A reduction of inequality brings hope to Latin America

It may be observed when comparing rural and urban landscapes, it may be appreciated in the unbalanced incomes between different social groups, and it is more than evident in the main Latin American cities, where poor slums coexist with high luxurious buildings. 

Inequality, one of the historic Latin American burdens, is among the factors that most paralyzes the economic and social aspirations of most of the countries of the region.  

Still, from the beginning of this century, there are reasons for hope: while inequalities increased in developed regions, in the last decade Latin American countries managed to slightly reduce them, according to data from the Gini coefficient, the most used indicator to measure inequality levels. 

In 2003, Latin America scored 0.542 points in the Gini index, and in 2013, it dropped to 0.486, representing a reduction of 10 percent (the index provides countries with scores that go from 0 to 1 based on their inequality, with 0 being a totally egalitarian country). In contrast, the countries of the European Union score an average of 0.3. 

These improvements were promoted by an unprecedented economic growth, which contributed to increase total incomes of less qualified workers and of 20 percent of the poorest homes. In addition, the governments of the region incorporated more non-taxable pensions to senior citizens, which helped to prevent them from becoming poorer when they quit working. 

Another measure which helped to reduce inequality in the region was the creation of social programs such as the Asignación Universal por Hijo (Universal Allowance per Child) in Argentina, Oportunidades (Opportunities) in Mexico, or the Bolsa de Familia (Family Bag), in Brazil, which offer direct transfers of money to the most vulnerable population in exchange, for example, for sending their children to school or going the regular medical checkups.  

Even though these advances should be highlighted, they have not prevented Latin America from being at the top of the sad ranking of the most unequal regions in the planet.

More and better education 

"Education is not only a driver of economic growth, but also of social inclusion and reduction of inequality. A good educational and training system helps develop the necessary competencies of the population, while at the same time it favors greater equality of opportunities" explains the recent report on Perspectivas Económicas de América Latina,(Latin American Economic Prospects) developed by CAF, Development Bank of Latin America, and the OECD.  

Public investment in education has increased in past years, getting closer to the OECD average (in 2012 Latin American countries invested on average 5 percent of GDP in education, while the OECD countries reach 5.6 percent). 

The increasing investment in education has materialized in universal access to primary education (91 percent of the potential population in the region, in contrast to 97 percent in the OECD), and a coverage of 74 percent in secondary education, in contrast to 91 percent in the OECD countries. 

Among the challenges for coming years in this area, an improvement in the quality of primary and university education stands out. Only four Latin American universities appear in the ranking of the 400 best universities in the world.

How to protect inequality

The economic situation faced by the region, characterized by a low or non-existent growth in several Latin American countries, is a threat for the social advances achieved between 2003 and 2011. 

Enrique García, CAF's Executive President, stated in a recente interview, "With a growth of 2 percent it is not possible to maintain, in the long term, the social advances achieved in the region since 2000. We must have a long term vision that allows for the development of fundamental changes that are not possible without consensus". 

According to experts, among the most successful measures to reduce inequality is to improve the quality of public services so that citizens in vulnerable conditions may get, for example, good health and educational systems. In this respect, equitable fiscal policies will be key so that governments deepen and expand the existing social programs.