The Count

31...

...is the gap in percentage points between male and female hourly wages in Latin America. That's right, the region has made great progress in addressing gender disparities but income gaps nevertheless remain quite large.

For the full scoop head on over to Eclac, where you'll find a new report out this week on regional progress towards achieving the UN's Millennium Development Goals (MDGs). As usual, this publication is a wonk's statistical wet dream and contains far more fascinating information than could ever be adequately covered here. So go check it out, here.

But what's there to learn about gender equality in the region from the report's myriad of tables and graphs?

Insight number one is that gender disparities don't seem to be driven by educational differences. In most countries of the region men and women exhibit very similar levels of enrollment in both primary and secondary schooling (but not so similar when it comes to tertiary schooling).

Insight number two is that in most countries women have begun to diversify away from purely agricultural employment. In this area, both Venezuela and Colombia stand out for making the most progress.

Insight number three: wage equality has steadily improved since 1990 but the gap with respect to men still remains large. However, as can be seen below, the gap is significantly smaller for salaried employees.

[Average hourly and salaried income of women, compared to men, urban areas (in percentages)]

The blue line shows women's average hourly income in relation men, the purple line shows average salaries in relation to men and the black line, 100 percent, represents men's wages. The first thing to notice is the big improvement since 1990. However, as can be seen from the dotted trend line to the right of 2008, the gap continues to narrow at the current pace it won't completely close even by the year 2015.

Now, an implication of the difference in relative gaps between hourly and salaried employees is that the lower your income, the less equality you should expect vis a vis men. And this takes us to insight number four: Latin America has A LOT of women in politics. No, seriously. It beats every other developing region of the world except for the Caribbean.

[Percentage of members of parliament that are women, 1990, 2005 and 2009]

So the moral of the story is... more equality for women in the heights of power and wealth but significantly less futher down on the socioeconomic stratum.

But hey. Stop reading my ramblings and go enjoy your freakin' weekend.

The Count: childhood poverty

45 and 17.9...

...are the percentages of children and teenagers in Latin America living in poverty and extreme poverty defined in terms broader than simple income. That's right, ECLAC has a new research bulletin out giving us a sneak peek of an upcoming ECLAC and UNICEF report on poverty trends throughout the region.

The idea is simple. Much like the World Bank's Human Opportunity Index (HOI), which sets out to measure access to the resources that grant a child the opportunity to succeed in life, this new measure of childhood poverty is based on the notion of human rights--both social and economic. In other words, going beyond the mere notion of income, a child is considered poor if any of his or her basic rights are violated. The six rights explicitly considered are:

1. Nutrition: defined in terms of weight and size by age.
2. Clean drinking water: taking into account it's origin, supply and accessibility.
3. Sanitation: defined as relative access to a sewer system.
4. Housing: considering the number of people per room, the building materials of the roof, floor and walls.
5. Education: in terms of assistance and number of completed school years.
6. Information: defined as access to electricity and having a radio, tv or telephone.

So how much of a difference does this new measure make? A LOT. The pie chart below shows the percentages of different poverty classifications for the whole region. Light blue is outside of poverty, dark gray represents income poverty, light gray is poverty in terms of both income and the absence of rights, and green is poverty just in terms of the violation of rights. In other words, without the new methodology, we'd be ignoring all of the green chunk and a big part of the light gray chunk.



Now, as usual, the Count asks: what does the country breakdown look like? And you'll find just such a thing right below, courtesy of Maladjusted Graphs™.

[Percentage of children and teenagers living in poverty and extreme poverty, circa 2008]

As can be seen above, the top five on the list are, in order, Costa Rica, Chile, Uruguay, Argentina and Venezuela. On the other extreme, the five countries where children are worse off are, again in order, El Salvador, Guatemala, Nicaragua, Bolivia and Peru. (so much for Peru's economic miracle, no?)

Well there you have it folks. Yet another welcome attempt to challenge the misleading simplifications of standard statistical indicators.

The Count: LAC 2009 unemployment

0.8...

...is the percentage point rise in unemployment in Latin America and the Caribbean during 2009. That's right folks, ECLAC and the International Labor Organization have a new report out, showing that contrary to fears about the potentially grim effects of the global financial crisis, unemployment in Latin America and the Caribbean only increased from 7.3 percent to 8.1.

