Illicit economies such as illegal mining and money laundering are expanding across Latin America, threatening investment and competitiveness in areas where state presence remains weak, according to Juan Andrés Medel, an associate researcher at the Chair of Security and Globalization at the University of Chile's Institute of International Studies.
Medel made the comments during a panel titled "Illicit Economies: The Hidden Cost to Competitiveness and Investment in Latin America," organized by the Commission for the Fight Against Illicit Trade (CLCI) of Peru's National Society of Industries (SNI).
He said the advance of organized crime, illegal mining and money laundering is no longer a problem confined to security agencies. One of the biggest risks, he said, arises when money obtained through criminal activity manages to enter the formal economy.
Through money laundering, illicit funds are disguised to hide their criminal origin and are made to circulate as though they came from legitimate business. Once inside the financial system, tracing that money becomes far more difficult, and it can end up distorting market competition and transparency.
Medel said the phenomenon is not limited to Peru but is a global reality, and that once money is successfully laundered, it becomes integrated into the system.
Illegal mining in Peru could keep growing
Within this picture, illegal mining in Peru stands out as one of the biggest concerns. Medel said the activity could continue to grow because of rising interest from criminal organizations and the behavior of international gold prices.
He said the data point to a scenario that is set to escalate, noting that statistics show a growing number of criminal groups moving toward illegal mining, a trend he said is likely closely tied to the price of gold.
Medel said the problem goes beyond policing. Illegal mining tends to take place far from major cities, in areas where the state has limited reach and where gaps in education, investment, basic services and employment persist.
It is precisely that vacuum, he said, that allows criminal organizations to gain ground. He said these groups are not necessarily seeking to confront the state directly, but rather to take advantage of territories where the state has failed to provide sufficient answers to the population.
Corruption often precedes organized crime, research shows
Money laundering is one of the main mechanisms connecting criminal economies to the formal financial circuit, Medel said, adding that the phenomenon is not limited to organized crime since illicit funds can have different origins.
He pointed to corruption as another piece of this structure, citing research showing that the relationship between corrupt officials and criminal organizations can form even before the criminal group makes direct contact with the official.
He said researchers found that organized crime did not seek out the public official; rather, the official sought out organized criminality, meaning the official was already corrupt beforehand.
Region spends far more on security than innovation
Medel cited estimates suggesting that between 3% and 4% of Latin America's gross domestic product is linked to organized crime activity. He said the impact does not stop at policing or the courts, but also reaches investment, competition and countries' prospects for growth.
He warned that Latin America spends seven times more on security than on innovation. For Medel, that imbalance reflects one of the least visible costs of rising crime: the more resources and capacity that must go toward containing it, the less room remains to boost innovation, productivity and investment.
Call for stronger integrity controls
Given this scenario, Medel proposed strengthening integrity and probity controls in both the public and private sectors. He noted that companies can also become vehicles for introducing illicit money into the economy.
He said tackling these illicit economies requires a joint response involving the state, the private sector and civil society.
