KEY CHALLENGES FOR ERRADICATING POVERTY AND … · o Ecuador a/ Argentin a a/ Guate m ala Chil e Venezu e la (Boli v ar ian Repu blic o f) Costa Rica Peru El Salv ador Paragu ay Hond

1

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 Alicia BárcenaBárcenaDeputy Executive Secretary

Economic Commission for Latin America and the Caribbean The Hague-29 September 2005

2

MAIN FINDINGS

3

CRITICAL ISSUESCRITICAL ISSUES

Slow, unstable and volatile growth Slow, unstable and volatile growth Overall social frustration with results of Overall social frustration with results of Washington consensus Washington consensus Adverse structural patterns: low investment and Adverse structural patterns: low investment and savingssavingsAdditional distributive tensions: most unequalAdditional distributive tensions: most unequalFree trade opportunities unevenly distributedFree trade opportunities unevenly distributedHigh vulnerability to natural disasters assessed High vulnerability to natural disasters assessed costs costs -- 50 billion 50 billion dllsdlls in the last 10 years (79% in the last 10 years (79% infrastructure)infrastructure)Fragile democracies and spread of low intensity Fragile democracies and spread of low intensity conflictsconflictsEnvironmental degradation & loss of biodiversityEnvironmental degradation & loss of biodiversity

4

INSTABILITY OF ECONOMIC GROWTH, BUTINSTABILITY OF ECONOMIC GROWTH, BUT IN 2004 IN 2004 THE REGION GREW THE REGION GREW BYBY ALMOST 6%, THE HIGHEST ALMOST 6%, THE HIGHEST

RATE IN THE PAST 25 YEARSRATE IN THE PAST 25 YEARS

-3

-2

-1

0

1

2

3

4

5

6

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

5

TARIFF CONCESSIONS NEGOTIATED IN THE URUGUAY TARIFF CONCESSIONS NEGOTIATED IN THE URUGUAY ROUNDROUND

0

0.5

1

1.5

2

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.

6

ENSURE ENVIRONMENTAL SUSTAINABILITYENSURE ENVIRONMENTAL SUSTAINABILITY

SINGULARITY OF THE REGION

DEFORESTATION HOTSPOTS AND CROPS

PRESSURE ON RAIN FOREST AND

BIODIVERSITY CONTINUES

7

WORRISOME SOCIAL FACTORSWORRISOME SOCIAL FACTORS

Social expenditure rose from 10.1% to 13.8% of Social expenditure rose from 10.1% to 13.8% of GDPGDPUnemployment climbed from 6.9% to nearly 10% Unemployment climbed from 6.9% to nearly 10% and youth more than 2x higher (from 18% to and youth more than 2x higher (from 18% to 23.2%)23.2%)7 out of every 10 urban jobs were in the informal 7 out of every 10 urban jobs were in the informal sector sector Adverse trend in income distributionAdverse trend in income distributionOne out of every 5 persons is indigentOne out of every 5 persons is indigentFragility of democratic systems due to Fragility of democratic systems due to unemployment, informality and inequityunemployment, informality and inequitySpread of low intensity conflictsSpread of low intensity conflictsExpansion of international migrationExpansion of international migrationFragmentation of the social institutional structureFragmentation of the social institutional structure

8

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 millionPercentage of people Number of people

Perc

enta

ge

Milli

ons

GD

P 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.

9

SOCIAL EXPENDITURESOCIAL EXPENDITURE

10.1

2.9 2.5

3.6

1.1

12.1

3.62.7

4.6

1.2

13.8

4.2

3.1

5.1

1.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

Total SocialExpenditure

Education Health Social Security Housing

1990-1991 1996-1997 2000-2001

Growth 0.3%

Growth 1.5%

Growth 0.6%

Growth 1.3%

Growth 3.7%

Soc

ial E

xpen

ditu

re a

s G

DP

%

10

DISTRIBUTION OF INCOME: THE MOST UNEQUALDISTRIBUTION OF INCOME: THE MOST UNEQUALGini coefficient, 1997-2002

Source: World Bank, World Development Indicators (WDI), 2004 (online).

