The Perverse “Cradle Lottery”

There is no argument that Latin America is one of the most inequitable regions in the world. Since colonial times we have been persistently characterized by poor distribution of wealth and opportunities. While various economic and social development indicators show a marked improvement over the past decades, the usual imbalances remain.

The purpose of the recently published Economy and Development Report, prepared by CAF, is to present an updated diagnosis, and also to include ideas that might help change the current state of affairs. The title of the study is “Inherited inequalities”, and focuses on low intergenerational mobility as a cause of the current issues.

The diagnosis confirms that we have been experiencing an inertia-driven phenomenon rooted in the perverse “cradle lottery.” Factors such as place of birth, household features, gender and belonging to a certain ethnic group, act either as a burden or a facilitator for success in life. Both in terms of the chances of good human capital training and access to high-quality jobs and asset accumulation, the dice are loaded in favor of some and against others.

This is typically evident in the case of education. We show how only 12 percent of people born in the 1980s of parents with no college degree managed to finish college. By contrast, the chances for those with college-graduate parents is closer to 50 percent.

Starting points that are different in practice end up determining an individual’s fate and future once they reach the labor market. In addition, informality is much more prevalent among the poorest households, which struggle to own a home or legalize a property deed. Noteworthy is the case of women, whose disadvantages are even greater and who are stuck in various traps that can hinder their progress.

Thus, we live in a region where what happens to our children or to ourselves is pre-established by factors beyond our control. Social mobility still exists, but much less so than in other countries where the ground has been laid for everyone.

Undoubtedly, many of the scourges we experience are both the cause and effect of these claims. Apart from how reprehensible inequity is in terms of individual development, it also negatively impacts growth or political and institutional stability, while corroding citizens’ trust in democracy.

Not surprisingly, protests arise since people perceive that demonstrating is a way of pressuring for solutions that would otherwise not come through established channels. Other scourges such as violence or illicit activities, including drug trafficking, feed into this breeding ground of injustice.

That is why the report we have released is also a call to action and to strengthen the presence of the state. To begin with, we established a common baseline in terms of access and quality of learning from the earliest ages. This requires labor markets that promote mobility and seek to equalize the productive potential of workers. We also need policies related to formal credit access or improved social protection systems, among others.

Against this backdrop, as the bank of economic and social recovery in Latin America, CAF has promoted investments in the most vulnerable regions and sectors of the population, such as Afro-descendants and indigenous people. An example of this is the Prosperity Program in Colombia, with USD 1.2 billion financing and a pre-investment fund. It targets the poorest regions of the country, to promote greater equity and social inclusion, as well as advancing the attainment of Sustainable Development Goals (SDGs).

Winning the battle against inequality is not easy, but it is in everyone’s interests. There are specific ways to do this that require will, leadership and a long-term vision. At CAF we support this crucial task for the future of the region.