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More Social Investment Can Further Reduce Regional Poverty

By Odeen Ishmael
Guyana Journal, January 2008

CARACAS, 26 December 2007: The latest report by the Economic Commission for Latin America and the Caribbean (ECLAC) reveals that the poverty rate in the region fell by 3.3 percent even though 194 million of its people remain poor. Of this amount, 71 million are classified as indigent (or experiencing extreme poverty), according to the organization’s latest report, Social Panorama for Latin America 2007, released on November 15 last.

The report says that in 2006, 36.5 percent of the region’s 550 million citizens were living in poverty, while 13.4 percent of them were indigent. Compared with the report of the previous year, these figures indicate that 15 million people were able to get out of poverty and 10 million being no longer indigent.

This relatively “sharp” decline in the regional poverty rate apparently came as a surprise, and ECLAC’s Executive Secretary Jose Luis Machinea, on presenting the report, admitted, “Poverty fell a lot more than we had estimated.” Nevertheless, he warned against complacency because the poverty rate remains “extraordinarily high.” On the other hand, he emphasized that extreme poverty fell 30 percent in the past four years.

Significantly, in all the countries there have been noticeable advances in the fight against poverty as indicated by a continuation of a downward trend in the poverty rate registered in 2005. Actually, this is the first time since 1990 that the number of poor in the region dropped below 200 million.

The ECLAC report points out that the reduction of poverty in the region is associated basically with economic growth, which has generated employment, and to social programs, which have involved greater social spending. This has been most noticeable in Argentina which between 2002 and 2006 reduced poverty by 24.4 percent and its level of indigence by 13.7 percent. Venezuela was in second place, reducing its poverty and indigence level by 18.4 percent and 12.3 percent, respectively.

Following them are Peru, Chile, Ecuador, Honduras and Mexico, which accumulated a drop in poverty greater than 5 percent between 2002 and 2006. Brazil followed closely by reducing both poverty and indigence by 4.2 percent.

A significant drawback in the report is that it concentrates more on the Latin countries and gives little information about the English-speaking Caribbean, although the overall analysis points to the reduction of poverty in this sub-region as well. The Guyana government has reported that poverty declined substantially in the past 15 years with the rate now standing at less than 35 percent.

Poverty reduction remains a primary issue in all the countries of Latin America and the Caribbean. Three years ago, the Food and Agricultural Organization (FAO) warned that poverty continued to be very high in rural areas and that without dynamic, sustained and inclusive economic growth, accompanied by strong social policies, the rural population would be plunged into a greater poverty crisis.

The FAO noted then that while over two-thirds of the region's poor and more than half of those who lived in extreme poverty were city dwellers, in relative terms, the incidence of poverty and extreme poverty was much greater in the countryside. A full 62 percent of the rural population of Latin America and the Caribbean were living in poverty, with 38 percent facing extreme poverty, while the corresponding figures for the urban population were 38 percent and 14 percent. Undoubtedly, these figures, according to ECLAC, have reduced since the FAO issued its report.

While improving rural agriculture can play an essential role in the alleviation of poverty and economic marginalization throughout the region, the greatest obstacle to agricultural sector development is the difficulty in establishing efficient chains of agro-commerce and agro-industry. At the same time, it will be necessary for rural communities to adapt to the changing conditions brought by trade opening. But according to the FAO, one of the most serious problems facing Latin America and the Caribbean is that it remains the developing world region with the smallest proportion of foreign trade among its own economies.

Certainly, there are other methods which could be implemented in the anti-poverty war. For instance, the annual report of the International Food Policy Research Institute, issued in early November 2007, identifies other initiatives such as basic training in literacy, numeracy, and other skills required to make use of microcredit, which has assisted large numbers of poor people but still remains beyond the reach of the indigent.

Interestingly, even the countries that have made remarkable progress continue to feel the effects of extreme poverty. For instance, Chile’s rural campesino population accounts for only 13.4 percent of the country's 15.5 million inhabitants, but it is among them that the pockets of the most extreme poverty currently exist. Actually, Brazil, and Mexico have the region's largest poor populations. For Mexico itself, the North American Free Trade Agreement (NAFTA) has brought catastrophic effects for corn farmers who are forced to compete with large US agro-industrial companies. In addition, transportation difficulties and a lack of electrical power and communications services add to the isolation of many of these countries’ poor rural communities and deny them access to global technology.

Along with poverty, inequality also presents a serious challenge for Latin America and the Caribbean, which ECLAC describes as the most unequal region in the world. The countries with the highest inequality (in terms of distribution of income, social services, basic infrastructure, etc.) in the region, as measured with the “Gini index” in the UN Development Report in 2006, were Bolivia (60.1), Haiti (59.2), Colombia (58.6), Brazil (58), Paraguay (57.8) and Chile (57.1), while the countries with the lowest inequality in the region were Nicaragua (43.1), Guyana (43.2), Ecuador (43.7), Venezuela (44.1) and Uruguay (44.9). However, a lower Gini index does not necessarily translate into a lower poverty rate. (For comparison, the index for the US is 40.8.)

Clearly, the countries of the region continue to face a stiff struggle to reduce the inequalities and economic disadvantages facing a substantial proportion of their population. While, the reduction of the poverty rate is indeed good news, undoubtedly, more social investment in their citizens’ welfare can produce additional beneficial results in the year ahead.

(The writer is Guyana’s ambassador to Venezuela. The views expressed are solely those of the writer.)

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