A report by the Institute for Economics and Peace (IEP) shows that in 2021 the impact of violence in Mexico was US$243 billion, equivalent to 20.8% of the country’s Gross Domestic Product. Spending on the justice and public safety systems essential to reducing crime accounts for just 0.63% of GDP, the lowest figure among Latin American countries.

The Mexico Peace Index 2022, prepared by the IEP based on data released by the National Public Security System, shows that last year alone the country recorded more than 34,000 homicides, equivalent to about 94 killings per day. Compared to the homicide rates recorded in 2015, it showed an increase of 76%. However, the number of murders decreased by about 4% compared to 2020. Despite this, Mexico ranks eighth among the countries with the highest number of murders in the world.

In addition to the social problems and the trauma inflicted on the families of the victims, there are thousands of lives lost, creating a high economic impact and as a result becoming one of the main constraints on a nation’s development. According to the report, in the case of Mexico, spending on homicide crimes exceeded US$105 billion, representing 43.4% of the total economic impact of violence in the country.

According to the research, the economic impact of violence is defined by the expenditure on activities to prevent and combat violence, in addition to the economic losses caused by crime. It includes direct costs to the victim, government, and perpetrator, all including medical and funeral costs, security and surveillance, and costs related to the justice system. Indirect costs are, for example, the loss of family income and expenses caused by physical and psychological trauma.

“We have had a slight improvement in the economic impact of violence by around 2.7% between 2020 and 2021. But the economic losses are huge. More than 200,000 people have been killed in Mexico in the last decade. And we estimate that young men were among the Top Victims. This means that they have stopped contributing to the country’s economy and supporting their families. Because the death of a 20-year-old young person who is engaged in economic activity disrupts the life and work cycle.” Carlos Juárez, director of the Mexican Institute for Economics and Peace.

Increased investment in the military

Other data from the Mexico 2022 Peace Index are noteworthy. Federal government spending on violence, which includes spending on public safety, the armed forces, and the judiciary, accounted for about 13% of the economic impact of total violence in the country in 2021. In 2007 and 2021, these expenditures increased by 78.5%, given inflation.

However, investments in each of these areas were different. For example, spending on the military increased by 31% between 2015 and 2021. On the other hand, the decrease in investments in public security was 37% in the same period. In the judicial system, it was 7.5% according to the IEP survey.

The national crime rate related to organized crime has increased 48% since 2015. In 2021 alone, the increase was 7%, resulting in an economic impact of over US$800 million. Growth has been driven by racketeering crimes and the small-scale illegal drug trade. However, according to IEP researchers, this is a conservative estimate as it does not account for all losses caused by organized crime groups such as theft of property and activities related to drug trafficking such as production, shipping and distribution.

“The impact of organized crime is increasing in different areas of municipal and state governments, including the police. We are aware that the Mexican state is betting more and more on the military sector to combat violence. But it is not a solution. And train municipal and government agencies to prevent inefficiency of services and corruption. ,” says the IEP director.

Also, according to Carlos Juárez, one of the first steps in reducing violence rates in the country is to increase investment in Justice and Public Safety policies. We are one of the least invested OECD countries in security, just 0.63% of GDP. that investing in peace is far more profitable than investing in Public Safety. What does it mean? We need to reduce social vulnerability in the country, starting with education and job creation”.

Blackmail and violence against companies

A crime that is on the rise in Mexico and has a strong impact on the country’s economic activities and productivity is extortion. The study shows that the national rate of such crimes increased by almost 38% between 2015 and 2021. Also, in 2018 alone, gangs’ earnings from racketeering crimes exceeded $600 million.

The most recent National Enterprise Victimization Survey, published in 2020 by Mexico’s National Institute of Geography and Statistics (INEGI), shows that crimes against the private sector account for a significant portion of criminal activity and the economic costs it creates. According to INEGI, more than 8,700 reports of extortion of businessmen and merchants were recorded between December 2018 and July 2019. In 2020, blackmail represented 23% of crimes against companies of different sizes.

For Eduardo Guerrero Gutiérrez, security expert and director of consulting firm Lantia Intelligence, the numbers should have been even higher, as the research did not take into account extortion against informal businesses and the absence of complaints for fear of reprisals.

“The actual losses are very difficult to calculate because, as we know, a large part of the Mexican economy is informal. And it is precisely in this type of business that organized crime has a lot of influence. Also only 3%. The proportion of victims report extortion,” says Eduardo Guerrero.

Also, according to the expert, extortion crimes started to increase in the country in 2010 after the violence crisis that started in Felipe Calderón’s government (2006 – 2012) and the disintegration of major criminal organizations.

“Calderón declared war on organized crime. During his government, along with hundreds of murders, nearly 40 drug trafficking leaders were arrested, which led to the disintegration of these organizations and their dispersal to different regions, including tourist areas and low-population states. Rates of violence. That’s it. At that time, we began to notice an increase in different types of usurpation, mainly towards territorial dominance,” concludes Eduardo.