Economists estimate a 24% loss in per capita GDP in Manaus caused by organized crime

Manaus (AM) – According to the Brazilian Public Security Yearbook, Brazil had 47,500 intentional violent deaths (IVMs) recorded in 2021, making it the eighth most lethal country in the world that year. The high rates of violence are concentrated mainly in the North and Northeast regions, which suffer from the strong activity of criminal factions and the activities of drug trafficking. The impact of this brutality, however, is not restricted to the safety of the population and can be felt in different social spheres, such as the economy.

Researchers from the Faculty of Economics, Administration, Accounting and Actuarial Science (FEA) at the University of São Paulo (USP) analyzed this type of consequence by studying the effect of the actions of the criminal organization Família do Norte (FDN) on the Gross Domestic Product (GDP) per capita from Manaus. The investigation recorded a cumulative reduction of 24.9% in per capita GDP caused by the FDN’s activities between 1999 and 2020 – implying an average annual loss of 2%.

GDP is calculated from the sum of all products and services produced in a specific region over a given period. In turn, GDP per capita is determined by dividing GDP by the total number of inhabitants of a location.

To achieve this result, the synthetic control method was used, which consists of simulating a fictitious Manaus, without the criminal faction, based on data from municipalities that are economically similar to the capital. Called a counterfactual city, it is from there that it becomes possible to make a comparison with Manaus indices and quantify the impact of the FDN.

“We observe that the GDP per capita of the counterfactual city and Manaus go together until 2007. However, from that date onwards a difference opens up that exposes the negative consequences of the faction – created precisely in 2007”,

explains Pedro Drugowick, FEA economist to Jornal da USP.

Among the reasons behind the reduction in the index, the researcher highlights the political and social insecurity brought by the group, in addition to the redirection of public resources to combat organized crime.

“Where there is crime, the productivity of employees is reduced, the functioning of commerce is impaired and there is a misallocation of resources with the reduction of the budget of other fields, such as education”,

put Drugowick.

This scenario also ends up pushing away possible private capital, which seeks security and social stability to invest its money.

Thus, in addition to being responsible for the high levels of violence in the municipality, the FDN poses obstacles to the economic development of Manaus. Since the creation of the faction, the homicide rate per thousand inhabitants in the city has increased by 76% in less than a decade, reaching the 23rd position in the list of the most violent cities in the world in 2016.

northern family

Manaus is located in a key region for drug trafficking in South America. Even before the FDN, the capital was considered a gateway to the international narcotics market route, which used the Solimões River to transport drugs. drugs. However, it was with the emergence of the faction, in 2007, that crime in the region became more organized and, consequently, intensified.

After having contact with members of the Primeiro Comando da Capital (PCC) and Comando Vermelho (CV), two of the largest criminal organizations in Brazil, the organization itself was structured along the lines of its predecessors.

“The creation of the Northern Family took place in an exogenous way: if the authorities had not sent its founders to federal prisons, this organizational network would not have been established”,

explains the economist.

The group came to dominate drug trafficking and the prison system in the North region. In 2017, the estimated number of members affiliated with the FDN was 200,000 across the country. In 2019, experts began to consider the faction as extinct after internal fights between its leaders – which resulted in deaths and massacres inside prisons amazonenses.

Economic impacts

According to the Brazilian Public Security Forum, there was a reduction in the death rate due to violence in Brazil in 2022 – from 48,400 in 2021 to 47,500 victims last year. However, the country remains ranked among the 35 most violent nations in the world, resulting in a significant influence of the dynamics of organized crime in the daily life of the population.

Faced with this, Paula Pereda, professor at FEA, highlights the lack of information and research that investigate the effects of crime on the economy.

“Because it takes illegal activity into account, there are few surveys of data on the subject. Understanding what the effects are on society and understanding how organized crime affects individual decisions is a relevant and difficult question to answer”,

affirm.

Now, the professor seeks to understand the reasons behind the impact of the FDN on the economic and social indicators of Manaus, for a better understanding of the city’s situation.

“The rise of the group diminishes formal economic activity in the region. The increase in crime, the departure of companies and the reduction in enrollments of elementary and high school students may be indicative that you have less incentives for the emergence of the group in Manaus”,

explains.

The research results were published in the article Crime and economic growth: A case study of Manaus, Brazil, available in the Review of Development Economics.

Camilla Almeida, from Jornal da USP

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