Source: CAF Development Bank of Latin America
Reintroducing Poverty to the Forefront of Public Debate
Reducing poverty requires a strong political commitment from all sectors of society. To accelerate progress, it is imperative to re-establish poverty as a central issue in public debate. In recent years, the focus on poverty has been overshadowed by a series of severe crises affecting the region. Beyond the significant impact of the COVID-19 pandemic, the escalating climate crisis, with massive fires in areas like the Amazon and the Chaco, and increased flooding in other regions, has had a devastating effect. Governance crises have also emerged, including in countries that traditionally excelled in economic growth and poverty reduction, such as Chile. Moreover, migration crises, once primarily directed towards the United States, have now developed an intraregional dimension, imposing pressure on public expenditure and, at times, leading to conflicts within recipient communities. Violence has spread to previously peaceful countries, with organized crime posing an ever-greater threat. These crises have diverted attention away from the poverty debate, even though poverty remains a fundamental factor in each of these challenges.
Public discourse should stimulate action and encourage a more ambitious discussion on the determinants of poverty and their policy implications. Key determinants such as high inequality, sluggish economic growth, environmental degradation, entrenched power structures, inadequate social protection systems, ineffective governance, a fragile rule of law, an unfavorable business environment, low female labor force participation, informality, crime and violence, and a lack of innovation, have all been identified as determinants of poverty in the region (UNDP, 2021; IMF, 2024; CODS, 2020). A comprehensive debate is needed to distil the most critical aspects and understand their interconnections to optimize efforts towards achieving sustainable development and equitable growth.
Furthermore, public debate is essential concerning the data needed to make meaningful progress in poverty reduction. While the availability of data in the region has improved, there remain issues related to periodicity, potential for disaggregation, and gaps in crucial topics. For example, the inability to link data on crime and violence with poverty data hampers a comprehensive understanding of these phenomena. Thus, a rigorous debate on where to channel limited resources for data collection is vital to generate robust data that can effectively guide policy decisions.
New Instruments for Poverty Reduction
As previously highlighted, economic growth and the widespread implementation of conditional cash transfer programs have played a pivotal role in reducing income poverty across the region in recent decades. However, from 2015 onwards, the pace of poverty reduction began to slow due to declining growth rates, a trend further exacerbated by the COVID-19 pandemic. Three years after the crisis, income poverty levels in the region are only now returning to pre-pandemic figures (The World Bank, 2023). Yet, economic growth—and consequently, the fiscal capacity to fund poverty reduction initiatives—remains constrained, with regional GDP projected to expand by merely 1.6% in 2024, 2.7% in 2025, and 2.6% in 2026, rates insufficient to generate widespread prosperity (The World Bank, 2024).
Given this, the principal mechanisms that drove poverty reduction in previous years must be supplemented with innovative tools capable of maximizing poverty alleviation within a restricted fiscal environment. Aspects such as strategic planning, effective coordination, rigorous monitoring, and efficient expenditure will become increasingly crucial in the coming years. The region must foster innovation and develop a new generation of poverty reduction strategies and instruments that can effectively complement the existing frameworks.
Strengthening the Integration of Poverty Reduction Strategies with National Policies
In many cases, significant national policies that have a direct impact on poverty are formulated and implemented without a clear analysis or identification of their connections to the country’s poverty reduction strategy. Policies in areas such as energy, productivity, private sector development, and environmental or climate change often have profound implications for poverty alleviation. However, these policies are frequently designed with sector-specific objectives and within a growth-oriented framework, rather than with a focus on poverty reduction. Strengthening these connections can facilitate valuable cross-fertilization between different policy agendas, thereby accelerating efforts to reduce poverty.