Reducing Poverty and Inequality in Latin America

Abstract

INTRODUCTIONPoverty and persistent inequality in income distribution remain a key concern in Latin America. The recent financial and economic crisis has retriggered a debate on mechanisms and policies required to improve socioeconomic situation in this region characterized by worst income distribution in world.During last decade, Latin American countries have overcome several important crises: emerging countries crisis in 2002, followed by financial crisis that began in United States. Currently, focus is on a third crisis, or second part of financial crisis - European sovereign debt crisis. Despite magnitude of these crises, Latin American countries have proven to have more solid economies than they had before period from 2002 to 20I2. Although strong and sustained economic growth has in some way reduced poverty, it has been less effective in reducing income inequality. Latin American countries are renowned for having highest income inequality in world in past four decades. Ten out of fifteen countries with highest levels of inequality are in Latin America and Caribbean. Significant and persistent inequality, accompanied by low social mobility, has led region to fall into an inequality trap.1This article examines what has been and could be Canada's contribution to address these challenges. The first section describes economic outlook of Latin American countries facing economic crisis and its impact on social indicators such as poverty and income inequality. The second section provides a descriptive overview of Canadian development assistance to region in last ten years. The third section reviews Ottawa's recent strategy of economic engagement in region. Finally, we discuss a potential role for Canada to contribute to inclusive growth, i.e., economic development that encompasses poverty reduction and lesser inequality in regionPOVERTY AND INCOME DISTRIBUTION IN LATIN AMERICA: THE UNSOLVED CHALLENGEThe development of more equal societies is potentially one of most radical challenges for any country,2 particularly for Latin America. The region has worst income distribution indicators in world.3 The study of social and economic inequalities in Latin America has attracted great attention from academic researchers, international organizations, and policy makers. There is some agreement that inequality in region is historically rooted in colonial era, which cemented racial and socio-economic divides. As a recent report by UN's economic commission for Latin America and Caribbean observes, colonial period was succeeded by republican regimes that perpetuated those assymetries; and finally, the pattern of development and modernization helped to perpetuate socio-economic divides based on race, ethnic origin, gender and social class. The productive structure and education system helped to ingrain and reproduce inequality.4There is evidence that neoliberal models have increased or at least maintained levels of inequality. Hoffman and Centeno refer to Latin America as inverted continent in which resources assignation and opportunities are highly concentrated.5 The region remains worst in world in terms of income distribution, even though Latin America has increased its overall income in recent years. Between 1980 and 2010, income per-capita has increased, although it varies significantly depending on indicator used, i.e., whether figure is based on purchasing-power parity or not. Based on purchasing-power parity figures, it has moved from US$2,680 in 1980 to US$9,119 in 2010.Moreover, we observe great variation of level of inequality from one country to another. During period from 2000 to 2009, nine countries were above Latin American average, and these countries included with a high per-capita income, such as Chile, as well as countries with extremely low incomes, such as Haiti and Bolivia. …