Following almost a decade of decreasing unemployment rates, the onset of the global crisis posed the threat of erasing all that hard-earned progress. Indeed, during the first quarter of 2009 many countries saw an alarming spike in unemployment rates. So then what happened next? To quote ECLAC:

"Although the crisis caused a drop in employment, an increase in unemployment rates and the deterioration of the quality of employment, the impact was mitigated by the signs of economic recovery as of mid-2009 around the globe, the countercyclical policies adopted in many countries and the stability of the purchasing power of wages due to decreasing inflation, which restrained the fall in domestic demand."

But how did each country fare individually? Well, below are the ECLAC/ILO numbers presented all pretty like courtesy of Maladjusted Charts™:

[South America: Percentage point change in unemployment, 2008-09]

For a while now the Count has been getting a little bored of seeing Chile "bestest-society-ever" scoring highest in every freaking social indicator around (except inequality, haha!). So it is surprising to see it leading the pack in unemployment increases. But what's most remarkable about this picture is Uruguay on the opposite end, showing unemployment actually decreasing by 0.2 points.

Not bad Uruguay. Not bad at all.

The Count

[editor's note: The Count would like to apologize for failing to count during his regularly scheduled counting time.]

0.84, 1.15, 2.7, 5.94...

...is the percent of GDP it would cost to transfer one poverty line to poor children in Chile, Brazil, Venezuela and Bolivia, respectively. Yes indeed, as promised, here's another excerpt from ECLAC's new report, showing that the relative cost of eliminating childhood poverty is rather low and well within reach.

The graph below shows the result of a simulation estimating the cost of transferring the income equivalent of one poverty line to children around or younger than five years old. The yellow line shows the estimates for every child and the blue line shows the costs for only children from vulnerable households. Also, as can be seen, the relative cost is lowest in countries with a higher level of development.

[Cost of transferring one poverty line to children younger than 5, around 2008, in percent of GDP]

Quite astoundingly, Chile could transfer enough money to eliminate poverty for every child with just 0.84 percent of GDP. Even Bolivia, with a far lower level of development, could theoretically get rid of poverty with a relatively small 5.94 percent of GDP.

Of course, this type of exercise is a pure abstraction and takes for granted all sorts of institutional and implementation hurdles. But it's certainly food for thought, no?

ECLAC's Time for Equality

A couple weeks ago maladjusted gave you a sneak peek of ECLAC's new document "The Time for Equality," outlining a regional agenda to promote social equality. Well, the final version is now out and it's safe to say it's a must read for anyone interested in the state of development in Latin America and where the region might be going in the future. This ambitious document is essentially a development blueprint for the region calling for a return of the State as a leading actor in the promotion of economic development and social equality.

The full report comes in at a whopping 290 pages, so this one will take a bit to digest since clearly I can't do justice to this high quality and book-length document in a single post. But you can be sure the Count will soon share many of its insights.

But in the meantime I'll leave you with a simple question included in the report: why equality and why now?

• equality is tremendously important for social cohesion. When wealth is concentrated and growth isn't shared broadly an "expectations gap" is created that "increases social conflict, which erodes government legitimacy and threatens the sustainability of growth."

• equality is more conducive to "authentic competitiveness." Which is to say that there are large long-term productivity gains from an egalitarian society in which everyone has the opportunity to make use of their talents and labor and the environment aren't over exploited. "In the long-run there's a virtuous circle between smaller social gaps, smaller productivity gaps and a more dynamic and sustainable growth. The evidence is conclusive, in the sense that economic development and social equality tend to converge."

• the experience of the recent crisis suggests that highly unequal societies that are overly dependent on financial sectors tend to be more volatile and carry significant costs in terms of poverty and general welfare.

In any case, this is all just a really tiny flavor of all the good stuff included in the document, so I strongly urge all of you to check it out (no english version yet, but it should be out soon).

ECLAC: new report calls for pro-equality agenda

A lot of commentators have said that the global financial crisis marked the end of the neoliberal era and the beginning of a new economic order. But now roughly two years after the onset of the crisis following Lehman's collapse, have any international institutions really started to define what this post-neoliberal economic agenda will look like?

Well, one international institution now seems to be taking the lead.

