Finance:Wealth inequality in Latin America

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Short description: Economic disparity by region
Slums on the outskirts of a wealthy urban area in São Paulo, Brazil is an example of inequality common in Latin America.
"Las castas" – An interesting Spanish painting from the 18th century containing a complete set of 16 socio-racial casta combinations from Spanish America.

Wealth inequality in Latin America and the Caribbean refers to economic discrepancies among people of the region. Wealth inequality remains a serious issue despite strong economic growth and improved social indicators observed over the past decade. A report release in 2013 by the UN Department of Economic and Social Affairs entitled Inequality Matters. Report of the World Social Situation, observed that: ‘Declines in the wage share have been attributed to the impact of labour-saving technological change and to a general weakening of labour market regulations and institutions.[1] Such declines are likely to affect individuals in the middle and bottom of the income distribution disproportionately, since they rely mostly on labour income.’ In addition, the report noted that ‘highly-unequal land distribution has created social and political tensions and is a source of economic inefficiency, as small landholders frequently lack access to credit and other resources to increase productivity, while big owners may not have had enough incentive to do so.[1][2]

According to the ECLAC, Latin America is the most unequal region in the world.[3] Inequality is undermining the region's economic potential and the well-being of its population, since it increases poverty and reduces the impact of economic development on poverty reduction.[4] Children in Latin America are often forced to seek work on the streets when their families can no longer afford to support them, leading to a substantial population of street children in Latin America.[5] According to some estimates, there are 40 million street children in Latin America.[6] Inequality in Latin America has deep historical roots in the Latin European racially based Casta system[7][8][9][10][11][12][13] instituted in Latin America in colonial times that have been difficult to eradicate since the differences between initial endowments and opportunities among social groups have constrained the poorest's social mobility, thus making poverty to be transmitted from generation to generation, becoming a vicious cycle. High inequality is rooted in the deepest exclusionary institutions of the Casta system[14][15][16] that have been perpetuated ever since colonial times and that have survived different political and economic regimes. Inequality has been reproduced and transmitted through generations because Latin American political systems allow a differentiated access on the influence that social groups have in the decision making process, and it responds in different ways to the least favored groups that have less political representation and capacity of pressure.[17] Recent economic liberalisation also plays a role as not everyone is equally capable of taking advantage of its benefits.[18] Differences in opportunities and endowments tend to be based on race, ethnicity, rurality and gender. Because inequality in gender and location are near universal, race and ethnicity play a larger, more integral role in the unequal discriminatory practices in Latin America. These differences have a strong impact on the distribution of income, capital and political standing.

In 2008, According to UNICEF, Latin America and the Caribbean region had the highest combined income inequality in the world with a measured net Gini coefficient of 48.3, an unweighted average which is considerably higher than the world's Gini coefficient average of 39.7. Gini is the statistical measurement used to measure income distribution across entire nations and their populations and their income inequality. The other regional averages were: sub-Saharan Africa (44.2), Asia (40.4), Middle East and North Africa (39.2), Eastern Europe and Central Asia (35.4), and high-income nations (30.9).[19] There are quite many different approaches for measuring  inequality. In one of the studies by Baten and Fraunholz (2004), the authors chose an anthropometric approach, namely height inequality in order to see if inequality itself is a threat to globalization and whether openness increases the inequality by using the coefficient of height variation. "This measure covers not only wage recipients (as some other inequality indices do), but also the self-employed, the unemployed, housewives, children, and other groups who may not be participating in a market economy. In addition, this variable has the advantage to be an outcome indicator, whereas real income is an input to human utility."[20]

According to a study by the World Bank,the richest decile of the population of Latin America earn[21] 48% of the total income, while the poorest 10% of the population earn only 1.6% of the income. In contrast, in developed countries, the top decile receives 29% of the total income, while the bottom decile earns 2.5%. The countries with the highest inequality in the region (as measured with the Gini index in the UN Development Report[22]) in 2007 were Haiti (59.5), Colombia (58.5), Bolivia (58.2), Honduras (55.3), Brazil (55.0), and Panama (54.9), while the countries with the lowest inequality in the region were Venezuela (43.4), Uruguay (46.4) and Costa Rica (47.2).

Trends on income inequality 1998–2010 in 7 Latin American countries (Argentina, Brazil, Chile, Colombia, Mexico, Peru, Venezuela). Source of the data: World Bank.

