The Effect of Insecurity on Economic Growth in Mexico - Literature review Example

The effect of insecurity on economic growth in Mexico Task: The effect of insecurity on economic growth in Mexico Literature Review The 2011 World Development report outlines the diverse costs that economies incur from the high insecurity levels, Mexico included. Violent crimes have unprecedented costs on the economy of various countries. According to the World Bank Group, 2011, insecurity has serious indirect costs in the economic development of Mexico. Employees have trauma and frustrations that lower their turn out to work places. This reduces the GDP of the country since employees are less productive when they are under stress and trauma when they are in their working stations. Violence and insecurity in Mexico is a cause of a number of mental illnesses among the citizens of Mexico. This reduces the productivity of the Mexican population and since mentally ill people who would offer personnel are under strain. The cost of insecurity in Mexico turns detrimental with the effect it has on the levels of sales. Business hours are short in societies where there is high insecurity. The Mexican business sector thrives under strenuous conditions with intense insecurity in the country. This reduces the level of sales and profits and, consequently, the GDP. According to the World Bank Group, 2011, heightened insecurity in Mexico, there is a most likely high expenditure in internal security. The high expenditure on the internal security reduces the level of investments that the country has on infrastructure and development projects. Investment in human capital equally reduces with increased expenditure on security in Mexico. The cost of health care in Mexico increases with intense insecurity situations. The cost of policing is most likely to increase with high instances of insecurity in Mexico. All these costs have detrimental effects on the economy of Mexico. According to the World Bank Group, the Mexican government incurs a reduction in its GDP by an estimated one per cent (World Bank Group, 2011). Insecurity in Mexico spills over to its neighboring countries and creates an unfavorable business environment for the country. Poor relations with its neighbors, because of insecurity, reduce the economic productivity of the country. According to Rodgers, Beall and Kanbur, 2012, the violence-insecurity nexus poses detrimental effects to the local economy of most Latin American societies, Mexico included. Crime in cities of Latin American countries is among the greatest challenges to growth of businesses. The investment confidence of most investors in Latin American societies is low because of the high level of insecurity. Domestic investors in Mexico are reluctant to take risks involved in putting up businesses. Foreign firms are cautious to put up investment in insecure societies because of the high potential impacts of insecurity. Losses to business from the high incidences of burglary in Mexico are among the most detrimental challenges to investors. The cost of paying internal security officials to protect the Mexican society from violence continues affect the economy. The cost of compensation by insurance firms is high because of spreading incidences of robbery and burglary to businesses in Mexico. The net effect of insecurity to the Mexican economy is the loss of the potential revenues that accrue from domestic and foreign investments in the country. Sohnen, 2012, addresses the detrimental consequences that the high rate of crime, violence and insecurity has in Mexico and most of Central American society’s economic prosperity. The consequence of insecurity on the health of Mexicans is high and has related effect on the cost of health care expenditure. According to Sohnen, cooperation among different institutions in Mexico is under great challenge from the escalating insecurity conditions. Insecurity in the country compromises the efficiency of different government institutions to coordinate and promote economic growth in the country. The economy, therefore, experiences retardation because of the high level of insecurity. Countries that have high rates of insecurity, Mexico inclusive, are rampant for their high rate of homicide. Investors, both domestic and foreign, shun away from putting up investments in such countries. This reduces the amount of investments in such countries since investors fear the instances of homicide. Countries with rampant homicide incidences have serious challenges in implementing the millennium development goals (Sohnen, 2012). Strategies to evaluate poverty in Mexico, being a country prone of violence, face serious challenges. Poverty, therefore, remain the greatest challenge to achieving economic growth in Mexico. Poor implementation of development goals, because of the concerns of insecurity in Mexico, is among the reasons for high unemployment. Youth unemployment, for instance, is a serious challenge that Mexico faces and continues to affect the economic development. According to Carstens, 2008, crime poses serious damages to the Mexican economy. The extent of effect of crime and violence on the economy of Mexico amount to nearly one per cent of the growth in the economic growth. The level of investment by foreign companies in the country is under serious challenges, according to Carstens, 2008. The high incidence of killings in Mexico is among the greatest concerns that shun away domestic and foreign investments in the country. Carstens, 2008, cites that an approximate number of two thousand seven hundred casualties, in addition to a high number of kidnaps, are serious insecurity consequences in Mexico. These incidences occur