An ominous economic trend may be returning to Latin America, and it could have deadly consequences

The Latin America and Caribbean region is the only region in the world that managed to reduce inequality during the first decade of this century, according to the UN Development Programme.

Since 2000, the population in poverty has fallen from nearly 42% of the region’s almost 600 million residents to just over 25% — “in absolute terms, this translates to at least 56 million people lifted above the poverty line,” according to Americas Quarterly.

Moroever, 82 million people in the region were hauled into the middle class between 2000 and 2012, and the region’s Gini coefficient, a measure of inequality, improved, falling from 55.6 to 51.8 between 2003 and 2012.

But many of those workers whose economic status has improved are now imperiled by the economic headwinds that have struck the region.

The largest group of the region’s workers, the 38% who make between $4 and $10 a day, are “vulnerable,” and at risk of slipping back into poverty, according ot the World Bank.

A December 2014 paper from the World Bank found “stagnation in the pace of reduction of income inequality in Latin America since 2010.”

The paper singled out Mexico and parts of Central America for increases in inequality, and noted that Colombia, Ecuador, and Bolivia had seen a slowing rate of inequality reduction.

And slowing or reversed poverty reduction could bring more inequality to a region that already has 10 of the 15 most unequal countries in the world.

And, as research has shown, a higher level of economic inequality is linked to a higher level of violence.

A paper published in 2014 examining the Mexican drug war found that between 2006 and 2010, “an increment of one point in the Gini coefficient translates into an increase of more than 10 drug-related homicides per 100,000 inhabitants.”

This relationship wasn’t found to exist before 2005, only after Mexico’s war on drugs started in 2006. This is “likely because the cost of crime decreased with the proliferation of gangs … which, combined with rising inequality, increased the expected net benefit from criminal acts after 2005,” according to the paper’s authors, emphasis added.

If this finding holds for the region at large, it may augur an increase in violence in what is already one of the world’s most deadly regions: In 2012, 13 of the world’s 20 highest homicide rates belonged to countries in the region, according to the UN.

As of 2015, Latin America and the Caribbean was home to 41 of the 50 most violent cities in the world. The region accounts for one-third of global homicides, despite being home to just 8% of the world’s population.

More inequaltiy, more violence

Inequality, with its link to violence, remains a persistent problem for Mexico in particular.

A 2015 report found that 2,540 of Mexico’s nearly 125 million residents held 43% of the country’s individual wealth. “In the most unequal economies, poor people tend to receive fewer benefits from economic growth,” according to El Daily Post.

More worryingly, in a “more unequal setting, the higher the rates of violence,” notes America’s Quarterly.

And in 2015, Mexico experienced its first increase in homicides since 2011, with a rise of 7.6%, reversing declines the country had seen over the previous two years.

The north-central Mexican state of Zacatecas is perhaps the best example of what this trend may look like.

Between the end of 2008 and the beginning of 2015, Zacatecas saw income inequality worsen the most in Mexico, driving its Gini coefficient up from 0.403 to 0.428 — the fourth-highest of Mexico’s 32 states at the beginning of 2015, according to think tank Mexico ¿Como Vamos?.

Homicides in Zacatecas MexicoChristopher Woody/Infogram/Mexican government dataBoth total homicides and intentional homicides have risen consistently in Zacatecas, Mexico, in recent years.

Over that same period, the number of intentional homicides (i.e., deliberate killings) in the state rose consistently, from 74 in 2008 to nearly 300 in 2015, according to government data.

And there are signs that a rise in violent deaths has a cooling effect on economic opportunity.

In Mexico, “for every increase of ten points [in homicide rates] you see an increase in unemployment in that region of half a point per cent,” said Viridiana Rios, a Harvard Ph.D. and research fellow at the Wilson Center in Washington, DC.

“Unemployment currently in Mexico is 5%, so for each ten points of increase in the homicides rates, you see half a point extra on unemployment. That’s pretty significant,” Rios added at a conference on Mexican security at the Wilson Center in late January.

‘Virtuous and vicious circles’

Violence and economic troubles are not uniform in Mexico.

Aguascalientes state, just south of Zacatecas, had about one-fifth the number of intentional homicides in 2015, while Mexico state, further south, had almost 10 times the number of intentional homicides last year.

Moreover, some Mexican states have done quite well recently, like Aguascalientes, which grew 14.2% in 2014, while Mexico state grew just 1% over the same period.

And in Mexico, like much of the region, divergent trends in growth “threaten to aggravate already deep economic divides, creating virtuous and vicious circles in terms of infrastructure, education, and opportunities,” wrote Shannon O’Neil, the senior fellow for Latin American studies at the Council on Foreign Relations’ Civil Society, in June 2015.

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