According to the World Bank, the poorest countries in the region were (as of 2008):[23] Haiti, Nicaragua, Bolivia and Honduras. Undernourishment affects 47% of Haitians, 27% of Nicaraguans, 23% of Bolivians and 22% of Hondurans.

Many countries in Latin America have responded to high levels of poverty by implementing new, or altering old, social assistance programs such as conditional cash transfers. These include Mexico's Progresa Oportunidades, Brazil's Bolsa Escola and Bolsa Familia, Panama's Red de Oportunidades and Chile's Chile Solidario.[24] In general, these programs provide money to poor families under the condition that those transfers are used as an investment on their children's human capital, such as regular school attendance and basic preventive health care. The purpose of these programs is to address the inter-generational transmission of poverty and to foster social inclusion by explicitly targeting the poor, focusing on children, delivering transfers to women, and changing social accountability relationships between beneficiaries, service providers and governments.[25] These programs have helped to increase school enrollment and attendance and they also have shown improvements in children's health conditions.[26] Most of these transfer schemes are now benefiting around 110 million people in the region and are considered relatively cheap, costing around 0.5% of their GDP.[27] In some countries e.g. in Peru decentralisation is hoped to help address social justice and poverty better. NGOs which addressed those problems on the local level before could help with that.[28]


Definition of Free Cultural Works logo notext.svg This article incorporates text from a free content work. Licensed under CC-BY-SA IGO 3.0 License statement: Rethinking Education: Towards a global common good?, 24, UNESCO. UNESCO. To learn how to add open license text to Wikipedia articles, please see this how-to page. For information on reusing text from Wikipedia, please see the terms of use.


