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The Extent of Poverty in Latin America

Oscar Altimir
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WORLD BANK STAFF WORKING PAPERS

Number 522

SWP522 5
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 WORLD BANK STAFF WORKING PAPERS
Number 522

The Extent of Poverty in Latin America

Oscar Altimir

The World Bank

Washington, D.C., U.S.A.
Copyright 0 1982
The International Bank for Reconstruction
and Development / THE WORLD BANK
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Library of e'ongress Cataloginig i. p'ublic .tioni Dalta

Altimir, Oscar.
The extent of poverty in Latin America.

(World Bank staff working papers ; no. 522)

"March 1982."
Translation of: La dimension de la pobreza en
Ame'rica Latina.
Bibliography: p.
1. Poor--Latin America. I. Title. II. Series.
HC130.P6A4513 1982 339.2'2'098 82-8533
ISBN 0-8213-0012-1 AACR2
 ABSTRACT OF THE STUDY

This work originated in a research project for the measurement

and analysis of income distribution in the Latin American countries, under-
taken jointly by the Economic Commission for Latin America and the World
Bank. The present paper presents estimates of the extent of absolute
poverty for ten Latin American countries and for the region as a whole
in the 1970s, on the basis of available household surveys and population
censuses. They are based on country-specific poverty lines representing
minimum acceptable levels of private consumption, drawn according to a
food-based method. Such poverty lines -- ranging from 150 to 250 1970
dollars of annual household consumption per capita -- express a normative
definition of the absolute dimensions of poverty, partly based on expert
appraisals and partly reflecting the actual behaviour of low income house-
holds facing the life style projected by Latin American development.
According to these estimates, 40 percent of Latin American households
were poor at the beginning of the 1970s, the incidence of poverty being
26 percent in urban areas and 60 percent in rural areas. Urban poverty
extended to more than one-third of urban households in some countries
(Brazil, Colombia, Honduras) while affecting between 20 and 30 percent in
others (Peru, Mexico, Venezuela), about 15 percent in Costa Rica and
Chile and less than 10 percent in Argentina and Uruguay. The extent of
poverty in rural areas would not be less than 20 percent in any case and
would reach more than 60 percent in some countries. The corresponding
poverty gaps were also estimated; in terms of total household income,
they may represent manageable proportions (around 2-3 percent) in the
better-off countries, but are in the 4-8 percent range in the bigger
countries of the region and reach as much as 12 percent in Peru and
17 percent in Honduras.

This work, the author of which is the Chief, Statistics and Quantitative
Analysis Division of the Economic Commission for Latin America (ECLA),
originated in a research project for the measurement and analysis of
income distribution in the Latin American countries, undertaken jointly
by the Commission and the World Bank. The opinions expressed are those
of the author alone and may not coincide with the points of view taken
by the sponsoring institutions.

Originally published as La dimensi6n de Da pobreza en America Latina,

Cuadernos de la CEPAL No. 27, Chile, 1979. Translated by D.R.J. Black,
Language Services Division, World Bank, Washington, D.C.
 TABLE OF CONTENTS

I. INTRODUCTION

II. THE CONCEPT OF POVERTY

A. The poverty syndrome and how it is perceived ................... 2

B. Theoretical significance of the concept of poverty ............. 4
C. The normative nature of the concept of poverty ................ 10
D. Relative poverty and absolute poverty ......................... 13
E. Poverty and inequality ........................................ 18

III. POVERTY AND BASIC NEEDS

A. Material components of basic needs ............................ 23

B. Non-material basic needs ... 26

IV. THE MEASUREMENT OF POVERTY

A. Measurement of levels of living . . .............................

27
B. Poverty lines . ................................................ 33
C. Drawing of relative poverty lines . ............................ 37
D. Drawing of absolute poverty lines . ............................ 38
E. Poverty measures .............................................. 39

V. A METHOD OF DRAWING POVERTY LINES FOR LATIN AMERICA

A. The method selected ............................................ 39

B. Nutritional requirements and determination of the
contents of a minimum food basket........................41
C. Estimation of minimum food budgets ............................ 48
D. Relationship of food expenditure to other
consumption expenditure ....................................... 55
E. Housing needs and expenditure .. 61
F. Access to public services ..................................... 66
G. Resulting poverty lines ....................................... 70

VI. THE DIMENSIONS OF POVERTY IN THE LATIN AMERICAN COUNTRIES

A. The data on income distribution and consumption ............... 78

B. The incidence of poverty .. 81
C. The poverty gap............................................... 88
D. The relative dimension of poverty . . 94

ANNEXES

BIBLIOGRAPHY
 I

INTRODUCTION

This work is an attempt to assess the magnitude of poverty in the

Latin American countries. To that end, it establishes poverty lines for the

larger countries in the region to serve as approximate indications of the

levels of purchasing power below which the basic needs of a household would be

so neglected as to place it in a situation of absolute poverty.

