Global Policy Forum

The Root Cause of Poverty in Latin America


By Mario Osava

Inter Press Service
September 12, 2005

The unequal distribution of wealth remains the underlying cause of poverty throughout Latin America, although the region's countries have made widely varying degrees of progress towards meeting the United Nations Millennium Development Goals (MDGs).

Chile has already reached the first MDG, which is to reduce by half the proportion of people living in extreme poverty, using 1990 figures as a baseline measure. The poverty rate in Chile has dropped from 38.5 percent of the population in 1990 to 18.8 percent this year, President Ricardo Lagos announced in a state of the nation address in May. The proportion of Chileans living in extreme poverty fell from 12.9 percent to 4.7 percent over the same period.

But Argentina, for its part, will be hard pressed to meet this target by the established deadline of 2015. While its social development indicators were among the highest in Latin America in 1990, it has suffered dramatic setbacks in the past few years as a result of the late 2001 economic and financial meltdown. In countries like Brazil, which has the most unequal distribution of wealth in the world, the transference of only five percent of the income of the wealthiest 20 percent of the population to the poorest 20 percent would reduce the poverty rate from 22 percent to seven percent, according to the 2005 Human Development Report released last Wednesday by the United Nations Development Programme.

In real terms, this would mean lifting 26 million people from below the poverty line. The MDGs, adopted by the 191 U.N. member nations in 2000, establish the commitment to reduce extreme poverty and hunger, achieve universal primary education, promote gender equality and empower women, reduce child mortality, improve maternal health, combat HIV/AIDS, malaria and other diseases, ensure environmental sustainability, and develop a global partnership for development. The achievement of these goals is based on the fulfilment of 18 specific targets set for the year 2015 and measured through 48 indicators. Progress towards the targets is based on the levels recorded in 1990.

Most South American nations have begun to place greater emphasis on social policies in general over the past decade. For the most part, however, this has not been a result of the adoption of the MDGs, but rather a response to the exacerbation of poverty in the region and greater awareness of the problem, as reflected by the election of progressive governments in a number of South American countries.

In Argentina, for example, the rates of poverty and extreme poverty rose from 22.6 percent and 4.5 percent in 1992 to 54 percent and 27.7 percent in 2002, at the height of the economic crisis, according to figures from the National Statistics and Census Institute. This situation led the government of President Néstor Kirchner, who took office in 2003, to adopt a number of social programmes that include the distribution of food aid and the provision of a monthly subsidy of 150 pesos (52 dollars) to unemployed heads of households. Modest economic recovery has now reduced the number of people relying on these programmes from 2.2 million to 1.5 million.

In the meantime, various other initiatives have been introduced, like the development programme, which has provided credits and tools to 425,000 micro and small businesses, and the family programme, through which 250,000 mothers are provided with a stipend for ensuring that their children remain in school. These income supplement programmes are "a badly needed band-aid, but not the solution," which lies in "opening up genuine sources of employment," community activist Marcelo Cresta told IPS. Cresta is the coordinator of a project that provides free meals for children at the Our Lady of Luján de Quilmes Church in the province of Buenos Aires.

In Chile, social policies have been a priority since the country's return to democracy in 1990, with concerted efforts to overcome the poverty inherited from a 17-year military dictatorship. Public demand and criticism from the opposition have led to the implementation of programmes like Chile Solidario, set up in 2002, which has benefited 180,000 families by offering employment opportunities as opposed to income assistance. Nonetheless, as in the rest of the region, inequality persists when it comes to the distribution of income.

A young Chilean from the wealthiest stratum of society who finishes at the bottom of the class in a private school will still command a higher salary in the workforce than a young working-class Chilean who graduates with top marks from a public school, remarked Dante Contreras, an economist at the University of Chile. Despite the efforts made over recent years, he told IPS, the country is still far from achieving the status of a "meritocracy", and inequality remains the norm.

In Brazil, a large number of social programmes were launched in the 1990s, including the "family grant" system of social assistance payments for families who keep their children in primary school, and other mechanisms to transfer income to the most impoverished sectors of the population. These programmes were given an additional boost through the Zero Hunger plan put into effect by leftist President Luiz Inácio Lula da Silva immediately after he took office in January 2003. There are now over seven million families receiving a "family grant" of up to 95 reals (40 dollars) a month, and the ultimate goal is to extend this benefit to a total of 11.2 million Brazilian families - in other words, all those classified as vulnerable - by the end of 2006.

The Zero Hunger initiative also encompasses the distribution of food aid, literacy training for young adults, incentives for family farming and the construction of tanks to collect rainwater in drought-stricken areas, among other measures aimed at combating the root causes of poverty. As a result, social indicators have gradually improved over the last decade in Brazil, and some MDG targets, such as eliminating gender disparity at all levels of education, have already been met, stressed Luis Fernando Rezende of the state-run Institute of Applied Economic Research (IPEA). But Brazil continues to lag behind in key areas like access to basic sanitation services, which poses a major obstacle to achieving the goal of reducing under-five mortality, Rezende commented to IPS.

In Venezuela, leftist President Hugo Chávez launched a wide range of social programmes in 2003, backed by windfall profits from record-high oil prices. An estimated 15 million Venezuelans, out of a total population of 26 million, now purchase food at subsidised prices from a government-run chain of stores, while four million new students of all ages have entered the school system, including half a million students who receive grants or scholarships to enable them to study. In the meantime, primary medical care has been brought to millions of Venezuelans in impoverished urban and rural areas thanks to the cooperation of 15,000 doctors from Cuba.

While the MDGs did not specifically give rise to the social policies adopted in most South American countries, they have served as a means of monitoring and reporting the advances made in social development. One exception to this general rule is Uruguay. Immediately upon assuming power in March, the left-wing Broad Front government led by President Tabaré Vázquez launched the National Plan to Attend to the Social Emergency (PANES) with the explicit goal of meeting at least some of the MDG targets.

Once known as the "Switzerland of the Americas" thanks to its high degree of social development, Uruguay was hit in recent years by an economic crisis similar to that of neighbouring Argentina. The unemployment rate soared to 17 percent in 2002, accompanied by a dramatic plunge in wages, exports and foreign currency reserves. As a result, 33 percent of Uruguayans have fallen below the poverty line, while eight percent, or 276,000 people, live in extreme poverty. In Montevideo, which is home to roughly half of the country's total population, the poverty rate rose from 18 percent to 31 percent between 1998 and 2003. PANES provides the equivalent of 50 dollars a month in income assistance to needy families, and also includes a programme called Work for Uruguay, through which participants are offered vocational training and a four-month temporary work placement.

The World Summit taking place Sept. 14-16 at U.N. headquarters in New York will evaluate the progress made in meeting the MDGs around the world. For the moment, Latin America still has a long way to go towards living up to these commitments by the 2015 deadline.

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