How did the inflow of drug profits into low-income countries in South and Central America adversely affect diminish economic growth in those countries?

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The inflow of illegal drug profits affects the low-income countries of South and Central America in a number of ways.

First, the homicide rate is far too high. Although most of the victims are young, the killings have created widespread fear and insecurity in a number of nations. Central America is an extremely violent place, and that violence hinders the development of legitimate business enterprises. Even Costa Rica, long-known as a tranquil tourist destination, has seen a marked increase in drug-related murders in recent years. Indeed, the drug trade and its concomitant high homicide rate frightens off tourists. Mexico's once-famous beach resorts are now better known for their violence.

Second, the drug trade also sullies the reputation of the nations where it occurs in other ways. For example, Colombia has long been associated with drugs, and this association dates back to the Pablo Escobar (1949–1993) era. Today, in 2020, Colombia is a much more diverse and prosperous nation, but its reputation still impedes its development. That reputation discourages legitimate foreign investment.

Third, drug lords operate outside the law. They bribe or kill those who oppose them. Police officers and judges are often corrupt. The absence of a strong legal system discourages and hinders legitimate business ventures.

Finally, the drug trade encourages migration. Migrants leave their countries to move abroad—often to the United States. Their exodus deprives their nations of a valuable labor force.

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