Globe, Latin America, Uncategorized, United Kingdom

Inequality in Latin America: the worst in the world

In this region of the world, the macro-economic outlook of the last few years shows a slowing down of economic activity, with a reduction in GDP per capita and consumption per capita, fewer exports and a sustained decline in the quality of work.


Ivette Fernández Sosa


This is the outlook described by the Economic Commission for Latin America and the Caribbean (Eclac) which warned at the end of 2019 that the economy would this year face the added pressure of demands from the people that inequality by reduced, in a context already characterised by a slowing of internal and external demand, and more fragile international markets.

In combination, these forces are keeping growth projections for 2020 low, at around 1.3% for the region as a whole.

Consequently, Eclac has ruled that the period from 2014 to 2020 will be the one with the least growth for Latin American and Caribbean economies in the last seven decades.

The Executive Secretary of Eclac, Alicia Bárcena, has already stated that “In view of this outlook, the region cannot endure policies of adjustment but requires ones to stimulate growth and reduce inequality. Current conditions make it imperative for fiscal policy to be centred on the reactivation of growth and on responding to social demands”.

The World Bank said a few weeks ago that discontent over lack of opportunities is an underlying risk to social stability, and also to economic growth, in Latin America and the Caribbean in 2020.

According to its study, the continent displays alarming indicators of inequality in comparison to other regions, even though levels of inequality have reduced in many countries in the region over recent years.

The proportion of GDP destined to the 40% of households with the lowest income in this part of the world is lower, on average, than the figure in all emerging economies and developing countries on other continents, and also in developed countries.

Meanwhile, the share going to the richest 10% represents over 35% of GDP, whilst in developed countries it is 25%, and 31% in emerging and developing countries.

The organisation observed that growth in Latin America and the Caribbean fell significantly in 2019 to an estimated 0.8% due to a slowdown in world trade and social unrest in a number of the region’s countries.

Nonetheless, the World Bank has projected regional growth of 1.8% this year since it predicts that the growth of the region’s largest economies will stabilise and internal demand will rise.

In a similar vein, the chapter dedicated to this region in a report by the United Nations Department of Economic and Social Affairs revealed a preoccupation with the same concern as the organisations mentioned above.

“Between a lower average income and perpetually high inequality, levels of poverty are rising,” said the report, commenting on Latin America and the Caribbean.

In this analysis, a slow and uneven recovery is predicted for the region over the next two years, with growth of up to 1.3% in 2020 and 2% in 2021, after growth of 0.1% in 2019.

“Economic activity will be supported by financial policies of expansion and by the recovery of internal demand in Brazil and Mexico. But even this recovery could be subject to important risk factors, like a greater decrease in global trade, renewed financial volatility and greater political uncertainty,” the report emphasised.

The study also reported that South America will experience its third year of recession in 2020, though its severity will ease. Economic activity is expected to slowly pick up in Central America and Mexico, after growth reached its lowest figure in a decade in 2019. The discontent that inequality generates in the region was again mentioned by the International Monetary Fund as it deducted percentage points from its earlier economic predictions.

According to the report, which calculated that the region’s economy grew by only 0.1% in 2019, the IMF reduced its predictions for the next two years by 0.2% and 0.1%.

Therefore, the estimates for growth in Latin America and the Caribbean in 2020 and 2021 are 1.6% and 2.3%.

The reductions comes from anticipating “less growth for Mexico, and Chile, which is afflicted by social unrest”, while a moderate increase has been predicted for Brazil. Despite being particularly beset by inequality, and being the most unequal region in the world above Sub-Saharan Africa, according to Eclac, Latin America also suffers from the downturn afflicting the world economy as a whole.

The ineffective wealth redistribution policies that mark the region make it particularly vulnerable in times of difficulty.

“Protests across the region share a common thread which is inequality, and they could transform this into an opportunity for social change. As a result of mass demonstrations, we have seen how some governments have agreed to structural improvements to essential public services like healthcare, education, pensions and transport,” said Eclac’s Executive Secretary. (PL)

(Translated by Elizabeth Dann – Email: Pixabay

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