Central America: crime and violence eating up small business profits

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Central America: crime and violence eating up small business profits

From any tall building in Guatemala City you have a bird's eye view of a common site in cities across Latin America and the Caribbean: lodged in the alleys and walkways between modern highrises, low tin-roof structures shelter the hard world of the informal economy.

Those are usually the structures of small businesses, such as the one belonging to Cristina Lajuj's, currently feeling the pressure of the spiral of crime and violence that is threatening Central America's own prosperity. For more than 11 years, Lajuj has been making a living selling tortillas and other typical dishes. In a space just off a parking lot and smaller than a Washington DC food truck, five women begin mixing corn flour at 6:30 every morning. By 8AM a basket full of warm tortillas and a small plate of cheese slices await the clientele of office workers, delivery men and other street vendors.

For one quetzal (about 13 US cents) you can buy five tortillas. That means that Lajuj has to sell 5,000 of them just to cover the rent for her tiny business. Whatever is left covers wages of her employees and her basic needs and those of her three children. "You can never get ahead," the 41-year-old micro entrepreneur said during a conversation early one morning.

Just blocks away the first international Conference in support of Central America's new Security Strategy is taking place. Its main goal is to come up with a strategy to tackle the growing wave of crime and violence that stifles growth and development in the region.

Asked what she thinks about that, Lajuj says insecurity is not as bad as it was when she was a little girl growing up in the midst of Guatemala's 36-year civil war that ended in 1996. But she does blame lack of security for the rising prices of corn and other staples.

Today she pays 250 quetzals per 100 pounds of corn flour, 70 more quetzals than last month. The price increase has forced Lajuj to gradually decrease the size of her tortillas, which these days fit in the palm of the hand. At some point, Lajuj says she is considering migrating to the United States where she thinks she could do well selling tortillas to so many immigrants already living there.

The economic consequences of security are very much what brought the World Bank here this week. Crime and violence have gotten so bad in most of Central America -- reaching epidemic levels according to World Health Organization criteria -- that the Bank realizes development efforts won't take hold until citizen security improves. Beyond the trauma and suffering of individual victims, crime and violence carry staggering economic costs at the national level –as much as 8 percent of GDP, which is more than what countries typically spend on social programs in this region, according to a recent World Bank report.

This week, Central American governments received more than US$1.5 billion in pledges from the World Bank, the United States and other multilaterals, which no doubt will contribute to build up the region's defenses against the scourge of crime and violence.

But a lot more needs to be done.

From our perspective and that of many others present at the Conference, rich people in these countries have to be willing to step up to the plate and pay more taxes. Today, Central American countries have the lowest tax rates in the hemisphere.

In an opinion column published by the Guatemalan daily El Periódico, World Bank Vice President for Latin America and the Caribbean Region, Pamela Cox, stressed the need for "Central America's leaders and wealthiest citizens … to signal their commitment by making additional domestic fiscal efforts."

Otherwise, the governments' ability to attend to other social needs will continue to suffer, as security demands require more and more public resources. And, as U.S. Secretary of State Hillary Clinton said during her speech at the Conference, "security cannot be funded on the backs of the poor."



Marcela Sanchez

Communications Officer

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