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Unformatted text preview: would mean that there would be 8.3 million more poor people in 2009 than in 2008. A more pessimistic forecast will move the increase in the poverty rate to 2 points and increase in the number of poor to 13 million. The aggregate extreme poverty rate is estimated to rise 0.5 points. This would mean a further 3.6million would fall into extreme poverty. Introduction This note examines the recent evolution of poverty in Latin America and estimates what is likely to happen to poverty as a result of the current economic crisis. It presents new estimates for the average poverty and extreme poverty rates and for the number of extreme poor and poor for LAC, based on PPP $4 and $2 international poverty lines. While the World Bank uses international poverty lines of PPP $2 a day for poverty and PPP $1.25 a day for extreme poverty when reporting world figures, applying these lines yields a level of poverty in PPP terms that is too far below the national figures to be of interest in Latin American countries. An analysis of the national poverty and extreme poverty lines used in Latin America suggest that international poverty lines of PPP$ 4 a day for poverty and PPP$ 2 a day for extreme poverty are more appropriate (See Annex 1). After establishing the recent history of what has happened to regional poverty in LAC, the note presents simulations of the potential poverty impact of the current crisis. A range of simulations 5 5 are presented, drawing upon alternative specifications of the relation between per capita GDP growth and poverty and a range of estimates of how GDP per capita in different countries is expected to evolve in 2009. Evolution of Poverty in LAC over the recent past Evolution of poverty rates and link to movements in per capita GDP Figure 1 illustrates how extreme poverty and per capita GDP have evolved between 1981 and 2008 in Latin America, while Figure 2 shows a similar evolution of poverty and per capita GDP96. The patterns are quite striking in both cases, as there are clearly four distinct periods. In three of the periods, the evolution of poverty rates move is an almost exact mirror image of the evolutions in per capita GDP. It is only during the 1990s (a “lost decade” in LAC in terms of poverty reduction), where the link between movements in per capita GDP and movements in poverty is broken97. Over that period, per capita GDP continued to grow as it had in the 1980s, but poverty rates did not decline. 96 The data for 1981 to 2005 are taken from the WB’s regional aggregation module of POVCALNET, after setting the PPP international poverty lines at $2 and $4 a day. This module weights the individual country data by their respective populations and interpolates the data (as needed) so as to produce observations for all countries for every 3 years between 1981 and 2005. The data for 2006 were calculated by the authors using 2006 and 2007 individual country data from POVCALNET from Argentina, Brazil, Chile, Paraguay, Uruguay, Bolivia, Colombia, Peru, Ecuador, Venezuela, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Panama, the Dominican Republic and J...
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