Policies for Reducing Income Inequality: Latin
America during the Last Decade
Giovanni Andrea Cornia and Bruno Martorano^42
rom the mid-to-late 1990s, Latin America witnessed
profound economic, political and distributive changes.
During the 1990s, the region experienced slow growthfollowed by the ‘lost half-decade’ of 1998-2002. However, from
2003 to 2008 Latin America experienced an unprecedented
expansion which generated an average GDP growth of 5.5% a year,
second only to the growth registered from 1967 to 1974 (Ocampo
2008). Such steady expansion was, to some extent, a rebound from
the stagnation recorded during the “lost half-decade” of 1998-2002,
but featured also a sharp increase in investment rates which grew by
5 GDP points relative to 2002. However, from the third quarter of
2008, Latin America was affected by the global financial crisis which
is expected to reduce GDP by 1.9% and produce a moderate
growth of 3.4% in 2010 (CEPAL 2009). A second important
change concerns income distribution. Contrary to the adverse
distributive trends observed in the 1990s, between 2003 and 2007,
income inequality declined in the vast majority of the countries of
the region. Finally, since the mid-1990s, the region has also
experienced a steady shift towards democratization and the election
of Left-of-Centre (LOC) governments (Panizza 2005)^43. As
underscored by the election in mid-March 2009 of Mauricio Funes
in El Salvador, during the last decade the region’s political centre of
gravity has shifted with surprising regularity towards regimes which
(^42) G. A. Cornia is Professor of Development Economics, University of Florence.
He is a former Chief Economist at UNICEF
Bruno Martorano is Staff Consultant at UNICEF’s Innocenti Research Center.
(^43) In the following analysis LOC group comprises countries which were ruled for
at least four of the six years spanning 2002-2007 by left-of centre regimes. The
countries responding to this criterion are: Argentina, Brazil, Chile, Costa Rica,
Ecuador, Panama, Uruguay, and Venezuela.