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www.cgdev.org
October 2007
1 Nancy Birdsall is the president of the Center for Global Development. Peter Hakim is the president of the Inter-American Dialogue.
2 See Nancy Birdsall, Augusto de la Torres and Rachel Menezes, Fair Growth: Economic Policies for Latin America’s Poor and Middle-Income Majority
(Washington, D.C.: Center for Global Development and Inter-American Dialogue, Fall 2007).
CGD Brief

Poverty and Inequality in Latin America:
How the U.S. Can Really Help
By Nancy Birdsall and Peter Hakim1

The Bush administration woke up recently to the fundamental challenge Latin America
faces: undoing the injustices reflected in that region’s longstanding poverty and social
inequalities. During a week-long trip to the region in March, President Bush said that
the United States was newly determined to help its neighbors tackle their long-neglected
social agendas. Three months later, he hosted a White House conference on “Advancing
Social Justice in the Americas,” again highlighting a new U.S. policy commitment to help
Latin American countries alleviate pervasive poverty, combat widespread racial and ethnic
discrimination, and reduce the income and wealth gaps that make Latin America the most
unequal region in the world.
A U.S. focus on social issues in Latin America would be a refreshing change. For the last
two decades, Washington’s limited attention to Latin America has concentrated on free
trade, narcotics trafficking, and security threats. Not since President Kennedy launched
his Alliance for Progress in 1961 has social development been the centerpiece of U.S. policy
in Latin America.
While the bulk of reforms to address poverty and inequality must come from the
governments, corporations and civil societies of Latin America itself,2 there is a lot the
United States can do. The most important question is not whether Washington is willing
to make the resources available. Though more resources would help, the size of the U.S.
aid budget pales in comparison to private capital inflows and remittances (for some
countries), and President Chavez’s aid and cheap oil amount to more than four times
U.S. spending on aid for the region in 2006 of $1.4 billion. The fundamental question is
whether this and the next administration will stay focused long enough to overhaul tired
and sometimes foolish practices in aid, trade and other areas in favor of a strategic and
practical approach.
This brief describes the political risks poverty and inequality pose for the region and the
hemisphere , including the United States, and then lays out a practical agenda for how the
U.S. can help. Chief among the recommendations:
n Buttress free trade agreements with aid programs that compensate the losers (such
as farmers competing with subsidized U.S. agriculture) in the short run and help to
increase their ability to compete or adjust in the long run
n Include redistribution of land and investments in alternative employment programs in
the so-called “war against drugs”
n Push U.S. banks to lead the way in making banking in Latin America accessible to the poor
n In Brazil, Mexico and other middle-income countries, fund small aid programs aimed at
engaging those countries’ poorest—often minority and indigenous groups
n Use aid for education to support reform of hidebound school systems
n Help Latin America confront its surge of crime and violence by stemming illegal small
arms sales in the region and supporting police reform
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