These poverty lines are used in conjunction with available data on

income distribution to obtain preliminary estimates of the poverty afflicting

each of the countries separately and the region as a whole. The extent of

poverty is assessed in terms both of the number of poor persons and the income

deficits involved. But the drawing of lines of absolute poverty based on

uniform criteria is also intended to provide other researchers with a means of

identifying poverty situations and so facilitate the analysis of their causes,

which can be approached through various research methods.

This initial attempt is limited to those countries in the region

best endowed with the pertinent statistics, the idea being to test the method

selected and analyze the results obtained. However, the statistical

requirements of this method of estimating absolute poverty lines suit it for

application to nearly all countries in the region, with the additional

possibility of periodic update.

This paper was originally published as La dimensiodn de la pobreza en Ame/rica

Latina, Cuadernos de la CEPAL no. 27, Chile, 1979. It was translated by D.R.J.
Black, Language Services Division, World Bank. Data used in this work were
prepared bv Mrs. Mabel Bullemore, Mr. Jorge Ducci and, in the early stages, Mr.
Pedro Tejo. The author is grateful for the suggestions and comm-ents made by
Messrs. Adolfo Gurrieri and Ruben Katzman, which enriched the discussion of the
concept of poverty.
 Such an undertaking calls for the acceptance of a series of

assumptions, some of them quite forced, and the turning of a blind eye to a

number of conceptual difficulties. Only the heuristic nature of the

objectives pursued, which have no analytical aims beyond those already

indicated, justifies such an approach which, nevertheless, does not excuse

anyone who follows it from the methodical examination of those assumptions and

conceptual leaps if the results produced are to be reasonably useful to

cautious researchers.

THE CONCEPT OF POVERTY

A. The poverty syndrome and how it is perceived

On the face of it, poverty is a situationai syndrome in which the

following are combined: underconsumption, malnutrition, precarious housing

conditions, low educational levels, bad sanitary conditions, either unstable

participation in the production system or restriction to its more primitive

strata, attitudes of discouragement and anomie, little participation in the

mechanisms of social integration and possible adherence to a particular scale

of values different to some extent from that held by the rest of the society.

The perception of poverty and its conceptualization are nevertheless

greatly influenced by the social and economic environment and the general

goals of the social project of which the prevailing anti-poverty policies form

part.

As Galbraith points out (1958), "the experience of nations with

well-being is exceedingly brief. Nearly all, throughout all history, have

been very poor. The exception ... has been the last few generations in the

comparatively small corner of the world populated by Europeans".

 - 3 -

During the early stages of the developnent of capitalism, the great

mass of the working population lived in generalized poverty. This explains

why, in both the classic and Marxist conceptualization, observations on the

poverty of the working masses are confused with reflections on wages and

employment (Smith, 1776, Book I, Chap. VIII; Marx, 1867, Book I, Chap. XXIII)

and why only the"pauperism" of the most disfavored segments of society was

regarded as a special situation, one in which the wage earned barely allowed

mere subsistence. Even after the marked improvement in the conditions of the

working population of the industrialized nations during thd 19th century, the

prevailing thought could conceive only of the possibility that the poverty of

the so-called "lower classes" might disappear gradually (Marshall, 1890)..

The economic and social development of the industrial nations over

the following decades raised living standards to the point where the existence

of huge masses of unemployed and semi-employed during the crisis of the 30s

seemed to be a paradox of "poverty amid the plenty" caused by the equilibrium

with unemployment in potentially rich economies (Keynes, 1936). After the

remarkable prosperity of the post-war period, the persistence of poor

minorities in affluent societies became more visible and shocking, giving rise

to a renewed interest in the question of poverty, regarded as a self-

perpetuating problem in rich societies (Galbraith, 1958; Harrington, 1963).

