Compared With OECD Countries, Latin America Trails in Effort to Reduce Poverty, Inequality

The Economist recently summarized a report by the OECD which supports findings that "compared with rich countries, Latin American countries still fall short" in the fight to "reduce poverty and inequality." Even within the OECD, which The Economist recognizes as "a club of mostly rich countries," it is a Latin American country, Chile, which performs the worst in these efforts.

The report, according to The Economist, identifies Chile as the OECD's "most unequal member." (Although Brazil is shown in the visual, it is not an OECD country). Further, Chile "also finished third from the bottom, ahead only of Mexico and Israel, in relative poverty, measured by the share of the population earning less than half the median income."

The Economist notes, "Governments can reduce poverty and inequality through taxes and cash transfers." It argues that Chile does not effectively reduce poverty or inequality because of deficiencies in these areas. In Chile, "Government spending on health, education and social policies is low, around 16% of GDP; the OECD average is around 27%." And that's not Chile's only problem: "Tax evasion by corporations and individuals alone is estimated to cost the government some 2.5% of GDP."

The Chilean government has introduced a program, Ingreso Ético Familiar, aimed at fixing these problems. But The Economist points out that "the new cash transfer programme only targets the extreme poor." So how could these problems in Chile be better targeted? The Economist suggests, "More efficient and progressive taxes would raise revenues and reduce inequality." Looking forward in Chile, The Economist notes, "Better job opportunities and higher quality education are needed to improve labour productivity and boost growth."