OECD

Sub-Saharan

Africa

South Asia

East Asia

and the Pacific

Middle East

and North Africa

Latin America

and the Caribbean

Eastern Europe

and Central Asia

Gin

icoe

ffici

ent i

n 19

97-2

002

Median

Minimum

Maximum75th percentile

25th percentile

11

LATIN AMERICA: HOUSEHOLD SHARES OF TOTAL INCOME, BY INCOME QUINTILE, CIRCA 2002

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).

0

10

20

30

40

50

60

70

Uru

guay

a/

Mex

ico

Ecua

dor a

/

Arge

ntin

a a/

Gua

tem

ala

Chi

le

Vene

zuel

a (B

oliv

aria

nR

epub

lic o

f)

Cos

ta R

ica

Per

u

El S

alva

dor

Para

guay

Hon

dura

s

Nic

arag

ua

Col

ombi

a a/

Pana

ma

Dom

inic

an R

ep.

Bra

zil

Bol

ivia

0

5

10

15

20

25

30

35

Poorest quintile Richest quintile Richest quintile/Poorest quintile

UNEQUAL INCOME DISTRIBUTIONUNEQUAL INCOME DISTRIBUTION

12

THE LINKAGES OF INEQUITYTHE 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

Tertiary education

47.9

12.3

0.9

80.5

58.2

20.1

Poorest quintile Richest quintile

Primary education Secondary education

13

THE NEGATIVE IMPACTS OF INEQUITYTHE NEGATIVE IMPACTS OF INEQUITY

LATIN AMERICA: INFANT MORTALITY RATE, BY INCOME QUINTILESIN SELECTED COUNTRIES, 1999

0

20

40

60

80

100

120

Quintile I Quintile 2 Quintile 3 Quintile 4 Quintile 5

BrasilBolivia Colombia

GuatemalaHaiti

Brazil

Bolivia

Colombia

Guatemala

Haiti

14

OVERVIEW OF PROGRESS TOWARDS 2015OVERVIEW OF PROGRESS TOWARDS 2015

The region is on track to meet the targets for:

Reducing hungerReducing undernutrition among childrenReducing infant mortalityAccess to drinking waterGender 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 mortalityUniversal primary educationAccess to sanitationEnvironmental sustainability

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CHALLENGES AND RECOMMENDATIONS FOR

ACTION

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TEN ESSENTIAL INSTITUTIONAL ATTRIBUTESTEN ESSENTIAL INSTITUTIONAL ATTRIBUTES

ClearClear--cut and durable rulescut and durable rulesPublic policy as collective actionPublic policy as collective actionConsistency between the markets and social Consistency between the markets and social cohesion for redistributioncohesion for redistributionEnsure effective management through information Ensure effective management through information and transparencyand transparencyDevelop interDevelop inter--agency social policy coordinationagency social policy coordinationFoster participation and voiceFoster participation and voiceSpread and improve access to Spread and improve access to TICsTICsDecentralize and incorporate the territorial Decentralize and incorporate the territorial dimension dimension Build regulatory capacity in relation to Build regulatory capacity in relation to public/private financing and delivery of basic public/private financing and delivery of basic servicesservicesPromote the enforceability of economic and social Promote the enforceability of economic and social rightsrights

17

KEY INGREDIENTS FOR ACHIEVING EQUITYKEY INGREDIENTS FOR ACHIEVING EQUITY

Public investment on human capital (education, Public investment on human capital (education, social protection, health)social protection, health)Employment and income as instruments of Employment and income as instruments of endogenous developmentendogenous developmentThree speed pThree speed productionroduction strategiesstrategiesStable economic growth for 10 years: a rate of Stable economic growth for 10 years: a rate of 2.9% per capita and 4.3% in total GDP2.9% per capita and 4.3% in total GDPBuild consensus for a social cohesion convenant to Build consensus for a social cohesion convenant to raise raise public social expenditure (10% of GDP)public social expenditure (10% of GDP)Improve & increase taxation (the lowest in the Improve & increase taxation (the lowest in the world) world) Develop a new generation of economic Develop a new generation of economic instruments to price environmental and social instruments to price environmental and social externalitiesexternalities

