Latin America is the region of the world with the highest level of income inequality. Until now the evidence appeared to indicate that, despite a fairly respectable performance in terms of growth in the last decade, inequality had not been decreasing and might even have been worsening.
Supporters of the neoliberal economic model that prevails in the continent have therefore enthusiastically received a recent report from the World Bank1 that seeks to show that things are not as bad as have been depicted; in doing so, however, the report confirms the fears of the critics of the model with regard to the prospects for equality.
The report’s main message is that inequality has in fact decreased in the period 2000-2010 2:
- In 12 of the 15 countries for which there are comparable data the Gini coefficient has gone down by an average of 5 points (unweighted);
- In the three largest economies of the region, Brazil, Argentina and Mexico, the decrease was 5, 6 and 7 points respectively.
The picture, however, is not all that benign:
- Even after this improvement the levels of inequality in Latin American remain ‘unacceptably high’(Ibid.): the average Gini in 2010 for the 12 countries that are improving was 0.482, compared with 0.257 for the Scandinavian countries.
- Furthermore, the rate of improvement over the 10 years is very modest indeed; should the tendency be maintained it would take the 12 countries 50 years to reach the level of equality of Scandinavia.
The ability of the governments to maintain that level of support depends on whether the economies will continue to perform well. This in turn is highly dependent on the international economic context remaining favourable, an uncertain prospect at best. The gains are therefore fragile, and do not relieve the governments from the need to engage in serious structural reforms as the only solid basis for a reduction in inequality.
1 Francisco H. G. Ferreira, Julian Messina, Jamele Rigolini, Luis-Felipe López-Calva, Maria Ana Lugo, and Renos Vakis, Economic Mobility and the Rise of the Latin American Middle Class, Washington D.C., The World Bank, 2013. At http://siteresources.worldbank.org/LACEXT/Resources/English_Report_midclass.pdf (Pdf)
2 Based on data in the Socio-Economic Database for Latin America and the Caribbean (SEDLAC). At http://sedlahttp://sedlac.econo.unlp.edu.ar/eng/statistics-detalle.php?idE=35