The economic impact of gang violence in El Salvador

The economic impact of gang violence in El Salvador

High murder rates, gang violence, and regional cartel control all inhibit Salvadorians seeking to start businesses. The violence has also scared off foreign investment in the country.

Thirty years ago, during the civil war in El Salvador, thousands fled to the United States, where some joined dangerous Latino gangs for protection and a source of income.

This trend has come full circle, as many of these gang members were deported back to El Salvador, where they have established a threatening presence in their home country.

Gangs stifle bottom up economic development

Consequently, business as usual in El Salvador translates into a country that has the distinction of boasting the world’s highest murder rate—68.6 homicides per 100,000 people. As if this statistic was not sobering enough, violence is further escalating in El Salvador. This is in part due to the end of the 2012 truce between two main gangs—MS-13 and Barrio 18.

El Salvador’s gangs exercise hegemonic control over areas of the country, where many citizens consider them a serious threat to sovereignty and economic opportunity. Residents in these areas have to weigh their economic decisions, such as whether to and how to run—or shut down—a business, or how and when to pay the local gang tax for security and protection.

An estimated 60,000 to 100,000 gang members speak as one power because they do not act alone. In comparison with the Farabundo Martí National Liberation Front (FMLN) of 1980’s, these members operate in city shantytowns and poor rural areas, where they receive support from local inhabitants.

In order to combat widespread violence and economic uncertainty, the Obama administration announced a $1 billion aid package to El Salvador in early February.

Known as the Alliance for Prosperity in the Northern Triangle (APNT), which includes funding for Honduras and Guatemala, the APNT signifies a new opportunity for stronger regional relations and political stability. Vice President Joe Biden is leading the initiative, which is also in response to the migration to the United States of more than 60,000 unaccompanied minors fleeing violence in the triangle.

U.S. aid package focuses on reform and economics

Alongside aid, El Salvador needs to implement a host of reforms, coupled with more transparency and accountability from local authorities. Specific initiatives to enhance security measures include a focus on police restructuring, improving community security, continuing defense collaboration, and greatly reducing organized crime.

According to a White House fact sheet, $300 million will be allotted to reducing crime, training police, and improving criminal justice procedures under the Central America Regional Security Initiative (CARSI) for El Salvador’s heavily impacted communities. An estimated $400 million will be used to reduce poverty and boost economic competitiveness by strengthening the region’s trade networks, sustainable energy developments, and labor force productivity.

El Salvador hopes this initiative will attract the private sector and boost an investment environment that has been rapidly deteriorating due to the ongoing gang violence. This initiative contains new hope for the people of El Salvador. The people hope the APNT will address their concerns about both the declining economic opportunities and the complexities of citizen security in the roughest parts of their communities.

El Salvador hopes to retain the essential international sponsorship and funding for technical assistance in support of market integration, renewable energy developments, and resource preparations to improve their citizens’ access to clean, affordable, and reliable electricity and to attract private investment in clean energy infrastructure.

Categories: Economics, Latin America

About Author

Yesenia Lugo

Yesenia Lugo has written and worked on global governance and international financial institutions (IFIs) for a Washington, D.C. NGO. Her interests include economic opportunities, emerging financial markets and fiscal transparency reform. Yesenia holds a Masters in Diplomacy and International Relations from Seton Hall University, where she specialized in economic development and international security.