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Central America remains the poorest region in Latin America, despite success reducing extreme poverty

June 24, 2013

As Latin America and the Caribbean make impressive progress combating extreme poverty, Central America and Mexico are falling behind with a growing share of the region’s poor, according to a report from the World Bank last week.

Shifting Gears to Accelerate Shared Prosperity in Latin America and the Caribbean” lauded the region for reducing extreme poverty by 50 percent and growing its middle class from 1995 to 2011, but noted that at its current sluggish pace, Latin America would take until 2052 to reach the same levels of income equality as wealthy nations had in 2000.

“Since the year 2000 the poverty level has been reduced to half, and in 2011, for the very first time in the history of Latin America, middle class surpassed poverty numbers,” the report noted.

Central America and Mexico, however, have the largest number of people living in extreme poverty. According to the report, 16.4 percent of people in Mexico and Central America are extremely poor, compared to 10.6 percent in the Southern Cone, the region’s leader.

The report pointed out that half of the 80 million people living in extreme poverty in Latin America and the Caribbean – surviving on less than $2.50 a day – are in Brazil and Mexico.

While Costa Rica is known for its relatively high level of development and stable economy, the “Switzerland of the Americas” lags behind several of its neighbors on income inequality.

The country’s Gini coefficient, an income distribution index, trails behind Nicaragua, El Salvador and the Dominican Republic. According to World Bank data, inequality has been rising in Costa Rica since 2005. Guatemala and Honduras remain the most unequal countries in Latin America.

Central America and Mexico also have the region’s smallest middle class, although it has grown to 24.7 percent from 16.6 percent in 1995.

Statistics from the United Nations Economic Commission on Latin America and the Caribbean raised eyebrows in January when the United States’ income inequality rose above that of many countries in Latin America. Costa Rica edged out the U.S. for 10th place.

While the number of people living in extreme poverty has dropped during the last 15 years, the report notes that these gains are not yet solid. Many who escaped poverty but did not reach the middle class could easily slide back. As much as 40 percent of Latin America and the Caribbean’s population is made up of this “vulnerable” group living a the knife’s edge. 

The report recommended maintaining an efficient, sustainable fiscal policy, strengthening the transparency of public institutions and improving market accessibility, among others, to help achieve a more equitable society in the hemisphere. 

 

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Data from World Bank

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