Global Observer

Mexico suffers stiff income inequality, despite improvement

Mexico suffers stiff income inequality, despite improvement

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MEXICO CITY -- The chasm separating the haves and the have-nots in Mexico has narrowed slightly but is still gaping, according to a new report.

MEXICO CITY -- The chasm separating the haves and the have-nots in Mexico has narrowed slightly but is still gaping, according to a new report.

Mexico ranked No. 2 in economic inequality among the 34 member nations of the Organization of Economic Cooperation and Development, falling just below Chile. The average income of the top 10 percent in Mexico in 2008 was 26 times higher than the average income of the bottom 10 percent.

That's more than twice the gap of the OECD average, in which the richest 10 percent earn nine times what the poorest 10 percent earn.

Still, the OECD report showed income inequality converging among member nations. Mexico and Chile actually showed improvement in the 2000s, while historically low-inequality countries like Germany, Denmark and Sweden saw inequality rise over the same period.

Mexico’s high public spending on health and education, as well as an increase in women going to work, served to narrow the gap in household income, the report said. The country’s targeted social welfare programs – especially one called "Opportunities" as well as social security – underpinned improvements in poverty, health and education statistics, but the report indicated their overall effect on inequality was small due to low spending relative to per capita gross domestic product.

The OECD report follows an analysis in Foreign Policy magazine touting Mexico’s economic growth potential. Ten years ago, a Goldman Sachs analyst pinned the world’s economic hopes on the “BRIC” nations: Brazil, Russia, India and China. Foreign Policy suggests that the BRIC block is being supplanted by the so-called TIMBIs: Turkey, India, Mexico, Brazil, and Indonesia. That’s where Foreign Policy says “the real story of emerging market growth will occur.”

All the TIMBI nations, the article said, are democracies with already large economies, booming labor forces and political openness that point to “rapid increases in human capital and innovation that will propel these regional powers into global powers in the near future.”

Mexico is projected to overtake Spain and Russia by 2020 and catch up to Italy by 2030.

Whether that expected growth will buoy all boats—or simply power the yachts of the very rich—remains to be seen.

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Lauren Villagran

Correspondent (Mexico City)

Lauren Villagran has written for the Associated Press, Dallas Morning News and Christian Science Monitor. She holds a degree from the Medill School of Journalism at Northwestern University. Follow her on Twitter. Disclosure