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Latin America: poverty falls

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Poverty levels fall in Latin America

By DAVID LUHNOW

4 December 2011

MEXICO CITY—While the U.S. and Europe struggle with weak economic growth, poverty rates in Latin America have fallen sharply in the past 20 years thanks to rising household incomes, the United Nations reported.

From 1990 to 2010, the poverty rate in Latin America dropped by 17 percentage points to 31.4% from 48.4%, according to the U.N. Economic Commission for Latin America and the Caribbean.

The region has also made strides in reducing its notorious income inequality mostly thanks to a more equitable distribution of labor income as well as government cash transfer programs for the needy, the agency said in its annual review of the region.

“Poverty and inequality continue to decline in the region, which is good news, particularly in the midst of an international economic crisis,” said Alicia Barcena, head of the agency, in a statement.

In absolute terms, the region still has 174 million inhabitants who live in poverty, but that is well below the peak of 225 million in 2002, the agency said.

Several factors help to explain the fast decline in poverty. Governments managed to stabilize their economies after the 1980s “lost decade” of debt crises and inflation—a period more extreme than what Europe is suffering with its current crisis. That allowed countries to spend less on servicing debt and more on social spending.

Many nations like Mexico also opened to trade, which helped to lower prices for consumers. Others, like Argentina, Venezuela and Brazil, benefitted from rising commodity prices in products including oil, iron ore and soybeans. Lastly, fertility rates dropped everywhere, meaning the region has fewer babies and more working-age citizens.

“Macroeconomic stability, opening to trade, less debt, and better demographics have all come together,” said Luis de la Calle, a former Mexican trade official who recently wrote a book about the rise of the Mexican middle class called “Clasemediero.”

While some countries measure poverty differently, making comparisons difficult, some nations clearly had more success in reducing poverty than others. From 2001 to 2009, Brazil cut its poverty rate to 24.9% from 37.5%, while Peru cut its poverty rate to 34.8% from 54.7%. Mexico, meanwhile, had a much more modest reduction to 34.8% poverty in 2008 from 39.4% in 2001.

Latin America still has a long way to go in development. The region is still the world’s most unequal and has too many barriers to social and economic mobility for the poor, the agency said. Its educational system is largely broken and economists say a sudden reverse in commodity prices could hurt some countries like Argentina, Brazil and Venezuela very hard.

 

Fist published in the Washington Post