BREAKING THE CYCLE OF CHRONIC POVERTY IN LATIN AMERICA AND THE CARIBBEAN

Lima, March 10, 2015.- One out of every five Latin Americans or around 130 million people have never known anything but poverty, subsisting on less than US$4-a-day throughout their lives. These are the region´s chronically poor, who have remained so despite unprecedented inroads against poverty in Latin America and the Caribbean since the turn of the century.

Their situation is becoming more precarious as the economic boom that significantly contributed to reduce poverty dwindles. Regional GDP growth has slowed, from about six percent in 2010 to an estimated 0.8 percent in 2014. This contraction will likely take away one of the biggest drivers behind the strong reduction in poverty: an improved job market.

A new World Bank report, Left Behind, Chronic Poverty in Latin America and the Caribbean, takes a closer look at the region’s entrenched poor, who and where they are, and how policies and thinking will need to change in order to more effectively assist them.

“Poverty exists and persists due to constraints within and without the households, everything from lack of appropriate skills and motivation to the lack of basic services such as clean water,” said Jorge Familiar, World Bank Vice President for Latin America and the Caribbean. “In other words, supporting individuals is necessary but not sufficient. An enabling context that provides appropriate services is also crucial. Therefore, social policies and regional development need to go hand in hand”.

But who are the chronic poor? The answer to that question traditionally has been hard to come by due to the lack of data tracking the poor over time. The World Bank report, however, applies a new methodology to shed light on those who have remained poor in Latin America.

Among the report’s key findings:

- There are significant variations among countries. Uruguay, Argentina and Chile have the lowest rates of chronic poverty, with rates around 10 percent. On the other extreme, Nicaragua, Honduras, and Guatemala have rates of chronic poverty significantly higher than the regional average of 21 percent, ranging from 37 percent in Nicaragua to 50 percent in Guatemala.

- There are significant variations within countries. Within a single country, some regions show incidence rates up to eight times higher than the lowest. In Brazil, for instance, Santa Catarina has a chronic poverty rate of about five percent, while Ceará is nearly 40 percent.

- The issue is rural and urban. Despite the much higher percentage rates of chronic poverty in rural areas, such poverty is as much an urban as a rural issue. In fact, considering absolute numbers, urban areas in many countries, including Chile, Brazil, Mexico, Colombia and the Dominican Republic, had more chronic poor between 2004 and 2012 than rural areas.

“In addition to focusing on access to basic services and good jobs, policies must also take into account the very real social and aspirational barriers facing the chronically poor in Latin America,” said Ana Revenga, Senior Director for Poverty at the World Bank Group. “If this remains unaddressed, it will be far too easy for the most vulnerable to fall through the cracks of social safety nets, no matter how well-targeted these programs are”.

In Peru, for instance, patients with tuberculosis, who live largely in Lima’s slums, were 43 percent more likely to abandon treatment before being cured if they were depressed at the time of diagnosis.

To better assist these patients, a program that provides free treatment also offered clinical psychologists to help treat depression and special support to help identify income-generating opportunities for patients. Other social intermediation programs, such as Chile Solidario, or Red Unidos in Colombia, employ social workers to actively match beneficiaries with social programs that address family-specific needs.

Moving forward, policymakers in Latin America would be justified to rethink the approach of poverty reduction programs, using this new analysis to better understand who the chronically poor are and where they reside. It will be crucial to improve coordination between different social and economic programs, and to tackle the mental and emotional toll that poverty takes on the poor and their ability to improve their lives. Only then will it be possible to forge a clearer path out of poverty for the 130 million chronically poor in Latin America.

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