Beruflich Dokumente
Kultur Dokumente
that deny
rights
EXTREME INEQUALITY AND
THE HIJACKING OF DEMOCRACY
IN LATIN AMERICA AND THE CARIBBEAN
Privileges
that Deny
Rights
- September 2015 -
EXECUTIVE SUMMARY
Acahualinca, Nicaragua. Photo: Rger Antonio Ramrez Romero | OXFAM
content
80 70.8
70
60
50
40
30
20 11.9
4.4 7
10 1 1.7 2.8
0 0.1 0.4
0
1 2 3 4 5 6 7 8 9 10
9
Source: Own calculations based on Credit Suisse (2014) .
six percent higher than the growth of wealth Oxfam has calculated the annual yield of
in the rest of the world. This means that most the fortune belonging to a person from each
economic growth is being obtained by the countrys multi-millionaire set in order to com-
richest, which dramatically widens the inequa- pare it with the average annual income of a
lity gap. person from the countrys poorest 20 percent.
Moreover, according to the 2014 World Ultra The results are very conclusive and show the
Wealth Report,10 Latin American multi-mi- extreme concentration of wealth: For exam-
llionaires individuals with a net asset worth ple, in Honduras, the average multi-millionaire
exceeding $30m already total 14,805 people. receives 16,460 times more per year than a
Their collective wealth is equivalent to the mo- person from the poorest 20 percent of the
ney that would be needed in order to eliminate population [Fig. 2].
extreme monetary poverty in Brazil, Colombia, In terms of unequal land ownership, Latin
El Salvador, Guatemala, Honduras, Mexico, Ni- America is ranked first worldwide, and the
caragua and Peru. In Bolivia the wealth owned Caribbean second. Governments have found
by the countrys 245 multi-millionaires is equi- it difficult to develop policies geared towards
valent to 21 times the countrys public health more equitable land distribution, and histo-
expenditure, while in Nicaragua the wealth of rically large-scale landowners have exerted
the countrys 245 multi-millionaires is equiva- pressure in order to prevent and limit the de-
lent to 76 times the countrys public education velopment of agrarian reforms. Combined with
expenditure. models of agrarian use based on intensive crop
farming, this has hit small producer families
figure 2.
RATIO OF MULTI-MILLIONAIRESi ANNUAL INCOME PER CAPITA/POOREST QUINTILES ANNUAL
INCOME PER CAPITA 2014 (CURRENT VALUES IN US$)
16,460.3
12,197.6
18,000
8,306.5
7,397.8
16,000
6,434.1
14,000
4,845.8
4,406.4
4,079.0
4,046.8
3,845.4
3,695.3
12,000
3,338.1
2,848.2
2,626.1
1,801.4
2,025.8
1,683.4
10,000
1,018.9
1,012.6
8,000
6,000
4,000
2,000
0
f/
a
ay
ile
d/
h/
ca
il
ic
be nd
ay
e/
i/
g/
do
do
az
el
bi
bl
Pa an
Pe
u
gu
a
Ch
a
Ri
rib a a
ia
a
as
o
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Br
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a
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ur
em
l
Pa
Ca ic
Ec
nt
st
ra
Sa
Ur
Re
n
Co
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M
e er
nd
Ve
ca
Co
ge
at
El
n
Th Am
Ho
Ni
a
Gu
Ar
ic
tin
in
m
La
Do
Based on figures from ECLAC, WEALTH X, Credit Suisse and the World Bank. e/ Percentage share in national income by the 1st quintile from 2011
Notes: f/ Percentage share in national income by the 1st quintile from 2006
g/ Percentage share in national income by the 1st quintile from 2010
d/ Percentage share in national income by the 1st quintile from 2012 and
h/ Percentage share in national income by the 1st quintile from 2012
only for the urban area
i/ Percentage share in national income by the 1st quintile from 2009
INFLUENCING PUBLIC Elites use their influence to shape public policies - Influence-peddling
POLICIES, LAWS AND and legislation in their favour, establish social and - Lobby
REGULATORY FRAMEWORKS economic priorities for their own economic or political - Political parties private funding
benefit.
