World Bank & O.E.C.D. Reports Criticize Mexico for Failing to Address Steady Growth in Poverty

SourceMex Economic News & Analysis on Mexico, May 12, 1999 | Go to article overview

World Bank & O.E.C.D. Reports Criticize Mexico for Failing to Address Steady Growth in Poverty


Recent reports published by the World Bank and the Organization for Economic Development and Cooperation (OECD) criticized Mexico for failing to take adequate steps to stem a steady growth in poverty, which could threaten Mexico's recent macroeconomic stability. Estimates released by the Mexican government's Consejo Nacional de la Poblacion (CONAPO) in early May show that at least 26 million Mexicans live in extreme poverty. The number includes 12 million children, according to the United Nations Children's Fund (UNICEF). The CONAPO report did not mention the total number of Mexicans living in poverty, but a recent government study suggested that 52 million out of a total population of 95 million Mexicans were suffering some degree of poverty. The World Bank report, released in late April, highlighted the growing income disparity between the wealthiest and poorest segments of the population. The report said economic conditions worsened for most Mexicans between 1980 and 1997, despite increases in GNP and GDP in most of those years. The bank said Mexico was the world's 16th-wealthiest nation in economic production during 1997. Mexico reported a 7% growth in GDP for that year (see SourceMex, 1998-02-18). But the report also said Mexico's ranking would drop to 81st in per capita income, a clear sign of the huge disparity between the poor and the wealthy in Mexico. World Bank figures show that the wealthiest 10% of Mexico's population accounts for 43% of the country's total earnings. Similarly, the richest 20% accounts for 60% of the total earnings. In general terms, said the World Bank, roughly 40% of Mexico's population earns less than US$2 per day. The World Bank report also presented dramatic statistics on employment trends, which reflect massive migration from the countryside to the major cities in Mexico. Changes in the agricultural economy have forced many Mexicans to seek employment in cities or to migrate to the US. The report said the agricultural sector employed only 28% of Mexico's population in the 1990s, compared with 44% in 1970. Similarly, the percentage of residents living in urban areas increased to 74% in the 1990s, compared with 59% in 1970.

OECD links poverty to surge in informal economy A separate report published by the OECD in early May pointed to the huge growth in the informal economy, which it said was a symptom of the growing poverty and the lack of educational opportunities in Mexico. "[The growth in] the informal sector in Mexico is a consequence of generalized poverty, the lack of training and educational opportunities for a large segment of the population, and the absence of a social safety net," said the OECD. The Secretaria de Hacienda y Credito Publico (SHCP) estimates that Mexico's informal economy generates the equivalent of 10% of the country's GDP. But the OECD suggests street vendors could account for as much as one-third of Mexico's annual GDP. The OECD said the informal economy could represent as much as 44% of the country's total urban employment. But since earnings in this sector are very low, the informal economy's participation in the country's GDP is relatively low. The Mexican informal economy is the largest among the 29 members of the OECD, with the possible exception of Turkey, said the report. The OECD said a trait of the Mexican informal economy is its tendency to expand during times of recession. This sector is often the only option for Mexicans who have lost their jobs in the formal economy, as was the case in the months following the devaluation of the peso in late 1994. …

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World Bank & O.E.C.D. Reports Criticize Mexico for Failing to Address Steady Growth in Poverty
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