Mexico is among the world’s 15 largest economies and is the second largest economy in Latin America. Similar to many other economies in 2020, Mexico’s GDP contracted. According to IMF estimates, Mexico’s GDP growth fell by 8.2 percent from the previous year in 2020 — a GDP contraction greater than the average recorded for North, South and Central America.
Prior to the COVID-19 pandemic, Mexico was facing significant humanitarian crises related to violence, displacement, food insecurity and poverty. However, the pandemic has exacerbated some of these fragilities, and UNICEF now predicts the pandemic could push an additional 10 million people living in Mexico and other Central American countries into poverty.
Faced with the unprecedented economic impact of the pandemic, many countries rolled out spending measures to address the downturn and stimulate their economies. In order to facilitate Mexico’s economic recovery plan, reducing violence and the associated costs could provide the funds for future economic boosts.
Mexico ranks as the 137th least peaceful country and is the least peaceful in Central America and the Caribbean. Since 2000, countries that have improved in peacefulness have seen an average 1.4 percentage points higher GDP per capita growth per annum when compared to countries that have become less peaceful. This is a significant difference and over 20 years, GDP per capita could compound to be 30 percent larger.
In 2020, the economic impact of interpersonal violence was 3.86 trillion pesos. This is equivalent to 18.4 percent of Mexico’s GDP, or 30,211 pesos per person. The economic impact of interpersonal violence is an aggregate of homicide, violent crimes such as physical and sexual assault, organized crimes and the fear of violence.
Only 41 countries recorded a higher homicide rate in 2020 than in 2010. With over 35,000 homicides last year, Mexico’s homicide rate has more than tripled from 7.9 homicides per 100,000 people in 1990 to 27.8 in 2020. Since 2015, homicides in Mexico have risen dramatically by 84 percent, and homicide is now the leading cause of death for 10 to 54-year-olds.
To put into perspective the extent of Mexico’s economic burden from interpersonal violence, it is 1.3 times the amount Mexico spent on social protection in 2020 — this includes the expenditures on health, education, housing services and social protection. If Mexico were to reduce its national homicide rate to that of Chile’s, Mexico’s economic impact of homicide would decline by 83 percent to 372.9 billion pesos. These averted losses are equivalent to 8.9 percent of Mexico’s GDP in 2020. Given the Mexican government is spending an additional 1.1 percent of GDP on the economic recovery, averted losses from reducing interpersonal violence could greatly assist with supporting households and businesses as well as boosting the economy and health system.