June 21, 2004
By Peter Micek, NCM News

Decades of painful free market reforms have not decreased the yawning gap between rich and poor in Latin America and the Caribbean. In fact new statistics show the number of poor people in the area grew by 91 million during the last 20 years.

Reports detailing the new wave of poverty, including a new World Bank publication called "Inequality in Latin America and the Caribbean: Rupture with History?" have made an impact recently in the U.S. Spanish-language and bilingual press.

Earlier this month, Los Angeles Spanish-language daily La Opinión carried a series of front-page stories on the "new poor" by the Agence France Presse, or AFP. The series, called "The New Misery in Latin America," quotes officials and statistics putting some of the blame on 1990s belt-tightening economic policies, which cut spending on social welfare.

"The most notable phenomenon … is the new poor, people who were not poor a few years ago or whose parents also were not poor. They belonged to the middle class and they fell in the social ladder," says Bernardo Kliksberg, of the Inter-American Development Bank.

Many institutions note the same trend. Twenty-three million Latin Americans slipped from the middle class into poverty in the last six years, according to the U.N. Economic Commission for Latin America and the Caribbean, or CEPAL for its acronym in Spanish.

"There is definitely a shrinking middle class," agrees Tracy Garza, associate editor of San Francisco's bilingual El Mensajero weekly.

The trend is especially disappointing because during the 1990s many were hopeful that Latin America would be a bright spot for developing world economies.

"In the last presidential election [in Mexico in 2000], there was a lot of promise" due to manufacturing jobs created after NAFTA was signed in 1994, says Garza, who reported for the Associated Press in Mexico in the late 1990s.

However, many of Mexico's industrial jobs have moved to China, Garza says. The economic slowdown in the United States caused a similar slowdown there. "Mexico has tried to balance its trade by pursuing free trade agreements with Europe. But you cannot get around the fact that the biggest export market is the United States."

The phenomenon of the "new poor" is particularly striking in Argentina, where some 7 million people, or one-fifth of the population, went from middle class to poor between 1999 and 2003, according to CEPAL. Growing inequality is also blamed for rising violence.

Argentine economist Eduardo Pompei is quoted as saying by Agence France Presse the region's crime problem will be resolved once "the population can satisfy its needs." He warns, though, that needs increase when the wealth of a few is paraded about and when individual success is identified with "possession of goods and brands that are outside the reach of more than half the population."

Many Latin Americans have opted for emigration, while others work jobs that they are overqualified for. The story says this trend "is reflected in the quantity of doctors that sell merchandise door-to-door, ex-businessmen that now paint houses, and professors that wait tables at night."

Even people with higher education drive taxis or maintain a mom-and-pop store at home, says Garza, the El Mensajero editor. "They are wasting their abilities because there aren't any jobs for people with advanced degrees." Plus, no taxes are paid on informal work in the underground economy so the cash does not feed into public coffers.

There are many emigrants who manage to establish themselves in the United States and send cash back or return with money to build homes and infrastructure. "Those who immigrate to the United States … have been very successful. They often build houses [in their native countries]," Garza says.

The remittances sent back to Latin America from the United States do not however solve the root problems of poverty. "Whatever they get from the United States … it will help them get through a few years," Garza says, "but in the end you have a huge gap between the very, very wealthy and the very, very poor."

A more reciprocally beneficial immigration situation, in Garza's eyes, is the steady current of legal workers coming and going regularly between Canada and Mexico.

A similar plan could help Latin Americans access jobs in the United States and ease poverty at home. "It's very easy for the workers to go back each year as needed. They help out their home economies better."

President Bush proposed earlier this year an offer of three-year work visas that could be renewed as part of an expanded guest worker program.

But critics say President Bush's plan would become mired in bureaucracy since there is no expedient way under current systems to line up workers with visas. Critics also point out that there is no indication that families would be able to stay together as part of the worker program.

In any case it is unclear whether any guest worker plan will be able to gain any traction in the U.S. Congress in an election year.