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Cause for Economic Optimism in Latin America

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According to the U.N., poverty-reduction in Latin America has hit a snag.

The U.N. Economic Commission for Latin America and the Caribbean, or ECLAC, recently put out an annual report, showing that 28 percent of the region’s population was living in poverty in 2014. Of those 167 million people, 12 percent were living in extreme poverty.

Economic growth in Latin America has slowed recently. The region registered 1.1 percent growth in 2014—its smallest growth rate since 2009. Alicia Barcena, head of the ECLAC, blamed ineffective policy for much of the region’s woes.

“It seems the recovery from the international financial crisis was not taken advantage of sufficiently to strengthen social protection policies that reduce vulnerability from economic cycles,” said Barcena.

ECLAC has called on regional governments to put mechanisms in place that would improve the region’s resilience in the face of global economic downturns.

“Now, in a scenario of a possible reduction in available fiscal resources, more efforts are needed to fortify these policies, establishing solid foundations with the aim of fulfilling the commitments of the post-2015 development agenda,” said Barcena.

While the regional poverty rate has stagnated, some countries, such as Paraguay (from 49.6 percent in 2011 to 40.7 percent in 2013) and Chile (10.9 percent to 7.8 percent), have made significant progress in reducing their poverty rates. Peru (25.8 percent to 23.9 percent), Colombia (32.9 percent to 30.7 percent) and El Salvador (45.3 percent to 40.9 percent) also made positive progress.

ECLAC’s latest report also showed that while the income-based poverty rate has languished in recent years, multidimensional poverty has indeed fallen significantly since 2005.

According to the report, the percentage of the Latin American population living in multidimensional poverty dropped from 39 percent in 2005 to 28 percent in 2012.

Despite the current state of relative economic stagnation, preliminary ECLAC projections for 2015 suggest that there is cause for optimism, forecasting a 2.2 percent regional increase.

The ECLAC’s Third Summit of the Community of Latin American and Caribbean States will be held in Costa Rica, January 28-29.

– Parker Carroll

Sources: Andina, El Universal, Mercopress, Reuters, Telesur 1, Telesur 2,
Photo: Huffington Post

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The Fluctuating Latin American Economy

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The Latin American economy has experienced a period of great fluctuation since 2010. Whenever there is good news, there seems to be an equal and opposite force of bad news applied. Constant fluctuation has curbed poverty and opened the door to the middle class, only to have that door slam close. There are several key points to consider as to why this is.

In the past decade, nearly 50 percent of those in poverty have risen above the poverty ranking. But many are still struggling to enter the middle class. Around 200 million, or over two-thirds of the population, are at a high risk of falling back into poverty.

To fully understand this, it is necessary to know how economic divisions are classed in Latin America. Twenty-five percent of Latin Americans are earning less than $4 USD per day and this is considered living in poverty.  Some 34 percent  earn between $10 and $50 USD per day and these individuals are judged to be middle class. When someone earns between $4 and $10 USD, they are part of the vulnerable class. This final group accounts for 38 percent of the population.

The UNDP disclosed this information in the 2014 Human Development Report; a report that uses data as recent as August 24 of the same year.

But not all news is bad.

The middle class of the combined Latin America and Caribbean grew from 21 percent to 34 percent equaling 81 million individuals in the time period form 2000-2012. The vulnerable population grew from 35 percent to 38 percent. The UNDP recognized poverty dropping from 42 percent to 25 percent over that same time period as a significant regional achievement.

Now, Jessica Faieta, the UNDP Director for Latin America and the Caribbean, says the good news might be running out unless a change is made.

“It is very clear that using the same policies will not provide the same results,” said Faieta. “More than ever, the region must invest in universal social protection, particularly in the most critical phases of life, as is the case with children, the elderly and youth entering the labor market.”

Other analysts agree with her conclusion. The region lacks critical social protection, a defense that has been pinpointed as crucial to long-term economic growth. Nearly 50 percent of the country lacks access to medical services, a retirement pension or a labor contract. If this is not amended, the region cannot be expected to grow at the same rate indefinitely.

– Andrew Rywak

Sources: UNDP, The Economist, BBC