Latin America: The Income Gap

A long the oceanfront in Rio de Janeiro, Brazil, gleaming office buildings and hotels share the boulevards with trendy restaurants and exclusive shops.

Behind all this glitter and glamour, however, is another world, hidden from sight—the favelas, or slums, of Rio. Here, the poor live among swamps and garbage dumps, and on barren hillsides.

These contrasting conditions are evidence of what economists call an income gap. This is the difference between the quality of life enjoyed by the rich and the poor. In many Latin American countries, the gap is widening. Some solutions have been proposed for this problem.

The Nature of the Problem

As you've learned in this unit, the income gap in Latin America has many causes, some of which reflect the impact of colonialism in the region. There are three angles to exploring the income gap: it is a moral issue, an economic dilemma, and a political problem.


Some people argue that Latin America's income gap raises important ethical questions. How can any caring society, they ask, justify vast wealth in the hands of a few while most people live in poverty from which they will likely never escape? The Catholic Church and other religious faiths in Latin America have argued that narrowing the gap between rich and poor is more than just an economic necessity; it is a matter of social justice.


Most Latin American countries now have free-market economies with a minimum of government rules. A freemarket economy offers many people the freedom and rewards they need to create wealth. However, in Latin America the poor often lack the basic skills that would make taking part in the economy possible. Often, the poor have little education. Many cannot read. Most cannot find jobs. Those who find work may end up sweeping streets or shining shoes. Conditions in the slums breed disease and encourage crime. In fact, the life spans of slum dwellers are shorter than those of the middle and upper classes. To the poor of Latin America, the doors to economic equality appear shut.


Poverty can make people desperate. Those who think they have nothing to lose are sometimes willing to take great risks. Throughout history, battles have been waged and governments have been overthrown by citizens protesting what they regard as an unjust society in which a few have too much while the many have too little.

Argentina, Bolivia, Brazil, Colombia, El Salvador, and Guatemala have all seen bloody rebellions put down by harsh military measures. In the process, human rights and human dignity have been violated. The story is usually the same. The rebels seek economic justice, and the military protects the wealthy. Clearly, attitudes will have to change before the poor in Latin America will be able to participate fully in their nations' economies. Some attitudes are already changing as, for example, more money is going to education.

Possible Solutions

The income gap in Latin America varies from one country to another. For example, according to a recent report issued by the United Nations' Development Program, nearly 45 percent of all Brazilians live in poverty, existing on less than two dollars a day. In Ecuador, Paraguay, and Uruguay, on the other hand, the income gap is much narrower than it is in Brazil.


Many of the countries of the region have put in place free-market economies that they hope will eventually help to narrow the gap by providing economic opportunity and stability for all citizens.

Along with market economies, democracy is now seen by many countries as an essential part of the equation needed to achieve widespread prosperity. Democracy provides an outlet for protest and opposition so that policies can be adjusted to reflect the will of the majority of the people.

Finally, education is an important part of the mix. A literate, well-educated population will be needed to fill the jobs that will become available in an increasingly complex economy. A case study project on the income gap follows on the next two pages.