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History tells us that economic crises cause large increases in poverty and slow down or reverse progress in key social indicators, such as infant mortality and average years of schooling. They may also increase income inequality. The most recent economic crisis will cause Latin America’s GDP to contract around 2 percent in 2009. And it comes on top of the negative effects that rising food prices have had on the poor since 2006. Although it is too early to tell whether the impact of the crisis on poverty will be lasting, one thing is clear: the poor will suffer while the crisis lasts.
During economic crises, governments frequently adopt fiscal austerity measures without adequately considering their impact on the poor. Even when governments try to protect the poor, they often lack the information, resources and institutional capacity to do so quickly and effectively. Only a few have social safety nets in place and ready to scale up. In what follows, we discuss how past economic crises affected poverty, education and health in Latin America, and suggest a pro-poor policy response in three areas: the macroeconomic policy mix, the composition of fiscal adjustments and social safety nets.
The brief is the second in a series of policy briefs that will target key issues on the region’s social agenda. Download the full briefing below.
