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The number of people in poverty in Latin America dropped in 2008, although these improvements will be difficult to sustain due to forthcoming economic recession, according to a new report by the UN Economic Commission for Latin America and the Caribbean.

10th December 08 - ECLAC

Link to original source: Social Panorama of Latin America: 2008 

During 2008, the percentage of the population living in poverty in Latin America and the Caribbean dropped to 33.2% (182 million people) from the 34.1% (184 million) the previous year. However, extreme poverty or indigence rose mildly, from 12.6% in 2007 (68 million people) to an estimated 12.9% (71 million) this year.

These are some of the conclusions of the annual ECLAC report Social Panorama of Latin America 2008, launched today by Commission Executive Secretary Alicia Bárcena. The report asserts that efforts to reduce poverty and indigence in 2008 were less effective than in the 2002-2007 period, when the number of people living in poverty or indigence dropped by 9.9% (37 million people) and 6.8% (29 million), respectively.

Estimated figures for poverty and indigence reflect the impact of rising inflation since early 2007, and particularly escalating food prices, although food and fuel prices in the region have ceased climbing in recent months.

ECLAC expects the global economic deceleration to impact the region through a weaker demand for commodity exports, declining investment in productive sectors, lower migrant remittances, and international financial market constraints for emerging countries.

Employment is expected to stagnate during 2009, while average real wages are to remain unchanged or diminish slightly. Economic forecasts suggest that average household incomes will deteriorate, particularly among independent and informal workers whose jobs are most sensitive to movements in economic cycles. In this context, poverty and indigence will most likely increase moderately, continuing the negative trend begun in 2008.

The ECLAC report emphasizes that the situation will differ among groups of countries. The most seriously affected will probably be those countries that are most dependent on remittances, or that have more direct links with the United States market, as well as those with scantly diversified export structures that rely on the commodity markets that have suffered most of the impact of the global crisis, as well as countries with weak financial systems.

With regard to the factors that bear on poverty reduction efforts, the region continues to show a significant disparity in income distribution, with the average per capita income of households in the tenth decile about 17 times greater than that of the poorest 40% of households. Most progress in lowering poverty during 2002-2007 was due to an increase in the average income of the poorest households, mainly labour income.

In terms of unemployment, the Social Panorama notes that it remains high, and that as of 2006, the rate continues to be 2.4 points higher than in 1990. However, unemployment has dropped in most urban areas since 2002. Nevertheless, sharp inequalities persist, and these are reflected in higher unemployment rates among the poor, women and youths. In this context, the report examines the new target of the first Millennium Goal: "to achieve full and productive employment and decent work for all, including women and young people."

The third chapter of the report deals with the opportunities provided by the "demographic dividend", which accrue to all Latin American countries. This dividend, which reflects the favorable ratio of the working-age population to the population in conditions of dependency (children and the elderly), has had a positive impact on the education sector. Demand for primary education will continue to decline over the coming decades (due to a relative and absolute reduction in the child population), while demand for secondary education will begin to decrease (as a result of the relative and subsequently absolute decline in the adolescent population). This is providing governments with the opportunity to tackle the goal of increasing coverage and improving the quality of secondary education cycles.

Lastly, the Social Panorama report analyzes the issue of youth and domestic violence in Latin America. Such violence feeds on various forms of social and symbolic exclusion among youths, such as the lack of equal opportunities, a lack of access to employment, alienation, discrepancies between symbolic and material consumption, territorial segregation, and the absence of public facilities for social and political participation. In addition, there is the issue of street gangs and the involvement of youths in organized crime and armed conflicts.

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Latin America: Poverty Rates Likely to Rise

10th December 08 - Daniela Estrada, Inter Press Service

According to the 2008 edition of ECLAC’s annual Social Panorama of Latin America report, released Tuesday in the Chilean capital, 33.2 percent of the regional population, or 182 million people, are now living in poverty, 0.9 percent less than in 2007. It the same time, the extreme poverty rate rose slightly, from 12.6 percent of the population in 2007 to 12.9 percent this year (68 to 71 million people). Factors that played a role in this increase were the rise in inflation, and especially food prices.

Although the region is better prepared than in the past, both poverty and indigence rates could go up in 2009 as a result of the global financial and economic crisis that originated in the United States, said ECLAC (Economic Commission for Latin America and the Caribbean) executive secretary Alicia Bárcena at the presentation of the report.

Bárcena grouped the countries of the region according to their poverty levels: low (below 22 percent), medium-low (below 32 percent), medium-high (between 38 and 48 percent) and high (over 50 percent). The first category includes Argentina, Chile, Uruguay and Costa Rica, the second Brazil, Mexico, Panama and Venezuela, the third Colombia, the Dominican Republic, Ecuador, El Salvador and Peru, and the fourth Bolivia, Guatemala, Honduras, Nicaragua and Paraguay.

