KEY CHALLENGES FOR ERRADICATING POVERTY AND OVERCOMING INEQUALITIES: A LATIN AMERICAN AND CARIBBEAN PERSPECTIVE INTERAGENCY REPORT: ECLAC, ILO, FAO, UNESCO, PAHO/WHO, UNDP, UNEP, UNICEF, UNFPA, WFP, UN-HABITAT, UNIFEM Alicia Bárcena Deputy Executive Secretary Economic Commission for Latin America and the Caribbean The Hague-29 September 2005 1
MAIN FINDINGS 2
CRITICAL ISSUES Slow, unstable and volatile growth Overall social frustration with results of Washington consensus Adverse structural patterns: low investment and savings Additional distributive tensions: most unequal Free trade opportunities unevenly distributed High vulnerability to natural disasters assessed costs - 50 billion dlls in the last 10 years (79% infrastructure) Fragile democracies and spread of low intensity conflicts Environmental degradation & loss of biodiversity 3
INSTABILITY OF ECONOMIC GROWTH, BUT IN 2004 THE REGION GREW BY ALMOST 6%, THE HIGHEST RATE IN THE PAST 25 YEARS 6 5 4 3 2 1 0-1 -2-3 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Annual growth rate 2.1% average for 1981-2004 4
TARIFF CONCESSIONS NEGOTIATED IN THE URUGUAY ROUND 2 1.5 1 0.5 0 Developed countries Developing countries Concessions given Concessions received Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of J. Michael Finger and Ludger Schuknecht, Market access advances and retreats: the Uruguay Round and beyond, World Bank Policy Research Working Paper, No. 2232, Washington, D.C., November 1999. Note: The measure used to quantify concessions is depth of cut, which the authors define as dt/(1+t), where t is the tariff rate. The estimates correspond to a weighted average of all products, including those on which no cuts were made. 5
ENSURE ENVIRONMENTAL SUSTAINABILITY SINGULARITY OF THE REGION DEFORESTATION HOTSPOTS AND CROPS PRESSURE ON RAIN FOREST AND BIODIVERSITY CONTINUES 6
WORRISOME SOCIAL FACTORS Social expenditure rose from 10.1% to 13.8% of GDP Unemployment climbed from 6.9% to nearly 10% and youth more than 2x higher (from 18% to 23.2%) 7 out of every 10 urban jobs were in the informal sector Adverse trend in income distribution One out of every 5 persons is indigent Fragility of democratic systems due to unemployment, informality and inequity Spread of low intensity conflicts Expansion of international migration Fragmentation of the social institutional structure 7
Between 1990 and 2004, extreme poverty reduced from 22.5% to 18.6%, but the number of people in extreme poverty rose by 3 million to 96 million Percentage of people Number of people Percentage Millions GDP index 1994=100 Source: Economic Commission for Latin America and the Caribbean (ECLAC), Social Panorama of Latin America, 2004, Santiago, Chile, 2005 [in press]. a/ Includes extreme poverty. b/ Projections. 8
SOCIAL EXPENDITURE 18.0 16.0 Growth 3.7% 1990-1991 1996-1997 2000-2001 Social Expenditure as GDP % 14.0 12.0 10.0 8.0 6.0 4.0 10.1 12.1 13.8 Growth 1.3% 2.9 3.6 4.2 Growth 0.6% 2.5 2.7 3.1 Growth 1.5% 3.6 4.6 5.1 Growth 0.3% 2.0 1.1 1.2 1.4 0.0 Total Social Expenditure Education Health Social Security Housing 9
DISTRIBUTION OF INCOME: THE MOST UNEQUAL Gini coefficient, 1997-2002 Maximum 75 th percentile Median 25 th percentile Minimum Source: World Bank, World Development Indicators (WDI), 2004 (online). 10 Gini coefficient in 1997-2002 Sub-Saharan Africa South Asia East Asia and the Pacific Latin America and the Caribbean Middle East and North Africa OECD Eastern Europe and Central Asia
UNEQUAL INCOME DISTRIBUTION LATIN AMERICA: HOUSEHOLD SHARES OF TOTAL INCOME, BY INCOME QUINTILE, CIRCA 2002 70 35 60 30 50 25 40 20 30 15 20 10 10 5 0 0 Uruguay a/ Mexico Ecuador a/ Argentina a/ Guatemala Chile Venezuela (Bolivarian Republic of) Costa Rica Peru El Salvador Paraguay Honduras Nicaragua Colombia a/ Panama Dominican Rep. Brazil Bolivia Poorest quintile Richest quintile Richest quintile/poorest quintile Source: Economic Commission for Latin America and the Caribbean (ECLAC), on the basis of projections derived from household surveys in the relevant countries (urban areas). 11
THE LINKAGES OF INEQUITY LATIN AMERICA: COVERAGE OF PRIMARY, SECONDARY AND TERTIARY EDUCATION AMONG YOUTHS AGED 25-29 YEARS, GENDER PARITY HAS BEEN ACHIEVED Quintiles I and V, 2002 80.5 47.9 58.2 12.3 20.1 0.9 Poorest quintile Primary education Secondary education Richest quintile Tertiary education 12
