The Political Economy Review 2017

leaving the country with an inadequate workforce to fill out those complex jobs. Some sectors, such as tourism, which saw a 15% fall in revenue in 2009 for the first time in over a decade, have a huge correlation with the level of violence. The recent rise in homicide rates has had a drastic effect on these sectors and in turn increased unemployment as bosses no longer need as many staff. As you can see in the graph below, some key sectors to the economy such as retail and tourist services are particularly sensitive to increases in violence.

The violence also means an extra cost for the producer as they have to take into account potential raids or loss of clients. Huge oil companies and other global companies such as Pepsi have had trucks with millions of dollars’ worth of goods stolen or hijacked. This is a big problem as it reduces business confidence which means there is less likely to be investment, thus growth is harder to achieve. An Amchan survey revealed that in 2010, 27% of people who had recently made an investment were reconsidering due to security fears. The fight that the Mexican government has undertaken against drugs is an expensive one, with recent estimates that the cost of the fight being at around $65bn or 8% of GDP. This price of such a war not only leads

to high direct costs to the government but also a large opportunity cost as the government is unable to invest the money in other areas such as infrastructure, education or healthcare: areas which the Mexican people have been crying out for improvement in. The opportunity cost is not only financially dear, but has cost both time and government personnel, where resources have been sacrificed from other sectors to maintain the fight against the cartels (some of whom have the funds of a small country).


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