Weak judicial and police institutions, as well as proximity to the largest consumer economy globally, have made Mexico the hub of one of the world's most sophisticated drug networks. Though the government has been waging war on drugs since 2006, violence is still rampant in Mexico. The violence also comes with a high price tag.
The Mexico Peace Index, an assessment of the cost of violence on the country's economy says the total economic impact of the violence in Mexico in 2015 was $134 billion, 13% of the country's GDP.
That comes to US$1,105 per Mexican citizen , which is the equivalent of about two months' wages for an average Mexican worker. A staggering amount in a drug war that has killed nearly 160,000 people.
The study factors in not only extortion and kidnapping but also indirect costs like deferred investment and the potential flight of capital.
"The people don't understand that the violence affects all of our productive sectors. It doesn't matter what sector, tourism or industry. If you get on a bus and they rob you that means we are all affected," said Alexei Chevez, security analyst.
The study also points out improvements as economic costs have decreased by 38 percent since 2011 but progress has slowed down because of a rise in the homicide rate. Security expert and journalist Alejandro Hope says this is mainly due to Mexico's defense spending.
"In terms of defense and security, the budget is actually very small, even in comparison with Latin America. Latin America spends relatively little. Mexico spends on defense on average 2.5 percent of the GDP. In Colombia, it's around 5 percent. I think you can make the case that Mexico should spend more on security not less especially because the potential welfare gains are so large," said Alejandro Hope, editor of El Daily Post.
Despite the rise in murders, the statistics show that Mexico is slowly lowering the economic impact of violence. And if this trend continues, it will not only be good for the country but also for the quality life of it's people.