Yes indeed, maladjusted just so happened to get a sneak peek at a new ECLAC report set to be published during it's 33rd general session at the end of the month. The report, entitled The Time for Equality, is an ambitious document proposing a new economic, social and political agenda to fill the gap left by the collapse of neoliberalism's ideological hegemony.

To paint broad strokes, the report calls for expanding the role and mandate of the State, a return to active industrial policies, increased redistributive social policies and more progressive taxation, among other things.

From the draft report:

"A pro-equality public agenda should not be limited to leveling out opportunities. Rather the role of the State should be broadened to obtain more equal results and levels of well-being. The State and public policies should, therefore, play a decisive role in neutralizing the inertial power of inequality within markets and families."

I can't tell you how refreshing it is to hear an international economic institution break with the liberal discourse of leveled playing fields and social mobility to explicitly address the need for equality--not to mention calling for a concerted and actually substantial regional development agenda.

The Count: friday FDI wonkiness

40 to 50...

...is the percentage that foreign direct investment (FDI) to Latin America is expected to grow in 2010. After contracting sharply between 2008 and 2009 during the world financial crisis, FDI is expected to make a big comeback this year due largely to stronger than anticipated recovery across the region. Or at least according to Eclac's new annual report on FDI.

The climate of uncertainty, tight credit conditions, falling commodity prices and recessions across the world that followed Lehman's collapse caused FDI flows to Latin America to shrink a whopping 42% from 2008 to 2009. The biggest contractions, predictably, took place in countries that in the past have attracted the most FDI. For instance, flows to Brazil shrank $19 billion, a 42.4% decline. In Argentina, FDI flows contracted by $4.8 billion or by 49.6%.

But while in almost every country FDI, though slowing significantly, was still coming in, in Venezuela FDI just wanted to get the fuck out. In 2008 FDI inflows to Venezuela were just barely positive. And during 2009, Venezuela experienced net FDI outflows of $3.1 billion, a 990% decline! This was due mostly to the various nationalizations that took place in 2009.

But before we predict doom and gloom for the Venezuelan economy, we should remember that it's not exactly Greece, has plenty of oil cash lying around, and just signed a $20 billion deal with China to develop it's heavy crude refining capacity.

Whatever. In any case, the regional decline is indeed quite impressive. But why don't we put it in perspective? The graph below shows FDI flows to Latin America and the Caribbean between 1990 to 2009 in billions of dollars.

As can be seen, the lead up to the 2009 crisis was nothing short of an FDI bonanza. In fact, 2007 and 2008 were historical records for FDI. And even after its huge decline, FDI inflows in 2009 were still the 5th largest ever recorded. In other words, FDI flows to Latin America have wethered the crisis quite well, all things considered.

On a compositional note, the sharpest decline between 2008 to 2009 was in FDI flows to natural resource extraction. As can be seen below, this surged in 2008 coinciding with the large worldwide rise in commodity prices. The share of the service sector, the largest recipient of FDI, remained more or less at its 2008 level.But while FDI flows to the manufacturing sector retook the second place, its technological content remained weak. Moreover, Eclac notes that the technological content of FDI to Latin America has been low accross the board. This takes us to our final graph:
The graph above divides all announced FDI in Latin America into "low", "medium-low", "medium-high", and "high" technology content. As can be seen, low and medium-low dominate new FDI inflows.

This is a big problem because one of the biggest supposed benefits of FDI in textbook economic theory is that it transfers technology to developing countries, leading to positive "spillovers" into other industries and thus increasing overall productivity. Of course, no one seriously believes that FDI in and of itself leads to technology transfers and productivity growth. Smart developing countries, like China for instance, have always used industrial policy to harness FDI to suit their development strategies. It's a real shame that so many countries in Latin America have abandoned this type of thinking.

The Count: China edition

19.3...

...is the percentage of total Latin American and Caribbean exports that will go to China in the year 2020. And before you ask: no, maladjusted is NOT clairvoyant...... or at least not yet.

According to a study prepared by ECLAC the world's workshop will soon also surpass the European Union as the second largest destination for Latin America and the Caribbean's exports. The graph below shows the share of the region's exports that go to its top three markets. The key take away here is that over the last ten years the region is significantly less dependent on US markets than before and that China has rapidly become an important alternative destination for exports.

