HomeNewsBriefInsecurity Hurting El Salvador's Economy: Banks
BRIEF

Insecurity Hurting El Salvador's Economy: Banks

EL SALVADOR / 5 JUN 2015 BY DAVID GAGNE EN

El Salvador's banking sector has stated that insecurity is one of the biggest obstacles to increasing economic output, pointing to high levels of violence as a deterrent for investment.

Armando Arias, President of the Salvadoran Banking Association (Abansa), said insecurity is one of the most significant barriers to kick-starting El Salvador's sluggish economy, reported El Salvador.com. According to figures from the Central Reserve Bank, the country's economy grew just 2 percent last year, reportedly the lowest economic growth rate in Central America.

Specifically, Arias noted that the country's unstable security situation has limited the ability and interest of small and medium-sized businesses in investing and applying for loans to grow their companies. "To reverse this tendency, the country must reduce criminality and guarantee physical security," Arias said. 

Meanwhile, Genaro Ramirez, head of the Salvadoran bus owner's association (AEAS), recently estimated that bus companies pay gangs a total of at least $34 million dollars a year in extortion fees. "Public transportation has been and remains the sector most affected by the violence plaguing this country," Ramirez stated.

InSight Crime Analysis

Considering that the past year has been the most violent 12-month stretch in El Salvador since the end of the country's civil war, it stands to reason that insecurity would have a noticeable effect on the economy. As indicated by Arias, the country's security situation appears to have the greatest impact on local businesses. In 2013, Salvadoran business organizations estimated that two small businesses shut down every week, mainly as a result of extortion. 

SEE ALSO: El Salvador News and Profiles

In addition, Ramirez's estimate that bus companies lose $34 million dollars a year to extortion suggests El Salvador's transportation sector continues to be a principal target for street gangs. In 2013, bus owners lost roughly the same amount -- around $36 million dollars -- to criminal groups, paying between 10 and 25 percent of their monthly income to meet extortion demands. Indeed, the extortion of this industry has become so problematic that authorities have even deployed an elite anti-terrorism unit to patrol bus routes in capital city San Salvador. 

The negative impact of violence and insecurity on economic growth is an issue facing countries throughout Latin America. Earlier this year, the World Bank highlighted violence as one of the primary factors that could stunt the development of Latin American economies.

share icon icon icon

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

What are your thoughts? Click here to send InSight Crime your comments.

We encourage readers to copy and distribute our work for non-commercial purposes, with attribution to InSight Crime in the byline and links to the original at both the top and bottom of the article. Check the Creative Commons website for more details of how to share our work, and please send us an email if you use an article.

Was this content helpful?

We want to sustain Latin America’s largest organized crime database, but in order to do so, we need resources.

DONATE

Related Content

EL SALVADOR / 21 APR 2021

A recently published report warns that pacts made between gangs and public officials to lower homicides in El Salvador will…

CHEPE DIABLO / 25 MAY 2021

A business magnate who is an alleged leader of El Salvador’s Texis Cartel has escaped justice once again, after a…

BOLIVIA / 3 MAR 2023

As the CITES treaty hits 50, we take a look at its successes, failures, and future challenges in reducing the…

About InSight Crime

THE ORGANIZATION

Venezuela Coverage Continues to be Highlighted

3 MAR 2023

This week, InSight Crime co-director Jeremy McDermott was the featured guest on the Americas Quarterly podcast, where he provided an expert overview of the changing dynamics…

THE ORGANIZATION

Venezuela's Organized Crime Top 10 Attracts Attention

24 FEB 2023

Last week, InSight Crime published its ranking of Venezuela’s ten organized crime groups to accompany the launch of the Venezuela Organized Crime Observatory. Read…

THE ORGANIZATION

InSight Crime on El País Podcast

10 FEB 2023

This week, InSight Crime co-founder, Jeremy McDermott, was among experts featured in an El País podcast on the progress of Colombia’s nascent peace process.

THE ORGANIZATION

InSight Crime Interviewed by Associated Press

3 FEB 2023

This week, InSight Crime’s Co-director Jeremy McDermott was interviewed by the Associated Press on developments in Haiti as the country continues its prolonged collapse. McDermott’s words were republished around the world,…

THE ORGANIZATION

Escaping Barrio 18

27 JAN 2023

Last week, InSight Crime published an investigation charting the story of Desafío, a 28-year-old Barrio 18 gang member who is desperate to escape gang life. But there’s one problem: he’s…