Financial Crime World

Financial Crime Takes a Toll on El Salvador

Economic Impact of Violence in El Salvador

In recent years, El Salvador has made significant strides towards reducing violence and crime. However, the economic impact of these activities continues to weigh heavily on the country. According to estimates, the economic cost of violence in El Salvador is approximately 15 percent of its Gross Domestic Product (GDP), with costs per capita ranking third in the region at almost $2,000 per inhabitant.

The Role of Gang Activity in Economic Burden

The country’s history of gang activity, dominated by La Mara Salvatrucha (MS-13) and Mara Barrio-18, has been a major contributor to this economic burden. These organizations have engaged in a range of illicit activities, including:

  • Extortion: Demanding money from businesses and individuals under threat
  • Drug trafficking: Smuggling narcotics into the country for sale on the black market
  • Human trafficking: Transporting people across borders for exploitation
  • Kidnapping: Abducting individuals for ransom or other forms of coercion
  • Money laundering: Concealing the origin of illicit funds to make them appear legitimate

Government Efforts to Address Crime and Violence

In an effort to address this issue, El Salvador’s government declared an “exception regime” in March 2022, which allowed for increased security measures and the deployment of military personnel to high-risk areas. While the effectiveness of these measures is still being debated, they have undoubtedly had a significant impact on the country’s crime rate.

The Economic Costs of Incarceration

The war against crime has led to a significant increase in incarceration rates, with El Salvador now boasting one of the highest prison populations per 100,000 inhabitants in the world. In fact, more than 1,000 people are incarcerated for every 100,000 inhabitants, twice the number recorded by the United States.

The Challenge of Overcrowding in Prisons

The construction of the Terrorism Confinement Center (CECOT), a maximum-security prison with an approximate capacity for 40,000 inmates, is a testament to the government’s efforts to address this issue. However, despite its size, CECOT still faces overcrowding issues, with an occupancy rate of 237 percent in 2023.

Conclusion

As El Salvador continues to navigate its complex and challenging security landscape, it is clear that financial crime remains a major obstacle to economic growth and development. The country’s history of violence has taken a significant toll on its economy, and addressing this issue will require sustained efforts from the government, law enforcement agencies, and civil society organizations.

Ultimately, El Salvador’s path towards reducing financial crime and promoting sustainable peace will require a multifaceted approach that addresses the root causes of violence, strengthens institutions, and promotes economic growth and development.