Social Panorama of Latin America, 2001-2002

Economic Commission for Latin America and the Caribbean

In 2001, 214 million people, almost 43% of the population of Latin America, were living in poverty and of these, 92.8 million (18.6%) were indigents, according to the annual report from the Economic Commission for Latin America and the Caribbean (ECLAC), Social Panorama of Latin America, 2001-2002.

If the region's economy contracts as all the indicators suggest (by around -0.8%), poverty is expected to rise this year to 44%, indigence to 20%. As in 2001, this greater increase will be particularly pronounced in Argentina, with important increases in Venezuela, Paraguay and Uruguay as well. It is likely that only in Peru and the Dominican Republic the poverty level will fall slightly.

Projections for 2002 suggest that the number of people living in poverty will rise by about 7 million, of which 6 million are indigents. These figures, however, do not reflect a proportionate rise in poverty spread across the region's 18 countries, but rather the impact in the region as a whole of a significant increase in poverty in Argentina.

Toward 1997, Latin America saw the end of a growth cycle that, with some fluctuations, permitted many countries to make significant progress toward reducing poverty. But in the two years since 2000, when the number of poor people was estimated to have reached 206.7 million, the region has performed more poorly than desired, with very low growth rates in per capita output, which even became negative in some countries. More sluggish economies and more volatile growth caused unemployment to rise and hampered progress or even brought regression in income distribution, which has once again pushed the region's poverty indices upward.

Following the decline in economic growth, poverty and indigence in Latin American countries seems to have declined in 2000, before rising significantly in 2001 and 2002.

The current issue of Panorama Social reviews the feasibility of meeting the United Nations target, expressed in the Millennium Declaration, of cutting extreme poverty around the world by half between 1990 and 2015. Progress to date is uneven, given that while some countries have already met their target, others have fallen even further behind.

The most favourable situation has occurred in Chile and Panama, both of which successfully cut extreme poverty by half in 2000, while Brazil, the Dominican Republic and Uruguay managed some partial but significant progress toward the target, reaching more than 95% in the case of the first two countries and 82% in the case of the third. Similarly, Costa Rica, El Salvador, Guatemala, Mexico and Nicaragua have advanced toward meeting about 40% of the target, while Bolivia, Honduras and Peru have also made some progress, but too slowly to meet the target by period's end, if they continue at the same pace. Colombia, Ecuador, Paraguay and Venezuela, where the levels of extreme poverty in 2000 were higher than those in 1990, face a more complex situation.

According to ECLAC calculations, to cut extreme poverty in half toward 2015, the region's total output would have to rise by 2.7% per year for 15 years, that is, 5.7% for the countries with the most poverty, 2.7% for those in the mid-range, and 2.5% for those with the least poverty. In terms of reducing total poverty by half, a target that in principle is more in line with the region's degree of development, the possibilities are practically non-existent for some of the poorest countries, because these would require growth rates well beyond their past performance.

ECLAC underlines the need to resort to economic and social policies that reinforce the possibilities of expanding the productive base, but at the same time involve the progressive redistribution of income, which allows economic growth to improve the standard of living of the population with the least resources more quickly.

Because of the importance of income distribution in Latin America in the fight against poverty, Social Panorama analyzed the income structure underlying the region's patterns of concentration. Last year's report found that distribution in the region was among the most unequal in the world.

Household Heads Still Main Providers

An analysis of income breakdown indicates the enormous importance of work-related income (wages and profits) in most households. In 1999, these accounted for an average of 63% (in Brazil) to 90% (in Ecuador and Nicaragua) of total household income, with its share reaching over 80% in 11 countries.

Of all the income from the labour market, wages are the most important, as well as constituting the least concentrated source of income, followed by income for those self-employed. Similarly, transfers, mainly in the form of pensions paid out by pension systems, constitute an important source of household income, averaging around 13% of total income. In almost every case, income from property is the smallest source of resources.

One constant in every country: household heads continued to be the main income providers, although their contribution fell during the 1990s. Similarly, the percentage of household income provided by women rose significantly, comparatively speaking, and today represents 32%. Finally, in the specific case of work income, the contribution of young people from 15 to 24 years of age reached 12.5%, while for those over 65 years, it averaged 3.3%.

A breakdown of family income confirms that the possibilities of correcting distributive problems through direct intervention are limited and, except for public transfers, an improvement is only apparent over the long term. Because of this, ECLAC recommends that governments take advantage of the relatively slim margin for action that they have to encourage improved income distribution, if they seek to improve the living standards of the poorest sectors more quickly and thus meet the goal of cutting their numbers by half by 2015.

More General Analysis on Poverty and Development
More Information on Inequality of Wealth and Income Distribution

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