TRUE_ECONOMIC_DEVELOPMENT

99

TABLE 1 - World Economic Indicators

Source of original data: World Development Report - World
Bank - 2007.

Graphic I - The Unequal World

1. Income distribution

100

101

2. Distribution of population

The Definition Problem

The concept of poverty varies from country to
country and over time. Poverty can also be defined
from an objective or subjective viewpoint , apart from
the gospel meaning. Individuals have, at any time, their
opinion of what constituted poverty.

The objective standards are of three species: phys-
ical, economic and social. Take, for example, what
Adam Smith says about the conventional needs of the
poor:

By essential needs I understand not only the
articles that are indispensable and necessary
for the sustenance of life, but whatever, in the

102

absence, the inhabitants of the country con-
sider their ordeals unworthy for sick people,
even from the lower strata.

It is not mere sophistry about definition, but of
considerable practical importance, for all standards
for the measurement of poverty are relative in time
and space.

The standard of minimum needs now adopted for
the population of São Paulo is quite different from fifty
years ago, although the minimal needs of food and
housing have not changed. The minimum field standard
is probably lower than in the city. And the minimum
standards of São Paulo would be considered as pure
luxury in many areas of the Northeast.

As poverty currently afflicts a representative part
of humanity and Brazil, it is necessary to analyze its
extent and its causes so that economic and social policy
can be addressed, through both income redistribution
and other means.

It is not pure rhetoric to speak of this struggle to
reduce poverty as the greatest challenge in world his-
tory. Today it overcomes, in complexity, size and
breadth, any previous enterprise of man in the last
fifty years.

In reality, poverty means something more than
simply living with the minimum of dignity and respect
one year. The struggle for the redemption of poverty is

103

not only a search for economic growth, but the rescue
of a social debt, a moral duty of government and civil
society, which are responsible and enjoying the benefits
of prosperity.

What I describe in this chapter is intended to pro-
vide insights for a better understanding of this incon-
testable and impressive reality of world poverty.

The Meaning of Rural and Urban Poverty

The poor constitute a heterogeneous group. As
outlined above, definitions of poverty are differentiated
in industrialized and underdeveloped countries. In ad-
dition, says David Satterthwate of the London-based
International Institute for Environment and Develop-
ment, that income-based poverty lines are not adequate
to understand this phenomenon.

Income poverty lines show very low levels that
do not cover the costs of non-food essential items,
such as transportation, childcare at school, and water
and health services. Also not represent aspects of
poverty related to poor housing, inadequate access to
emergency services and legal protection and lack of
voice in political systems.

Most definitions of poverty do not distinguish be-
tween rural and urban areas. Although the outcome of
the poverty may be the same, the causes and the char-

104

acteristics are different. The cause of rural poverty de-
pends on the possession of a small land and low in-
come. It differs from an urban domicile.

Poverty in urban housing may be due to being lo-
cated in a community of slums, unemployed, with
health problems and home maintenance expenses. Pro-
grams designed to reduce rural and urban poverty need
to consider these differences.

The World Bank estimates that there were about
500 million poor urban dwellers in 2000, below the
poverty line based on "one dollar a day." On rural pov-
erty, the estimate for 114 developing countries is who
lived in the rural areas about one billion people with
regulations below the poverty line. Of these, 2/3 were
in Asia and another 1/5 in sub-Saharan Africa. In most
of Latin America, most of poverty is now considered
urban, but, in relative terms, the rural area still prevails
for many countries.

In fact, 74% of the population and 62% of poor
Latin America and the Caribbean inhabitants are in ur-
ban areas. However, in relative terms, poverty remains
a rural phenomenon in the Region. In addition, the av-
erage rural income is much lower than urban. About 70
percent or more of the rural population of Bolivia, Ec-
uador, Guatemala, Haiti, Honduras, and Nicaragua are
below the poverty line. In Brazil, Mexico and Colombia
this proportion was 50% to 62%. There are about 205

105

million poor people, with 30% of those living in ex-
treme poverty. The highest concentrations of land are
found in Central America, the Andean region and the
Brazilian Northeast, where 60% of the population is so
below the poverty line.

TABLE 2 - Latin America: situation of poverty - per-
centage (%)

Poverty Extreme Poverty

Years Total Urban Rural Total Urban Rural

1980 35 25 54 15 9 28

1990 41 35 58 18 12 34

2000 36 32 54 15 10 34

2005 38 30 56 14 10 31

Source: ECLAC (2000) Estimate (2005)

The vast majority of the rural poor live in areas of
low agricultural potential, including degraded or semi-
arid areas, erosion, fragile and heavily inclined areas
suchas the Andes and coastal areas of Mexico.

Brazil has about 20 million poor people in rural
areas, most of them in northeastern Brazil. Over the
years, many poor rural inhabitants migrate to the met-
ropolitan areas of São Paulo and Rio de Janeiro. In the
case of South America, the poor are generally indige-
nous, lessees or live in remote mountain communities
of Bolivia, Peru, and Ecuador. In Brazil, the highest

106

concentration is in the semi-arid nor destination, as al-
ready mentioned.

Rural poverty is generally associated with a lack
of better land distribution and inadequate access to
technological information and productive assets for
small products. Poor rural populations suffer from the
consequences of rural isolation and limited education,
health and housing services. Market-oriented policies
in recent decades have led to a pattern of investment in
rural areas that have contributed to rising poverty.

Vicious Poverty Circle

The causes of poverty can be historical, geo-
graphic, anthropological, political and even circum-
stantial. Each country or region has its motivations, alt-
hough there are similarities in the origin of this phe-
nomenon. There are many theories and conceptions that
seek to explain this grave problem of humanity. Some
models are based on strictly economic or sociological
grounds, while others argue geographically (poor coun-
tries in the tropics), social, religious or ideological rea-
sons (capitalism / socialism).