In the majority of present-day developing countries, poverty has for

centuries been the lot of the largest part of the population. The perceptions

of poverty and underdevelopment fused in a single fatalistic diagnosis

throughout the colonial era (Myrdal, 1972). The process of decolonization

that followed the Second World War gave birth at the centers of world power to

an awareness of the iniquity of poverty and the possibilities that existed for

developing the underdeveloped nations. For two decades, the mainstream in

 - 4 -

this current of thought concentrated on the aggregate growth of the poor

nations and the opportunity to bridge the gap separating them from the rich

nations, the confident view being held that such growth would progressively

wash away the structures of underdevelopment, and with them poverty itself.

The rapid advance of the developing world over those two decades, without any

significant improvement in the situation of its great masses of poor, led to a

rediscovery of poverty -- a second birth of awareness that has been

preoccupied with "massive poverty", a subject now discussed in the

international fora, and with the development strategies designed to combat it

(United Nations, 1972; Chenery et al., 1974; World Bank, 1975b; Hammarskjold

Report 1975; ILO, 1977).

It is nevertheless undeniable that that preoccupation is naturally

influenced by the perception of the poverty in which the great mass of the

population -- predominantly rural -- of Asia and Africa live, although no more

than by the naked fact of its purely human dimensions.

In Latin America, given the extent of internal migrations, the

center of gravity of poverty has been moving slowly from the countryside to

the cities, so that by now urban poverty in the region is considerable and

more generalized than in rural areas.

These urban poverty situations, characteristic of the dependent

development of the post-war economy of the Latin American countries, have been

focused more specifically in the concern which emerged over a decade ago, with

"social marginalization", and in the more recent preoccupation with the

informal urban sector.

B. Theoretical significance of the concept of poverty

An examination of the extent to which the concept of poverty has

theoretical significance may seem pedantic when juxtaposed against the

 - 5 -

dramatic human dimensions of the problem. It is quite clear, however, that

the ambiguity in the theory which underlies that concept becomes a fundamental

difficulty in any studies on poverty, and that justification for use of the

concept lies in an ethical and political preoccupation with this particular

and extreme facet of the problem of the uneven distribution of social goods,

and in the political will to devote special effort to its solution.

In the present state of our understanding of the poverty syndrome,

there is no theoretical framework within which poverty can be satisfactorily

explained in its entirety!/, taking into account the whole range of symptoms

that indicate its presence; we can manage no more than an explanation of each

isolated symptom as an extreme case of inequality in a particular subsystem of

the distribution of social goods.

Furthermore, although poverty and inequality of income distribution

are frequently confused, they are neither equivalent nor mutually inclusive.

They are separate problems, both conceptually and in the political sense.2 !

Also, the relationship between them differs depending on whether the societies

concerned are industrialized or underdeveloped: in the latter case, poverty

situations may come to be so widespread as to make the differentiation between

them and more general social inequalities inconsequential.

The theories on income distribution in relatively developed

capitalist economies have traditionally concentrated on explaining the

1/ Attempts to identify a "culture of poverty" (Harrington, 1963; Lewis,

1966) undoubtedly take this approach, but at the price of assuming that
cultural patterns are the feature which distinguishes poverty and of
isolating the poor, as an object of analysis, from the rest of society.

2/ There are situations of broad inequality in which almost the entire

population is still above minimum consumption levels -- as there are
situations in which poverty is so general that they show a considerable
degree of comparative uniformity.
 - 6 -

functional distribution of income among relatively homogeneous production

factors. Such theories assume income distribution by size to depend

implicitly on the quantities each individual possesses of each of the primary

factors, whose overall share in income is spelled out, although no attempt is

made to explain the origin of inequalities in the possession of each factor.

A number of hypotheses, based on a variety of approaches, have been put

forward to explain those inequalitiesl/, although it has been impossible to

integrate them satisfactorily into a broad theory on the macro-distribution of

income. But even these hypotheses do not incorporate poverty as an analytical

category in the explicans or as a special situation of the explicandum, except

insofar as it is considered one of the extremes -- the other being richness --

in the distribution of income.

In conventional economic analysis, poverty is never more than a

problem of welfare, the result of a value judgment, for which a precise slot

cannot even be found among the propositions of the theory of welfare used in

an attempt to compare, on a scale from "better" to "worse", possible optative

economic situations.

