Tuesday, June 8, 2010

Income inequality in Latin America today

Starting in 2001, the UN Development Program's annual Human Development Reports began to publish estimates of the income of the wealthiest and poorest 10 percent of countries' populations. The ratio between what each tenth earns in a year offers a useful measure of social and economic inequality.

According to UNDP, the countries with the most well-distributed wealth are Japan (the wealthiest 10% earns only 4.5 times what the poorest 10% earns); Scandinavia (6.1 times in Norway; Sweden 6.2) and Western Europe (France 9.1, Netherlands 9.2). The United States is one of the more unequal developed countries with a wealthiest-to-poorest income ratio of 15.9 times.

Latin American countries, however, are concentrated on the opposite end of the spectrum. Along with parts of southern Africa, Latin America is the most economically unequal region in the world. National income and wealth are in very few hands.

The table below incorporates data from the past nine years' UNDP Human Development Reports. Most countries reported data during at least one year in the mid-1990s, around the turn of the decade, and during the mid-2000s.

Ratio of the income of the wealthiest 10% to that of the poorest 10% in Latin America

(Source: UNDP Human Development Reports)

Mid-90s Around 2000 Mid-2000s
1 Honduras 119.8 1 Bolivia 168.1 1 Bolivia 93.9
2 Bolivia 91.4 2 Paraguay 73.4 2 Colombia 60.4
3 Paraguay 91.1 3 Brazil 68 3 Honduras 59.4
4 Nicaragua 70.7 4 Colombia 63.8 4 Panama 49.9
5 Brazil 48.7 5 Panama 62.3 5 Brazil 40.6
6 Colombia 42.7 6 El Salvador 57.5 6 Paraguay 38.8
7 Chile 33.7 7 Guatemala 55.1 7 El Salvador 38.6
8 Panama 29.8 8 Peru 49.9 8 Ecuador 35.2
9 Guatemala 29.1 9 Mexico 45 9 Guatemala 33.9
10 El Salvador 28.5 10 Ecuador 44.9 10 Argentina 31.6
11 Mexico 26.4 11 Chile 40.6 11 Nicaragua 31
12 Venezuela 24.3 12 Argentina 39.1 12 Chile 26.2
13 Peru 22.3 13 Costa Rica 37.8 13 Peru 26.1
14 Uruguay 21.6 14 Honduras 34.2 14 Costa Rica 23.4
15 Costa Rica 20.7 15 Venezuela 20.4 15 Mexico 21
16 Uruguay 18.9 16 Uruguay 20.1
17 Nicaragua 15.5 17 Venezuela 18.8

Income distribution data are hard to measure accurately, and it is difficult to discern trends. But a few phenomena are apparent.

  1. Income inequality is very high compared to the rest of the world. Few other countries come close to the levels registered by the top 10 countries in these lists. Indeed, in UNDP's 2009 report, 18 of the 25 highest rich-poor ratios (out of 131 countries measured) were those of Latin American countries (see the list below).
  2. Income inequality may have improved somewhat during the first half of the 2000s. Most countries registered some lowering in their ratios during a period of economic growth. In several countries, centrist or left-of-center leaders also implemented poverty alleviation programs aimed at the bottom 10 percent.
  3. Colombia, often billed as an economic success story since 2000, appears to have become more unequal. This echoes the findings of an April 2010 Washington Post analysis, which cites UN Economic Commission on Latin America data:

    The other Colombia is one of rising inequality, the only major country in Latin America in which the gap between rich and poor has increased in recent years, according to a report by the U.N. Economic Commission on Latin America. The percentage of Colombians who are indigent also rose, from 20.2 percent in 2007 to nearly 23 percent in 2008, nearly double the region's average.
    ...
    The number of Colombians in poverty did fall from 51 percent in 2002 to nearly 43 percent in 2008, according to the Economic Commission, but the contrast with big Latin neighbors is sharp. In Brazil, more than 32 million have joined the middle class since 2003, and in Peru poverty fell from 55 percent in 2002 to 36.2 percent six years later.

Top 25 highest ratios of top to bottom 10% income, 2009 Human Development Report
1. Namibia 106.6
2. Bolivia 93.9
3. Angola 74.6
4. Comoros 60.6
5. Colombia 60.4
6. Honduras 59.4
7. Haiti 54.4
8. Panama 49.9
9. Brazil 40.6
10. Suriname 40.4

11. Botswana 40.0
12. Lesotho 39.8
13. Paraguay 38.8
14. El Salvador 38.6
15. Ecuador 35.2

16. South Africa 35.1
17. Guatemala 33.9
18. Argentina 31.6
19. Nicaragua 31.0

20. Zambia 29.5
21. Chile 26.2
22. Peru 26.1
23. Guyana 25.5
24. Dominican Republic 25.3
25. Costa Rica 23.4