  1. 1.0 1.1 Rethinking Education: Towards a global common good?. UNESCO. 2015. pp. 24, Box 1. ISBN 978-92-3-100088-1. 
  2. Report on World Social Situation 2013: Inequality Matters. United Nations. 2013. ISBN 978-92-1-130322-3. 
  3. Protección social inclusiva en América Latina. Una mirada integral, un enfoque de derechos. United Nations Economic Commission for Latin America and the Caribbean (UNECLAC). March 2011. ISBN 9789210545556. 
  4. Francisco H. Ferreira, David de Ferranti et al. An example of the policies introduced to combat the poverty and inequality was the import substitution industrialization economic policy. This policy sought to grow national industry and offer protection from foreign competition as a means to reduce external dependencies and improve local economies. "Inequality in Latin America:Breaking with History?", The World Bank, Washington, D.C., 2004
  5. Scanlon, TJ (1998). "Street children in Latin America". BMJ 316 (7144): 1596–600. doi:10.1136/bmj.316.7144.1596. PMID 9596604. 
  6. Tacon, P. (1982). Carlinhos: the hard gloss of city polish. UNICEF news. 
  7. Schaefer, Richard T. (ed.) (2008). Encyclopedia of Race, Ethnicity and Society. Sage. p. 1096. ISBN 978-1-4129-2694-2. "For example, in many parts of Latin America, racial groupings are based less on the biological physical features and more on an intersection between physical features and social features such as economic class, dress, education, and context. Thus, a more fluid treatment allows for the construction of race as an achieved status rather than an ascribed status as is the case in the United States." 
  8. Nutini, Hugo; Barry Isaac (2009). Social Stratification in central Mexico 1500–2000. University of Texas Press. p. 55. "There are basically four operational categories that may be termed ethnic or even racial in Mexico today: (1) güero or blanco (white), denoting European and Near East extraction; (2) criollo (creole), meaning light mestizo in this context but actually of varying complexion; (3) mestizo, an imprecise category that includes many phenotypic variations; and (4) indio, also an imprecise category. These are nominal categories, and neither güero/blanco nor criollo is a widely used term (see Nutini 1997: 230). Nevertheless, there is a popular consensus in Mexico today that these four categories represent major sectors of the nation and that they can be arranged into a rough hierarchy: whites and creoles at the top, a vast population of mestizos in the middle, and Indians (perceived as both a racial and an ethnic component) at the bottom. This popular hierarchy does not constitute a stratificational system or even a set of social classes, however, because its categories are neither exhaustive nor mutually exclusive. While very light skin is indeed characteristic of the country's elite, there is no "white" (güero) class. Rather, the superordinate stratum is divided into four real classes—aristocracy, plutocracy, political class, and the crème of the upper-middle class—or, for some purposes, into ruling, political, and prestige classes (see Chap. 4). Nor is there a mestizo class, as phenotypical mestizos are found in all classes, though only rarely among the aristocracy and very frequently in the middle and lower classes. Finally, the bottom rungs are not constituted mainly of Indians, except in some localized areas, such as the Sierra Norte de Puebla" 
  9. Acuña, Rodolfo F. (2011), Occupied America: A History of Chicanos (7th ed.), Boston: Longman, pp. 23–24, ISBN 978-0-205-78618-3 
  10. MacLachlan, Colin; Jaime E. Rodríguez O. (1990). The Forging of the Cosmic Race: A Reinterprretation of Colonial Mexico (Expanded ed.). Berkeley: University of California. pp. 199, 208. ISBN 0-520-04280-8. "[I]n the New World all Spaniards, no matter how poor, claimed hidalgo status. This unprecedented expansion of the privileged segment of society could be tolerated by the Crown because in Mexico the indigenous population assumed the burden of personal tribute." 
  11. Gibson, Charles (1964). The Aztecs Under Spanish Rule. Stanford: Stanford University. pp. 154–165. ISBN 0-8047-0912-2. 
  12. See Passing (racial identity) for a discussion of a related phenomenon, although in a later and very different cultural and legal context.
  13. Seed, Patricia (1988). To Love, Honor, and Obey in Colonial Mexico: conflicts over Marriage Choice, 1574–1821. Stanford: Stanford University. pp. 21–23. ISBN 0-8047-2159-9. 
  14. David Cahill (1994). "Colour by Numbers: Racial and Ethnic Categories in the Viceroyalty of Peru". Journal of Latin American Studies 26: 325–346. doi:10.1017/s0022216x00016242.,%2012%20pages.pdf. 
  15. Maria Martinez (2002). "The Spanish concept of Limpieza de Sangre and the emergence of the race/caste system in the viceroyalty of New Spain, PhD dissertation". University of Chicago. 
  16. Bakewell, Peter (1997). A History of Latin America. Malden, Mass.: Blackwell. pp. 160–163. ISBN 0-631-16791-9. "The Spaniards generally regarded [local Indian lords/caciques] as hidalgos, and used the honorific 'don' with the more eminent of the them. […] Broadly speaking, Spaniards in the Indies in the sixteenth century arranged themselves socially less and less by Iberian criteria or frank, and increasingly by new American standards. […] simple wealth gained from using America's human and natural resources soon became a strong influence on social standing." 
  17. Fracisco H. Ferreira et al. Inequality in Latin America: Breaking with History?, The World Bank, Washington, D.C., 2004
  18. "Untangling links between trade, poverty and gender". ODI Briefing Papers 38, March 2008. Overseas Development Institute (ODI). 
  19. "Global Inequality: Beyond the Bottom Billion". UNICEF. April 2011. p. 26. 
  20. Baten, Joerg; Fraunholz (2004). "Did Partial Globalization Increase Inequality? The Case of the Latin American Periphery, 1950 - 2000". CESifo Economic Studies 50: 45–84. doi:10.1093/cesifo/50.1.45. 
  21. Francisco H. Ferreira et al. Inequality in Latin America: Breaking with History?, The World Bank, Washington, D.C., 2004
  22. "- Human Development Reports". 
  23. "World Development Indicators database, 1 July 2011". Gross national income per capita 2010, Atlas method and PPP. World Bank Organization (WBO). 
  24. Barrientos, A. and Claudio Santibanez. (2009). "New Forms of Social Assistance and the Evolution of Social Protection in Latin America". Journal of Latin American Studies. Cambridge University Press 41, 1–26.
  25. Benedicte de la Brière and Laura B. Rawlings, "Examining Conditional Cash Transfer Programs: A Role for Increased Social Inclusion?", Social Safety Net Primary Papers, The World Bank, 2006, p.4
  26. "Regional Human Development Report for Latin America and the Caribbean 2010". Inequality in Latin America and the Caribbean. Inequality in Latin America and the Caribbean. 
  27. "Societies on the move". The Economist. 2010-09-11. 
  28. "Mixed Feelings". February 2013.