PHA-Exchange> Inequality in Latin America and the Caribbean: Breaking with History?

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From: Maria Hamlin Zúniga <iphc at cablenet.com.ni>
From: EQUIDAD at LISTSERV.PAHO.ORG

Inequality in Latin America and the Caribbean: Breaking with History?,

INSTITUTIONAL AND POLICY REFORMS NEEDED TO END DEEP INEQUALITY IN LATIN
AMERICA
AND THE CARIBBEAN
David de Ferranti, Guillermo Perry, Francisco H.G. Ferreira, Michael
Walton,
David Coady - International Institute for Food Policy Research, Wendy
Cunningham - World Bank, Leonardo Gasparini - Universidad Nacional de
la
Plata, Argentina, Joyce Jacobsen -Wesley University, Yasuhiko Matsuda -
World Bank, James Robinson- California University, Berkeley, Kenneth
Sokoloff - California University, Los Angeles, Quentin Wodon - World
Bank.
October 2003

http://wbln0018.worldbank.org/LAC/LAC.nsf/ECADocByUnid/4112F1114F594B4B
85256
DB3005DB262?Opendocument

MEXICO CITY, October 7, 2003 - ".......To break with the long history
of
inequality in Latin America and the Caribbean, societies need to
undertake
deep reforms of political, social and economic institutions, improve
access
by the poor to vital services and assets - especially education -
deliver
income transfers to poor families, and adopt specific policies to help
indigenous people and Afro-descendants, a new World Bank study says.

Inequality in Latin America and the Caribbean: Breaking with History?
released in Mexico city today, explores why the region suffers from
such
persistent inequality, identifies how it hampers development, and
suggests
ways to achieve greater equity in the distribution of wealth, incomes
and
opportunities.

"Latin America and the Caribbean is one of the regions of the world
with the
greatest inequality," said David de Ferranti, World Bank Vice President
for
Latin America and the Caribbean who, with Guillermo Perry, Francisco
H.G.
Ferreira and Michael Walton, guided the team that produced the report.
"Latin America is highly unequal with respect to incomes, and also
exhibits
unequal access to education, health, water and electricity, as well as
huge
disparities in voice, assets and opportunities.  This inequality slows
the
pace of poverty reduction, and undermines the development process
itself."

The richest one-tenth of the population of Latin America and the
Caribbean
earn 48 percent of total income, while the poorest tenth earn only 1.6
percent, the research team found.  In industrialized countries, by
contrast,
the top tenth receive 29.1 percent, while the bottom  tenth earn 2.5
percent.  Using the "Gini Index" of inequality in the distribution of
income
and consumption, the researchers found that Latin America and the
Caribbean,
from the 1970s through the 1990s, measured nearly 10 points more
unequal
than Asia, 17.5 points more unequal than the 30 countries in the
Organization for Economic Cooperation and Development, and 20.4 points
more
unequal than Eastern Europe.

The data show that inequality in the least unequal LAC country -
Uruguay -
is higher than in the most unequal country in Eastern Europe and the
industrialized countries. On average, income inequality has tended to
worsen
slightly in the region, though experiences have varied.  Some
relatively
equal countries, including Argentina, Uruguay and Venezuela have
experienced
rises in inequality- Argentina dramatically so.  By contrast Brazil,
historically the most unequal country in the region, experienced a
modest,
but significant improvement.  Mexico may also have enjoyed a small
improvement.

The report singles out race and ethnicity as enduring determinants of
one's
opportunities and welfare in Latin America.  Indigenous and
Afro-descended
people are "at a considerable disadvantage with respect to whites," the
report says, with the latter earning the highest wages in the region.
Focusing on seven countries - Brazil, Guyana, Guatemala, Bolivia,
Chile,
Mexico and Peru - the study found that indigenous men earn 35-65
percent
less than white men. The disparity between white women and non-white
women
was in the same range. In Brazil, men and women of African descent earn
about 45 percent of the wages of their white counterparts.

In Guatemala, Bolivia and Brazil, three countries where ethnic and
racial
categories are significant, over 50 percent of households headed by
white
men or women have access to sewerage as compared to 30 percent for
those
headed by indigenous men and 37 percent for those headed by indigenous
women. Among Brazilians, 50 percent of households headed by white women
have
sewerage, versus 40.5 percent for non-white males and 45.1 percent for
non-white females.  Across the region, citizens who are both female and
of
indigenous or African descent are at the bottom of all
asset-distribution
scales.

