the Southern Cone nations, which trade mainly with East Asia, are
less likely to be affected due to the milder recession experienced in
that region. Fourth, most countries have introduced in recent years
important public works and cash transfer programs (Table 10). At
the moment, 85 million Latin-Americans receive a subsidy through
some kind of CCT schemes (UNDP 2009). This prior institutional
development should facilitate the expansion of safety nets during
the crisis and help preserve some of the recent inequality declines.
However, not all countries may have the administrative capacity to
act in a timely manner. Finally, the inequality trends over 2009 and
2010 will depend on the ability of governments to sustain the
measures introduced during the recent past in the fields of direct
taxation, social expenditures, labor market policies and a gradual
drive towards an integrated, universal social protection system, and
away from the traditional highly segmented and informal systems.
As noted, a feasible countercyclical fiscal policy should sustain some
of these efforts over the years ahead, and preserve part of the
inequality gains achieved during the recent past. It seems unlikely,
therefore, that an 18-24 month crisis will undo the full distributive
gains of 2002-2007.
One way to grasp the impact of the current crisis is to use the
parameters of the column 1 model in Table 13 to estimate the likely
inequality impact of the global financial crisis in 2009 on a few
prototypical countries. Prototypical countries include a few oil-
metal exporters (Chile, Ecuador, and Mexico – which as noted
above will suffer a decline in tax revenue of 3.8 points of GDP) and
more broad-based economies (Argentina and Brazil). In this regard,
the 2008 and 2009 values of the right-hand side variable (terms of
trade, GDP/c, real exchange rate, tax/GDP ratio, migrant
remittances and FDI) were derived from various ECLAC
publications or were projected (as in the case of ‘stock variables’
such as FDI/GDP stock and the Gini education) assuming only
minimum changes in their level. What needs to be noted is that
several of the non-policy explanatory variables in the model
presented in Table 13 varied little in 2008 and in 2009, a strong
impact is evident only in a few countries (Mexico above all). As for
the policy variables, two scenarios were simulated, one assuming
moderate cuts, and the other assuming more severe cuts. The first