Portrait of the Poor

This text paints a new picture of poverty in Latin America by asking a simple question: Why do poor people earn less? Despite Latin America's positive growth trends in recent years, the ranks of the poor continue to swell. Traditional poverty reduction programmes and safety nets have been largely ineffective, in part because they address the short-term consequences of poverty instead of its causes. This work examines poverty as a structural problem caused by the way economic systems operate. Case studies in Bolivia, Brazil, Chile, Colombia, Costa Rica and Peru find the poor caught in a vicious circle because they lack sufficient access to education, credit and other means to generate income. They have few productive assets, so they earn lower wages, which in turn prevents them from accumulating the assets they need to increase future income. The approach to poverty reduction proposed here analyzes the ownership, accumulation and use of income-generating assets, as well as access to them.
Where the evidence points to market imperfections, the study proposes poverty reduction policies that ease the constraints to accumulating the human, physical and social capital needed to generate greater income.