That apparent robustness, however, masks a structural fragility. The position of the region in the global trade system remains practically the same as it was in the 19th Century. The situation in Argentina and Peru is even worse. In a paradox that theorists of dependency theory would not find surprising, the region as a whole exports a significant amount of crude oil, but is increasingly dependent on imports of refined gasoline.
Similar stories can be told of a myriad of industrial and chemical products.
Remittances are another form of dependence on a continuing global system and these remain an important part of the economies of several countries. These are economies whose engagement in global trade is largely an exchange of human labor for wages in another currency.
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China and the United States represent an outsized share of the export markets in the region. Disruption in either of these political economies or breakdowns in the global trade infrastructure would severely constrain the delivery of exports and imports. It seems historically inaccurate to single out inequality as one of the challenges Latin America faces towards the future.
Inequality is a historical stigma, constantly visible, throughout all countries in the region. Why is inequality a defining characteristic of Latin America? One possible answer is that economic inequality is a self-reinforcing phenomenon that cannot be separated from its political consequences. As countries become more unequal, the political institutions they develop and the relative strength of different political actors might make economic inequality more durable.
Modern Latin America was early on set on a path of inequality, and it has mostly been faithful to it. Therefore, the main challenge Latin America faces in terms of inequality might not be economic inequality per se but the capacity to keep access to political institutions broad and open enough so that the underprivileged can influence economic outcomes.
The last couple of decades in Latin America offer some hope on how inequality can be reduced, though it may not be enough to say that the region is set on a path that will finally make equality self-reinforcing. The s was a decade where inequality increased overall in the region.
South-South Relations beyond the Washington Consensus
The establishment of cash-transfer programs explains in large part this important change, especially in the overall reduction of the GINI coefficient. In contrast to previous social policy in the region, these programs are targeted to the population with lowest incomes, thus achieving a direct impact on inequality by affecting the indicator we use to measure it: income.
The most visible transfer programs because of their size and their measured impact were Oportunidades in Mexico, and Bolsa Familia in Brazil. However, similar programs were implemented in other countries throughout the region. Also, excluding important cases like Mexico, minimum wages were raised in most of the region during the same period, again affecting directly the income of the poorest. It is hard not to associate the reduction of inequality in Latin America with the election of left-wing governments in the early years of the current century Huber, The establishment of democracy not only brought more stable political institutions, and less political violence, it also brought the opportunity for segments of the population that had been historically underrepresented to finally influence policy decisions.
The cases of Bolivia with the election of Evo Morales, the Frente Amplio governments in Uruguay, the center-left coalition in. Chile and the PT in Brazil are some of the most prominent examples. However, stable organizations that substantially represent the underprivileged like labor unions are either weak or due to the historical exclusion of informal workers tend to represent another source of privilege, not of equalization.
The diminishing rate in the reduction of inequality for the s is a bitter reminder that the relevant characteristic of the region is not only the prevalence of inequality, but also its durability. Even though cash-transfer programs may have put a dent in it, their effect is limited by the fact that after their initial success further coverage can only be marginal and increasing the value of the transfers might put too much pressure on public finances, as economists throughout the region have argued Gasparini, This is especially true now since the ability of many Latin American countries to keep rates of economic growth stable has been put into question in the last couple of years.
Furthermore, even though economic inequality is a highly visible aspect of inequality, and one that is constantly measured, it only illustrates indirectly other aspects of inequality. Stark differences in the quality and access to public goods like a healthy environment, comfortable housing, and other aspects that determine our overall quality of life might be even more important that just income inequality.
As it is well known, Latin America is still highly unequal in all these other aspects. The combination of slower economic growth and persistent inequality is a source of anxiety for all political actors in the region.
The prospects for Mexico | Ditchley Foundation
The political effect on the stabilization of inequality cannot be underestimated. People are directly affected by differences in income in terms of lifetime outcomes. However their perception of fairness and justice are also strongly linked to levels of inequality. Negative perceptions regarding the fairness of society are a source of anxiety for economic elites. They worry that populist politicians might come into office and wreak havoc to economic stability. At the same time, leftist parties and politicians worry that economic elites and international financial institutions will overreact to demands of redistribution by curtailing the ability of the underprivileged to influence policy.
This anxiety filled context may lead to situations such as the current political turmoil in Brazil which should be a cautionary note for the rest of the region. There are two main challenges that Latin America currently faces in regard to violence. The first one is an increase in interpersonal violence throughout the region; and the second one is violence linked to organized crime, especially in areas that are relevant for drug related markets.
The latter type of violence is constantly made visible by the media and it has become a source of mano dura policies with little respect for human rights, whereas it is the former, interpersonal violence that claims more victims every year in countries across the region. There is great variation in national homicide rates within Latin America, and there is even more variation within countries see Figure 2. Some countries like Honduras and El Salvador share the highest levels of homicides around the world, whereas others like Chile and Uruguay are among the lowest.
Larger countries like Mexico, Brazil, Colombia, and Venezuela have regions where their homicide rates are comparable to those of Scandinavian countries, while at the same time they have locations with levels of violence reminiscent of the American wild-west. A large part of this variation is explained by social and demographic phenomena. The two characteristics that seem to be driving violence are demographic structures with bulges of young men, and an increasing participation of women in the labor market Rivera, Though these large trends do not allow to pinpoint with precision the motivations behind increasing interpersonal violence, it is not farfetched to make the link between violence, changing family structures, weakened state institutions, and the increasing presence of unsupervised young men.
This absence of supervision or social control, either by traditional social institutions—i. The other important source of variation is not drug production or trafficking per se, but how governments deal with illegal drug markets Lessing, There are some countries that are ranked as large producers of drug-related products, but have little violence linked to them. On the other hand, there are other countries with small drug markets, or with territories exclusively used as trafficking routes, where there are high levels of violence associated to these activities.
Governments sometimes confront, sometimes appease, and sometimes simply turn a blind eye to drug trafficking; each policy option leading to divergent outcomes in terms of violence. Nonetheless, even if structural sources of violence play an important role in explaining insecurity in Latin America, the perception many people have is that the main source of violence and crime is impunity. Everyday life in most countries in the region goes on with the expectation that the authorities will not be able to intervene when a robbery or homicide is committed, and once it is committed the expectation is that victims will not receive much help.
Furthermore, perpetrators will most likely not be punished or if they are punished this punishment will be attenuated by their relative economic or political power. In this respect prospects are grim. Reflecting on the future, the region has to seriously reconsider the basic premises of what produces violence, and what controls it. It has to rethink both the role of the state and the role of society on what controls the use of violence in everyday life, and what exacerbates it.
By any standard measure, the Latin American state is weak and fragile. Perhaps the most obvious indicator is the size of the percentage of the economy accounted for by the state.
Coal prospects in Latin America to 2010, IEAPER/23
Whether measured in terms of revenue or expenditure, the Latin American states are small and broadly ineffective. Paradoxically, Latin American states do perform well in some of the functions associated with strong institutions. The region as a whole outperforms countries with similar wealth in providing some foundation of public health and educations.
But in others and notably monopoly over the means of violence as described above Latin American government institutions are widely perceived as inadequate. Infrastructure is one area where the region underperforms based on its wealth. This creates a permanent obstacle to more sophisticated forms of economic development and also takes a toll on citizens relying on transport and communication services.
The delivery of some services such as postal and garbage collection is very bad and has often been absorbed by private sector firms. One indication of the relative weakness of the state is the size of the informal economy. While some may argue that this serves as an economic dynamism, it also means that the state has a difficult time taxing much of the economic activity and also fails to protect workers.
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