Organized Crime and Economic Stagnation: A New Crossroads for Latin America’s Future

The World Bank’s 2025 report warns that Latin America and the Caribbean face deepening economic stagnation and rising organized crime, threatening development gains. Without urgent reforms in governance, security, and productivity, the region risks prolonged instability and inequality.

The World Bank’s Chief Economist Office for Latin America and the Caribbean, supported by contributions from the Economic Policy Global Practice, Finance, Competitiveness and Innovation teams, and the Poverty and Equity Global Practice, paints a sobering portrait of the Latin America and Caribbean (LAC) region in its April 2025 Economic Review. The region today stands precariously between sluggish economic performance and a surge in organized crime that threatens to undermine hard-won developmental gains. Despite some modest advances internally, like progress against inflation, improving consumer sentiment, and a slow poverty reduction, external pressures have escalated dramatically. Persistent inflation in advanced economies has delayed monetary easing, the United States’ increasing trade protectionism has clouded nearshoring prospects, China’s recovery remains weak, and cuts to overseas aid are threatening humanitarian efforts. Most critically, the unchecked rise of transnational organized crime is now a dominant threat to governance, security, and economic progress across the region.

Stagnating Economies and Missed Opportunities

Growth remains painfully slow across LAC, with GDP expansion projected at only 2.1 percent in 2025, largely thanks to a strong rebound in Argentina. Investment, both public and private, continues to lag, and there are worrying signs that even before new global uncertainties, LAC was already missing opportunities to capitalize on nearshoring trends. Fiscal deficits remain entrenched, with debt service consuming a worrying 10.9 percent of government spending across the largest economies. Public debt levels, while stable, have plateaued at high levels, leaving governments with little room to invest in development or infrastructure. In the Caribbean, tourism has rebounded sharply, particularly in St. Vincent and the Grenadines and Dominica, but future growth remains dependent on expanding infrastructure and connectivity. Commodity exporters like Trinidad and Tobago and Suriname are only seeing marginal improvements. Meanwhile, Guyana’s economy continues its extraordinary expansion thanks to oil production, standing as an outlier in an otherwise sluggish regional picture.

Poverty reduction, once a regional success story, has slowed to a near-halt. The poverty rate is expected to fall only slightly to 24.4 percent in 2024, and inequality remains alarmingly high with a Gini coefficient near 50 percent. Much of the recent gains were driven by government transfers and labor market improvements. However, as pandemic-era fiscal supports fade and employment creation slows, future reductions in poverty will increasingly rely on raising productivity, a challenge given the region’s structural weaknesses. Employment levels have largely recovered from the pandemic, but real labor income remains stagnant, particularly among middle-class workers. Informality continues to dominate, with the majority of jobs concentrated in small, low-productivity firms. Without deep structural reforms in education, digital infrastructure, and labor market policies, Latin America’s economic engines risk stalling even further.

The Dark Shadow of Organized Crime

The economic challenges are compounded by the rapid expansion of organized crime, which has metastasized beyond traditional strongholds like Mexico, Colombia, and Brazil to new countries and industries. Latin American organized criminal groups are now embedded in a vast international network dealing not only in drugs but also in human trafficking, illegal mining, and environmental crimes. According to the Global Initiative Against Transnational Organized Crime’s criminality rankings, twelve LAC countries ranked among the top fifty globally. The consequences are far-reaching. Organized crime raises uncertainty for businesses, deters investment, redirects public resources toward security rather than development, depletes human and natural capital, and critically undermines state institutions. Communities dominated by criminal groups lose not only physical safety but also access to basic freedoms and civic participation.

Several drivers explain the surge in criminal activity. A boom in global demand for illicit goods, power vacuums exacerbated by the COVID-19 pandemic, increased technological sophistication, such as the use of cryptocurrencies, and expanded access to firearms have all contributed. Lethal violence in LAC is unparalleled: the region, with only 9 percent of the world's population, accounts for a third of global homicides. Even after controlling for income and inequality, homicide rates in Latin America are eight times the global average. Victimization surveys also suggest that violent crime rates remain persistently high across the region. Meanwhile, poorly managed prison systems often serve as recruitment centers for criminal organizations rather than tools for rehabilitation, and police forces struggle with low trust and ineffective deployment.

Weak Institutions and the Need for Smarter Strategies

The World Bank’s report highlights that institutional weakness is a critical enabler of organized crime. Prisons across the region are overcrowded and often under the control of criminal groups. Police forces vary widely in size and effectiveness, but even where personnel numbers are sufficient, poor training and lack of trust undermine their role. Judicial systems are overburdened, under-resourced, and often incapable of dismantling complex criminal networks. Impunity remains a serious problem. The report strongly advocates that policy responses must go beyond reactive security measures. Investing in better training, coordination between agencies, more strategic deployment of security forces, and critically, building trustworthy and functioning justice systems are all essential.

Moreover, smarter use of data, improved research on organized crime dynamics, and strategic targeting of criminal finances are vital steps forward. In particular, understanding hidden criminal economies and deploying specialized, recurrent surveys could significantly enhance the ability to design effective interventions. Without better intelligence, law enforcement will continue to lag behind increasingly sophisticated criminal networks.

Building Hope: Prevention, Opportunities, and Collaboration

The report underscores that prevention must become a pillar of anti-crime strategies. Young men, the principal recruits and victims of organized crime, need better opportunities. Criminal groups often offer more attractive income, career prospects, and even "emotional mobility" (respect and belonging) than the formal economy. Targeted education programs, mentorship schemes, community-based interventions, and efforts to address harmful gender norms are all critical. Successful reintegration programs for former criminals and expanded access to economic opportunities could help break the recruitment cycle.

Finally, no country can confront transnational organized crime alone. International cooperation, through intelligence sharing, harmonizing financial regulations, and presenting unified voices in global forums, is essential. The challenge facing Latin America and the Caribbean is immense, but not insurmountable. The region has overcome similar crises in the past. With political will, strategic reforms, and sustained international support, the current tide of violence can be stemmed, and a foundation laid for more inclusive, prosperous societies.