[Latin America and the Caribbean: top three export markets share of total 2000-2020 (percentages)]

Of course, the U.S. will continue to be the region's main export market but it's relative importance will have dropped tremendously, from 38.6 percent in 2009 to 28.4 by 2020. The EU's share will more or less stay the same while China's will continue its impressive increase, from 7.6 percent in 2009 to 19.3 in 2020.

Yes indeed, while the US and EU were stuck in a severe recession last year, China's economy still grew 8.7%. Also, while the value of exports to the US and EU plummeted 26 and 28 percent, respectively, the value of exports to China actually grew 5 percent.

Significantly, the assumptions underlying ECLAC's projections don't require Chinese demand for the region's products to continue growing at the same pace. As the report notes:

"If demand for our products in the United States, European Union and rest of the world continues to grow at its current pace, and assuming that Chinese demand only grows at half its current pace, China would surpass the European Union in 2014 and would become the second largest market for the region's exports."

As can be seen below, China already represents a key export market for many Latin American countries. 13% of Chile's exports go to China, followed by Peru, with 11% and Argentina, with 9%.

[Latin America and the Caribbean: Asia-Pacific country/regions average export shares 2006-2008]

But what's more, it attained this huge share of Latin American exports very, very, very quickly. Between, 2000 and 2008 it climbed from being Brazil's 12th largest export market to being number one. For Costa Rica it went from being 26th to second. Chile: from 5th to first. Colombia: 35th to fourth. Venezuela: 37th to third.

But there's a downside to this story. The pattern of trade between China and Latin America and the Caribbean is not very encouraging. With a few exceptions, the region is only exporting raw materials.

[Latin America and the Caribbean: technological content of exports to China, 1995-2008]

Not much of a clear trend in this one, except for that big blue space at the bottom. Yup, that shows the share of raw materials in total exports to China increasing.

So in the end, if these projections hold up, by 2020 Latin America and the Caribbean will be less dependent on US markets and much more dependent on Chinese ones. It would be nice if the moral of the story was that trade between developing countries meant a better pattern of trade for the region, but so far this doesn't seem to be the case. There are some exceptions though. For instance, virtually all of Costa Rica's exports to China are high-tech goods. Mexico also exports a large amount of high-tech manufacturing. But at the end of the day these are just exceptions.

ECLAC, poverty, inequality and the importance of social spending

Ok, so before you ask... no, this isn't the beginning of a regular maladjusted feature on poverty and inequality... or is it?

The Economic Commission for Latin America and Caribbean (ECLAC) has a great brief on poverty and inequality in Latin America over the last 30 years. Long story short, there’s been tremendous progress in fighting poverty since the 1980s. You know, those 1980s, when every country on the block was getting structurally maladjusted, discovering their love for free markets and hatred for import substitution and, oh, failing to achieve even the most minimum levels of per capita income growth.

As can be seen below, during this lost decade—as economists refer to the period—the regional poverty rate rose from 40.5% in 1980 and peaked at 48.3% in 1990. At the same time, indigence rose from 18.6% to 22.5%. But then, beginning in 1990, poverty and indigence rates began to drop.

[Latin America: Poverty and Indigence, 1980-2008 (percentages)]

This huge drop in poverty and indigence rates since 1990 was first and foremost driven by GDP growth. However, as the brief notes, starting in 2002 another significant factor came into play: a decrease in inequality. As can be seen below, between 2002 and 2008 most countries in the region became more equitable.

[Latin America: Gini coefficient, 2002-2008]

See that? The countries below the 45-degree line are those where inequality decreased. And also, note which country is the farthest away from the line… starts with a "V", just sayin'.

In any case, the brief offers a nice little explanation for why inequality has been decreasing since 1990, which takes me to this last graph below:

[Latin America: Total public spending and social spending, 1990-2008]

That red line on the top is total public spending and the bottom blue line is public social spending, which has more or less steadily increased from 12.4% of GDP in 1990 to 17.9% in 2008. However, more to the point, is the line in the middle, which shows the “fiscal priority of social spending.” This is basically the ratio of social spending to total spending. In other words, governments in Latin America have increased the priority of social spending, a lot, and it is showing results in the reduction of both poverty and inequality.

There’s a lesson to be learned somewhere in there.