Under the present circumstances, the countries of Latin America and the Caribbean should "protect the poor, maintain social spending, implement effective employment programmes, and step up the fight against child malnutrition," Bárcena told IPS.

With regard to short-term measures, ECLAC suggests that countries in the region launch special public works spending programmes, boost public investment in housing and basic services, expand unemployment insurance, and increase coverage of conditional cash transfer programmes.

In the medium-term, it recommends the development of "new fiscal pacts and social contracts that make it possible" to combat tax avoidance and evasion and thus raise taxes. According to Bárcena, the effects of the crisis will include a rise in unemployment, and some of the activities in which women make up a large proportion of the workforce, like sales, financial services, manufacturing, tourism and domestic employment, will be hit especially hard.

In addition, credit for small and medium-sized companies will become scarce, real wages will not grow, and youth and domestic violence will be exacerbated, says the U.N. agency.

Countries that are heavily dependent on expatriate remittances and official development aid will likely feel the brunt of the crisis, said Bárcena, who added that the impact on countries will vary depending on their degree of diversification of exports of goods and services.

The ECLAC official said public social spending in countries in the region does not favour the poor in times of crisis.

And the report states that "There are few examples of effective countercyclical social expenditure policies for financing compensatory mechanisms that mitigate social risks when the economy starts to contract."

Bárcena also noted that the tax burden is low in Latin America (18.2 percent), compared to the European Union (39.8 percent) and the countries of the Organisation for Economic Cooperation and Development (OECD) (36.2 percent).

She noted that Latin America made strides in terms of social development from 2003 to 2007 thanks to the steady economic growth enjoyed by most countries in the region and improvements in income distribution.

Between 2002 and 2007, the number of people living in poverty or indigence dropped by 9.9 percent (37 million people) and 6.8 percent (29 million), respectively.In the meantime, public social expenditure rose from12.92 to 16.34 percent of GDP between 1990 and 2007 in 21 countries of the region, with spending increasing especially in the areas of security and social assistance.

In addition, 14 countries in the region managed to reduce the gap between rich and poor, although it widened in three countries (Guatemala, Honduras and the Dominican Republic) and remained the same in one (Uruguay), said Bárcena.

But the region is still the most unequal in the world, "and the disparity in its income distribution remains high, with the average per capita income of households in the tenth decile approximately 17 times greater than that of the poorest 40 percent of households," says the report. "This ratio varies considerably from one country to another, from 9-to-1 in…Venezuela and Uruguay, to 25-to-1 in Colombia," it adds.

Up to 2007, the region made important progress towards the first Millennium Development Goal (MDG), which is aimed at halving the proportion of people living in extreme poverty between 1990 and 2015, said the ECLAC executive secretary.

According to the report, "The percentage of indigent persons in the region (12.6 percent) was just a bit more than one percentage point short of the target of 11.3 percent. This means that, in the 68 percent of the total time available for meeting the target that has elapsed so far, 88 percent of the ground has already been covered."

However, the regional average "is low partly because of the ‘subsidy’ represented by the fact that Brazil, Chile and Mexico, which account for approximately 60 percent of the region’s population, have already exceeded the target," it adds.

The international financial crisis and the resulting world economic slowdown are expected to have repercussions on poverty levels that cast doubt on the feasibility of achieving the target set for 2015," says the document.

The Social Panorama of Latin America also discusses the new target added this year to the first MDG: "to achieve full and productive employment and decent work for all, including women and young people".

Another chapter of the report urges the countries of Latin America and the Caribbean to take advantage of the so-called "demographic bonus" or "demographic dividend," described as "a favourable stage" that the countries of the region are going through, in which "the proportion of people in the potentially productive age bracket grows steadily relative to the number of people of potentially inactive ages (children and older persons)."

Over the next few decades, says the report, "not only will demand for primary education continue to decline, but so will demand for secondary education, relatively at first, but subsequently in absolute terms. During this period, governments will have the opportunity to pursue ambitious goals for increasing coverage and quality in secondary education."

The last chapter focuses on youth violence in Latin America, which "feeds on various forms of social and symbolic exclusion among youth, including a lack of equal opportunities, a lack of access to employment, alienation, discrepancies between symbolic consumption and material consumption, territorial segregation, the absence of public facilities for social and political participation, and an increasingly informal labour market," the report concludes.

ECLAC recommends "inclusive approaches" to tackle the phenomenon.

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