Poverty, Inequality and the Millennium Development Goals in La:n America. Nora Lus)g Professor, Tulane University Nonresident Fellow, CGD and IAD

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1 Poverty, Inequality and the Millennium Development Goals in La:n America Nora Lus)g Professor, Tulane University Nonresident Fellow, CGD and IAD OECD, Paris, February 27,

2 La:n America and MDGs Significant reduc)on in poverty and inequality. Unques)onable progress in access to educa)on, health care and basic infrastructure Improvements in indicators of nutri)on and health. The region as a whole is advancing at the right pace to fulfill a number of the targets set forth in the Millennium Development Goals. 2

3 Gini (x100) Unemployment Employment Indigence Poverty

4 15 to 19 year olds who completed primary educa:on Chile (2006) Argen)na (2006) Uruguay (2008) Mexico (2008) Paraguay (2008) Brazil (2008) Ecuador (2008) Panama (2008) Costa Rica (2008) Peru (2008) Colombia (2008) Venezuela (Bol. Repub. of) (2008) Bolivia (Plur. State of) (2007) Dominican Republic (2008) Honduras (2007) El Salvador (2004) Nicaragua (2005) Guatemala (2006) Simple average La)n America (2008)

5 Change in Gini Coefficient by Country: circa (yearly change in percent) 5

6 Determinants of declining inequality Skill premium fell (as a result of educa)onal upgrading, among other things) Public spending targeted to the poor increased with the introduc)on of large- scale transfer programs: e.g., Pension Moratorium and Family Allowances (Argen)na), Bolsa Familia (Brazil), Oportunidades (Mexico) 6

7 7

8 Incidence of Direct Transfers by Decile: Arg, Bra, Mex 150.0% 130.0% Change in Disposable Income with respect to Market Income 110.0% 90.0% 70.0% 50.0% 30.0% 10.0% % Argen)na Brazil Mexico % Decile 8

9 However, no :me for complacency Degree of progress is mixed; in some countries targets will not be met Extreme poverty remains too high for middle- income LATAM Region is s)ll the most unequal in the world 9

10 Gini Coefficient by Region (in %), Gini coefficient High Incom e Europe and Central Asia South Asia North Africa and the Middle East Eas t As ia and the Pacific Sub-Saharan Africa Latin America and the Caribbean 10

11 Excess Inequality (IDB, 2011) 11

12 Excess Poverty (IDB, 2011) 12

13 However, no :me for complacency Most children and youth in La)n America receive low- quality educa)on and a large share does not have access to post- primary educa)on Maternal mortality is s)ll too high for the region s level of development and there has been lidle progress toward remedying this problem Although public spending has become more pro- poor, income redistribu)on via taxes and transfers is s)ll low and high propor)on of poor not covered by exis)ng transfer programs 13

14 LATIN AMERICA (SELECTED COUNTRIES): TRENDS IN MATERNAL MORTALITY RATIOS (INDICATOR 5.1 OF THE MILLENNIUM DEVELOPMENT GOALS), (Per 100,000 live births) Country Downward Trend Paraguay Colombia Mexico Nicaragua Venezuela (Bolivarian Republic of) Little variation Brazil Cuba Costa Rica Chile Upward Trend Dominican Republic Argentina Source: Pan American Health Organization (PAHO), Basic Indicator Database, Februrary,

15 Coverage of Transfer Programs Leaves a Considerable Propor:on of Xtreme Poor % 90.00% Out (% of poor who are beneficiaries) 92.47% 87.42% 80.00% 70.00% 69.29% 66.79% 60.00% 50.00% 40.00% 43.36% 41.05% 61.48% 53.82% 57.86% 50.43% Poor <2.5 Poor < % 20.00% 10.00% 0.00% Argen)na Bolivia Brazil Mexico Peru 15

16 Indirect Taxes Hurt the Poor Even 1.2 axer Direct Transfers (incomes decline when compared to pre- tax 1 Change in Post- Fiscal Income with respect to Market Income from 2 nd or 3 rd decile on) Bolivia Brazil Mexico Peru Decile 16

17 Share of Benefits to Nonpoor High (green bars) 100% 90% 80% 41.05% 37.03% 70% 60% 50% 40% 52.68% 47.32% 68.50% 75.72% 58.95% 62.97% Non- poor Poor<4 Poor <2.5 30% 31.50% 20% 24.28% 10% 0% ARGENTINA BOLIVIA BRAZIL MEXICO PERU 17

18 Five main recommenda:ons emerge: 1. Implement policies designed to serve those who are excluded from exis)ng social protec)on systems, especially the poor who do not currently receive benefits, young people at risk and those who have been impoverished by adverse shocks (economic crisis and rising food prices, for example). 18

19 Five main recommenda:ons emerge: 2. Reduce inequality of opportunity for all groups, regardless of socioeconomic status, ethnic background, age or gender, par)cularly in terms of ensuring access to quality educa)on up through the higher secondary level. 19

20 Five main recommenda:ons emerge: 3. Implement ac)ons that significantly reduce preventable deaths, par)cularly maternal mortality. 20

21 Five main recommenda:ons emerge: 4. Transform fiscal policy (taxes and transfers) to make it more redistribu)ve. Above all, use public spending to eradicate extreme poverty, modify tax collec)on systems to more effec)vely tax the income and wealth of rich individuals, and eliminate expenditures that worsen income distribu)on. 21

22 Five main recommenda:ons emerge: 5. Significantly improve data bases to more broadly assess the progress and effec:veness of public policies in reducing poverty and inequality and in promo:ng social development. OECD could help: - Systema:c collec:on of comparable social spending series (no mul:lateral organiza:on has been made responsible for this) - Genera:ng tax and benefit incidence analysis on a recurrent basis - Transparency of informa:on codes: e.g., tax returns to analyze evolu:on of top incomes - Informa:on on inequality, poverty and social indicators for Caribbean 22

23 References: Declining Inequality in La=n America: A Decade of Progress? Edited by Luis F. López- Calva and Nora Lus:g, Brookings Ins:tu:on and UNDP, Declining Inequality in La:n America: How Much, Since When and Why?, Lus:g, Lopez- Calva and Or:z, Working Paper, Tulane University, hep://ideas.repec.org/p/tul/wpaper/1118.html Poverty, Inequality and the Millennium Development Goals in La=n America and the Caribbean Nora Lus:g, Background Paper for Summit of the Americas, Tulane University, September 2011 (available online at Inter- American Dialogue s website) The Rise and Fall of Income Inequality in Mexico: , Campos, Esquivel and Lus:g, Working Paper, WIDER, January hep:// papers/2012/en_gb/ wp / Fiscal Policy and Income Redistribu=on in La=n America: Challenging the Conven=onal Wisdom, Lus:g et al., Tulane University, under revision, March