For the sake of simplicity and objectivity, I will
deal only with the most consensual and empirical basis
of documentary comparison. Over many years, organ
study groups of the United Nations in several identified
elemental causes of poverty: not access to medical ser-
vices and basic resources for economic segment of the

107

population; misleading public economic policies and
market economy to stimulate private initiatives ; social
discrimination that makes it difficult for people to use
productive potential; failure of the public security role
in human rights; crises and wars, environmental disas-
ters and the spread of contagious diseases.

Added to this is the lack of mechanisms to protect
the population with low social expenditures; inefficient
public administration and weak institutions; insuffi-
cient government interest in poverty reduction; protec-
tionism of the external market against the countries de-
veloped by the industrialized countries, blocking the
growth of the countries that produce raw materials.

In studies contends in Reporting Human UNDP
development (United Nations) are related to other
physical causes that generates the poverty and perpetu-
ate. They are illiteracy, food insecurity (hunger, under-
nourishment), lack of social structures and services for
the poor, basic sanitation and safe water, insecure insti-
tutions and political life. Vale this car yet, the lack of
freedom that restricts opportunities.

Because of these characteristics, poverty is more
than a demographic category or socioeconomic class:
"Poverty is also an attitude of life." (Inter-American
Development, 2000).

108

Some preeminent economists defend the thesis
that in underdeveloped economies there is a phenome-
non that perpetuates poverty as if it were a vicious cir-
cle of poverty. Since per capita income is low, there is
not enough savings and as a consequence, the invest-
ment rate is low. If this occurs, there is a low produc-
tivity that is the basic element for increasing per capita
income. In addition, the economic expansion element is
demand from the market or from consumption patterns.
In a low-income economy, there is little consumption
and stagnation of the stimuli that motivate an increase
in demand. As can be deduced, the scheme of the vi-
cious circle of poverty is a great simplification of real-
ity, but serves to guide the reasoning of the growth pro-
cess.

GRAPH II - Vicious Poverty Circle

109

It must also be made clear that the problem of pov-
erty goes beyond what is on the income side. It is nec-
essary to know the structure of the source of the income
to identify the factors that are determining its behavior.

The income of each household or isolated person,
for example, depends on the income generated by the
assets of the unit or individual that are: human, physical
and social capital. From production to production, these
factors generated income, according to the market price
of these factors. The income can also be received inde-
pendently of income from assets from other sources and
transfers. Finally, family income depends on the num-
ber of people in the household.

Strategies to break the vicious circle of poverty are
related to all these factors. Therefore, it is not an inde-
pendent policy. The main objective is actually to im-
prove the living standard of the poor population by in-
creasing the productivity of the factors of production
and improving the allocation of these factors in the eco-
nomic system.

The faster increase in average incomes is funda-
mental to reduce absolute poverty. The grown alone is
not enough. There is a big difference between average
incomes and the poorest people. Growth tends to in-
crease this difference. This pattern is explained by the
Kuznets Curve, which shows that the income of the
poorest 40 percent of the population typically increases
more slowly than the average until per capita income

110

reaches a range of $ 5,700 to $ 9,000. Above this level,
incomes of the poorest groups tend to rise faster than
average.

Thus, income distribution is usually more unequal
in underdeveloped than in developing countries. The
initial increase in inequalities is motivated by the incen-
tives that, in the initial phase, go to those with better
conditions and more resources.

Inequality and Equality in the Distribution of In-
come

It is not enough to know about the level of income
to know how many people in the population are in a
certain category. The number of poor people in a coun-
try also depends on inequality or equality in income dis-
tribution. The lack of adequate understanding on this
subject has been the cause of many scholarly polemics
and misperceptions about the formulation of develop-
ment policies and the fight against poverty in Brazil and
in many underdeveloped countries.

These problems have already been studied in pre-
vious chapters. For the moment, I simply want to
demonstrate new arguments about the complex prob-
lem of poverty in the midst of abundance.

The World Bank's 2000/2001 World Develop-
ment Report on Combating Poverty offers a sure con-
tribution to the problem of this scourge. According to

111

this conceited document, the poor are those who do not
have adequate conditions and there, housing, education
and health. The poor, in addition, live without freedom
of action and choice and suffer deprivations that pre-
vent them from having a type of life that everyone val-
ues.

Because they do not have reserve resources, they
are extremely vulnerable to diseases, financial and cli-
matic crises, such as droughts in Northeast Brazil. It
does not receive the due attention of the institutions of
the State and of society in general.

The various dimensions of poverty can only be
fully understood by those who have already had the op-
portunity to see it in loco. It is such frustration and psy-
chological pain that people live in that state that, for
them, it seems impossible to escape from this situation.
As a resident in one of the poorest regions of Brazil
(Northeast) and have professionally lived with this re-
ality and known similar situations in Africa and Latin
America, I can testify that they are inhumane environ-
ments.

Poverty is not, however, a consequence of eco-
nomic systems that produce these conditions of depri-
vation and absence of real freedom of choice. Lack of
jobs, few goods and few productive opportunities keep
people in poverty and misery. This situation aggravates

112

the deformation of the political power system, the inef-
ficient functioning of institutions in relation to the poor,
including corruption and arbitrariness of the state.

The World Bank study also notes that the poverty
situation is heavily influenced by social norms, prac-
tices in communities and the market, leading to exclu-
sion of women, ethnic and social minorities. In poor
countries, for example, 20% of children do not com-
plete the five years of life and 50% are malnourished.

Glacial wealth in the world, however, has grown
more in the last century than in the rest of humanity's
history. On the other hand, the income distribution is
extremely unequal. The average income gap in the 20
richest countries in the world compared to the poorest
20 has doubled in the last 40 years. The experience of
these inequalities differs in each region, but the gap be-
tween rich and poor has steadily worsened.

Brazil is recording in patterns of inequality, as can
be seen in Table III. In this country, the top 10% of the
poorest 10% was 57.8% in 2006, compared to 34.5% in
Argentina, 8.1% in Denmark and 4.5% in Japan.

