Despite some progress, Latin America still faces a significant wealth gap, with Brazil topping the global disparity list in 2022 as per UBS’s Global Wealth Report 2023.
This report found 48.4% of Brazil’s total wealth was with only 1% of its people. Other nations, including India, the USA, China, and Germany, trailed Brazil.
The Economic Commission for Latin America and the Caribbean (ECLAC) reports a 29% poverty rate in the region.
This equates to 181 million people, a number reverting to pre-pandemic levels.
The 2023 Social Panorama report highlights that the wealthiest group in each country captures up to 45% of total income.
In contrast, the poorest decile earns 21 times less. This disparity illustrates the deep-rooted economic inequality in the region.
ECLAC’s executive secretary, José Manuel Salazar-Xirinachs, emphasizes that 11.2% of the population, or 70 million people, face extreme poverty.
He notes that income inequality has decreased in 2022 but remains high.
The report stresses the impact of income inequality on social dynamics. It affects labor inclusion, justice perception, and social cohesion.
Politically, high inequality presents challenges to governance and democratic processes, potentially destabilizing institutions.
High inequality also hinders growth. It limits access to education and restricts social mobility. This, in turn, reduces productivity and perpetuates the concentration of wealth.
Labor Market Crisis
Post-pandemic, Latin American countries are cutting back on central government social spending.
This trend reverses the expansion seen in response to COVID-19. Reduced spending impacts labor policies and leaves behind major emergency programs.
The report also highlights the labor market crisis, the worst since 1950. The pandemic exacerbated this, leading to a historic drop in job creation.
As of 2022, 49% of workers were in informal employment, mainly belonging to the lowest income quintile.
From 2000 to 2019, there was a steady increase in central government social spending relative to GDP.
However, this trend broke in the 2020-2022 period, with spending decreasing in real terms.
ECLAC suggests that public policy actions are needed. These should focus on achieving fiscal sustainability and addressing cascading crises.
The goal is to advance social spending’s financial sustainability and meet the Sustainable Development Goals (SDGs).