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Even criminals raise prices when forming a cartel | El Salvador

EConomists generally like competition. If the seller knows that he can go elsewhere, it helps consumers get a better price. However, economists are not usually talking about armed violence or organized crime. Therefore, those who are not regularly involved in the Mafia should learn a lot from new studies investigating competition between criminal organizations in El Salvador.

El Salvador is a dangerous place. The homicide rate in 2015 was 103 per 100,000. This is mainly due to the competition between two gangsters, Marasal Battlecha and Vario 18. However, in 2016 they agreed on a non-aggression pact, ending the competition for territory. As a result, homicide has been reduced by almost half. Other than violence, the other major costs of gangsters are economical and are estimated to be over $ 700 million (£ 515 million) annually, or 3% of El Salvador’s GDP, due to the extortion payments they depend on. I will.

Data on 50,000 extortion payments made by truck drivers stopped by gangs show that the non-aggression pact reduced violence, but extortion payments surged 15-20%. Even more worrisome, this has significantly pushed up the prices of important commodities such as medicines. Outpatient visits for some chronic illnesses increased by almost 10%.

There is reason for many in El Salvador to agree with economists’ intuition of promoting competition that the main beneficiaries of the ceasefire are the gangs themselves.

•• Torsten Bell is the Chief Executive Officer of the Resolution Foundation.See resolutionfoundation.org for more information

Even criminals raise prices when forming a cartel | El Salvador

Source link Even criminals raise prices when forming a cartel | El Salvador

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