- Causes of Poverty in Latin America - Free Economics Essays Causes of Poverty in Latin America

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Causes of Poverty in Latin America

Poverty is the lack of or inability to afford the basic human needs. The needs include nutrition, shelter, clean water, health care, clothing, education among others. Compared to worldwide averages, Latin America is among the poorest of the poor. Most of its population lives in absolute poverty. Up to 70% of the population in South America lives in cities. Research has revealed the great variation in Latin America societies. In 1970, up to 40% of all households in Latin America lived below the line of poverty. Countries like Argentine, Brazil, Colombia and Peru 62% of households lived at starvation level. Poverty is more severe in the countryside especially on households that depend on agricultural sector.

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In Latin America, poverty is a structural problem. It began in the days of colonialism when a small group was the upper class who owned large amounts of land (UNRISD Report, 2010). In 1930s, the elite gained political and economic power. They possessed great wealth but were not concerned with the inequitable distribution of property. This has led to a huge difference between the minorities who owns everything and the majority who owns only there labor and lives. In the 80s, Nations like Venenzuela, Chile, Panama, and Uruguay had large unemployment figures. The situation got worse. Latin American countries began to experience political change but its cost was so high that the available social structures were not able to support the poor. This caused economic instability hence escalating poverty levels. Large slums began to emerge the problematic nature of poverty is difficult to solve. Neither the government nor non-governmental organizations had solutions. The development of urban centers led to poverty concentration. Today, there are up to 240 million people living with less than one U.S. dollar per day. In rural areas, lack of food, inadequate health centers and lack of educational facilities are the main problems. In Urban centers, unemployment and lack of regular and good paying jobs is the main predicament. Low-income jobs that last for a short term with no social security have made the situation worse.


The main cause of poverty is unequal distribution of wealth. In rural areas, the peasants are amongst the poorest people. Other causes of poverty are internal conflicts, migration, higher fertility and structural adjustment. Colonialism also contributed to South America’s poverty. Though South America has vast natural resources, it is still home to the world’s poorest people. Injustice and inequality has largely contributed to the gnawing poverty. Politics have also resulted rise of poverty levels. Diversion of resources from domestic needs to western markets fueled by international political interest is common (Shah, 2010).

This leads to lack of basic needs like water, food, health care, education and other important social amenities. The policies of international bodies like IMF and the World Bank has resulted to debt hence poverty. Latin American countries have increased their dependence on rich western nations leading to an increase in poverty. The World Bank and IMF to ensure economic restructuring and debt repayment have imposed structural Adjustment Policies. Thus, these poor nations have reduced their expenditure on education, health and development and focused on repaying debts. This has resulted in lower standards of living of the people.

The imposition of IMF and World Bank policies has been devastating to these nations. They have remained dependant upon developed nations and have become even poorer. In order to raise money to ay off debts, they must export more. Since all Latin American countries are struggling to export, their resources have become cheaper in the international market, which is an advantage to the developed nations. Governments in these poor nations have reduced consumption and are spending less. Thus, the value of labor has reduced and the workforce is earning less. This can lead to social unrest; if things go, wrong investors may pull out their assets, which may cause economic collapse. Mexico and Brazil experienced this in 1998/99. Whenever the IMF keeps the exchange rate in their favor, poor Latin American countries remain even poorer. IMF and World Bank prescribe that Latin American countries should allow more imports in their nations leading to dependency and poverty. Developed nations sell products for consumption and not tools of production. This makes the poor nations dependant on their products.


The effects of poverty are social and political instability, drug addiction and insecurity. Extreme poverty is becoming a threat and can affect global economy. It generates social tensions especially when development policies fail. Latin American countries are amongst producers of illegal drugs. Cocaine production is very high in these nations. Drug trafficking has also has social costs to local communities and national institutions. It causes rampant violence and corruption leading to human rights abuse. Social deterioration increases with increase in national poverty. Despite these problems, attempts to reduce drug trade remains unsuccessful. The events that have been taking place have demonstrated this clearly. Immigration of millions of people pushed to search for better economic prospects is on the rise (Shah, 2010). Skilled and unskilled workers migrate to destinations such as Spain and U.S.A. estimates show that up to seven thousand have migrated. Most of the ones migrating are women who work as domestic workers and in agriculture.

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Social institutions viewed as obstacles to progress, they get broken down in a bid to tidy up the cities. Removing the homeless from the streets is a common sight in Latin American cities. Social dislocation is also likely to increase crime. Street crimes and burglary is on the rise in the rise. The main driving force at the back these crimes is poverty. Efforts to reduce crime have resulted in creating more prisoners instead of reducing crime. Poverty has also caused an increase in drug trafficking and money laundering. It can lead to environmental degradation on global scale. Miserable poor people who do not have jobs can do anything to survive. One of the activities they can easily engage in is drug abuse. Drug addiction is so rampant in most Latin American, is a result of poverty. Poverty has also caused environmental problems. Food supply is also insufficient. Millions of children die each year because of inadequate health services. Up to 26% of children five years and below were suffering from malnutrition. Not all children access basic education. Illiteracy levels remain high. It is clear that after adopting structural adjustment, most Latin American countries are still in economic crisis. Economic growth remains unattainable.

These conditions are a threat to political stability. In 1999, poverty levels remained as high as 43.8%. Ecuador, Peru, Bolivia were amongst of the least developed countries in Latin America. Though these countries have expanded there export, there is little economic growth. Provision of Support to control poverty is necessary. Latin American countries can collaborate with nations like Japan to assist in solving environmental problems. Regional integration and promotion of trade important should be at the top of the list. They should improve their capacity to produce food by using natural resources efficiently and effectively. Poverty in Latin America does not affect its nations only but the entire world. Thus, the government of these nations should collaborate with the international body in order to find lasting solutions. The only way to achieve economic growth is by increasing domestic productivity. This means that they should produce more goods and reduce reliance on imported goods. Chile for instance has reached the first MDG, United nation’s millennium development goal. She has reduced the proportion of people living under the line of poverty by half.


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