7591 COHA Report, Inequality and Poverty in Latin America: Can the Decline Continue?

Over the past decade, income inequality and poverty in Latin America have been on the decline.  These two key socio-economic indicators have historically plagued the region, inhibiting it from prospering. Although most of the countries in Latin America and the Caribbean still suffer from very high levels of inequality and poverty, the region has made important initial strides in reducing these statistics. Some countries have improved far more than others, when measured by the Gini index, a statistical measurement for inequality ranging from 0 to 1.  For example, Uruguay, at .433 in 2009, and Venezuela, at .412 in 2008, recorded lower Gini coefficients than the United States (.468) in 2009.   Peru (.469), El Salvador (.478), Ecuador (.500) and Costa Rica (.501) all recorded Gini coefficients within range of the United States, and in 2009, Argentina, Chile and Uruguay each had lower poverty rates than the United States.

The effects of poverty and inequality can prove devastating on the social and economic landscapes of a country and a region.  Income inequality and economic growth are likely to directly impact poverty, as both high economic growth and a greater degree of equality in income distribution will help to alleviate poverty.  It is true that strong economic growth has helped to reduce poverty in Latin America. However, scholars have noted that the reduction of inequality and poverty over the past decade is partially due to increased levels of effective income distribution, in addition to the reduction in the earnings gap between high and low-skilled workers.  Policies that have been introduced to increase and yield such results include increased spending on education, as well as conditional cash transfer programs (CCT)—a monthly grant to low-income households attached to requirements such as mandatory school attendance. Bolsa Familia in Brazil, Chile Solidario in Chile and their objectives are examples of such programs.

This analysis was prepared by COHA Research Associate Mark Loyka.