MercoPress. South Atlantic News Agency

World Bank warns of poverty as a “brake” for growth

Poverty in Latinamerica could limit economic growth in the region warns the World Bank which suggests investing in education, infrastructure and micro-credits in support of the most needed segments of the population.

"Investing efficiently in poverty is good business for society", said World Bank chief economist for Latinamerica Guillermo Perry.

"If the poor can't improve their living standards, they won't contribute to national growth", he added.

This is one of the main conclusions of the report on "Reduction of poverty and growth: virtuous circles, vicious circles", which was made public Tuesday in Madrid by the World Bank's vice-president for Latinamerica Pamela Cox and economist Perry.

The report questions conventional thinking which points out that the increase in per capita income helps reduce poverty and economic growth is the efficient instrument to achieve such a goal.

According to the report, Latinamerica's "vicious circles" and the possible instruments to transform them in "virtuous circles" could be indicating poverty actually is part of the cause for the low economic growth rates.

The document also looks into the fact that being Latinamerica a region rich in human resources and intelligence, nevertheless poverty levels remain very high and quite similar to those of the eighties.

The World Bank reports estimates that if Latinamerican countries do not work on plans to reduce social inequalities, additional growth rates will become imperative for the economy.

More precisely the region's four heavy weights, Mexico, Brazil, Chile and Argentina would need an additional growth of 2% of GDP annually to lower poverty levels.

"In the poorest countries of the region such as Honduras and Bolivia, growth is vital but in the wealthier countries, which also have the highest inequality rates, growth policies will have to be combined with those for the reduction of inequalities".

Furthermore in countries relatively richer and with greater inequality, particularly in Argentina, Brazil, Colombia and Mexico, they will need both a sustained growth boost and a considerable redistribution of wealth if they are committed to a real reduction in poverty levels.

Economist Perry said that the greatest impact for "economic growth and global poverty reduction would be liberalization of multilateral trade", adding that it would be something similar to "a very ambitious Doha round".

However Perry admits the difficulties of world collaboration at such scale recalling that the Doha round objectives to liberalize trade which were launched in 2001 in Qatar have yet to be achieved besides the fact regional trade blocks have opted or showed a preference for bilateral agreements with other countries or regional spaces.

Regarding the region's prospects World Bank economist Perry said countries face a "very good external scenario", thanks to the impact of reforms and macroeconomic policies of the last few years which have enabled the region to expand at an annual rate above 5%.

"We're confident this will continue", underlined Perry who said that sustained economic growth is having an impact in the improvement of poverty ratios.