Inequality in Latin America and the Caribbean

By Paul Crist
December 18, 2010
According to the first ever Human Development Report for Latin America and the Caribbean, “Acting
on the Future: Breaking the Intergenerational Cycle of Inequality,” published by the United Nations
Development Program (UNDP) in July of 2010, the region is the most unequal in the world. Ten of
the fifteen countries with the highest levels of inequality are in Latin America and the Caribbean (LAC).
According to the report, inequality in the LAC region is 65% higher than in high-income countries,
36% higher than in Asia, and 18% above Sub-Saharan Africa.1 Not only is the region the most unequal,
the inequality is persistent from generation to generation and characterized by low social mobility that
has led to an “inequality trap” that is difficult to break.
Coupled with, but distinct from poverty, inequality poses obstacles to progress in human development
and democratic stability. Lack of equality of opportunity and empowerment lead to marginalization,
oppression, and domination. Women, indigenous groups, sexual and gender identity minorities, and
African-descended populations are particularly vulnerable.
Because inequality negatively affects nearly every aspect of social organization, it remains the LAC
region’s greatest challenge. It is a complex issue with many dimensions beyond mere inequality of
access to goods, services, and income. Inequality of opportunity and life choices; inequality in
education, health, and other indicators of human development; inequality in terms of political
involvement and influence; and other dimensions all matter. Inequality is the product of a combination
of factors. It cannot be explained by one cause, or redressed by a single solution.

Inequality and Human Development

Recent reports on progress toward the eight Millennium Development Goals have been positive for the
LAC region, but progress has been very uneven, both among and within countries. Brazil, Chile,
Mexico, Costa Rica, Peru, and Venezuela, for example, have made progress on alleviating extreme
poverty, while Haiti, Nicaragua, Bolivia, Honduras, and Guatemala remain the poorest in the
hemisphere.
Progress has been made in the areas of child mortality; access to HIV, malaria, and other disease care;
maternal health; and primary education. But that progress has not been equitably shared within any of
the countries in the region. Individuals and households at the bottom of the socioeconomic ladder, and
vulnerable populations, are far less likely to be sharing in the benefits of progress in human
development indicators.
The UNDP report proposes a new type of indicator that better shows how inequality impacts human
development. It is estimated that the Human Development Index of countries in the region would
diminish, on average, by between 6% and 19% if the index were corrected to reflect inequality.

Inequality and Democracy

1
Regional Human Development Report for Latin America and the Caribbean 2010: Acting on the Future: Breaking the
intergenerational transmission of inequality. United nations Development Program – UNDP. July 2010.
Evidence from societies around the globe, not only in the LAC region, points to a correlation between
inequality and weak democratic institutions. High and generationally persistent inequality creates class
conflicts that make successful democracy difficult to achieve and sustain. Liberal democracies are
invariably embedded in market economies, and seek to protect individual freedoms. But market
economies inevitably generate inequalities in the absence of a broad social contract between rich and
poor.
In the LAC region, military governments have repeatedly abolished democracy to protect elite interests
in the face of social upheaval related to inequality. Today, liberal democratic institutions have been
eroded by populist governments (e.g., Venezuela, Bolivia, and Nicaragua) seeking to redress social and
economic wrongs. These swings between military and populist regimes are not the cause of weak
democracy,2 but rather, a symptom of the deeper problem of inequality. The consequence for LAC has
been a polarized politics in which a populist-left and an oligarchic-right have repeatedly faced off in a
zero-sum struggle that precludes sustained progress toward democratic institution building.