THE NEGATIVE IMPACTS OF INEQUITY LATIN AMERICA: INFANT MORTALITY RATE, BY INCOME QUINTILES IN SELECTED COUNTRIES, 1999 120 100 80 60 40 Brazil Brasil Bolivia Bolivia Colombia Guatemala Haiti Haiti 20 0 Quintile I Quintile 2 Quintile 3 Quintile 4 Quintile 5 13
OVERVIEW OF PROGRESS TOWARDS 2015 The region is on track to meet the targets for: Reducing hunger Reducing undernutrition among children Reducing infant mortality Access to drinking water Gender equity in education The region has not made enough progress towards the targets concerning: Extreme poverty (adverse pattern: countries with higher poverty rates have advanced less) Maternal mortality Universal primary education Access to sanitation Environmental sustainability 14
CHALLENGES AND RECOMMENDATIONS FOR ACTION 15
TEN ESSENTIAL INSTITUTIONAL ATTRIBUTES Clear-cut and durable rules Public policy as collective action Consistency between the markets and social cohesion for redistribution Ensure effective management through information and transparency Develop inter-agency social policy coordination Foster participation and voice Spread and improve access to TICs Decentralize and incorporate the territorial dimension Build regulatory capacity in relation to public/private financing and delivery of basic services Promote the enforceability of economic and social rights 16
KEY INGREDIENTS FOR ACHIEVING EQUITY Public investment on human capital (education, social protection, health) Employment and income as instruments of endogenous development Three speed productionp strategies Stable economic growth for 10 years: a rate of 2.9% per capita and 4.3% in total GDP Build consensus for a social cohesion convenant to raise public social expenditure (10% of GDP) Improve & increase taxation (the lowest in the world) Develop a new generation of economic instruments to price environmental and social externalities 17
SOURCES OF INTERNAL FINANCING: COMPARATIVE TAX BURDENS (Percentages of GDP-2003) 45 40 40.6 36.3 35 11.4 30 25 20 15 12.7 9.3 11.7 26.4 6.8 4.6 16.8 15.6 2.9 0.8 10 5 0 16.5 8.0 9.5 15.3 15.0 4.5 6.8 EU (15) OCDE (30) United States Latin America (19) South-East Asia (6) Direct tax burden Indirect tax burde Social security burden 18
LATIN AMERICA (18 COUNTRIES): ANNUAL GDP GROWTH RATE REQUIRED IN 2005-2015 TO REACH THE TARGET FOR EXTREME POVERTY REDUCTION, WITH AND WITHOUT CHANGES IN INCOME DISTRIBUTION a/ Annual GDP growth rate required to reach the target 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% No change in income distribution Improvement in income distribution (10% reduction in Gini coefficient) Average annual regional GDP growth rate,1991-2004: 2.7% 0.0% Uruguay b/ Chile Mexico Brazil Ecuador b/ Panama Costa Rica Peru Guatemala El Salvador Colombia Nicaragua Honduras Paraguay Bolivia Venezuela Argentina b/ Source: ECLAC, on the basis of special tabulations of household survey results and official figures. a/ The Gini coefficient has been used as an indicator of the degree of concentration of the income distribution pattern. b/ Urban areas. 19
AN URGENT SOCIAL AGENDA Emphasis on programmes entailing synergies among different MDGs Conditional transfers: 11.8 billion dollars to eliminate extreme poverty School lunchrooms: 3.6 billion dollars to eliminate malnutrition Comprehensive early childhood care Epidemiological surveillance Universal preschool and secondary school Access to water and sanitation (0.21%-GDP) The need for a comprehensive development programme Identify the cost to erradicate extreme poverty 20
TARIFF ESCALATION Soja Co pper Fruits Sugar Cacao Co ffee 19% European Union 0 5 10 15 20 25 30 35 40 Soja Co pper Fruits Sugar Cacao Co ffee 12% United States 0 5 10 15 20 25 30 35 40 Soja Co pper Fruits Sugar Cacao Co ffee 17% Raw materials Processed products Japan 0 5 10 15 20 25 30 35 40 21
SOURCES OF EXTERNAL FINANCING (PERCENTAGES OF GDP) 5.0 4.0 3.0 ODA FDI Remittances Debt 2.0 1.0 0.0-1.0-2.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 22
A MORE EQUITABLE GLOBAL PARTNERSHIP Managing interdependence: guarantee the provision of global public goods: security, financial stability, transparency, global climate stability Overcome international asymmetries (ODA, Trade and FDI) More debt relief initiatives are needed (debt to export ratio-1.5) Increase ODA and improve quality at least in: Bolivia, Guyana, Haiti, Honduras & Nicaragua Facilitate carbon market opportunities Increase access to developed-country markets (reduce tariffs and subsides) especially for agricultural goods: Doha Round Foster Global Citizenship and solidarity 23