Apropiation of resources and state properties with - Bidding and award of government contract without due process
CORRUPTION
the purpose of obtaining payments or other economic and transparency.
benefits such as economic support to a political party - Overvaluation of infraestructure works.
or individual benefits. - Sale or delivery of undervalued public owned land.
CONTROL Elites use public and private resources to buy media - Concentration of media ownership.
OF MEDIA and opinion makers in order to promote either mes- - Standardization of media content and economic dependency of
sages that benefit them or discredit ideas that go government publicity.
against their interests.
- Threats and attacks against journalists.
Plural and diverse media systems can become 3. EXTRACTIVISM, PRIVATIZATION AND
an effective way of fighting against inequality OTHER CHALLENGES PRESENTED BY
in environments where ideas and public debate THE MODEL
led by political and economic elites predomi-
The privatization of public services also dee-
nate20. Accountability and citizen participation
pens inequality and contributes to the rupture
can also be antidotes against the hijacking of
of the social pact needed in order to tackle it.
democracy and economic inequality.
This process creates relational segregation
Control of private funding for parties, anti-lo- in terms of guaranteeing rights and it distan-
bbying laws, guaranteeing plurality and di- ces the middle and upper classes from using
versity in the media, protection of the right to public services and consequently from their
free expression, civic monitoring and peaceful willingness to contribute towards funding them
protests, as well as the correct application of and to demand satisfactory levels of quality.
laws on holding public office, are all essen-
Private interests and multilateral organizations
tial mechanisms for curbing the hijacking of
have long promoted the concept of privatiza-
democracy.
tion as a response to the lack of efficiency and
70 61
2000
60
2011
54
50
40 33
30
21
20 13 24
9
10 14
5 8
0
Q1 Q2 Q3 Q4 Q5
Source: Own calculations based on SEDLAC household surveys in Argentina, Brazil, Chile, Colombia, Costa Rica, Peru and Uruguay.
quality of state-provided services. At present, also a trap for the middle classes, making them
the lack of investment and commitment to more vulnerable to any external shock, inclu-
quality and universalization has brought public ding loss of employment, chronic diseases,
funds to a level of private management in disabilities, etc., which puts them at risk of
which the interests that predominate are far joining the ranks of the poor.
removed from the principle of the common Governments must prioritize policies, gua-
good. This has resulted in poor quality servi- rantee sufficient public funds and take the
ces, a reduction in coverage and the creation necessary measures to ensure the provision
of fragmented societies where private provi- of quality public services including education,
ders obtain huge benefits without any efficient health, water and sanitation. They should also
state regulation. Meanwhile, the impoverished regulate private provision of these services if
classes are deprived of quality services, and they want to effectively tackle inequality.
in some cases, even the services themselves,
Public services and rights cannot respond to
due to their inability to pay.
market forces, just as state income should
We are faced with a situation of public servi- also not be subject to the whims of the mar-
ces for people who are living in poverty and kets. The region is still as dependent on the
private services for the middle classes and extraction of natural resources as it was 40
the rich, a model that reinforces poverty and years ago,22 and just as sensitive to price vola-
21
unequal income distribution [Figure 3]. It is tility. In 2011 raw materials exports represented
50
45
45 42 41
40 35
35 31
30
25 20
20 15
15
10
5
0
Venezuela Ecuador Trinidad & Bolivia Mxico Per Colombia
Tobago
60 percent of total LAC exports, and their con- high prices in the first decade of the 21st
tribution to public income and budgets fiscal century explain to a large extent the golden
dependence was also very high. Venezuela years experienced by the region in terms
tops the list: the share of extractives in total of economic growth. This boom gave many
income was 44.5 percent during the period governments in the region some room for
20102013 [Figure 4]. manoeuvre to finance a more decisive com-
According to estimates, the regions combi- mitment to social policy. However, the recent
ned agricultural production in 2012 exceeded deceleration in growth of Latin American
$300bn, boosted by the increase in price of economies is also related to the fall in the
agricultural raw materials. The region is the price of raw materials and the slowdown of
worlds main producer of sugar, soya beans growth in China,24 a major importer of Latin
and coffee, supplying more than 50 per- American raw materials.
cent of global exports of these products.23 The consequences have not taken long to
Nonetheless, as in the case of mining and appear. The negative impact on public finan-
hydrocarbons, soya bean and sugar produc- ces of the fall in international prices of raw
tion generate large capital profits but create materials is already evident in some coun-
little employment and are not environmentally tries25: lower taxation income and a threat
sustainable in the long term, especially in the to the fiscal balance, which reduces states
case of soya beans. capacity to fund social problems and cater to
Dependence on natural resources and their their citizens needs.