113

Table III - List of Countries Selected by Income
Distribution - 2006

Countries 10% richer over 20% richer over Gini Index*
the poorest 10% the poorest 20%

Argentina 34,5 17,6 52,8
Australia 12,5 17,6 35,2

Brazil 57,8 23,7 58

China 18,4 10,7 44,7

Denmark 8,1 4,3 24,7

Spain 10,3 6 34,7

U.S 15,9 8,4 40,8

France 9,1 4,9 32,5

Italy 11,6 3,4 24,9

* Note: The higher the percentage, the greater the inequality.

A question that economists have been asking in
recent years is whether equality is prejudicial to the de-
velopment of a country? Is it possible to justify this
concern in the face of the collapse of the former Soviet
Union’s economy, where the policies of income distri-
bution were much more stringent than in the capitalist
countries? Hence the different opinions on the optimal
distribution of income. Some consider in recent years
that the Gini Index (distribution) should be close to
25% (as in Sweden), another 40% as in the United
States.

114

A World Bank study group considers that a distri-
bution very close to the absolute value can be detri-
mental to economic efficiency. It is imagined that when
this occurs there may be an elimination of the incen-
tives that people need to participate more actively in the
labor market and entrepreneurship.

In spite of all this, what we have as incontroverti-
ble proofs are the wrongs of excessive centralization of
income. High inequality can motivate political instabil-
ity, as it increases the incidence of poverty, and im-
provements in the provision of services of education,
health and public safety. The 2006 Report of the United
Nations Development Program (UNDP)

Brazil among the most unequal in the world. In a
list of 126 countries, Brazil ranks 10th ahead only in
Colombia, Bolivia, Haiti and five sub-Saharan African
countries, the poorest region on the planet. The Brazil-
ian performance is evaluated in the aforementioned Re-
port based on the Gini Coefficient, an indicator of in-
come inequalities ranging from 0 to 1, 0 being a situa-
tion in which the entire population had an equivalent
income and 1 if only one person stopped all the wealth
of the country.

Regarding the Human Development Index (HDI),
another indicator to assess the problem of inequality,
Brazil has advanced in recent years, but remains the
most unequal among all countries with a HDI higher
than its own. The poorest 10% in Brazil hold only 0.8%

115

of income, which is higher than that of the poor in Co-
lombia, El Salvador, Botswana, Paraguay, Namibia, Si-
erra Leone and Lesotho.

The United Nations Development Program
(UNDP) Report notes that reducing inequality will in-
crease the efficiency of the country and transform
growth in poverty reduction.

Chronic Poverty

Graph III - Historical and Structural Conditions

116

World Poverty

Poverty is present in all modern societies, even in
the richest. To better understand this situation, it is nec-
essary to take into account that the criteria for poverty
in an underdeveloped country and in an industrialized
country are different.

For underdeveloped countries, the United Nations
and the World Bank have set the $ 2 per day threshold
as the poverty line. For people in extreme poverty (in-
digression) the line is US$ 1 per day. By this criterion,
poverty in industrialized countries is minimal.

About three billion people worldwide live in pov-
erty with an income of US$ 2 a day, with 50 percent of
them in indigence. In addition to low income, the poor
have other characteristics, that is, 2/5 are children under
10 and are part of a large family; and ¾ live in rural
areas. Many poor families own or are tenants of a small
land where they work on a subsistence basis.

The vast majority of the poor are illiterate and suf-
fer from tropical diseases. The deadly one-way rate is
high. The well- being of the poor can suffer great fluc-
tuations. A year of good winter and plenty offers food
for the family but one or two years of rains can cause a
lot of damage and suffering. The description of her con-
ditions of poverty is wide, especially for people who
have never seen her in loco.

117

To illustrate what I'm saying, it's worth telling a
little story. To a certain extent, the Brazilian Society of
Rural Economy and Sociology was conducting a the
Latin American Conference, at the Luis de Queiroz
Higher School of Agriculture (USP), on rural develop-
ment. As a speaker, he was speaking at one of the ple-
nary meetings and analyzed the disparities in the devel-
opment of agriculture in Northeast Brazil and the
Southeast. One of the directors of the International So-
ciety of Agricultural Economists, Swedish professor
Ulf Renborg, was attending this event.

At one point of my presentation, the an empha-
sized the humiliating characteristics they live in the
Northeast subsistence farmers, the translator teacher
Renborg started crying, wildly you! He left the table,
and at the same time, there was a great malaise. I had to
encourage my digression on the rural poverty of the
Northeast, which for me was an almost natural situa-
tion, even though the minimum standards of human re-
spect are intolerable.

In the following year, I was invited by the Interna-
tional Association of Agricultural Economists to pre-
sent a paper at the XIX International Conference of Ag-
ricultural Economists in the city of Malaga (Spain). The
subject that I discussed together with Yugiro Hayami
and Professor Mancur Olsom of the University of Mar-

118

yland (USA) was Forces who will shape the rural de-
velopment of the future. In a certain part of my presen-
tation at this conference, I said:

The great political and social challenge
of the present, in the Northeast of Brazil, is to
introduce the necessary improvements to
counterbalance the imbalances of its current
productive system and to obtain a level of dig-
nity and minimal decency bearable. Indeed,
certain prejudices about poverty have created
ditches of hostility to the observance of man's
right to survival.

Finally, based on data from the World Develop-
ment Report 2007 (World Bank), I estimate that this
year about 1.2 billion people live in this condition. In
comparison with the total population of the Earth, this
amount corresponded to 28.8%. According to the fig-
ures for each region, this ratio rises from 1.9% in Eu-
rope and Central Asia to about 39% in sub-Saharan Af-
rica and South Asia.

In these regions are countries such as India, Bang-
ladesh and Indonesia. It is relevant to note that 46% of
all extreme poverty in the world is concentrated in
South Asia. Another 23% live in sub-Saharan Africa,
followed by Latin America and the Caribbean with 6%.
Even so, this Region has 81 million miserable people
and has increased by 28% in the last 20 years.

