The MDGs in Latin America and the Caribbean: Employment Remains a Challenge for Poverty Reduction

There is no doubt that Latin America is on track to meeting its commitment to halve the 1990 extreme poverty rate by the 2015 target deadline. The most recent estimates by the UN Economic Commission for Latin America and the Caribbean (ECLAC) show that some 14 million Latin Americans escaped from poverty in 2006 and another 10 million are no longer destitute. The number of poor people stands at 36 per cent of the population (194 million) and those living in indigent conditions at 13.4 per cent (71 million); during 2007, these figures are likely to drop to 190 million and 69 million, respectively. For the first time since 1990, the total number of people living in poverty in the region has dropped below 200 million.

However, these figures merit further careful analysis. On average, Latin America is 87 per cent on track to reach the first Millennium Development Goal (MDG 1) of reducing by half the 1990 extreme poverty rate by 2015. But poverty levels are high when viewed in terms of the potential of Latin America, which has only recently returned to the levels it registered prior to the debt crisis that shook the region during the 1980s. Furthermore, the rate of progress differs greatly from country to country. Of the 17 countries for which ECLAC has data, only four -- Brazil, Chile, Ecuador (urban areas only) and Mexico -- have met the MDG target; five -- Colombia, El Salvador, Panama, Peru and Venezuela -- are on track; and eight -- Argentina, Bolivia, Costa Rica, Guatemala, Honduras, Nicaragua, Paraguay and Uruguay -- lag behind.

Fulfilment of the MDG targets for hunger and undernutrition across Latin America and the Caribbean demonstrate a similar pattern. Progress in combatting undernourishment -- 48 per cent of the target goal -- since 2001 has been seen, but region-wide figures mask the considerable disparities among countries and do not provide a basis for accurate assessment of individual progress. Five countries currently surpass the target for 2015 and eight have progressed beyond the mid-term target. However, the remaining countries show less progress than anticipated, and to achieve the targets they must increase food supply and improve accessibility at significantly faster rates than in the past. The region as a whole appears likely to meet the target regarding the number of underweight children under the age of five. Its rate of weighted average progress stands at 54 per cent, but the situation among and within countries varies greatly. Five States show insufficient progress and three countries report significant backsliding; the remainder, however, equal or surpass the set targets. Barring major economic downturns, natural disasters or the discontinuation of current policies and programmes, we can expect these countries to meet this target.

The review of progress on the MDG targets for poverty reduction across the region invites us to examine the forces behind these results. On the positive side, we can highlight the ways in which some countries are benefiting from job creation following a return to economic stability as of 2003. We can also point to the importance of the decline in the demographic dependency ratio (the number of dependents in relation to the number of employed per household) that is characteristic of the region's current stage of demographic transition. Monetary transfers, including cash subsidies, pension benefits and remittances, help explain the diverse outcomes among countries. Another significant point is the variations in average incomes, which have dropped in several countries -- a trend suggesting that, to a large extent, more employment is not synonymous with better employment. This decline in income, coupled with the future reversion of the current demographic dependency ratio as a result of population ageing, makes clear that the creation of quality employment through competitive and productive development is the main challenge faced by Latin America in meeting its poverty reduction goals. The importance of public social expenditure and the role it plays in institutional development of social policies in general, and poverty reduction policies in particular, should not be underestimated. As a consequence of the economic adjustment policies adopted in response to the debt crisis, the region saw severe cuts in public social expenditure as a percentage of the gross domestic product (GDP). But such expenditure has increased by 50 per cent in per capita terms since 1990. Allowing for variations among countries, public social expenditure overall had reached 16 per cent of GDP by 2002 and has stayed close to that level since. The growth of public social expenditure as a percentage of GDP between 2003 and 2007 is taking place at a time when per capita GDP has increased by over 3 per cent per year. Numerous countries now enjoy the conditions necessary to both secure macroeconomic stability and expand the social expenditure that can help protect their citizens from the risks associated with unemployment and poverty.

But some words of caution are in order. Despite its impact on poverty reduction and income redistribution, the current level of public social expenditure in Latin America is insufficient to compensate for the enormous inequality gap generated by differences in primary income sources. The distributive impact of public social expenditure also varies according to its composition by sector -- social security, education, health, social assistance, housing -- and the extent of coverage. These respond to established budgets and institutions that are difficult to modify, and not to the changing structure of social and citizens' needs. Moreover, these are often managed pro-cyclically, curtailing implementation of a stable social security system for the most vulnerable population.

In conclusion, we stand by the recommendations of the most recent ECLAC biannual session, held in 2006 in Montevideo, Uruguay: to continue our fight against poverty, we must promote a social covenant that not only secures resources for social policies in sustainable macroeconomic conditions, but also -- and most importantly -- allocates those resources to a comprehensive social protection system in which social, economic and cultural rights constitute the normative horizon to address existing inequalities and budgetary restrictions, through a combination of contributory and non-contributory financing mechanisms.

ECLAC, Shaping the future of social protection: Access, financing and solidarity. Santiago, Chile, 2006
ECLAC, Social Panorama, 2007. Santiago, Chile, 2007