InterAmerican Development Bank Poverty and Inequality Unit, SDS

1
Inter-American Development BankPoverty and
Inequality Unit, SDS
Overview of the Poverty Situation in Latin
America and the Caribbean
Roundtable with Representatives of Nordic
GovernmentsParis, January 10-11, 2002
2

• These slides present an overview of the poverty
  and inequality situation in Latin America and the
  Caribbean.
• Comparisons are made with other developing
  regions, across countries of the region, and
  within countries using data and definitions as
  homogeneous as possible.
• Most of the data and estimations come from a
  databank of household surveys constructed by IDB
  through the MECOVI program.

3
Currently aproximately 35 percent, or more than
than one third of the population in Latin America
and the Caribbean are poor, about 180 million
Latin Americans(1).
(1) Using a uniform poverty line of US2 a day in
PPP (Purchasing Power Parity) in 1985 across
countries.
4

• Poverty incidence in the region is in the middle
  range compared with other developing regions.

• This represents 5.7 of the total number of poor
  in the developing world.

5
A similar picture emerges using a poverty line of
US1 a day (PPP 1985).
6

• The region is the most unequal in the world.
• 25 percent of national income is earned by the
  top 5 of the population. The bottom 30 earns
  only 7.5 of total income.

7

• There is great dispersion in poverty incidence
  across countries in the region going from 75.3
  in Honduras to 13.6 in Uruguay (US2 a day PPP
  1985).

8
The same is true when poverty is measured using
US1 a day (PPP 1985).
9

• In absolute numbers, four medium to large
  countries (Brazil, Mexico, Colombia, and Peru)
  together have two thirds of the total number of
  poor (US2 a day-PPP 1985) in the region (123,7
  m).
• A similar picture emerges using a poverty line
  of US1 a day PPP 1985.

10

• There are also large disparities in the
  incidence of poverty within countries in the
  region. For example, in Guatemala poverty
  incidences in the North and the North-West Region
  (72.4 and 69.1) are more than 5 times that in
  Guatemala City (13.7).

11

• In Peru, poverty incidences in the Rural Jungle
  (79.6) and the Rural Highlands (79.5) are more
  than 5 times that in the Metropolitan Area of
  Lima (14.6).

12

• In Mexico, poverty incidence in the South-East
  region (51.0) is more than 17 times that in the
  Federal District (2.9).

13
BASIC POVERTY PROFILE FOR THE REGION

• Poverty is more severe in rural areas
• Incidence of poverty in rural areas (59.1) is
  more than 2 times that in urban areas (26.1).
• The Poverty Gap in rural areas (53.9) is more
  than 10 points higher than that in urban areas
  (42.5).

14

• Due to the process of urbanization, the shares
  of the total number of poor (US2 a day- PPP
  1985) living in rural and urban areas are
  similar.
• However, poverty measured by US1 a day (PPP
  1985) is still highly concentrated in rural areas.

15

• Poverty is concentrated in agriculture and non
  financial services
• 35.5 and 29.1 of the poor have a household
  head who works in agriculture and non financial
  services respectively.
• The probability of being poor is 6 times higher
  for people with a household head working in
  agriculture (66.8) than for people with
  household head working in the financial sector
  (10.1).

16

• Poverty is associated with low education levels
• 49.1 of the poor have a household head with
  only primary education.
• The probability of being poor is more than 8
  times higher for people with a household head
  with primary education (41.3) than for people
  with a household head with higher education
  (5.1).

17

• Poverty is higher among indigenous and Afro-Latin
  people
• Incidence of poverty for indigenous and
  Afro-Latin people doubles that of the rest of the
  population in Brazil, Guatemala and Peru.

18

• Poverty is higher in women-headed urban
  households
• Incidence of poverty for women-headed urban
  households (30.4) is 5 points higher than that
  for men-headed urban households (25.0).
• This figures does not capture any further gender
  inequality that might occur within households.

19
Reducing Poverty and Inequality

• Economic growth and macroeconomic stability are
  essential for poverty reduction, but not
  sufficient.
• To cut poverty in half by 2015, the region must
  grow at an average annual per capita rate of 3.5
  percent, twice the rate in the 1990s.

20
Growth is strongly associated with reductions in
income poverty
Note Collection of 150 country-level spells of
poverty change and mean income change from
poverty surveys 1980-1998.
21
but initial inequalities reduce the pace of
poverty reduction
3
Reduction in poverty associated with a one
percent increase in income
2
1
0
0.2
0.4
0.6
Initial income inequality(Gini Coefficient)
Source World Bank, 2001
22

• Reducing Poverty and Inequality
• Growth must be accompanied by measures that
  ensure that its benefits reach all segments of
  the population, these include

Opportunities for the poor
Human development
POVERTY AND INEQUALITY REDUCTION
Social protection
Prevention of social ills
Political and social inclusion
23

• Opportunities for the poor
• Increase the assets base of the poor by, for
  example, land titling and housing programs.
• Promote the creation and development of markets
  by, for example, improving access to
  geographically inaccessible areas through
  investment in physical infrastructure, supporting
  microenterprises and environmentally sustainable
  rural activities, and increasing the access to
  credit markets.
• Human development
• Investment in projects that secure access to
  quality education and health services through
  supply and demand side interventions.
• Investing in mothers and early childhood
  interventions.
• Social protection
• Safety nets guaranteeing minimum consumption
  levels, access to basic services and protection
  of human capital investments during crises.
• Improving management of natural disaster risks.
• Instruments that help the poor cope with
  illness, crop failure, unemployment, drops in
  income, and old age.

24

• Prevention of social ills
• Upgrading of urban slums and community policing.
• Promoting youth participation in development
  projects.
• Social marketing campaigns to change social
  norms and attitudes toward domestic violence.
• Political and social inclusion
• Enhance governments accountability and make
  them more responsive to the needs of the poor.
• Strengthening civil society organizations and
  encouraging community participation in the
  process of public policy dialogue, especially of
  traditionally marginalized groups, such as,
  women, indigenous and Afro-Latin populations and
  the poor, more generally.
• Eliminate discriminatory practices and support
  projects that promote opportunities for socially
  excluded groups.