119

Noteworthy in terms of trends in world poverty
was the 36% reduction between 1987-2007 in East Asia
and the Pacific where China is located. Overall, in this
period, there was a slight increase of 6%. It should be
noted, however, that data from this category of extreme
poverty need to be contextualized in the overall poverty
line, which corresponds, under World Bank criteria, to
the range of $ 1 and $ 2 per day. That is, there is often
a reduction of those at the extreme of poverty, but they
may have transferred to the poor group. Thus, they have
improved on the degree of poverty, but remain below
the absolute poverty line.

120

TABLE IV - Extreme Poverty by Region 1987-2007

1. People living on less than $ 1 per day (millions)

Region 1987 1996-1997 2007*

East Asia and the Pacific 417,5 26,51 270,0

Europe and Central Asia 1,1 23,8 25,0

Latin America and the Caribbean 63,7 76,0 88,2

Middle East & North Africa 9,3 5,0 5,7

South Asia 474,4 531,7 577,0

Sub-Saharan Africa 217,2 287,0 292,0

Total 1.183,20 1.190,50 1.150,0

Excluding China 878,8 980,5 998

2. Portion (%) of the population living on less than $ 1 per day

Region 1987 1996-1997 2007*

East Asia and the Pacific 27,6 14,9 14,3

Europe and Central Asia 1,6 5,1 1,9

Latin America and the Caribbean 16,8 15,6 14,7

Middle East & North Africa 2,4 1,8 4,7

South Asia 44,0 42,3 39,2

Sub-Saharan Africa 47,7 48,5 39,4

Total 29,0 24,5 18,9

Excluding China 28,1 27,0 28,8

* Source of original data: World Development Report, 2000/2001;

World Bank, 2007.

Note: The international poverty line is US$ 1.08 per day with the 1993

PPA (extreme poverty), based on surveys covering 88% of the world's

population.

* Data estimated by the author based on the historical trend.

121

Frame I

Country classification

Countries in human development groups

High human development (HDI Average human development Low human develop-
0.800 and above) (HDI 0.500 to 0.799) ment (HDI below 0.500)
Germany South Africa Angola
Antigua and Barbuda Albania Bangladesh
Argentina Saudi Arabia Benin
Australia Algeria Bukina Faso
Austria Armenia Burundi
Bahamas Azerbaijan Bhutan
Bahrain Belarus Congo Republic
Barbados Belize Democratic
Belgium Bolivia Costa do Marfim
Brunel Botswana Djibouti
Canada Brazil Eriteia
Chile Bulgaria Ethiopia
Cyprus Cape Verde Gambia
South Korea Cameroon Guinea
Denmark Cambodia Guinea Bissau
United Arab Emirates Kazakhstan Haiti
Slovakia China Yemen
Slovenia Colombia Laos
Spain Camoros Madagascar
U.S Congo Malawi
Estonia Costa Rica Mali
Finland Croatia Mauritania
France Cuba Mozambique
Greece Dominica Nepal
Netherlands Egypt Niger
Hong Kong, China (SAR) El Salvador Nigeria
Hungary Ecuador Central African Republic
Ireland Russian Federation Rwanda
Iceland Fiji Senegal
Israel Philippines Sierra Leone
Italy Gabon Sudan
Japan Ghana Tanzania
Kuwait Georgia Togo
Luxembourg Grenade Uganda
Malta Guatemala Zambia
Norway Guiana
Equatorial Guinea Equatorial Guinea
Poland Honduras
Portugal Solomon Islands
Qatar India
UK Indonesia
Czech Republic Will
Singapore Iraq
Sweden Jamaica

122

High human development (HDI Average human development Low human develop-
0.800 and above) (HDI 0.500 to 0.799) ment (HDI below 0.500)
Switzerland Jordan
Uruguay Lesotho
Latvia
Lebanon
Lithuania
Macedonia
Malaysia
Maldives
Morocco
Mauritius
Mexico
Moldavia
Mongolia
Myanmar
Namibia
Nicaragua
Oman
Panama
Papua New Guinea
Pakistan
Paraguay
Peru
Kenya
Kyrgyzstan
Dominican Republic
Romania
Samoa (Western)
Saint Lucia
Saint Kitts and Nevis
Saint Vincent and the Grenadines
Seychelles
Syria
Swaziland
Suriname
Thailand
Tajikistan
Trindadee Tobago
Tunisia
Turkmenistan
Turkey
Ukraine
Uzbekistan
Vanuatu
Venezuela
Vietnam
Zimbabwe

123

Countries in human development groups

High income (GNP per cap- Average income (GNP per Low income (GNP per capita of
ita of $ 9,361 or more in capita of $ 761-9,360 in $ 760 or less in 1998)
1998) 1998)
Germany South Africa Angola
Australia Albania Armenia
Austria Antigua and Barbuda Azerbaijan
Bahamas Saudi Arabia Bangladesh
Belgium Algeria Benin
Brunei Argentina Burkina Faso
Canada Bahrain Burundi
Cyprus Barbados Bhutan
Denmark Belarus Senegal
United Arab Emirates Belize Cambodia
Slovenia Bolivia Sudan
Spain Botswana China
U.S Brazil Comoros
Finland Bulgaria Congo
France Cape Verde Democratic Republic of Congo
Greece Kazakhstan Papua New Guinea
Netherlands Chile Eritrea
Hong Kong. China Colombia Ethiopia
Ireland South Korea Gambia
Iceland Costa Rica Ghana
Israel Croatia Guinea
Italy Cuba Guinea Bissau
Japan Djibouti Haiti
Kuwait Dominica Honduras
Luxembourg Egypt Yemen
Malta El Salvador India
Norway Ecuador Indonesia
New Zealand Slovakia Laos
Portugal Estonia Lesotho
Qatar Russian Federation Madagascar
UK Fiji Malawi
Singapore Philippines Mali
Sweden Gabon Mauritania
Switzerland Georgia Mozambique
Grenade Moldavia
Guatemala Mongolia
Guiana Myanmar
Guinea Nepal
Hungary Nicaragua
Will Venezuela
Iraq Niger
Jamaica Nigeria
Jordan Pakistan
Latvia Kenya
Lebanon Kyrgyzstan
Libya Central African Republic
Lithuania Rwanda
Macedonia Solomon
Malaysia Sao Tome and Principe
Maldives Senegal

