More than 90 percent of businesses in the Honduran capital Tegucigalpa have experienced security threats, mostly in the form of extortion, highlighting the stranglehold criminal gangs have on the country’s economy.

A survey among Tegucigalpan business owners revealed that nearly all had suffered security problems ranging from theft to frequent threats by criminal groups demanding money in exchange for safety, Mario Bustillo, head of the city’s chamber of commerce, told Honduran daily La Tribuna.

Most businesses in Tegucigalpa are small-to-medium sized, according to the chamber’s report, leaving them more vulnerable to extortion. Criminal gangs like the MS-13 and Barrio 18, both of which have operations in Tegucigalpa, are known to rely heavily on extortion as a key source of funding.

The practice has taken its toll on Honduras’s economy: A July survey by Honduran newspaper El Heraldo found that a third of Tegucigalpa businesses had folded or fled to Nicaragua because of extortion demands.

The lost businesses would result in lowered government tax revenue and higher unemployment, Bustillo noted. Unemployed youth, in turn, provide ready recruits for gangs extorting the city’s businesses, police commissioner Alex Villanueva stated.

InSight Crime Analysis

Honduras has attempted to combat extortion on a variety of fronts. Police have set up telephone hotlines for businesses to report threats anonymously but at the same time police agents are suspected by many of participating in the extortion rackets.

The government also recently announced a deal with a group of international investors allowing them to construct three privately run cities in the country — with services including a private security force and judicial system — as potential safe-havens for companies.

But, as InSight Crime reported in July, gangs have adopted new extortion tactics in response to police efforts to quell the practice. MS-13 members, for instance, wear smart business attire to infiltrate upscale enterprises and later extort them.

And recent reports indicate the problem has broadened beyond the scope of businesses. Gangs have begun to extort Honduran individuals, too, demanding payments for allowing them to live safely in their own homes, the Associated Press reported in June.