Poverty reduction has stalled in Latin America…thanks in some part to Venezuela

Originally published at www.humanosphere

After years of substantial improvements in Latin America’s poverty rates, a new report shows that since 2012 rates have stalled and that the number of people living in extreme poverty has increased.

About 28 percent of the people in the region live in poverty, totaling about 167 million people. Nearly half of those people live in extreme poverty, with the extreme poverty rate rising 0.4 percentage points to 11.7 percent in 2013.

“The recovery from the international financial crisis was not taken advantage of sufficiently to strengthen social protection policies that reduce vulnerability from economic cycles,” said Alicia Barcena, the head of Santiago-based U.N. Economic Commission for Latin America and the Caribbean, or ECLAC.

The report, published by ECLAC, did have some bright spots. Poverty declined in the majority of the 12 countries with data available. Paraguay is the stand-out of the group with its poverty rate falling from 49.6 percent in 2011 to 40.7 percent in 2013. Other notable gains were seen in El Salvador, Colombia, Peru and Chile. Other countries showed marginal improvements, but it is in Venezuela where poverty jumped between 2012 and 2013.

The country is is the midst of an economic disaster. With an inflation rate above 60 percent caused by a recession, the sharp decline in global oil prices dealt a potentially mortal blow to the economy. Basic goods like toilet paper are hard to come by, forcing people to wait in line for hours just to meet their daily needs. The economy will contract by 7 percent this year, the International Monetary Fund predicts. The hardship is creating civil unrest and more people live below the poverty line.

The economic woes of Venezuela are causing concerns beyond the borders. U.S. companies that operate in the country, like Ford and Kimberly-Clark, recently revealed that the declining currency is causing harm. It adds to an already strained relationship between the two countries. Venezuelan President Nicolas Maduro blames the United States for the decline in oil prices that is harming the country.

“Did you know there’s an oil war? And the war has an objective: to destroy Russia,” said Maduro in late December speech. “It’s a strategically planned war … also aimed at Venezuela, to try and destroy our revolution and cause an economic collapse.”

The jailing of political opponents in early 2014 led U.S. Secretary of State John Kerry to raise the issue of sanctions against Venezuela. Setting aside the international disagreements, the country is performing poorly and there is little evidence to show that it will get better soon. Some see it as the result of policies that date back more than a decade.

“My country, Venezuela, is on the verge of social and economic collapse,” wrote jailed opposition politician Leopoldo López in the Wall Street Journal at the end of December. “This slow-motion disaster, nearly 15 years in the making, was not initiated by falling oil prices or by mounting debts. It was set in motion by the authoritarian government’s hostility toward human rights and the rule of law and the institutions that protect them.”

Despite the concerns illustrated by the report, the region has come a long way in the past decade. Brazil’s poverty rate exceeded 60 percent in 2004 and was down to 36 percent by 2011. Millions of people escaped poverty during the period. Leaders will now have to focus on ways to continue the rate of progress to reach the ambitious global goal that will see more than 70 million Latin Americans leave extreme poverty.

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