A report from the World Bank brings a renewed focus to the impact of organized crime on economic development in Latin America and the Caribbean, highlighting the cyclical relationship between poverty and crime.

The World Bank’s most recent Latin America and the Caribbean Economic Review (LACER) predicts the region will have the slowest economic growth in the world in the next two years, growing 2.1% in 2025 and 2.4% in 2026.

While persistent poverty and reduced international aid continue to hinder progress, the report argues that organized crime is a key force exacerbating the region’s economic woes.

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The report highlights four main ways criminal groups in Latin America and the Caribbean impede development: through the monopolization of licit and illicit markets within their territories; imposing criminal governance to substitute the state and leverage taxes on basic services; extorting legal businesses and driving up their costs; and state capture through the corruption and manipulation of state actors, like politicians. 

Organized crime in Latin American and the Caribbean is also more violent than elsewhere. While the region’s victimization rate, which expresses the frequency of crime against individuals, was three times higher than the global standard, average homicide rates were 5.4 times higher than the global average between 2000 and 2009. In the following decade, that rate grew to eight times the global average. This, demonstrated an “‘excess’ level of homicides given what would be predicted by the reported level of victimization,” the report stated, meaning the region’s criminal actors were more violent than elsewhere. However, not all homicides could be attributed to organized crime groups.

“We are far above the level of violence that would be predicted given the region’s level of poverty and inequality. We then have to ask why the region has so much organized crime, and why is it so much more lethal,” William Maloney, Chief Economist for Latin America and the Caribbean at the World Bank, told InSight Crime. 

The World Bank’s study follows analysis by the Inter-American Development Bank (IDB), which recently estimated the average direct price of crime and violence in Latin America and the Caribbean was 3.5% of GDP. This would mean that Brazil, the region’s leading economy, lost $76 billion in 2023, while Mexico lost nearly $63 billion. 

The International Monetary Fund (IMF), on the other hand, reports that when homicides increase by 10%, local economic activity declines by 4% at the municipal level.

InSight Crime Analysis

The World Bank report adds to a growing body of research showing how organized crime severely limits economic development in Latin American and the Caribbean. However, this is just half of the story. In turn, poor economic conditions provide fertile ground for organized crime to flourish, creating a destructive cycle of poverty and insecurity that is difficult to escape.

This was evident during the COVID-19 pandemic, which led to what the United Nations Economic Commission for Latin America and the Caribbean estimated would be the “most severe contraction in economic activity in the region’s history.” The economic devastation and social and political instability it wrought allowed criminal governance to flourish across Latin America, while drug trafficking organizations took the opportunity to expand.

Perhaps the most persistent and extreme examples of organized crime thriving in desperation are Haiti and Venezuela. 

SEE ALSO: Experts Say US Aid Slashes Will Hinder Anti-Drug and Crime Efforts in Latam

Haiti has descended into near-total failure, where gangs including 400 Mawozo control 85% of the capital, Port-au-Prince, and massacres of civilians and mass displacements are common. A UN-backed security mission to support Haiti’s beleaguered police force has done little to curb violence. Haiti, long the poorest nation in the Latin America and the Caribbean, has been in a situation of political and social unrest since 2018 after shortages of basic goods prompted mass anti-government protests. The assassination of President Jovenel Moïse in 2021 tipped the country into deeper crisis. Haiti is the only country the World Bank report forecast for recession in 2025.

Venezuela’s path to becoming a criminal hybrid state can be traced back to hyperinflation and recession following the collapse of oil prices and the imposition of international sanctions. The economic crisis not only impacted the population, pushing over 8 million people to flee the country, it also impacted the patronage and corruption networks the Maduro regime used to shore up political power, which no longer had access to the levels of resources they demanded to stay loyal to the government. This strengthened predatory gangs offering disaffected youth a route out of extreme poverty. And it drove the evolution of hybrid criminal networks and armed groups that cooperate with elements of the state to capture illicit income. Today, colectivos – paramilitary groups that support the Maduro regime – and Colombia’s National Liberation Army (Ejército de Liberación Nacional – ELN) work hand in glove with the government to control criminal economies and suppress political opposition. Venezuela rates among the most violent countries in Latin America.

Now, the decision by the United States and other nations to cut overseas development assistance and the introduction of tariffs by the Trump administration make the future of the global economy uncertain. Organized crime in Latin America and the Caribbean could prosper once more, further limiting the region’s prospects of breaking free of this vicious cycle.

Featured image: A gang member walks past a burning vehicle in Haiti. Credit: Goran Tomasevic, The Globe and Mail

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