In the last century, poverty affecting people living on less than US$6.85 per day (2017 PPP) in Latin America and the Caribbean (LAC) has not only fallen to its lowest point, but the indicator is also heterogeneous in the region.
Since 2016, poverty reduction has progressed at a slow pace, in line with the low economic growth recorded in Latin America.
During this period, the expansion of the Gross Domestic Product (GDP) has been considerably lower compared to other middle-income economies.
In contrast, in 2009 the poverty rate in East Asia and the Pacific was 30 percentage points higher than in Latin America and the Caribbean, but by 2023 both regions had reached similar levels, reflecting divergent development trajectories.
Considering the years 2021 to 2023, a reduction of 4.7 percentage points (pp) is observed and overall poverty affects one in four people.
In the case of Chile and Uruguay, the indicator is below 10%, in Paraguay 17.6%, while in other countries, such as Guatemala and Honduras, they are above 50%.
Among the factors, the strengthening of the labor market stands out, which explains almost two-thirds of the reduction in poverty between 2021 and 2023.
The improvement in employment rates contributed 1.8 percentage points (pp) to this decrease, while the increase in labor income added 1.5 pp and public transfers, 1.1 pp.
Other components, such as remittances and non-labor income, had a smaller impact, of approximately 0.3 pp each.
In line with the above, despite the significant recovery of labor markets in LAC after the pandemic, the Employment Quality Index (EQI) reveals that improvements in the quality of employment have been limited.
Since 2016, the ICE has shown stagnation in most countries in the region. Only five – Brazil, Colombia, Costa Rica, El Salvador and Mexico – experienced moderate progress, with increases ranging between 0.02 and 0.05 points.
In contrast, the quality of employment deteriorated or remained unchanged in six countries: Argentina, Bolivia, Ecuador, Panama, Peru and Uruguay, the World Bank reports.
The organization adds that the recovery after the pandemic has been gradual. However, in 2023 economic growth had a less favorable impact on lower-income households.
Between 2021 and 2022, incomes grew faster among the most vulnerable sectors than among the most affluent.
However, between 2022 and 2023, the rate of income growth slowed and showed a more homogeneous trend across socioeconomic groups.
For 2024, the international organization forecast moderate economic growth, accompanied by a slight reduction in poverty in the region of 24.7%.
The rate of the aforementioned indicator in Latin America in 2023 had reached 27.3% of the population, the lowest percentage for the region since 1990, although similar to what was observed in 2014, according to the Economic Commission for Latin America and the Caribbean (ECLAC).
Although the global scenario is characterized by a high level of uncertainty and volatility, developing countries such as those in Latin America and the Caribbean must design and promote public policies that mitigate the effects of international shocks in order to generate greater resilience in the labor and economic markets now and in the years to come.
