Development & Aid, Headlines, Latin America & the Caribbean, Poverty & SDGs

DEVELOPMENT-SOUTH AMERICA: Uneven Race Against Poverty

Marcela Valente*

BUENOS AIRES, Apr 6 2005 (IPS) - The race to halve extreme poverty in the Southern Cone countries of South America by 2015 is on, but while Chile has already reached the finish line and Brazil is approaching it, Uruguay, and especially Paraguay and Argentina, must begin moving towards the goal at a faster pace.

The commitment to reducing the proportion of hungry and extremely poor people by half (from 1990 levels) by 2015 was assumed by the international community at the September 2000 United Nations General Assembly.

During that Millennium Summit, U.N. member nations adopted the eight Millennium Development Goals (MDGs), which set specific targets in the fight against inequalities in income distribution, health care, education and gender, and in favour of an environmentally sustainable model of growth.

But each country’s road map for reaching the MDGs depends on its level of development and particular needs.

How have Chile and Brazil made such strong progress towards the poverty reduction goals, despite the fact that they are two of the countries with the greatest gap between rich and poor, in the region with the most unequal income distribution in the world?

And what obstacles have countries like Argentina and Uruguay, which have historically enjoyed a much more just distribution of wealth, run into in the fight against extreme poverty?

A study carried out in Argentina by the Centre for Distributive, Labour and Social Studies at the public University of La Plata states that economic growth is indispensable but not sufficient to reduce extreme poverty in this part of the continent by the deadline set by the international community.

Economist Leonardo Gasparini, one of the study’s two authors, said in an interview with IPS that "sustained growth is a fundamental ingredient in any poverty reduction process, but it must be accompanied by other basic elements."

"A policy that ensures quality education for the poorest of the poor, efficient social assistance that prevents clientelism, and fiscal and public spending policies oriented towards the poor" are a few of the factors that must be emphasised simultaneously, said the economist.

The study, "Meeting the Poverty-Reduction MDG in the Southern Cone", by Gasparini and Martín Cicowicz states that "Sustainable and vigorous productivity growth seems to be a necessary condition to meet the poverty MDG by 2015 in Argentina, Paraguay and Uruguay."

But, it adds, "The required growth rate could be significantly lower if some modest well-targeted redistribution could be performed."

They recommend, for instance, increasing educational levels, reducing birth rates among the lowest-income families, reducing unemployment and the size of the informal economy, and increasing employment in non-agricultural activities.

"(W)ith no changes in inequality, Argentina will have to grow at an annual rate of 9.5 percent until 2015, which is clearly an extremely unlikely scenario," adds the report.

Although Argentina has achieved an economic growth rate around that level in the last two years, it has grown from a very low level, pulling out of four years of recession.

The authors recommend that in the case of Argentina, the year 1992, rather than 1990, should be adopted as the baseline for calculating poverty reduction targets, because in 1990, Argentina was in the midst of a deep economic crisis, while 1992 was a year of relative macroeconomic stability.

Argentina’s performance in terms of poverty reduction has been "very disappointing," and the poverty level climbed significantly between 1992 and 2003, the authors point out.

In 1992, 22.6 percent of the population of Argentina lived below the poverty line, while 4.5 percent lived in extreme poverty. In order to meet the poverty reduction MDG, Argentina must lower the level of extreme poverty to 2.3 percent.

But after the late 2001 collapse of the Argentine economy, an unprecedented 55 percent of the country’s 37 million people fell into poverty, and 25.9 percent into extreme poverty.

Although the poverty rate has now dropped to 40.2 percent, Gasparini predicted that the pace at which poverty is decreasing will begin to slow down next year.

The report also states that reducing unemployment would not have a huge impact, since an estimated 30 percent of the jobless in Argentina are not actually poor, while "most poor unemployed people have characteristics (e.g. young, low education) that imply low wages if they do find a job" – wages that are often insufficient to pull them out of poverty, and which merely place them in the ranks of the working poor.

But Gasparini and Cicowicz say a reduction in the number of children in poor households would have a strong impact in terms of reducing extreme poverty.

In any case, said Gasparini, the likelihood that Argentina will meet the MDG poverty reduction goal is very low.

With respect to neighbouring Uruguay, which suffered its own economic meltdown, in 2002, the report takes 1989 as a baseline, when poverty affected 27.6 percent of the population, and extreme poverty reached 2.8 percent.

By 1995, extreme poverty had dropped significantly, to 1.6 percent.

But that proportion began to rise again in the late 1990s, to around three percent of Uruguay’s population of 3.2 million in 2003, when the country was just beginning to pull out of a severe economic crisis.

The small proportion of people in Uruguay living on less than a dollar a day (less than one percent) "presents a level of progress that is difficult to equal" in the region, says a 2003 report by the United Nations office in Uruguay.

