Dr Rafael Carranza studies Latin American wealth distributions for an ambitious new review of the region’s inequality, and shows why better data is urgently needed to understand the true depth of the problem.

Latin America is exceptionally unequal – the best data we have suggests it is one of the world’s two most unequal regions (along with Sub-Saharan Africa). And, despite some promising declines during the 2000s, inequality in many Latin American countries appears to be higher today than it was in the 1970s.

An ambitious new scholarly review – the Latin America and Caribbean Inequality Review (‘LACIR’) – brings together renowned scholars to provide a comprehensive overview of Latin America’s inequality problem. The aim of this review is to understand why, despite major structural economic and social change in Latin America and the Caribbean, inequality persists at exceptionally high levels.

One of the first papers published by LACIR is by Dr Rafael Carranza, Postdoctoral Research Officer at INET Oxford, alongside Dr Mauricio De Rosa (Universidad de la República) and Dr Ignacio Flores (CUNY). Their study investigates how much wealth has accumulated in Latin American countries and how it is distributed across households.

They find that aggregate wealth – the net worth of households and nonprofit organizations – has been increasing in countries like Brazil, Chile, Mexico, and Uruguay, reaching close to 3.5 times the national income for market value estimates. This wealth is extremely unequally distributed, however; for the few countries with administrative data, the wealthiest 1% of the population held between 37 and 40.6% of wealth. (For context, this level of wealth inequality is close to the United States' level and below South Africa's.)

What’s more, household asset surveys show very low shares among the poorest half of the population, who hold well below 10% of this wealth. In fact, in Colombia this poorer 50% own close to none of the nation’s wealth. While household surveys are only available for four countries, the study found indirect evidence to suggest that extreme inequality is likely to be the rule in the entire region.

The need for better data

Compared to high-income countries, data on Latin America is extremely limited and patchy; reasonably good data only exists for four countries in the region (Chile, Uruguay, Mexico and Colombia). Outside of these four countries, existing estimates use a combination of imputations and predictions, making them somewhat unreliable – especially if one wants to study trends over time. Researchers emphasised the urgent need for more and better information on wealth if the region is to properly understand and tackle its extreme inequalities.

Access to good quality data will not only help in measuring wealth inequality, but also in understanding its drivers and consequences. Data available in Europe allows researchers to generate cross-national insights about how wealth is moved between people and how low-income households fit into this picture, for example. More and higher quality wealth surveys, national balance sheets and publicly-available administrative records would paint a far better picture of the true inequality challenges the region faces.

Next steps

Over the next six months, the LACIR Working Paper series will present the contributions of more than 60 experts researching inequality issues in the region around five themes: levels and trends of inequality, inequality of opportunity, inequality and markets, taxation and redistribution, and inequality and political power. This Working Paper series will feature new data, analyses, and practical cases aiming to contribute to a more equal region.