18

SOURCES OF INTERNAL FINANCING: COMPARATIVE SOURCES OF INTERNAL FINANCING: COMPARATIVE TAX BURDENSTAX BURDENS

(Percentages of GDP-2003)

16.5 15.3 15.0

4.5 6.8

12.711.7

4.6

9.58.0

11.49.3

6.8

0.82.9

36.3

16.8 15.6

40.6

26.4

0

5

10

15

20

25

30

35

40

45

EU (15) OCDE (30) United States Latin America (19) South-East Asia (6)

Direct tax burden Indirect tax burde Social security burden

19

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/

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

Urugua

y b/

ChileMex

ico

Brazil

Ecuado

r b/

Panama

Costa R

ica PeruGuate

malaEl S

alvad

orColom

biaNica

ragua

Hondura

sParagu

ayBoliv

iaVen

ezuela

Argenti

na b/

Ann

ual G

DP

grow

th ra

te re

quire

d to

reac

h th

e ta

rget

No change in income distributionImprovement in income distribution (10% reduction in Gini coefficient)

Average annual regional GDP growth

rate,1991-2004:2.7%

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.

20

AN URGENT SOCIAL AGENDAAN URGENT SOCIAL AGENDA

Emphasis on programmes entailing synergies Emphasis on programmes entailing synergies among different among different MDGsMDGs

Conditional transfers: 11.8 billion dollars to eliminate Conditional transfers: 11.8 billion dollars to eliminate extreme povertyextreme povertySchool lunchrooms: 3.6 billion dollars to eliminate School lunchrooms: 3.6 billion dollars to eliminate malnutrition malnutrition Comprehensive early childhood careComprehensive early childhood careEpidemiological surveillanceEpidemiological surveillanceUniversal preschool and secondary schoolUniversal preschool and secondary schoolAccess to water and sanitation (0.21%Access to water and sanitation (0.21%--GDP)GDP)

The need for a comprehensive development The need for a comprehensive development programmeprogrammeIdentify the cost to Identify the cost to erradicateerradicate extreme povertyextreme poverty

21

TARIFF ESCALATIONTARIFF ESCALATION

0 5 10 15 20 25 30 35 40

C o ffe eC a c a oS ug a rF ruit s

C o ppe rS o ja

European Union19%

0 5 10 15 20 25 30 35 40

Co ffe e

Cac aoS ugarFruits

Co ppe rS o ja

United States12%

0 5 10 15 20 25 30 35 40

Co ffe e

Cac ao

S ugar

Fruits

Co ppe r

S o ja

Raw materialsProcessed products

Japan

17%

22

SOURCES OF EXTERNAL FINANCING(PERCENTAGES OF GDP)

-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

ODAFDIRemittancesDebt

23

A MORE EQUITABLE GLOBAL PARTNERSHIPA MORE EQUITABLE GLOBAL PARTNERSHIP

Managing interdependence: guarantee the Managing interdependence: guarantee the provision of global public goods: security, provision of global public goods: security, financial stability, transparency, global climate financial stability, transparency, global climate stability stability Overcome international asymmetries (ODA, Overcome international asymmetries (ODA, Trade and FDI) Trade and FDI)

More debt relief initiatives are needed (debt to export More debt relief initiatives are needed (debt to export ratioratio--1.5)1.5)Increase ODA and improve quality at least in: Increase ODA and improve quality at least in: Bolivia, Bolivia, Guyana, Haiti, Honduras & NicaraguaGuyana, Haiti, Honduras & NicaraguaFacilitate Facilitate carbon market opportunitiescarbon market opportunities

Increase access to Increase access to developeddeveloped--country markets country markets (reduce tariffs and subsides) especially for (reduce tariffs and subsides) especially for agricultural goods: Doha Roundagricultural goods: Doha RoundFoster Global Citizenship and solidarityFoster Global Citizenship and solidarity