Pulling Latin America out of the “inequality trap”

25 May 2011

Urban Housing in Mexico. Urban Housing in Mexico. Photo: UNHabitat

When we talk about development in Latin America, there are many reasons to be positive.  While the global recession left many developing countries with greater challenges in striving to reach the MDGs, Latin American and Caribbean economies have recovered more rapidly than expected reflecting the region’s economic resilience.

On a different front, the region leads the world in social programmes that give financial aid to people in poverty on condition for maintaining children in school and keeping up with vaccines and medical checkups, a huge boost to reduce poverty in 18 countries in the region. 

In spite of strong economic growth and advances in tackling poverty, high and persistent levels of inequality continue to be a great challenge. While the region is not the poorest in the world, it is the most unequal, as measured by the Gini coefficient.

"Ten of the fifteen most unequal countries in the world are in Latin America", said Head of UNDP, Helen Clark at the Fourth Latin America Ministerial Forum on Development. "Our priority must be to take the fight against poverty even further and make inroads into reducing inequality".

While economic growth is important for long-term development progress, it does not automatically translate into poverty reduction and broadly based human development. 

Often many people are left behind –women, ethnic and religious minorities, indigenous people, the disabled, the rural poor, or others who are literally or metaphorically at the end of the road– unable to benefit from economic growth or to access the services they need to improve their lives.

Studies demonstrate how inequality in income, education, health, and other dimensions, is transmitted from one generation to the next through various channels. UNDP’s first Regional Human Development Report for Latin America and the Caribbean suggest that this situation, combined with low social mobility, has led the region to fall into an “inequality trap” from which is difficult to break out.

It is possible to break the cycle, however. But this will require policy action on the economic, political, and social fronts. Reduction of inequality must be established as an explicit public policy objective and be designed to reach the poorest and most vulnerable people, including women, indigenous people, and Afro-descendants. 

This must be coupled with a realization that successful policies require the mobilization of domestic resources. The tax burden in countries in the region ranges from ten to 23 percentage points lower than the average in other regions of the world, and tax evasion is widespread.

Both issues need to be addressed if poverty and inequality are to be seriously tackled head on. 

Read the findings of the 2010 Human Development Report for Latin America and the Caribbean, The Real Wealth of Nations: Pathways to Human Development. Talk to us: What do you think should be the approach of Latin American countries to break free of the “inequality trap”?

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