Facing up to Inequality and Exclusion to End Poverty and Hunger in Latin America

In the last two decades of the 20th century, recurring fiscal and financial crises, unsatisfactory growth, and deep and persistent inequality endangered development prospects in Latin America and the Caribbean (LAC). Since then, financial stability and growth have improved, but inequality and economic and social exclusion remain key areas of concern; they are, arguably, the main challenges to be addressed in designing strategies to end poverty and hunger. Responding to high prices and demand for commodities, the region's economies have done well in recent years. After a long period of sluggish growth, the current upturn is in its fifth year and, thus, has lasted longer than other expansions in a generation. While growth in LAC has been lower than in the developing world overall—averaging 4.5 percent per year from 2002 to 2006 (or 3 percent per capita per year)—it is taking place in a context of low inflation, relatively balanced monetary and fiscal policies, dynamic capital markets, growing reserves, and declining foreign debt. Growth varies widely, as is to be expected, but most countries are participating in the boom. Growth, coupled with new poverty reduction programs, has begun to improve livelihoods and transform social conditions. But the fruits of growth are distributed unevenly within countries, and the media and academics are raising new concerns about two-speed, diverging national economies. Deep and persistent inequality implies that the ability of some groups to take advantage of opportunities is consistently inferior to that of others. This is unfair and polarizing, and (as is explained below) it limits growth and the scope for sustainably reducing poverty. Growth and poverty reduction programs alone are unlikely to shift the region out of poverty and hunger. Both approaches are necessary and have tallied up impressive gains in recent years, but both also need to be supported and enhanced by policies and programs that create and distribute opportunities more widely; generate productive, well-remunerated jobs; raise the capabilities of potential job holders; foster inclusion; and reduce inequality. This calls for broad-based social policies with supportive and well-aligned public investment and economic and fiscal policies. Growth and new poverty reduction programs have measurably affected poverty in recent years, causing it to decline, albeit slowly. As a result, for the region as a whole, it now seems possible to halve the proportion of people living in extreme poverty by 2015, relative to the 1990 baseline. Country-specific projections by the United Nations' …