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High Inequality and Low Growth in Latin REGIONAL HUMAN DEVELOPMENT REPORT 2021 TRAPPED: HIGH INEQUALITY AND LOW GROWTH IN LATIN AMERICA AND THE CARIBBEAN Copyright © UNDP 2021 United Nations Development Programme One United Nations Plaza New York, NY 10017, USA All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by means, electronic, mechanical, photocopying, recording or otherwise, without prior permission. Sales no.: E.21.III.B.4 ISBN: 9789211264470 eISBN: 9789210057844 General disclaimers REGIONAL HUMAN The designations employed and the DEVELOPMENT REPORT 2021 presentation of the material in this publication TRAPPED: HIGH INEQUALITY do not imply the expression of any opinion AND LOW GROWTH IN whatsoever of the United Nations Development LATIN AMERICA AND THE Programme (UNDP) concerning the legal status CARIBBEAN of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. Dotted and dashed lines The United Nations on maps represent approximate border lines for Development Programme which there may not yet be full agreement. (UNDP) is the leading United The findings, analysis, and recommendations of Nations organization fighting this Report do not represent the official position to end the injustice of poverty, of the UNDP or of any of the UN Member inequality, and climate States that are part of its Executive Board. They change. Working with our are also not necessarily endorsed by those broad network of experts and mentioned in the acknowledgments or cited. partners in 170 countries and territories, we help nations Some of the figures included in the analytical to build integrated, lasting part of the report where indicated have been solutions for people and planet. estimated by the UNDP or other contributors Learn more at undp. org or to the Report and are not necessarily the official follow at @UNDP. statistics of the concerned country, area or territory, which may use alternative methods. All reasonable precautions have been taken to verify the information contained in this publication. However, the published material is being distributed without warranty of any kind, either expressed or implied. The responsibility for the interpretation and use of the material lies with the reader. In no event shall the UNDP be liable for damages arising from its use. REGIONAL HUMAN DEVELOPMENT REPORT 2021 TRAPPED: HIGH INEQUALITY AND LOW GROWTH IN LATIN AMERICA AND THE CARIBBEAN · ii · United Nations Development Programme Background Papers Authors Achim Steiner Francisco Alvarado (UNDP Colombia) Administrator of the United Nations María Laura Alzúa (CEDLAS) Development Programme (UNDP) Ana Arjona (Northwestern University) Sócrates Barinas (UNDP Dominican Republic) Javier Brolo (Universidad Francisco Marroquín) UNDP Regional Bureau for Latin America Carlos Casacuberta (Universidad de la República) and the Caribbean (RBLAC) Alejandro Castañeda (COLMEX) Alejandra Correa (UNDP Mexico) Luis Felipe López-Calva Guillermo Cruces (CEDLAS) Assistant Administrator and Regional Marcela Eslava (Universidad de los Andes, Colombia) Director for Latin America and the Caribbean Eduardo Fernández-Arias (Independent Consultant) Linda Maguire Nicolás Fernández-Arias (Princeton University) Deputy Regional Director for Sergio Firpo (Insper Institute of Education and Research) Latin America and the Caribbean Luca Flabbi (University of North Carolina) Lucía Freira (Universidad Torcuato Di Tella) Nestor Gandelman (Universidad ORT Uruguay) Maite García de Alba (UNDP Mexico) Regional Human Development Report Alvaro García-Marín (Universidad de los Andes, Chile) for Latin America and the Caribbean Leonardo Gasparini (CEDLAS) Andrés Ham (Universidad de los Andes, Colombia) 2021 Team Santiago Levy (Brookings Institution and UNDP) Lead author Alejandra Martínez (UNDP Mexico) Cynthia Martínez (UNDP Mexico) Marcela Meléndez Marcela Meléndez (UNDP) Chief Economist for Latin America Sergio Membreño-Cedillo (UNDP Honduras) and the Caribbean (UNDP) Manuel Mera (CEDLAS) Matías Morales (UNDP) SDG and Development Policy Team Guido Neidhöfer (ZEW – Leibniz Centre for European Adriana Camacho Economic Research) Ana María Tribín Hugo Ñopo (GRADE) Maria José Uribe Camila Olate (UNDP) Laura Tenjo Ana Pacheco (CEDLAS) Andrea García Mónica Pachón (Universidad de los Andes, Colombia) Nicolás Peña-Tenjo Marcela Pantoja (UNDP Colombia) Andrés Barona Alejandra Peña (UNDP Ecuador) Pablo Hernández Alysson Portella (Insper Institute of Education and Research) Irma Ovelar Lucas Ronconi (University of Buenos Aires and CONICET) Daniel Ruiz (COLMEX) Other contributors Ernesto Schargrodsky (Universidad Torcuato Di Tella, CAF, and CONICET) Kim Bolch Ben Ross Schneider (MIT) Juan Camilo Cárdenas Annabelle Sulmont (UNDP Mexico) Mauricio