120% % 104
%
% 91% 96
%
97% 97
100% % 88
78% 80
80%
%
66%
% 54
40% 41% 46 50
60% %
40% 26%
20%
0%
o
la
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ia
il
ile
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as
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Ch
ur
Ri
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Br
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Pa
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Ve
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Ni
El
an
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Do
However, there is still a long way to go: out tead respond to the negotiating powers of the
of 15 countries only Costa Ricas legal mini- higher echelons of business, creating greater
mum wage reaches the minimum subsistence income and a concentration of wealth.iv
salary. In extreme cases, the legal minimum For their part, social protection systems are
wages in Mexico, Venezuela, Dominican Repu- essential in the struggle against inequality
blic and Bolivia do not cover even 50 percent inasmuch as they reduce peoples vulnerability
of the minimum subsistence wage. The case of to the risks associated with the life cycle, such
Bolivia is worth highlighting, because despite a as illness, motherhood, disability or old age,
sustained increase in the minimum wage since which can represent a loss of income. They
2006, it still fails to reach subsistence levels also comprise the public policies that cater
[Figure 5]. for the specific needs of the most excluded
Raising the minimum wage can improve eco- population groups and make society as a whole
27
nomic equality in the region, but so can more based on solidarity, more egalitarian and
imposing a ceiling on maximum salaries. In the less individualistic.28
private as well as the public sectors, maximum The social security systems in the region
salaries should be limited: as Thomas Piketty should guarantee universality and solidarity
has explained, there comes a point when between groups and thus curb the inequalities
salary differences cease to have any kind of that occur in the labour market. The promotion
relationship with worker productivity and ins-
iv
Piketty Thomas, 2014, Capital in the Twenty First, Harvard
University Press.
8:24
7:15
6:53 6:54
7:12
5:57 6:15 6:31 6:25
5:41
6:00 5:14
4:45
4:48 4:17 4:05
3:07 3:23
3:36 2:31
2:45
2:04 2:23 1:46
2:24 1:33 1:42 1:33 1:43 1:42 Men
51:12
Women
0.00
UNREMUNERATE
REMUNERATE
UNREMUNERATE
REMUNERATE
UNREMUNERATE
REMUNERATE
UNREMUNERATE
REMUNERATE
UNREMUNERATE
REMUNERATE
UNREMUNERATE
REMUNERATE
Argentina Uruguay Mxico Costa Rica Guatemala Ecuador
Source: Esquivel Valeria, 2011, The Care Economy in Latin America, UNDP, El Salvador.
table 2.
MILLIONS OF LATIN AMERICAN US$ HIDDEN FROM THE TAX
AUTHORITIES IN HSBC ACCOUNTS AND SIMILAR
VALUE IN US$ BILLIONS VALUE IN HSBC ACCOUNTS VALUE IN HSBC
IN HSBC ACCOUNTS AS PERCENTAGE OF PUBLIC AS PERCENTAGE OF THE
COUNTRY
(2006 AND 2007) INVESTMENT IN HEALTH PUBLIC DEBT IN 2013
Argentina 3.500 13% 5%
Bolivia 94 8% 2%
Brazil 7.000 7% 5%
Chile 468 5% -
Colombia 276 1% 1%
Costa Rica 23 1% 0%
Cuba 84 1% -
Dominican Republic 34 2% 0%
Ecuador 198 10% 2%
El Salvador 88 9% 1%
Guatemala 32 3% 0%
Hait 24 21% 2%
Mxico 2.200 6% 1%
Panam 2.800 149% 23%
Paraguay 46 5% 2%
Per 141 2% 1%
Uruguay 2.800 97% -
Venezuela 14.800 - -
ALC 52.579 24% 9%
Source: http://www.icij.org/project/swiss-leaks/explore-swiss-leaks-data y datos de deuda e inversin en salud de WDI.