124

High income (GNP per cap- Morocco Sierra Leone
ita of $ 9,361 or more in Average income (GNP per
1998) capita of $ 761-9,360 in Low income (GNP per capita of
1998) $ 760 or less in 1998)
Mauritius
Mexico Sudan
Namibia Tajikistan
Oman Tanzania
Panama Togo
Papua New Guinea Turkmenistan
Paraguay Uganda
Peru Vietnam
Poland Zambia
Dominican Republic Zimbabwe
Czech Republic
Romania
Saint Kitts and Nevis
Saint Vincent and the Gren-
adines
Samoa (Western)
Saint Lucia
Seychelles
Syria
Sri Lanka
Swaziland
Suriname
Thailand
Trinidad and Tobago
Tunisia
Turkey
Ukraine
Uruguay
Uzbekistan
Vanuatu
Venezuela

125

Situation in Latin America and the Caribbean

The greatest challenge for Latin America and the
Caribbean at the beginning of the 21st century is the
reduction of poverty and socio-economic inequalities.
Some countries in this region are classified as middle-
income countries, but poverty rates are too severe. One
of the reasons pointed out by the economists for this
"excess of poverty" is the high rates of social and terri-
torial inequalities.

In Brazil, for example, the Northeast alone ac-
counts for only 28% of the Brazilian population (50
million), while at the same time 49% of the poor and
55% of the indigent people of the whole nation. The
Brazilian regional imbalance is an old, problem, but has
not been improved over the years.

Most worrisome at the continental level is that
these indicators are stagnating or worsening in many of
these countries. Traditionally, governments in Latin
America and the Caribbean have applied welfare trans-
fer programs that only temporarily relieve the poverty
of the people assisted. These programs do not generally
act on the causes of poverty and are therefore a source
of criticism on the part of intellectuals and political rep-
resentations.

Latin America and the Caribbean they count with
a superfície 20 million km² and a population of 551 mil-

126

lion in 2005. Brazil, Mexico, Colombia and the Argen-
tine concentrated 68% of the population and 78% of
Gross Domestic Product, which is $ 2.2 trillion in that
year. Including Venezuela and Chile, this proportion
rose to 88%. However, with respect to the Gross Do-
mestic Product per capita, Argentina was a very prom-
inent position, as well as the year 2005. It is US $ 8,130
per capita, followed by Mexico, Chile and Venezuela.

Meanwhile, Brazil ranked fifth in this area, with
US $ 3,573, according to data from the Statistical Year-
book of ECLAC, used for this analysis. Of the 10 coun-
tries analyzed in descending order, Bolivia is in a worse
position with only US $ 1,033 per capita, or 12% of the
first-place figure. The average for Latin America and
the Caribbean is US $ 4,055.

What I can describe here serves to contextualize
the poverty line of this region. Used research data of
ECLAC, Reference Owner you to 18 countries and
93% of the total of the region population, an average of
40% is estimated to people below the poverty line,
based on World Bank the criteria $ 2 per capita per day.
In absolute numbers, this means 220 million people.
The serious and scary thing is that this number was 181
million Latin Americans in 1996. Therefore, a 21% in-
crease in the period.

There is a great variation of situations between
countries, as in the cases of Nicaragua, El Salvador and
Bolivia, where this proportion rises to 70%, falling

127

from Argentina to 20%, along with Chile and Vene-
zuela. Brazil and Mexico are in similar conditions, with
about 36% below the poverty line. It is worth mention-
ing, however, that poverty in Brazil's rural environment
was 53%. Contributing to this shameful result was the
position of the Northeast of Brazil, where no less than
70% of the rural population is affected by this situation.
About 33% of the urban population in Brazil is poor,
compared to 28% in Mexico.

Part of the explanation for the disastrous situation
in which the Latin American rural population finds it-
self lies in the fragile contribution of the agricultural
sector to the function of regional income. They are only
6% on average in the last ten years. With increases, the
proportion of people concerned with this sector is low
c consequently the productivity of hand labor em-
ployed. The services sector generates an average of
65% of gross domestic product, especially in metropol-
itan areas and cities.

128

TABLE V - Latin America - Population Estimates

Busy – 2005

(percentage)

Country Agriculture Industry services

Argentina 11,1 23,5 3,4
Brazil 19,5 21,6 58,8
Chile 13,2 23,9 62,9
Colombia 20,9 19,8 50,3
Ecuador 30,3 17,6 52,1
Mexico 13,9 35,7 60,4
Uruguay 4,6 22,0 73,4
Venezuela 9,7 20,8 69,5

Source: CEPAL

TABLE VI - Latin America and the Caribbean

1. Population and GDP - 2005

Countries Population GDP Total US $
(1,000) billion
1. Argentina
2. Mexico 38.592 313,8
3. Chile 106.147 636,2
4. Venezuela 16.267 93,2
5. Brazil 26.577 131,2
6. Cuba 187.597 670,4
7. Peru 11.369 30,0
8. Colombia 28.349 65,4
9. Ecuador 46.039 99,3
10. Bolivia 13.215 20,4
11. Latin America 9.427 9,7
Source: CEPAL 551.056 2.215,50

129

Graph IV - Income per capita *

1 5.993 8.130
2 5.724 8.000
3 4.939
4
5 3.573
6 2.700
7 2.341
8 2.156
9 1.550
10 1.033

0 2.000 4.000 6.000 10.000

Países

Source of original data: CEPAL. * Table VI.

What I am describing here is simply underdevel-
opment that still prevails in Latin America, although d
and all the advances and economic changes occurred in
the region over lest fifty years. The painful impression
of such a shocking picture is that governments and so-
ciety have not made a proper effort to resolve it. In
Latin America, ironically reminiscent of the economist
Albert Hirschman.

