A new report from Mexico’s statistics institute provides fresh evidence that the country's ongoing security crisis has taken a toll on the local economy, particularly on large businesses.
Of more than 35,000 businesses surveyed in 2017, a third reported being victims of crimes, including robbery, shoplifting and extortion, according to the latest National Survey of Business Victimization (Encuesta Nacional de Victimización de Empresas - ENVE), by Mexico’s National Institute of Statistics and Geography (Instituto Nacional de Estadística y Geografía – INEGI).
This is the fourth time the INEGI has released its report, which has now found that large businesses are particularly targeted by criminal groups, both big and small.
Yet nearly 32 percent of Mexico’s micro-businesses, which are defined as those that employ ten or fewer people and represent around 97 percent of the number of Mexican firms, reported suffering a crime in 2017.
In contrast, small, medium, and large firms reported higher rates of victimization: 59.3 percent, 61.5 percent, and 51.4 percent, respectively.
InSight Crime Analysis
The findings of the fourth ENVE survey paint a devastating picture of how Mexico’s security crisis is affecting the nation’s economy.
Nearly one-fifth of the businesses surveyed reported that they had reduced their hours of operation as a result of criminal threats. More than six percent said they had simply pulled out altogether, and 13 percent reported having reduced investments.
Whether directly or indirectly, all of these responses represent a reduction of Mexico’s economic activity.
While the ENVE doesn’t look at how the high level of crimes against businesses affects Mexico’s Gross Domestic Product (GDP), there’s evidence that the nation‘s growth has lagged behind that of its Latin American and North American neighbors for most of the past two decades.
As the ENVE survey shows, the relentless difficulties legitimate business face from criminal groups is one major reason. A separate INEGI study recently estimated that insecurity costs the nation nearly 1.65 percent in annual GDP growth.
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ENVE does not distinguish between petty criminals and organized crime groups. Certain common crimes like shoplifting and fraud have few natural ties to such groups. However, organized crime groups either engage in or enable several of the most frequent illegal acts that plague businesses: extortion, but also armed robbery and the corruption of government officials.
Similarly, the business community’s withdrawal from the economy was most pronounced in the three states where extortion and other aspects of organized crime have worsened: Veracruz, Guerrero, and Zacatecas.
The ENVE survey also inadvertently explains why the government has been unable to tackle this crisis. Businesses reported crimes against them only 16 percent of the time, which led to police investigations in 85 percent of those cases. When explaining their reluctance to report crimes, business owners cited a lack of faith in the government’s ability to prosecute criminals, a fear of the criminals themselves, and a distrust of the police.
Even in the small minority of cases that sparked investigations, it’s unlikely the perpetrators will be caught and punished. According to one recent study, just 12 percent of the nation’s criminal investigations resulted in a conviction or an acquittal.
Such a small chance that criminals will be brought to justice sends the message that illegal activities are effectively allowed. Against this backdrop, many businesses end up paying off criminal groups or choose to close down, and the result is Mexico’s economy continues to suffer.