810
tion in the capital source countries or coun-
tries of residence. The current global agenda
is insufficient for LACs interests.
1
Oxfam America calculation, 2015. Source: Revised headcounts from Brookings spreadsheet, Country HC & HCR revisions
- 05.14, received July 21, 2014; except China, India, Indonesia headcounts from Laurence Chandy e-mail, July 22, 2104;
2010 means from Brookings spreadsheet, Poverty means_2010, received July 22, 2014; conversion factors from GDP/ca-
pita growth to mean consumption/income growth from Chandy, Ledlie, and Penciakova, The Final Countdown: Prospects
for Ending Extreme Poverty by 2030, p. 17; $1.55 (2005 $) poverty line from http://www.brookings.edu/blogs/up-front/
posts/2014/05/05-data-extreme-poverty-chandy-kharas; GDP/capita projections are IMF World Economic Outlook April
2014 current-dollar PPP figures, adjusted for US CPI inflation in 2010-12.
2
ECLAC 2015 Social Panorama of Latin America and the Caribbean, 2014 p. 65
3
IMF 2015 Causes and Consequences of Income Inequality: A Global Perspective IMF Staff Dicussion Note.
4
Own calculation based on the World Banks World Development Indicators 2015
5
Credit Suisse 2014
6
CEPALSTAT
7
CEPALSTAT
8
The GDP of the countries of Latin America and the Caribbean grew by an average 3.5% per year from 2000-2013 http://
wdi.worldbank.org/table/4.1
9
Credit Suisse 2014, op. cit.
10
UBS 2014, World Ultra Wealth Report: http://www.worldultrawealthreport.com/home.php
11
CISEPA, CIRAD, International Land Coalition (2011) The Concentration of Land Ownership in Latin America: an Approach to
the Current Problems.
12
When we conduct a correlation analysis the level of economic equality measured by Gini and the perception of dissa-
tisfaction with the workings of democracy, a positive relationship of 0.473 is apparent in the Latin American countries.
Nonetheless, we find two atypical values in this analysis, for Costa Rica and Uruguay respectively.
13
We observe on average that there is a positive relationship of +0.474 between income inequality and peoples percep-
tion that government is for the benefit of powerful groups.
14
When we conduct a correlation analysis for the level of inequality (GINI) regarding peoples perception that some people
and/or groups have so much influence that the interests of the majority are ignored, we find a positive relationship of
0.357.
15
Esquivel 2015 for Oxfam Mexico, p. 19
16
Esquivel 2015 for Oxfam Mexico, p.21
17
Garay Jorge 2013 Minera en Colombia [Spanish only] General Comptroller of the Republic http://www.rebelion.org/
docs/167838.pdf
18
http://www.oxfamblogs.org/lac/
19
Latinobarmetro Corporation (2013) Report 2013, Latinobarmetro Corporation: Santiago, Chile
20
OXFAM (2014) Even It Up: Time to End Extreme Inequality; Time to Change the Rules, OXFAM GB: Oxford
21
ILO, (2014) World Employment Trends 2014: The Risk of a Jobless Recovery, Geneva: ILO.
22
Caliari (2014), Poltica Fiscal para salir del extractivismo, [Spanish only - Tax Policy for emerging from Extractivism] in
Economa Crtica quoting the International Monetary Fund (IMF).
23
Vergara W., A. R. Rios, P. Trapido, H. Malarn (2014) Agriculture and Future Climate in Latin America and the Caribbean:
Systemic Impacts and Potential Responses, IDB
24
World Bank (2015), Latin America Treads a Narrow Path to Growth: The Economic Slowdown and its Macro Challenges,
World Bank.
25
In 2014 the average price of copper was 22% lower than recorded in 2011; in the case of gold the variation was -19%,
silver -46% and lead -13%. In the case of oil prices, the decrease is recent: in mid-2014 the price per barrel was more
than US$100, but by January 2015 it had fallen below US$50 (See for example Epifanio Baca & Gustavo vila (2015), El fin
del sper ciclo de los commodities y su impacto en los ingresos regionales [Spanish only -The end of the commodities
supercycle and its impact on regional income]; Available at: http://www.propuestaciudadana.org.pe/sites/default/
files/publicaciones/archivos/NIA%207-2015.pdf
26
See ECLAC (2013) Social Panorama Latin America, United Nations: Santiago, Chile
27
ILO (2014) Labour Overview 2014. Latin America and the Caribbean, Lima: ILO / Regional Office for Latin America and the
Caribbean.
