Inequity Remains Throughout Region In LatAM.

Latin America and the Caribbean did not improve income distribution during the 1990s, with the region remaining the most unequal in the world in this sense, according to Social Panorama 2000-2001, prepared by the Economic Commission for Latin America and the Caribbean (ECLAC).

The wealthiest 10% of households captures a share of total income that on average is 19 times the amount received by the poorest 40% of households. From two-thirds to three-quarters of the population, depending on the country, receives a per capita income that is lower than the general average.

On the subject of trends in income distribution, ECLAC has concluded that “in most countries this situation did not improve significantly and in some cases it even worsened during the 1990s, despite the relative recovery of economic growth and higher social spending, so it was not possible to turn around the marked worsening of distribution during the preceding decade.”

Income distribution in Latin America stands out in the international context especially because of the large amount of total earnings received by the wealthiest 10% of the population. Except for Costa Rica and Uruguay, in all other countries national figures indicate the wealthiest 10% of households appropriates over 30% of income, and in most of them, except El Salvador and Venezuela, their share is over 35%, while in Brazil it is 45%.

This unequal situation tended to worsen from 1997 to 1999, despite improvements in average household income during this period in some countries.

At the same time, in the past three years, only four countries (Argentina, Brazil, Chile and Panama) saw an increase in the share of income received by the poorest 40% of households. In the rest, including those with more equal distribution, there was a decline or at the most less significant changes.

A simple comparison of average income for different household groups reveals the enormous magnitude of inequity in Latin America. In countries such as Bolivia, Brazil and Nicaragua, the per capita income of the wealthiest quintile (20% of households) was more than 30 times the income of the poorest quintile. Bolivia is particularly surprising, in that the wealthiest quintile receives almost 50 times more income than the poorest, while the average in other countries is around 23 times.

The high degree of income concentration in Latin America is also apparent in the percentage of the population receiving per capita income that is below half the average. In most of the region’s countries, this percentage ranges from 40% to 50%. At less than 36%, Uruguay and Costa Rica again appear as the countries with the best income distribution, while Brazil shows the highest concentration, with 55% of people receiving income that is less than half the national average. For Chile, Colombia, Guatemala, Panama and Paraguay this indicator is over 46%.

Inequality at the national level doesn’t necessarily translate into the same levels for urban and rural areas. In most countries, the former tend to show less equal distribution than the latter.

Distribution Worsened during the Past Decade

Over the past decade, of 17 countries studied, only Uruguay ended the period with results indicating progress in terms of distribution. Moreover, evidence confirms that even for those that managed to keep growth rates high over time (such as Chile) income distribution proved extremely rigid when it came to reducing high concentration and income disparities persisted as an undesirable feature of economic and social structures.

The above reveals the concentration typical throughout Latin America for many years now and confirms observations offered by previous editions of Social Panorama concerning the difficulties implicit in substantially improving the structural factors underlying income distribution.

During the 1990s, the share of national income captured by the wealthiest decile of households rose in eight countries, fell in five (but only in Uruguay was this by a significant amount) and remained the same in one (Mexico). It is worth noting that some increases in inequality occurred in countries that, since the post-war period, had more equal income distribution, such as Argentina, Chile, Costa Rica and Venezuela.

Meanwhile, in the case of the income share captured by the poorest 40% of households situations vary, since this fell during the decade in five countries, rose in eight, and remained the same in one (Nicaragua). In particular, some of the most significant declines occurred in those facing the worst crises (Ecuador and Venezuela), but El Salvador, Costa Rica and Mexico also lost ground.

Middle-income groups experienced modest changes in their income share, thus indicating that in many countries they have more powerful tools than the poor to defend their share of total income.

ECLAC has found it encouraging, however, that some Central American countries have progressed- to different degrees – in terms of distribution in urban areas, although high levels of concentration still remain in this subregion. Economic stability, less financial volatility, the ability to make the most of the boom in Canada and the United States, reduced demographic pressure resulting from international migration, and an increase in remittances from nationals living abroad are among the factors contributing to this result.

For a copy of the study CLICK below (Adobe Acrobat required):

http://www.eclac.cl/publicaciones/DesarrolloSocial/8/LCG2138P/PSE-2001-Cap2.pdf.