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Latin America's Expanding Wealth Gap

Escola do Amanha at Complexo do Alemao slum, where approximately 800 low-income children have access to top quality education. (Photo: Marco Antonio Teixeira, World Bank)

Significant socio-economic progress has been achieved in 21st-century Latin America. Most countries have picked themselves up and dusted themselves off from the negative effects of the 2008 economic crisis. However, the battle for improved conditions is not over. Except sub-Saharan Africa, the region still has the greatest income inequality worldwide.

According to the Organization for Economic Co-operation and Development, inequality has increased sevenfold, and the average income of the richest 10 percent of the population is now nine times the average of the poorest. The richest 1 percent of the population in Latin America already own 41 percent of the region's wealth. By 2022, the top 1 percent are projected to have more wealth than the remaining 99 percent. If this trend continues, will recent progress slip away? The labor market, education, healthcare and technology help shed light on the issue.

"People do not want to live in countries where the privileges of a few deny the rights of many," said Oxfam's Latin American and Caribbean Regional Director Simon Ticehurst. "What we can buy with our salaries depends on the international prices of raw materials." Policymaking that bends to lobbying, as well as corruption in the irregular allocation of contracts and patronage, intensify the divide. Ticehurst has called Latin American states to take further action to increase social programs in order to tackle inequality. On an optimistic note, many countries already have.

Argentina, Bolivia, Brazil, Chile, Costa Rica, El Salvador, Mexico, Panama, Peru and Uruguay have introduced, extended or improved their welfare systems. Increasing the minimum wage, expanding access to healthcare and progressive tax reform are underway. Another positive factor has been the increased participation of women and youth in the labor market. Countries such as El Salvador are benefitting from foreign remittances. Meanwhile, Argentina, Chile and Uruguay strive toward minimizing socio-economic inequality via contributory pensions with low fiscal contributions.

State social policies are crucial to further socio-economic inequality. One move has been improving access to primary and secondary education. Uruguay's renowned one-laptop-per-child plan (Plan Ceibal) is an excellent example. Poverty-reduction programs also make a difference, providing resources to those most in need, such as through conditional cash transfers. Brazil's Bolsa Familia, Chile's Solidario, Ecuador's Human Development Bond, El Salvador's Rural Communities Solidarity, Mexico's Opportunities, Panama's Opportunities Network, Paraguay's Hug and Peru's Together have all had success in providing direct relief. Many are becoming increasingly active and coordinated in order to provide opportunities for the chronically poor, such as Bolsa Familia in Brazil. Currently the world's largest conditional cash transfer program, it now benefits some 129 million people in the region and helped lift more than 36 million Brazilians from extreme poverty. Chile's Solidario, a pioneering program that reached 320,000 families in six years, tasked social workers with encouraging people to enroll in training plans, accept social benefits and raise their aspirations.

Educational inequality is also an issue, where half of those employed 25 years or older have only six years of education. Those in higher income brackets send their children to private schools, while the poor go to public schools, thus perpetuating the gap.

Low-income citizens' often lack social security pensions and healthcare (which causes a high "pocket expense"). In addition there is the equity gap at birth. Inherited wealth gives advantages (early opportunities in life, better education, capital to invest) to those born into means and privilege. Technology and globalization contribute to inequality as well. Low-cost labor in places like China reduces the value of unskilled labor along with commodity prices, which has indirectly expanded the gap.

Latin America was making significant progress in reducing income inequality until at 2012 or 2013. Persistent crises in Europe, problems in Russia, the fall in commodity prices and the potential increase in interest rates, combined with inappropriate economic policies in many countries, changed the picture in 2014 and 2015. According to a 2014 World Bank report, the slowdown in Latin America, particularly during recent years, combined with serious economic problems in countries such as Argentina (-0.2 percent growth), Brazil (0.2 percent) and Venezuela (-3 percent) has affected progress. These combined factors led to notable inequality increments in Brazil, Costa Rica, Ecuador, Mexico, the Dominican Republic and Venezuela.

Millions of Latin American lives are influenced by governments' economic and social policies. It is vital to promote both pro-business policies and social programs when combating inequality. It is not enough to simply introduce programs for the sake of filling ballot boxes. On the contrary, it is crucial to continue long-term financial sustainability policies of redistributive social programs.

Ailana Navarez is a journalist, photographer, artist and political analyst with a concentration in Latin America. She is pursuing a major in government with specializations in international relations and psychology at Harvard Extension School. She is a South America specialist for Pulsamerica and has been featured in multiple international news outlets, including Telesur, International Policy Digest, Mercury Magazine, Intentional Travelers and Casa Rosada. She speaks four languages and maintains permanent residency status in Panama, the United States and Uruguay.

View the Worldpress Desk’s profile for Ailana Navarez.

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