28
OXFAM (2014) Even It Up: Time to End Extreme Inequality. Time to Change the Rules
29
Esquivel Valeria, 2011, The Care Economy in Latin America, UNDP, El Salvador
30
It should be pointed out that in this document, fiscal pressure, unlike taxation pressure, is a broader concept that
includes contributions to security and other non-taxation income like royalties or licences for the extraction of natural
resources
31
14 in total.
32
This figure corresponds to new calculations by Oxfam, based on estimates from International Monetary Fund (IMF)
researchers on tax effort and the fiscal capacity of several countries. The estimates made by the researchers can be
found in the following publication: Ricardo Fenochietto & Carola Pessino (2013), Understanding Countries Tax Effort,
International Monetary Fund Working Paper, Fiscal Affairs Department, WP/13/244. Available at: http://www.imf.org/
external/pubs/ft/wp/2013/wp13244.pdf
Fenochietto and Pessino (2013) carried out a simulation exercise to estimate the total income that could be collected
if the collection gap is reduced by 50% in 2020. In order to make this estimate the following assumptions have to be
made: GDP (in US$ at current prices) expands at the same annual average growth rate registered in the two year period
2011- 2012 and estimated tax capacity remains constant over time. Tax capacity is calculated by the abovementioned
authors as the maximum level of tax income that a country can obtain given its actual level of GDP per capita, the de-
gree of trade openness, public spending on education as a percentage of GDP, inflation rate, Gini index, perception of
corruption, and agricultural share in GDP. It is to be expected that the first three variables will have a positive impact on
tax income, while the rest of the variables will have a negative influence on collections. Tax effort is the proportion that
results from dividing current tax income (2011 data, with some exceptions 2012) into estimated tax capacity.
33
Ibid.
34
Own calculations based on OECD, ECLAC and CIAT (2015), Revenue Statistics in Latin America and the Caribbean, Table C.
Available from: http://www.keepeek.com/Digital-Asset-Management/oecd/taxation/revenue-statistics-in-latin-ameri-
ca-and-the-caribbean-2015_rev_lat-2015-en-fr#page26
35
Such as financial investments, interest on public titles, profits from investment funds, capital gains from property
assets and shares, etc. Financial investments are funds that are banked for a specific period, from seven days to more
than one year, with higher interest rates than savings accounts.
36
After exonerations and other tax benefits/incentives.
37
IDB (2013), More than Revenue: Taxation as a Development Tool, figure 1.9.
Available from: http://www.iadb.org/res/centralBanks/publications/cbm75_1115.pdf
38
Includes social security cash payments (monetary public pensions)
39
Measurement made through the Gini index.
40
ECLAC and the Institute for Fiscal Studies (2015) Los efectos de la poltica fiscal sobre la redistribucin en Amrica Lati-
na y la Unin Europea [Spanish only - The effects of fiscal policy on redistribution in Latin America and the Caribbean],
Study n 8, Series: States of the Question, Area: Public Finances, Eurosocial, pages. 46-47.
Available from: http://www.cepal.org/es/publicaciones/37881-desigualdad-concentracion-del-ingreso-y-tributacion-
sobre-las-altas-rentas-en
The countries analysed in the study are: Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Ecuador, El Salvador,
Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Dominican Republic, Uruguay and Venezuela.
41
http://www.huffingtonpost.com/entry/multinational-corporations-taxes_55d4baede4b055a6dab265d9
42
SwissLeaks http://www.icij.org/project/swiss-leaks/explore-swiss-leaks-data
43
World Bank
44
Europaid. Transfer Pricing and Developing Countries. Final Report. July 2011 http://ec.europa.eu/taxation_customs/
resources/documents/common/publications/studies/transfer_pricing_dev_countries.pdf
45
G20 (2013) Information Centre: Tax Annex to the Saint Petersburg G20 Leaders Declaration http://www.g20.utoronto.
ca/2013/2013-0905-tax.html
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