Latin America’s Reduction in Poverty Slows with Weaker Economic Growth

The decline of poverty in Latin America has started to slow down as a result of weaker economic growth, according to a new report by the United Nations Economic Commission on Latin America and the Caribbean, ECLAC.

The report, released Thursday, said the total number of people living in poverty in 2013 was around 164 million, representing 27.9 percent of the region’s population. Eclac (Cepal is the acronym in Spanish) said that 68 million people, representing 11.5 percent of the population, are in extreme poverty.

The UN agency said that in absolute terms, poverty was stable in 2013 versus 2012, while extreme poverty actually increased slightly from 66 million last year. The increase in the number of people living in extreme poverty is explained by higher food prices, Eclac said.

Eclac Executive Secretary Alicia Barcena said that countries need to make structural changes to their economic policies in order to continue reducing poverty amid slower growth.

“Since 2002, poverty in Latin America has fallen 15.7 percentage points and extreme poverty 8.0 points, but recent figures show a slowdown,” Barcena said. “The only acceptable number of people living in poverty is zero, which is why we call on countries to carry out structural economic changes to achieve sustained growth with greater equality.”

Natural resource-rich countries in Latin America have posted robust economic growth during the past decade driven by China’s appetite for raw materials, which boosted commodity prices. The region’s strong economic growth has led to a decrease in poverty, as more and more of Latin America’s citizens have moved into the middle class. A bigger middle class, in turn, spurred on domestic demand as families snapped up new vehicles and homes thanks to easier access to credit.

A good example is Peru. The Andean country, which is rich in minerals like copper and gold, posted average annual growth of over 6 percent during the past decade. As a result of that growth, poverty rates fell from more than 50 percent in 2000 to about 26 percent last year. Declines in poverty were seen across the board, in countries like Brazil, Colombia and Ecuador.

However, the rate of growth in Latin America has slowed considerably this year as the prices for raw materials have fallen due to a cooling off of growth in China and an appreciation of the US dollar against regional currencies. The dollar has strengthened amid growing signs that the US Federal Reserve could start to ease up on its multi-billion dollar a month bond buying program.

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