Development Bank (IDB) which pegged it at 3.4% of GDP of the LAC region in 2022. In 2010, the World Bank estimated this cost to be 7.7% of GDP for Central America alone.

● In areas with high crime rates, economic growth gets hampered as investments are deterred and businesses are hindered. A 2024 IMF (International Monetary Fund) report on LAC has observed that a 30% rise in homicide rates can reduce economic growth by 0.14 percentage points.

● In continuation to the trend in previous years, LAC has remained one of the slowest growing regions in the world. Growth decelerated in most states, except for large economies of Brazil, Chile, Colombia, and Peru. In 2025, only Argentina and Colombia are expected to show acceleration.

● The Trade Policy Uncertainty Index shows that uncertainty in international trade has continually increased over the last decade even though the economy of the region is heavily trade dependent.

● Yet, trade remains a growth accelerator for the region. While the LAC exports mostly primary goods, 39 percent of total exports are manufactured goods. Additionally, services exports from the LAC are also increasing and growing slightly above the global average, exhibiting an average rise of 4.4% per year.

● The recent decrease in overseas development assistance (ODA) grants to LAC states by large economies could be consequential for dependent states like Haiti.

● The ever-present insecurity in the lives of people leads to physical injuries, psychological trauma and increased mortality rates, while pervasive violence leads to reduced access to healthcare services.

● Organised crime has spread beyond traditional hotspots of Mexico, Colombia and Brazil and into new territories and industries. It hampers development and growth by:

• Reducing investments

• Creating uncertainty about property rights

• Raising business transaction costs

• Reducing competitiveness in business

• Swelling public security expenses

• Depleting national capital through illegal activities

• Weakening the authority of government, state institutions and judiciary

• Normalising violence in society

Potential solutions

The World Bank report highlights the comprehensive strategies needed to mitigate effects of organised crime and violence in Latin America and the Caribbean. Engaging communities, promoting regional cooperation, and effectively implementing government initiatives can pave the way for sustainable economic development and improved public health outcomes in the region. Employing this strategy would entail:

● Collecting data through specialised surveys to build capacity for effective action.

● Creating opportunities for youth to foster autonomy, economic independence and social mobility.

● Focusing prevention programmes on at-risk young men.

● Sharing cross-country intelligence and resources to tackle international criminal organisations.

● Strengthening capacity and integrity of state institutions, law enforcement and judicial systems.

● Implementing community-based programmes to foster bonds among civil society.

● Developing community-based mental health programmes and rehabilitation services to address the psychological effects of violence.

Conclusions

An effective fight against crime and violence in the LAC region would address both its symptoms and root causes and adopt a holistic and co-ordinated approach towards bringing back the rule of law. As the development indicators remain poor across board, the state governments need to overhaul the workings of state institutions, reduce corruption and enhance regional cooperation. By investing in education and economic opportunities, the youth can be protected from falling in the grasp of organised crime cartels. Addressing drug use as a public health issue and disrupting financial networks that profit from its distribution requires long-term commitment and political willingness by the states.

Dr. Shivani Yadav is a non resident research fellow at the America Program of The Sixteenth Council