because of the high incidences of drug abuse in Mexico and several Central America countries. The high insecurity in Mexico, according to Carstens, 2008, affects the level of job creation. This consequently has impacts on the economic growth of the country, coupled with the low sales and development activities. Money laundering in Mexico is a great insecurity concern that affects the businesses sector and its contribution to the Mexican economic progress. In addressing the insecurity conditions in Mexico, the government resorts to deploy security personnel to boost stability of the country and allow business to thrive. Insecurity in the streets of Mexico is a serious concern that affects its economic development. The extent of insecurity influence on the Mexican economy is notably extreme and challenging to address. The various strategies by the government to tackle insecurity in Mexico stand against the test of well-organized drug cartels in the country. According to Carstens, 2008, the high corporation between security institutions and drug cartels in the country escalates the effect of insecurity in the country. The economic underperformance is most likely to increase despite the strategies to enforce security in the country. Casey and Berzon, 2011, address the effect of violence and insecurity to the economy of Mexico, with reference to the declining revenues from its tourism industry. Teourism is among the escalators of economy prosperity in most countries including Mexico. However, the rampant incidences of drug violence in the country pose serious threats to the economy of the country. Investors in diverse sub-sectors in the Mexican tourism industry, according to Casey and Berzon, 2011, have had a declining trend in their investment patterns. These include companies as American Express Co. that declined its investments and, consequently, lowered the number of tourists to the country. The low investment in by tour operators in the country continues to cost the economy because of the increase in drug violence. There is a notable decline in the number of visitors to Mexico, raising concern of the influence of violence on the economy. That translates to a significant decline in revenue from tourism in the country. Despite convictions to tourists in Mexico of insignificant effect of the drug violence and insecurity by the tourist industry, the turnout is low. According to Casey and Berzon, 2011, there was a notable decline of fifteen percent in the number of visitors to the tourist attractions in the country in 2010. The influence of violence and insecurity in the country, therefore, has influence on the country’s economic development. Robles, Magaloni and Calderón, 2011, note the recent increase in the incidences of violence related to drugs in Mexico and its impacts on the country’s economic prosperity. The major contributor to the increased incidences of drug related violence in the country is because of the technical challenges in combating drug business. The fight to gain territorial markets by influential drug trafficking organizations in the country has caused serious effects and homicides. The fights and their effects have direct influence on labor participation in the country. Most personnel fear do not participate in labor in the country since they fear the effects of violence and homicides that dominate most parts of the country. Unemployment in Mexico increases because of the high instances of violence in the country. Local economies in the country, as well, experience the influence of the serious drug wars in Mexico. Kidnappings, robberies and burglary in areas affected by drug wars are examples of the effects of the level of investments and business operations in the country. According to Miglierini, 2011, operating business in Mexico is a testing endeavor because of the heightened war among drug cartels. Besides the loss of human lives from the wars in Mexico, the economy is under serious constrains. Acapulco, being one of the best tourist attraction places in the country, receives a low turnout of tourists because of the violence and insecurity. This happens even as tourism remains a top revenue earner for the country. Since 2006, statistics prove a casualty number to be an estimate of seven hundred. This affects the tourism sector since some countries including America warns its citizens from visiting the violence-struck areas in Mexico. References Carstens, A. (3 September 2008).Crime damages Mexico economy. BBC NEWS. Retrieved from: http://news.bbc.co.uk/2/hi/7597138.stm Casey, N & Berzon, A. (8 June 2011). Mexico Tourism Feels Chill of Ongoing Drug Violence. The Wall Street Journal. Retrieved from: http://online.wsj.com/article/SB10001424052702304432304576367710290674534.html Dennis, R., Beall, J. & Kanbur, R. (2012). Latin American Urban Development Into the Twenty First Century: Towards a Renewed Perspective on the City. New York, NY: Palgrave Macmillan. Miglierini, J. (18 April 2011). The price of Mexicos drugs war. BBC NEWS. Retrieved from: http://www.bbc.co.uk/news/business-13120598 Robles, G., Magaloni, B & Calderón, G. (2011). The Economic Costs of Drug-Trafficking Violence in Mexico. Center for Democracy, Development and the Rule of Law. Retrieved from: http://cddrl.stanford.edu/publications/the_economic_costs_of_drugtrafficking_violence_in_mexico/ Sohnen, E. (2012). Paying for Crime: A Review of the Relationships between Insecurity and Development in Mexico and Central America. Washington, DC: Migration Policy Institute. World Bank Group. (2011). World Development Report 2011: Conflict, Security, and Development. Washington, DC: World Bank Publications. 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