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Economic Survey of Latin America and the Caribbean 2009-2010

The Distributive Impact of Public Policies

image of Economic Survey of Latin America and the Caribbean 2009-2010

In 2009, the countries of Latin America and the Caribbean experienced the brunt of the global financial crisis on their levels of activity. However, since the second half of the that year, most countries in the region just begun a vigorous recovery that should strengthen with a regional GDP expansion of approximately 5.2 per cent. The factors behind a more positive performance are both external and internal in nature. Amongst the former can be included the continued dynamism of some key Asian economies, whose sustained demand for products from this region has created important conditions for a recovery in exports, especially in the case of South America.

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The distributive impact of public policy and financing

The levels of inequality found in the countries of the Latin American and Caribbean region make State action through distributive policies especially important. Public provision of goods and services can change income distribution through programmes whose beneficiaries do not bear the burden of financing (or bear it only in part) and whose impact depends on the level and quality of social spending. But in societies as unequal as those of Latin America, redistributive policy based on public spending is not enough. It is important to examine how this provision is financed and how tax systems work to achieve more equitable income distribution. Not only must a certain amount of resources be generated to finance public spending (especially social spending). It is also necessary to consider which segments of the population are providing those funds

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