The country’s relatively high level of development prompts us to pose more demanding challenges: not only halving the proportion of people living in extreme poverty, but also the proportion of poor, as well as reverting the tendency towards a growth in poverty, says the U.N. study.

In 1989, 27.6 percent of Uruguayans were poor, a proportion that had risen 3.7 percent by 2003.

For Uruguay to meet the MDG, the report by Gasparini and Cicowicz recommends a concerted effort to make secondary education universal, reduce the proportion of workers who are active in the informal sector of the economy, and reduce the birth rate in the poorest households.

Uruguay’s leftist Broad Front government, led by Socialist President Tabaré Vázquez, appears to be determined to make up for lost time.

The new administration, which took office on Mar. 1, committed itself to meeting the MDGs, and has already launched a national plan to address the "social emergency".

The comprehensive programme will not merely provide a stipend to the country’s poorest families, but will also monitor the households participating in the plan to ensure that children stay in school, and that all of the adult members receive an adequate diet, health care, documentation and vocational training to help them find jobs.

In the case of Paraguay, the myriad shortcomings start with a lack of reliable statistics. Since there were no national surveys on poverty in the early 1990s, the authors take 2002 as the basis for estimating poverty, pointing out that there are indications that the poverty rate did not change significantly between 1990 and 2002.

In 2002, 21.7 percent of Paraguay’s 5.5 million people were living in extreme poverty, while more than 46 percent were poor.

Gasparini and Cicowicz recommend a transfer of wealth to the poorest of the poor through public policies, and underline that an increase in the number of years of schooling would have an especially significant impact in terms of meeting the MDG poverty target.

Other improvements that would bring the poverty rate down, they say, are reductions in unemployment and the size of the informal sector of the economy.

While the vastly different scenarios in Argentina, Uruguay and Paraguay give rise to different challenges, Gasparini said Argentina is in need of the highest sustained economic growth over the next decade in order to meet the MDG poverty reduction goal.

At the other extreme, in terms of the MDG target, is Chile, where poverty fell from 38.6 percent of the population in 1990 to 18.8 percent in 2003, while the proportion living in extreme poverty fell from 12.9 to 4.7 percent in the same period.

The latest annual "Social Panorama of Latin America" report by the Economic Commission for Latin America and the Caribbean (ECLAC) notes that Chile is the only country in the region to have already cut the extreme poverty rate in half since 1990.

The study by the regional U.N. agency, like the one carried out by Gasparini and Cicowicz, recognises that the steady economic growth that Chile has enjoyed over the past three decades is a key factor in its success in reducing poverty.

But they also agree that the expansion in the country’s gross domestic product was not solely responsible for the decline in the number of poor.

An increase in social spending and the "Chile Solidario" or Chile Solidarity Plan, which provides integral assistance to those living in extreme poverty, have also contributed to the fact that a greater proportion of Chileans now enjoy the benefits of the country’s economic success and development.

These measures were adopted after the 1973-1990 dictatorship, when the governing centre-left Coalition for Democracy first came to power.

In addition, poor families in Chile now have less children than families in similar economic circumstances in other countries in the region, according to ECLAC.

"Chile implemented economic reforms that paved the way for the development of an open economy characterised by a high level of growth," said Gasparini.

"But it also generated a critical mass of well-trained technical experts and technocrats for the public sector while maintaining stable economic rules and serious social policies, even in the midst of political ups-and-downs," the economist added.

However, due to the concentration of wealth in Chile, it remains one of the most unequal countries in the region, ECLAC states in its Social Panorama report.

Brazil has also been able to make "slow progress" towards the poverty reduction goal, he said. "If it is able to maintain the economic growth experienced over the past year, and advances with a little more energy in some of its social reforms, it is possible that the country will meet" the MDG, Gasparini predicted.

According to a government survey, the proportion of those living in extreme poverty (on less than a dollar a day) in Brazil fell from 8.8 to 4.7 percent of the population between 1990 and 2000.

That means South America’s giant has practically met the goal. However, the government survey admits that the administration of leftist President Luiz Inácio Lula da Silva is not satisfied with the progress made, above all because the gap between rich and poor remains wide.

Further, if extreme poverty is measured by an income of half of the minimum monthly wage of 48 dollars per person, 11.6 percent of the population of 182 million, or 20 million people, were living in extreme poverty in 2002, says the national report.

Through Lula’s Zero Hunger and Family Grant programmes, poor households receive cash stipends, food aid, education and other goods and services, in the effort to continue bringing down poverty.

Although Brazil and Chile remain highly unequal societies, Brazil is already just behind Chile in terms of reaching the MDG poverty reduction goal.

But Paraguay, Argentina and Uruguay still have a long road ahead to significantly reduce extreme poverty by 2015.

(* With additional reporting from Mario Osava in Brazil, Gustavo González in Chile and Diana Cariboni in Uruguay).