Extreme Poverty Growing for Fifth Year Running in Latin America

RIO DE JANEIRO, BRAZIL – The situation was reversed in 2015. After a sharp reduction in poverty in Latin America and the Caribbean in the first part of the current decade, progress gave way to a setback.

Far from being halted, this trend continues: extreme deprivation will grow again this year and will complete a five-year period by lining up regressions in one of the main indicators to understand the reduction in the well-being of the less well-off sections of the Latin American population, for whom social mobility is very limited.

The region will close 2019 with a seven-tenth increase in the overall poverty index – from 30.1 percent of the population to 30.8 percent, according to data published Thursday by ECLAC, the United Nations’ development arm in the subcontinent – and eight-tenths in its extreme variable – the most urgent, which rose from 10.7 percent to 11.5 percent.

“It is very worrisome and sends out strong warning signals, mainly in a regional context marked by low growth, climate emergency, increased and more complex migration and profound changes in demography and the labor market, said the Santiago-based body.

Statistics, which come to light in the midst of a wave of protests in several Latin American countries – including Chile itself – to demand social measures and a frontal fight against inequality, translates into even more shocking figures when it comes to absolute numbers: six million people will join the ranks of extreme poverty this year, a group that will grow to 72 million.

General poverty increases by the same amount: 191 million, compared to 185 million last year. The gravity of the data increases if the calculation period is increased: if the estimates are met, the region will close 2019 with 27 million more impoverished people than in 2014. Almost all of them – 26 million – are in extreme deprivation.

The change in the trend in the evolution of poverty and extreme poverty has been ascribed, in many areas and almost exclusively, to the end of the commodity boom at the beginning of the decade now ending. This is only a partial truth, as emphasized by the experts of the Santiago-based body, who introduce a complementary account.

“The end of the boom in raw materials exports and the resulting [economic] slowdown have changed the trend since 2015. But the situation has been aggravated by the reduction in fiscal space and adjustment policies that have affected the coverage and continuity of policies to fight poverty and social and labor inclusion,” they said in their latest Social Panorama of Latin America.

The “important” advances made at the beginning of the decade occurred not only in a more favorable economic context, but also in a political environment “in which the eradication of poverty, the reduction of inequality, and the inclusion and extension of social protection gained an unprecedented prominence in the region’s public agenda”.

The situation varies markedly between countries. A significant share of the increase in extreme poverty over the past five years is ascribed to two countries: Brazil, by far the largest in the region, with a population already exceeding 210 million people; and Venezuela, a nation plunged into a deep political and economic crisis that – according to the figures of Nicolás Maduro’s own regime – has lost at least half of its GDP.

The trend in the rest of the subcontinent has been toward a very slight decrease in the percentage of the population with insufficient income to cover basic needs, “although [the reduction] occurred at a slower pace than it did between 2008 and 2014.

Inequality declining, but no active fiscal policies

In a slightly better dynamic than that traced by poverty rates, the Gini dynamic – the most common for measuring inequality in the world – remained in a clearly downward trajectory, albeit at a noticeably lower rate than in the first part of this decade: if between 2002 and 2014 the gap between the lowest and highest income brackets decreased at an annual rate of one percent, since 2014 it has been at a rate of 0.6 percent.

In summary, inequality continues to spread freely in Latin America, by far the most unequal region in the world and in which welfare state advancement is by no means among the top priorities of most governments.

The ECLAC revives one of its classic mottos – “to grow to equalize and to equalize to grow” – by recalling, in the words of its executive secretary, Alicia Bárcena, that “overcoming poverty requires not only economic growth: it must be matched by redistributive policies and active fiscal policies”. The greatest improvements in inequality – measured by the Gini index – have occurred in Bolivia, El Salvador and Paraguay and, to a lesser extent, in Colombia.

On the other hand, Brazil sees how income disparity increases significantly, with the worst income distribution between the wealthiest one percent – who obtain almost a third of the wealth generated in one year – and the remaining 99 percent.

A greater middle class, but with pyramidal and vulnerable structure

The best news in the report, one of the worst news stories ever published by the ECLAC, is the progressive empowerment of middle-income brackets: if in 2002 less than 27 percent of Latin Americans were included in this group and six years later there were just over 36 percent, in 2017 – the last year for which data are available – this figure has grown to 41 percent.

Concurrently, in these 15 years, the lowest tiers of the scale dropped from 71 to 56 percent and the highest tiers – with income exceeding 10 poverty lines – increased from 2.2 to three percent.

“Becoming part of the middle class,” the body cautions, does not “automatically” imply exceeding the monetary poverty threshold for each of the countries in the region. “It is essential to recognize that there is a segment of the population in the region that, despite having overcome this threshold, is in a situation of high vulnerability and risk of returning to this situation. In particular, in the event of becoming unemployed”, the report concludes.

A growing threat in gloomy economic times, such as those experienced by Latin America and the Caribbean today.

Source: El Pais