Economic development takes place de-
spite and not because of governmental ac-
tion, as well expressed in the Brazilian - our
country develops at night, when politicians
are sleeping.

130

In fact, policies to combat poverty have been in-
fluenced by the literature on the subject. The focus of
these strategies is on the need for more resources for the
poor. While this type of income transfer program is jus-
tified in times of crisis and calamity, it has a reduced
focus. He does not consider the complexity of the prob-
lem and its scope.

Poverty in Latin America and elsewhere is a struc-
tural problem and is caused by the way the economic
system works. All mode of thinking that consider pov-
erty as a Separator the development phenomenon are
equivocates. Societies in underdeveloped countries suf-
fer from economic inertia that stems from their own in-
stitutions and social attitudes, explains Robert L. Heil-
brone of the New School for Social Research.

Thus, poverty can only be attacked by policies that
modify the environment and all those excluded can par-
ticipate in new opportunities. The first effective meas-
ure of such a policy is to attack the retrograde focus of
the mechanism that generates inequality and poverty. It
is necessary to construct a political structure that iden-
tifies the mechanism that makes the new system work.

We can have a clearer understanding of the digres-
sion, stating that the main cause of excessive poverty is
the high level of inequality.

In summary, it is worth mentioning the analysis of
ECLAC's executive secretary, José Luís Machinea, in

131

the presentation of the 2004 report of the United Na-
tions Economic Commission for Europe. He says:
“Latin America grows, but it does not reduce poverty."
The Argentine explains that poverty rates do not fall
back faster because there is a gap between rich and poor
that limits the benefits of the expansion of the second
group. The report noted that Latin America and the Car-
ibbean remain the region of greatest social inequality in
the world. "The poor distribution of wealth in the region
has not improved. On the contrary, it tends to get worse,
"Professor Machinea said.

On the other hand, Argentina, Paraguay, and Ven-
ezuela are expected to be in this year (2004) with a
higher level of India than in 1990. About 48 million
people in Latin America and the Caribbean live in ex-
treme poverty (less than US$ 1 per day), unable to af-
ford even enough food on their income alone. It defends
the argument that income transfer problems, even as-
sisting socialists, are justified as humanitarian action.
This peasant group, as informed by ECLAC, has grown
by 9 million people since 1997.

Nevertheless, it should be noted that some coun-
tries, including Brazil, have shown significant progress
in industrialization, infrastructure, education and sani-
tation.

132

TABLE VII - Latin America: Surface of Some Coun-
tries (1,000ha)

Country Total area farmable Irrigated

Argentina 278.040 27.900 1.550
3.050 1.132
Bolivia 109.858 59.000 2.920
3.063 870
Brazil 851.488 24.800 6.320
3.700 1.200
Cuba 11.086 1.982 1.900
2.600 575
Mexico 195.820 143.074 18.561

Peru 128.522

Chile 75.663

Venezuela 91.205

Latin America and the Caribbean 2.043.191

Source: CEPAL

TABLE VIII - Latin America - Gross Domestic Product
by Activities

1. Absolute Numbers - US$ Billions

Years Agriculture Industry Services Total
1.683,20
1995 107 471,9 1.211,30 1.972,0
2.215,50
2000 119,8 545,6 1.142,60

2005* 140,0 612,6 1.602,90

2. Percentage numbers (%)

Years Agriculture Industry Services Total

1995 6,4 28,0 65,60 100

2000 6,1 27,7 66,50 100

2005 6,3 26,6 67,40 100

Source: CEPAL, Statistical Yearbook for Latin America and the Caribbean,
2006. Note * Estimate

133

TABLE IX - BRAZIL: Gross Domestic Product

Years Average GDP in Annual Varia- GDP per cap-

US $ billion tion% ita (US$)

1960-70 29,3 7,2 363

1970-80 146,3 9,7 1.345

1980-90 308,3 2,6 2.536

1990-2000 6.445 2,1 4.243

2001 509,7 1,3 3.186

2002 459,4 2,7 2.359

2003 506,8 1,2 3.093

2004 603,9 5,7 3.655

2005 796,3 2,9 4.793

2006 825 3,7 5.715

Source of the original data: Conjuntura Econômica FGV, De-

cember 2007, n. 61.

134

Policies and Programs for Poverty Reduction

Poverty reduction policies and programs imple-
mented in recent decades have been driven by direct
and indirect instruments. This is why public spending,
the promotion of employment, the granting of public
subsidies, programs for the generation and transfer of
income to alleviate misery, are aimed at this purpose.
In some countries some attention has been paid to the
social differences between men and women.

These guidelines have not always been translated
into concrete or implemented actions, and have met be-
low expectations in most countries. As a result, there is
a growing concern to improve public policies on the in-
troduction of more effective criteria in line with the
principles of poverty reduction programs. The elimina-
tion or reduction of the paternalistic approach to poli-
tics is one of the greatest aspirations of the rulers of
these nations. The current objective is to adopt pro-
grams for the production and creation of jobs and the
application of democratic practices to participate in the
planning and execution of these programs.

One of the great difficulties that distort policies
and programs to combat poverty is the diversity of per-
ceptions of society on the matrix of this problem.

It is important to emphasize once again the im-
portance of bringing the benefits of economic growth
to the poorest countries and the broad masses of their

135

populations. The format of rapid, equitable and broad-
based growth remains a difficult target. Undoubtedly,
its attainment requires a genuine commitment to allevi-
ate poverty and meet social needs. At the same time,
growth with equity can only be achieved in most coun-
tries through a solid development strategy, with a
steady focus on investments in rural infrastructure, hu-
man capital and social services.

The most difficult part of Brazil’s development
has been the concentration of income. Northeastern
Brazil has suffered a lot from this problem, accumulat-
ing today the largest portion of the poor, illiterate and
suffering from deplorable health indices in the country.

If poverty is largely a consequence of inequality,
as seen earlier, "Why is there such inequality?"

