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The Brookings Institution / Ford Foundation Workshops
Asset Accumulation by the
Middle Class and the Poor:
Economic Considerations and
the Latin American Experience
Andrés Solimano
Regional Adviser
CEPAL, United Nations
Washington - June 27 & 28, 2006
Themes:
1. Current Paradigm in Social Policy (linked to the
Washington Consensus).
2. Asset Distribution in Latin America (LA).
3. Savings, Capital Markets and Property Rights.
4. What to do?: Alternatives for Social Policy and
Role for Asset Accumulation.
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1. Current Paradigm in Social Policy linked to
the Washington Consensus
 Main assumptions:
i) Growth-led poverty reduction.
ii) Targeted cash transfers.
iii) Social safety nets.
 Results have not been encouraging in Latin America:
i) Persistency of poverty (over 40% of the population is poor).
ii) High inequality (Gini coefficients over 0.5).
 Why?
i) Modest economic growth (see figure 1).
ii) High frequency of growth crisis (see table 1).
iii) Persistent inequality that reduce the impact of growth on
poverty.
iv) Narrowly defined social policies.
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Figure 1. Latin America and the Caribbean GDP per capita
(PPP) as a percentage of the United States
GDP per capita (PPP), 1975-2004
(Constant 2000 International US$)
35
30
Ratio (%)
25
20
15
10
5
0
1975
1980
1985
1990
1995
Source: World Bank, WDI Indicators online database.
2000 2004
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Table 1. Growth Crises in LA and Reference Group, 1960-2003
Number of years with negative
GDP per capita growth rates
Percentage of crisis
in total period:
1960-2003
1960-1980 1981-2003 1960-2003
Argentina
6
11
17
38.6
Bolivia
4
9
13
29.5
Brazil
2
11
13
29.5
Chile
4
3
7
15.9
Colombia
2
5
7
15.9
Costa Rica
3
8
11
25.0
Ecuador
3
8
11
25.0
Mexico
0
8
8
18.2
Peru
4
10
14
31.8
Dominican Rep.
4
6
10
22.7
Uruguay
5
9
14
31.8
Venezuela
10
13
23
52.3
Average
3.9
8.4
12.3
28.0
Korea
Spain
Philippines
Ireland
Thailand
Turkey
Average
2
2
0
2
0
5
1.8
1
2
7
2
2
6
3.3
3
4
7
4
2
11
5.2
6.8
9.1
15.9
9.1
4.5
25.0
11.7
Source: Solimano, A. (2006). Vanishing Growth in Latin America. The Late Twentieth Century 5
Experience. Edward Elgar Publishers.
2. Asset Distribution in Latin America (LA)
 Housing is the most important asset hold by households in
LA.
 Education is another important “asset” in LA.
 A large proportion of the population (69%) owns their homes.
 This high pattern of home ownership in LA is associated with
the prevalence of illegal settlement and with housing policy
for the poor and the lower middle class.
 Relative concentration of land tenure (partially corrected by
agrarian reform).
 Capital and financial assets are more concentrated than
home equity.
 “Quality education” is unevenly distributed.
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3. Savings, Capital Markets and Property
Rights
 There are three main impediments for a more evenly
distribution of assets in LA region:
1. The limited saving capacity of low income groups
(although their savings capacity is not zero).
2. The property rights often do not reach to the poor.
Lack of titling of property (“dead capital”).
3. Capital markets are segmented, low access by the
poor to productive credit and education loans.
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4. What to do?: Alternatives for Social Policy
and Role for Asset Accumulation
 Six highlights:
1. Reassess the link between economic growth and
poverty reduction. Attention to inequality.
2. Focus on labor markets and education.
3. Go beyond targeting and bring the middle class as a
beneficiary of broader social policy.
4. Widen the access to assets to the middle class and
the poor.
5. Reforms in credit markets and the legal system.
6. Avoid the populist temptation.
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The Brookings Institution / Ford Foundation Workshops
Asset Accumulation by the
Middle Class and the Poor:
Economic Considerations and
the Latin American Experience
Andrés Solimano
Regional Adviser
CEPAL, United Nations
Washington - June 27 & 28, 2006