In contrast to enduring gaps correlated to racial and ethnic
differences,
Latin America has experienced progress in narrowing gender
differentials in
income and education.  In much of the region, girls and young women are
actually overtaking boys and young men in educational attainment.

Inequality is as deeply rooted as it is complex. The World Bank's
research
team drew data from 20 countries based on household surveys covering
3.6
million people, and reviewed extensive economic, sociological and
political
science studies on inequality in Latin America.  The team found that
the
unequal distribution of resources that characterizes the region today
follows a pattern set with specific traits of European colonization in
the
region.

In modern times as in the early colonial periods, elite populations
shaped
institutions and policies to serve their interests first, the report
found.
For instance, most LAC countries did not achieve high levels of
literacy
until well into the 20th century.  Low levels of support for basic
education
contrasted with generous financing for universities, where the children
of
the elite were trained.   Political institutions in the region,
typically,
have been weak.  And while transitions to democracy have brought
valuable
gains, patterns of influence remain highly unequal, with traditions of
clientelism and patronage often continuing despite national and local
elections.

In a global economy, where "human capital" is critical to
competitiveness,
inequalities which result in a failure to develop people's skills and
knowledge to optimum levels, among other factors, can actually slow
down the
rate of economic growth, and weaken the poverty-reducing impact of the
growth that does occur.

To address the deep historical roots of inequality in Latin America,
and the
powerful contemporary economic, political and social mechanisms that
sustain
it, the report outlines four broad areas for action by governments and
civil
society groups to build coalitions to break this destructive pattern:

Build more open political and social institutions that allow the poor
and
historically subordinate groups, such as Afro-descendants and
indigenous
people, to gain a greater share of agency, voice and power in society.

Ensure that economic institutions and policies seek greater equity,
through
sound macroeconomic management and equitable, efficient crisis
resolution
institutions that avoid the large regressive redistributions that occur
during crises, and that allow for saving in good times to enhance
access by
the poor to social safety nets in bad times.

Increase access by the poor to high-quality public services, especially
education, health, water and electricity, as well as access to farmland
and
the rural services the poor need to make it productive.  Protect and
enforce
the property rights of the urban poor.

Reform income transfer programs so that they reach the poorest
families,
including use of measures that are conditional on keeping children in
school
and attending health services, so as to improve their lifelong
income-earning capacity.

"The key to reducing inequality in Latin America is institutional
reform,"
said Guillermo Perry, the Bank's Chief Economist for Latin America and
the
Caribbean, and co-author of the study.  "To overcome the inequality
that
undermines their efforts to get out of poverty, poor people must gain
influence within political and social institutions, including
educational,
health and public services institutions.  To enable them to achieve
such
influence, the institutions must be truly open, transparent,
democratic,
participatory - and strong."

Perry and fellow research team leaders Francisco H. G. Ferreira and
Michael
Walton concluded that success in "breaking with the long history of
inequality in Latin America" depends on "strong leadership and broad
coalitions" to achieve progress in the first area for action, namely to
mobilize "the political agency of progressive governments and the
poor."

 Finally, the report calls for reform of Latin America's "truncated,
elitist
welfare state", so that social security and social assistance actually
reaches the poor and households dependent on the informal sector.  In
addressing this complex agenda, the report focuses on a specific set of
measures as an illustration of what is possible.  For example, targeted
income transfers conditioned on keeping children in school and
attending
health services could be an important part of a more equitable welfare
state.  In making the case for expanded use of conditional cash
transfers,
the research team cites as examples of success programs such as those
underway in Mexico, Brazil and Nicaragua.

Mexico's "Oportunidades" (formerly PROGRESA) program helps poor
families
finance educational and health costs, and Brazil's "Programa Nacional
de
Bolsa Escola," and "Programa Bolsa Alimentação," offer education and
nutrition subsidies, respectively.  Results from Mexico, where
Oportunidades
covered 4.2 million rural and urban families at the end of 2002, show
enrolments in middle schools increasing from 67 percent to about 75
percent
for girls, and from 73 percent to about 78 percent for boys as a
consequence
of the program.  Health and nutrition results are even more striking.
Height
growth among infants in the crucial 12-36-month range increased by
about 1
cm per year - in an environment in which the incidence of stunting was
at 44
percent of the infant population before the program began.  And, as a
result
of increased visits to medical providers, illness among newborns
decreased
by 25 percent, among infants aged under two by 19 percent and among
children
aged three to five by 22 percent...."