Part of this motive is that people are different in
several dimensions: schooling, age, sex, regional loca-
tion, nature of occupation, and sectors of activity in pro-
ductive structure. In Latin America, inequalities and
poverty are deeply associated with the economic sys-
tem. Hence it is difficult to conclude that these prob-
lems will be solved if there are no new directions or
restructuring of the economic system.

Over the past fifty years, the benefits of public pol-
icies to combat poverty have been disappointing. Un-
less Latin America confronts those areas of poverty and
hunger with priority, we can expect the worsening of

136

social crises and the deterioration of the conditions of
the marginalized population.

The government can do a better job of tackling
global poverty by focusing more attention on helping to
increase the productivity of people. The political com-
munity also needs to do its part by eliminating the cor-
ruption that is devastating to the growth and reduction
of resources that could be used for productive purposes
and job creation.

It is important to stimulate and support the contri-
butions of determined social, political and cultural
forces of the poor population itself. In some ways they
can influence government policies to this end, as did the
emerging countries of Southeast Asia. That is, to create
a collection of productive assets and social activities;
move human capital from one sector to another, create
new production techniques, and take steps to reduce
government costs and waste.

The chart below indicates, schematically, a pro-
cess that has been called a virtuous circle of wealth, in
an illation to the process of stagnation represented by
the vicious circle of poverty.

137

GRAPH V - Redistributive Shares
Virtuous Circle of Wealth

Need for a Global Understanding

The search for more social justice and a more eq-
uitable society has become, in recent years, national
and international unanimity.

At the national level, the quest is directed directly
to the enormous problems of those living in absolute
poverty. Governments are focusing attention on strate-
gies that can combine substantial growth and concomi-
tance with more and more equity and income distribu-
tion.

138

At the international level, concern was focused on
the issues of the immense disparities between devel-
oped and underdeveloped countries and the desperate
situation of the poorest countries. More consists of the
agendas of these countries programs of financial help,
easing the trade therein and environmental protection.

Dialogue on these issues needs to find common
ground on the strategies to be adopted and the develop-
ment policies of each country. The international organ-
izations that guide and approve the programs for this
purpose need a crescent understanding. The extremes
of poverty and inequality are provoking political unrest
in various countries and situations of violence.

Policies hitherto adopted have emphasized that the
problem of poverty is to supply the poor with resources.
Although this type of policy has less response, it is ap-
propriate and necessary in certain economic crises.
Poverty in Latin America, however, is a structural prob-
lem caused by the operation of the entire economic sys-
tem. This can only be effectively solved with policies
that modify the operation of the entire system.

The role of education has been increasingly re-
garded as the fuel of the motor of development. The in-
fluence of education on economic growth is not only
due to the fact that skilled labor increases production
passively, such as fertilizer and tractor in agriculture. It
is also because the human being is the source of ideas

139

and measures with respect to investments and other op-
portunities. Technical, scientific and professional atti-
tudes to produce modern goods and services or entre-
preneurship in the public and private sectors depend on
people. In all countries, people with the highest educa-
tional level tend to perceive better wages. Underdevel-
oped countries with higher literacy rates have also had
faster rates of growth.

Economic growth depends on other factors such
as natural resources, fixed assets, and resource effi-
ciency.

The Millennium Development Compact by 2015

The United Nations Millennium Declaration,
agreed in September 2000, commits signatory nations
to a global effort to reduce poverty, improve health, and
promote peace, human rights and environmental sus-
tainability. The millennium development goals that
emerged from this milestone are very specific and
measurable, including that of reducing extreme poverty
by 2015.

At the United Nations Conference on Financing
for Development in March 2002 (Monterey), world
leaders from rich countries signed a pact among them
to support the Millennium Development Goals. This
pact calls on all concerned to guide their efforts to en-
sure the success of the objectives in a situation of
shared responsibility.

140

With educational objectives, it is essential to draw
some background to this historical decision in the re-
construction of world development policies.

In the 1980s and part of the 1990s, international
financial institutions worked driven by some political
and strategic beliefs. There was, then, a great confi-
dence in the sense that market forces would put all poor
countries on a path of self-sustaining economic growth.

Globalization was seen as a new engine of world
economic progress. It was believed that poor countries
would achieve economic growth based on good eco-
nomic governance and some strategic guidelines. That
is, adoption of macroeconomic stability precepts, liber-
alization of markets, and privatization of economic ac-
tivity. Because of these economic policies, there would
be widespread improvements in health, education, nu-
trition, housing and access to basic infrastructure - wa-
ter and sanitation - leading countries to overcome the
"poverty trap".

This conception has proved to be extremely good
and inadequate for hundreds of millions of poor people,
even though some emerging countries such as China,
Korea, and India have succeeded in their growth rates.
Globalization has benefited some regions of the world,
but has left many countries and human groups behind.

141

The review of United Nations thinking on poverty
revealed the strong influence of the human develop-
ment stimulus carried out by UNDP, which is one of
the United Nations bodies. In fact, UNDP has been
tasked with preparing annual human development re-
ports for a group of experts to analyze the fundamental
issues of general interest in world economic develop-
ment. A network of high-level academic, government
and civil society consultants collaborate on providing
ideas, suggestions and data.

One of the innovations of these studies was the
adoption of a concept of human development that is not
restricted to the aspect of per capita income alone. The
concern of these studies has been to evaluate the popu-
lation's diversity with parameters for evaluating the
program. It goes further, including factors such as free-
dom, dignity and human intervention in the productive
and social process.

Ultimately, development, according to these con-
ceptions, "is a process of widening people's choices,"
not only a question of increasing national income. One
of the striking conclusions on the subject is that eco-
nomic growth contributes more to eradicating poverty
when it contends the employment, productivity, and
wages of the poor. And public resources are channeled
towards the expansion of human development.

142

A pro-poor strategy is not uniform, but depends on
country-specific conditions. Governments are responsi-
ble for providing a better distribution of finance, credit,
housing and social services to reduce structural ine-
qualities. To achieve the goals and targets of the Devel-
opment Compact, many developing countries lack firm
action in strategic sectors.

