Latin America’s High Gini Coefficients

During an interview with the Global Foundation for Democracy and Development, the Secretary General of the OAS, Luis Almagro, said that the phrase, “more rights for more people,” “has to do with the situation in the continent… the continent that is the most unequal in the entire world.”

What Almagro was referring to is the high level of income and wealth inequality in Latin America. The rich in Latin America earn a large portion of the total income, while the poor have a very small share. Comparatively, the region is wealthier than Sub-Saharan Africa or South Asia, but the distribution between the rich and the poor is worst in Latin America.

One way to demonstrate Latin America’s level of income inequality is through the Gini coefficient, a standardized measure of income distribution among a population. The Gini coefficient or index is a number between 0 and 1 calculated by taking all people in a population and ordering them by income level. Based on the distribution of incomes, the Gini index predicts income gaps between two randomly selected individuals in a population[1].

A higher Gini index indicates greater inequality: a score of 0 means that every person has exactly the same amount of income, while 1 signifies that all the income in the country is held by a single individual.

In Latin American countries the Gini coefficient is often between .4 and .5. In 2015 Brazil’s Gini coefficient was .51. For comparison, in Russia, a country home to some of the world’s richest oil magnates, the Gini index is about .38[2].

Executive Secretary of the Economic Commission for Latin America and the Caribbean, Alicia Bárcena Ibarra argues that one reason the region has such high Gini coefficients is because of its revenue systems that are too greatly focused on consumption taxes and which disproportionately impact low and middle-income earners. Low tax rates for multinational companies as well as high tax avoidance hurt the situation, she says[3].

As Almagro suggests, another reason income inequality is so high is because of disparities in rights. Certain groups, women, children, indigenous communities and rural farmers, have much less access to education and health services, for instance.

With “more rights for more people,” Latin America would make significant progress in cutting back income inequality and reducing some of the world’s highest Gini coefficients.

[1] Kenton, Will. “Gini Index” Investopedia. February 6, 2019. Retrieved from:  https://www.investopedia.com/terms/g/gini-index.asp

[2] Bárcena Ibarra, Alicia & Byanyima,Winnie. “Latin America is the world’s most unequal region. Here’s how to fix it.” The World Economic Forum. January 17, 2016. Retrieved from: https://www.weforum.org/agenda/2016/01/inequality-is-getting-worse-in-latin-america-here-s-how-to-fix-it/

[3] “Gini index.” 2017. The World Bank. 2017. Retrieved from: https://data.worldbank.org/indicator/SI.POV.GINI?end=2017&start=2017&view=map&year=2015

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