When people are asked to picture Latin America, an image of poverty usually comes to mind. Yet while it is true that Latin America has historically been a region of high rates of poverty and income inequality, income inequality has in fact declined in 13 of 17 countries as measured by the Gini coefficient. The Gini coefficient is used to determine the level of income inequality in a country wherein a score of 0 is given to countries with complete equality (countries whose citizens have the same income) while a score of 1 is given to perfectly unequal countries (those in which one person owns all the income).

Recent data by the World Bank suggests that there has been a successful push to reduce poverty in the region, with the number of people living in extreme poverty (defined as those living on less than $2.50 a day) halved to 12.3 percent between 2003 and 2012. The largest proportion of the population, at 38 percent, includes those that are most vulnerable to falling back into poverty. This last part includes those making between $4-$10 a day. The middle class in Latin America is growing extremely rapidly at 34.3 percent of the population and is set to overtake the most vulnerable to become the largest segment of Latin America. The middle class is defined as the number of people who earn between $10-$50 a day.

Yet these numbers are a bit misleading. There continues to be a large degree of inequality between Latin Americans of different ethnicities. In Brazil, 76.4 percent of primary school children who are descended from Europeans are enrolled in school, while only 65.3 percent of indigenous or African children are enrolled. Similarly, in Chile 97 percent of families of European descent are enrolled in school, while 74.4 percent of children of indigenous or African descent are enrolled.

This is significant because as the middle class expands, it’s going to be able to expend more money on disposable goods and fuel economic growth. It will also be interesting to see what happens as the middle class demands more of a stake in the political process.

– Jeff Meyer

Sources: World Bank, IARIW
Photo: Not Adam and Steve