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5.5: Income Inequality in Middle and South America

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    Although income inequality in Middle and South America has fallen in recent years, this region remains by some measures the most unequal region in the world. Overall, the top 10 percent of people in Latin America control around 71 percent of the region’s wealth. If current trends continue, the top 1 percent will have amassed more wealth than the bottom 99 percent. In Mexico, around half of the population lives in poverty and while the rich in Mexico have seen their wealth climb dramatically in recent years, poverty rates remain relatively unchanged. In Brazil, the wealthiest 10 percent of the population own almost three-quarters of the country’s wealth, around the same as in the United States. This inequality has been a product of geography but has also impacted the landscape, as well.

    Farmers in Middle and South America have struggled with land ownership after their alienation from the land during colonization. While countries like Spain and Portugal no longer control land in Middle and South America, many of these countries’ governments took over colonial landholdings during independence rather than turning it back over to private farmers. Often, small farmers in the region simply can’t compete with the large-scale agricultural producers. This either worsens rural poverty or contributes to rural to urban migration as farmers leave to find work elsewhere.

    Government responses to income inequality vary. Some countries of Latin America and the Caribbean turned to socialism in the hope that government-controlled development would be able to more fairly distribute wealth. Often these socialist endeavors were financed with the exports of natural resources, such as oil or coffee, but this created a vulnerable dependency on foreign trade. In Venezuela, for example, where Hugo Chavez ushered in a socialist revolution at the turn of the 21st century, falling oil prices in 2016 threw the economy into steep decline leading to massive inflation and a shortage of domestic products (Figure \(\PageIndex{1}\)). Governments like Venezuela often relied too heavily on income from exports and invested little in developing their own infrastructure, instead simply relying on importing the goods they needed. In general, spending on social services remains relatively low across the region.

    Figure \(\PageIndex{1}\): Venezuela’s Inflation Rate Compared to Annual Oil Revenues, 1980-2015 (© ZiaLater, Wikimedia Commons, CC BY 1.0)

    Taxation systems have had a relatively minimal effect on bettering the lives of the region’s poor or assisting the region in infrastructure development. The wealthiest people in many of these countries hold their money offshore in order to avoid taxation, but this also prevents governments from being able to use this tax revenue. Many governments have also given tax breaks to large, multinational corporations who seek to do business in the region providing a short-term economic increase at the expense of long-term development planning.

    Inequality is not just an issue of poverty, however. It can also relate to unequal access to education and political power. 62 percent of the population of Bolivia is indigenous, for example, but the country did not have a president from indigenous descent until Evo Morales was elected in 1998. Among the indigenous population of Bolivia, most work in agriculture and around 42 percent of indigenous students do not finish school compared to just 17 percent of non-indigenous students. There is a distinct cycle between education and poverty with educational advancement directly linked to economic advancement. In some areas, access to adequate education, particularly among indigenous populations, remains low, limiting the opportunity to narrow the income gap.

    For some, liberation theology has provided a sense of hope. Liberation theology is a form of Christianity that is blended with political activism. There is a strong emphasis on social justice, poverty, and human rights. This approach also stresses the importance of alleviating poverty through action and followers believe that, like Jesus, they should align themselves with society’s marginalized groups.

    Others in the region have decided to look elsewhere for economic advancement. Most countries in Middle and South America have net out-migration, meaning more people are leaving than coming into the country. Around 15 percent of all international migrants are from Latin America and the United States continues to be top destination. Some from Central America, however, are choosing to stay in Mexico rather than continue the journey north to the United States.

    Liberation Theology:

    a form of Christianity that is blended with political activism and places a strong emphasis on social justice, poverty, and human rights

    This page titled 5.5: Income Inequality in Middle and South America is shared under a CC BY-NC-SA license and was authored, remixed, and/or curated by Caitlin Finlayson.

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