Cárdenas Florencia Torche (Stanford University) Lucía Cortina Nicolás Urdaneta (Universidad de los Andes, Colombia) José Cruz-Osorio Almudena Fernández Lyes Ferroukhi Alexandra Fischer Juan Pablo Gordillo Advisory Council of the UNDP RHDR 2021 Kasper Koefoed Marisol Argueta de Santiago Levy AND THE CARIBBEAN AMERICA IN LATIN GROWTH AND LOW 2021 · TRAPPED: HIGH INEQUALITY REPORT REGIONAL HUMAN DEVELOPMENT Santiago Levy Barillas Nora Lustig Guillermina Martin Hilary Beckles Angel Melguizo Mateo Salomon Marcela Smutt Compton Bourne Ángeles Moreno Bau Jolita Butkeviciene Dante Mossi Reyes Peer Reviewers José Carlos Díez Hugo Ñopo Marla Dukharan María Luz Ortega Ana Arjona Jimmy Fletcher Isabel St. Malo Juan Camilo Cárdenas Rebeca Grynspan Michael Shifter Santiago Levy Trinidad Jiménez Andrea Vigorito Nora Lustig Thierry Lemaresquier English Editor Robert Zimmermann · iii · Foreword The Latin America and the Caribbean (LAC) region has been historically characterised as a region with some of the highest rates of inequality in the world. The richest quintile of the population in the region accounts for some 56 per cent national incomes, for instance.1 The COVID-19 pandemic has now widened the gap. In the wake of closing and suffering businesses, incomes have dropped and unemployment has risen with millions of households struggling to get by.2 Moreover, the digital divide -- notably the lack of high-speed broadband internet and appropriate digital skills -- have prevented many people, especially the most vulnerable, from working or studying from home during the crisis.3 In these unprecedented circumstances, 22 million more people have fallen below the poverty line in the region, returning to 2008 levels.4 The LAC region finds itself stuck in a dual “trap” of persistently high inequality and low productivity. This new report examines the different dynamics that create this trap. In particular, it highlights how inequalities that lead to the concentration of power in the hands of a few can distort public policies in ways that perpetuate existing patterns of inequality and stifle productivity -- leaving an increasing number of citizens frustrated with the status quo. This publication also highlights a number of solutions which have emerged and are being tested in the region -- most notably in the form of universal, inclusive, fiscally sustainable, and growth-friendly social protection systems. These can help prevent segmentation of the labour market, provide predictable and reliable risk protection to households, redistribute income towards lower-income groups, and help to allocate resources towards economic activities that increase productivity and long-term growth. The region will also play a key part in the global green recovery. Colombia, for instance, aims to reduce its Greenhouse Gas emissions by 51 per cent by 2030.5 Or consider Chile, which is committing at least $1.3 billion to environmentally friendly measures such as installing electric bus terminals and retrofitting public buildings.6 The challenge now is to ensure that all countries -- and people -- in the region reap the benefits of a green economy that creates new opportunities in the form of jobs and livelihoods. This transition will reduce poverty and inequality -- and stimulate human development growth. Guided by the Sustainable Development Goals, these new green economies will also boost our collective ability to take decisive climate action as well as our efforts to protect and restore our natural world. As an intensive public dialogue takes place across the region on how countries can best realise this greener, more inclusive, and more sustainable future, we hope that this report will help to chart a bold new path forward for the entire region. Achim Steiner AND THE CARIBBEAN AMERICA IN LATIN GROWTH AND LOW 2021 · TRAPPED: HIGH INEQUALITY REPORT REGIONAL HUMAN DEVELOPMENT Administrator United Nations Development Programme 1 https://www.worldbank.org/en/topic/poverty/lac-equity-lab1/income-inequality/composition-by-quintile https://wid.world/es/mundo#sptinc_ p90p100_z/US;FR;DE;CN;ZA;GB;WO/last/eu/k/p/yearly/s/false/24.322/80/curve/false/country 2 https://www.latinamerica.undp.org/content/rblac/en/home/presscenter/director-s-graph-for-thought/covid-19-and-wealth-at-the-top--more-and- wealthier-billionaires-.html 3 https://www.oecd.org/coronavirus/policy-responses/covid-19-in-latin-america-and-the-caribbean-regional-socio-economic-implications-and- policy-priorities-93a64fde/ 4 ECLAC, Panorama Social (April 2021) 5 https://foreignpolicy.com/2021/03/19/a-green-recovery-in-latin-america/ 6 https://www.terram.cl/2020/08/ministra-schmidt-explica-los-proyectos-de-accion-climatica-del-plan-para-reactivar-la-economia/
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