Increasing the productivity of small-scale agricul-
ture is an essential condition for poverty reduction.
Most of the poor in underdeveloped countries depend
on agriculture for their livelihoods. East Asian coun-
tries faced poverty by initially developing the agricul-
tural sector and then through labor-intensive industrial-
ization.

Economic development should aim at creating
jobs and rising wages. For this, it is necessary to give
priority as the production of footwear and clothing. Mi-
cro-enterprises and the informal sector provided strong
support. The ingredients for a successful microenter-
prise are the mechanisms of savings, access to credit
and improvement of the infrastructures that facilitate
these enterprises. The promotion of human capacities is
the spring of the process of development and poverty
reduction, acting as a true virtuous circle of sustainable
development.

In essence, the Pact provides an informed devel-
opment process for the objectives of the Millennium
and its main obligations. The authors and institutions

143

committed to this goal reaffirm that in order to escape
poverty, it is necessary that countries reach certain crit-
ical limits on education, health, infrastructure and gov-
ernance. So yes, it will be possible to make a takeoff for
sustainable economic growth and development.

Millennium Development Goals

The millennium development goals were adopted
in 2000 by the governments of 189 countries - includ-
ing Brazil - as a commitment to combat inequality and
improve human development worldwide. It foresees
eight major objectives to be met, most of them by 2015.

To achieve the millennium goals, the countries of
Latin America and the Caribbean must make a great ef-
fort to ensure efficiency in the use of state resources to
meet development priorities.

The following are, in brief, the objectives and
goals of this agreement:

1 Eradicate extreme poverty and hunger

• Reduce by half, between 1990 and 2015, the pro-
portion of the population with incomes less than one
dollar a day.

• Reduce by half, between 1990 and 2015, the pro-
portion of the population suffering from hunger.

2 Achieve universal primary education

144

• Ensure that, by 2015, all children of both sexes
complete a full course of basic education.

3 Promoting gender equality and women's em-
powerment

• Eliminate gender disparity in primary / second-
ary education, if possible by 2005, and at all levels of
education by 2015 at the latest.

4 Reduce child mortality

• Reduce by two-thirds, between 1990 and 2015,
the mortality of children under five.

5 Improve maternal health

• Reduce by three quarters, between 1990 and
2015, the maternal mortality rate.

6 Combat HIV / AIDS, malaria and other dis-
eases

• By 2015, have halted the proportion of HIV /
AIDS and begun to reverse the current trend.

• By 2015, have halted the incidence of malaria
and other major diseases and begun to reverse the cur-
rent trend.

7 Ensure environmental sustainability

• Integrate sustainable development practices into
national policies and programs and reverse the loss of
environmental resources.

145

• Reduce by half the proportion of the population
by 2015 without permanent and sustainable access to
safe drinking water.

• By 2020, a significant improvement of at least
100 million degraded neighborhoods has been
achieved.

8 Global partnership for development

• Further development of an open financial system
based on predictable and non-discriminatory rules.

• To address the debt problem of developing coun-
tries globally, through national and international
measures in order to improve their long-term debt sus-
tainability.

Reflection

Poverty is a multidimensional phenomenon that is
concretized by social and economic exclusion and dis-
crimination. People in this condition have limited ac-
cess to services designed to meet their basic needs
(health, education and housing).

The way countries face the underdevelopment and
eradication of poverty depends on the perception that
society as a whole has of poverty and the economy.
Sometimes the officials in charge of formulating poli-
cies and programs can have a vision of the solutions and

146

consequences of these policies and other civil society
organizations and those who are above and below the
other poverty line.

The influence of international financial institu-
tions (World Bank, International Monetary Fund) is a
further element in formulating development strategies
that governments need to adopt.

These differing perceptions affect the definition of
policies, giving rise in many cases to contradictory the-
ories, approaches and programs. Most countries in
Latin America have applied differentiated development
models for each decade.

In the 1960s and 1970s, the top priority was indus-
trialization at any cost. I remember that at an invest-
ment promotion meeting held in São Paulo, the Secre-
tary of Planning of the State of Amazonas stated repeat-
edly that his state was willing to receive the pollution
that the industries would generate. The important thing
was development!

The economic models applied in the 1990s did not
consider the rural sector and agriculture as an important
development activity. Only agricultural export produc-
tion was supported by economic and financial
measures.

This view put forward by international institutions
was based on the assumption that global development

147

was sufficient to reduce urban and rural poverty gradu-
ally. This approach to poverty is known as the "trickle
down theory."

This approach originated from the team of Presi-
dent Ronald Reagan and widely disseminated by World
Bank economists. Latin America has generally adopted
this conception as a true dogma.

There were few results of this policy that, in fact,
generated a process of general impoverishment and
great concentration of income in Brazil. To counteract
this situation, several poverty alleviation programs
have been adopted in recent years by some Latin Amer-
ican countries, including Brazil. There are many criti-
cisms of these initiatives, arguing that they have be-
come instruments of politicization and political favor-
ing, such as the family grant. In view of this, one of the
most frequently asked questions is how to improve in-
come and employment opportunities to reduce poverty
without assistance. The most frequent response is to ac-
celerate growth.

One of the theses of this book is that while eco-
nomic growth can be a powerful means of eradicating
poverty, it is not enough. The quality and structure of
credit should be "enough” in favor of the poor. In other
words, economic growth contributes more to the eradi-
cation of poverty when it creates jobs, increases
productivity, and when public resources are channeled
to improving human development. Poverty is, in fact, a

148

consequence of the limits of the capacities of the indus-
trial (education), of the political structures and pro-
cesses that determine the distribution of income.

The history of nations does not record that de-
velopment is driven by any impersonal determinism.
This process is generated by a constellation of sub-
jects whose acts depends on social order. Institutions
do not guarantee the achievement of the well-being of
all. Politicians should strive to improve government
structures by taking historical situations into account
and using lawful means so that the freedom of all peo-
ple is respected.