Poverty and Inequality in Latin America: How the U.S. Can Really Help

By Nancy Birdsall and Peter Hakim
October 1, 2007

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For the last two decades, Washington's limited attention to Latin America has focused mainly on promotion of free trade and opposition to narcotics trafficking and security threats. Not since President Kennedy launched his Alliance for Progress in 1961 has social development been the centerpiece of U.S. policy in Latin America. While the bulk of reforms to address the region’s pervasive poverty and inequality must come from governments, corporations and civil societies of Latin America itself, there is much that the United States can do to help.

This brief describes the political risks poverty and inequality pose for the region and the hemisphere, including the United States, and lays out a practical agenda for U.S. assistance. Chief among the recommendations:

• Buttress free trade agreements with aid programs that compensate the losers (such as farmers competing with subsidized U.S. agriculture) in the short run and help to increase their ability to compete or adjust in the long run
• Include redistribution of land and investments in alternative employment programs in the so-called "war against drugs"
• Push U.S. banks to lead the way in making banking in Latin America accessible to the poor
• In Brazil, Mexico and other middle-income countries, fund small aid programs aimed at engaging those countries' poorest -- often minority and indigenous groups
• Use aid for education to support reform of hidebound school systems
• Help Latin America confront its surge of crime and violence by stemming illegal small arms sales in the region and supporting police reform