When thinking about the national economies of Latin America, I have a tendency to think of past problems and controversies: the hyperinflations and debt defaults of the 1980s; the arguments over whether and how to follow a \”Washington consensus\” of market-oriented reforms in the 1990s; and the history of being the highest-inequality region in the world. But as one looks back over the last 25 years, what stands out is not so much the country-by-country issues and problems, but the economic progress the region has made. Did you know that according to World Bank data, Brazil already ranked in 2012 as the 9th-largest economy in the world and Mexico as 10th, putting those two countries just ahead of Italy, Canada, and South Korea. Some progress is happening with regard to poverty and inequality in the region, too.
The World Bank has published a report called \”Social Gains in the Balance: A Fiscal Policy Challenge for Latin America & the Caribbean.\” To set the stage, here\’s the progress against poverty in the Latin American region in the last decade or so. The share of \”extreme poor,\” classified as those living on less than $2.50 per day, fell by half since 2000. The share of \”moderate poor\” living on $2.50 to $4 per day also fell sharply. The share of those \”vulnerable\” to falling back into poverty at $4 to $10 in consumption per day stayed about the same. But bit increase was the \”middle class,\” which refers to those living on between $10 and $50 per day. Indeed, of these four groups, the \”middle class\” is likely to become the largest in the next few years.
The World Bank has a simple measure of whether economic prosperity is being \”shared.\” It compares the growth rate of income for the bottom 40% of the income distribution to the overall average. That measure helps to explain why inequality in Latin America has declined since 2000–although that reduction in inequality has stagnated in the last few years.
The reduction in inequality and gains in shared opportunity are quite real. For example, here\’s a graph showing various measures of progress in Brazil.
The severe degree of inequality in Latin America over the decades has meant that it was underinvesting in the education and health of a large proportion of its population.