Inequality and Rights

Inequality plays an important role in the marginalization, oppression, and domination of vulnerable
groups by encouraging a fractured identity politics. In the LAC region, as elsewhere, even the poorest
light-skinned or “European-looking” are perceived as, and treated “better than” darker-skinned people.
It is acceptable for men to feel “superior” to women, even to the point of effective of “ownership” of
women in an infantilized macho culture. And heterosexuals are acculturated to denigrate and abuse
sexual minorities. In stratified and hierarchical societies where inequality is high, there may be a
psychological need to position oneself above someone, no matter how low on the scale one finds himself.
Elites may be complicit in cultivating and perpetuating these social fissures among the masses in order
to minimize the threat of upheaval and unrest that threatens their elite status.
Along with a fractured identity politics, violence is common where inequality is elevated. Gender-based
and domestic violence, for example, are a common problem in the region. Discrimination,
stigmatization, and violence statistics are high for all vulnerable and marginalized groups in the LAC
region, but reported cases significantly underreport the extent of the problem. The criminal justice
system, by both intent and incompetence, systematically discriminates against vulnerable groups while
ignoring or participating in violations against them. Thus, inequality is among the principle drivers of
rights abuses in the LAC region.

Latin America and Caribbean Inequality: The Way Forward

2
One cannot discount the traditions, dating back to origins on the Iberian Peninsula, of bureaucratic-patrimonialism,
corporatism, centralism, and authoritarianism in influencing modern Latin American governance. The church and
military have been virtual fourth and fifth “branches” of government pre-dating the development of the Spanish and
Portuguese nation-state, and those traditions affect the formation and functioning of democratic institutions today in
the LAC region. There is also a “mystique of liberation” that runs through LAC societies. Despite historical evidence
that revolutionary liberation has almost invariably led to oppression, LAC societies have repeatedly sought deliverance
through heroes rather than the slow, difficult work of democratic institution building. Democratization is a complex
and ongoing process, affected by historical and current conditions. Nonetheless, inequality throughout at least the
th
20 century cannot be underestimated as a major influence in the failure of democratic institution building in the LAC
region.
The UNDP report concludes that it is possible to reduce inequality and the negative sociopolitical
effects related to it. Recent studies by the World Bank and the Inter-American Development Bank
have shown that Latin American inequality is exacerbated by poorly planned and executed taxing,
spending and redistributive policies. Europe does more redistribution, through various income transfer
policies; and the U.S. has more progressive taxation policies. Both are more equal after accounting for
government policies, while in LAC, the reverse is true. LAC inequality is higher after accounting for
government programs.
If inequality is rooted in public policy, it can be redressed by efficient public services redirected to the
poor and marginalized. Sustainable programs and policies will require buy-in from elites, who must
bear the burden of progressive and effective tax administration that will support effective public
spending. This would require the emergence, via strong center-left or center-right parties, of a broad
social contract between rich and poor that has heretofore not existed in the region.
In a foreword to the report, UNDP Regional Director Heraldo Muñoz reaffirmed the importance of
continuing to fight poverty, but notes that it will be insufficient unless paired with programs to reduce
inequality. “Equality is instrumental in ensuring meaningful liberties; that is to say, in terms of helping
all people to share in meaningful life options so that they can make autonomous choices,” he said.
The design and implementation of policies to reduce inequality must:

 Focus on better reaching, and impacting the lives of, people who need assistance;
 Address the complex multiple factors that perpetuate poverty and inequality; and
 Provide citizens with a sense of ownership of their development outcomes. Beneficiaries must
become active agents of their own human development.

Access to goods and services are important to reducing inequality, but effective policies must also
impact:

 The constraints that individuals and households face;

 The determinants of aspirations for greater autonomy and mobility;
 The quality and effectiveness of political representation; and
 The state’s redistributive capacity.
Factors at the social, cultural, and household level must be better understood in order to develop
policies that successfully combat poverty and substantially and sustainably reduce inequality.
Progress must be made on strengthening early childhood and primary education;3 reducing income
inequality;4 health system capacity strengthening; improved childhood nutrition; regulatory and
enforcement capacity building; improved taxing administration and greater decentralization of taxing
authority; reduction of informal-sector employment; and social safety net enhancement.
Lowering inequality will help to create more connected societies in which economic growth and social
cohesion are strengthened.

3
Education policies in most LAC region countries focus on university support, rather than on primary and secondary
education. This effectively constitutes an education subsidy to middle and upper-class families, and so perpetuates
inequality.
4
Income inequality can and must be addressed in a variety of ways, including policies to promote equal pay for
women, progressive income taxation, social safety net reform, and other policies.