In Marxist thought, the poverty of the workers, and particularly of

the industrial reserve army, is an essential element in the capitalist model

of accumulation: "the law which maintains the surplus population or

industrial reserve army in constant equilibrium with the volume and intensity

of accumulation ... leads to an accumulation of misery equivalent to the

accumulation of capital" (Marx, 1867, Book I, pp. 728 and 729).

Poverty as a social situation, as a problem of welfare, cannot

however be articulated with the theory of the Marxist system. Although Marx's

1/ Valid hypotheses of this type will be found in Bjerke (1970) and Cline
(1975)-
 - 7 -

theory of social classes and the asymmetrical distribution of powr

incorporates an explanation of social inequalities in general, it is the

exploited and not the poor who constitute a significant analytical category.

Neither considerations of welfare nor -- in particular -- possible differences

in levels of living among the exploited form part of the explanatory argument

of Marxist theory.

The poverty observable in the developing countries has required

efforts of conceptualization that go beyond the premises underlying available

theories, but attempts to meet those requirements have so far produced only

ambiguous results.

The persistence of massive poverty in the Third World despite the

growth that followed World War II has led to the recognition that it is

associated with critical shortages of physical and human capital and basic

services (Chenery et al., 1974), and also to the view that the style of

dependent development prevailing in the Third World is inconsistent with the

eradication of poverty (Hammarskjold Report, 1975). But these hypotheses are

still a long way from incorporating the concept of poverty into the theory of

underdevelopment to a significant degree. The steps that have led furthest in

that direction are perhaps the theories that endeavor to explain the most

extreme underdevelopment situations and which view poverty as a central

element in the vicious circle made up of physiological insufficient, bad

sanitary conditions, low levels of education and training, negligible capacity

to save and the set of attitudes characteristic of poverty -- factors which

are the basic obstacles to increased productivity and the growth capable of

alleviating poverty (for instance: Myrdal, 1968; Streeten, 1972).

 -8-

At somewhat higher levels of development -- such as have been

achieved in Latin America -- poverty is perhaps less massive and not so

overwhelmingly rural0

Urban poverty in squatter settlements gave rise to attempts at

conceptualizing the "social marginalization" of what are considerable groups

in the Latin American population.

The initial formulations of the problem (ECLA, 1963; Rosenbluth,

1963; Utria, 1966a) were concerned with describing the poverty syndrome as

manifested among marginal population groups and therefore show a considerable

bias toward housing and ecological conditions -- a bias corrected to a large

extent as marginalization came to be understood as the very social conditions

of the inhabitants of such settlements (Quijano, 1966). However, the concept

of marginality was soon extended to analytical dimensions different from those

of poverty. One school of thought wanted to define social marginalization not

only by the lack of participation in social goods, but essentially by the lack

of active participation in decision-making and by the internal disintegration

of the marginal groups themselves (Vekemans, 1969). Subsequently, an attempt

was made to give greater theoretical value to the concept of marginalization

by applying it to that part of the work force not absorbed by the predominent

mode of production and therefore kept on the fringes of the labor market

existing around oliogopolistic activities (Nun, 1969; Ribeiro, 1971; Quijano,

1971). Here already the subject for analysis is not poverty:

marginalization, even though conceived of as a social situation, intersects

with poverty but does not coincide with it.

Something similar occurs with the most recent attempts to

conceptualize the unemployment, underemployment and low income of considerable

segments of the urban population in developing economies in terms of an

 - 9 -

"informal" sector (ILO, 1972; Bienefeld, 1975; Souza and Tokman, 1975). As

Bienefeld points out, this reformulation has done nothing of itself to confirm

this new concept as anything more than a basically descriptive term, the

analytical significance of which still remains to be established (1975,

p. 53).

In any case, these various attempts aim at the formulation of

theories of employment, and it is no easy task to incorporate poverty as a

concept of welfare into their central arguments.

The significance of the concept of poverty therefore continues to be

that it is descriptive of a social situation, so that it can only be validly

studied within the setting of some theory of the distribution of income, and

of social inequalities in general, which is regarded as applicable to the type

of society being dealt with.

The very lack of theoretical precision in the concept precludes

consideration of the poor as a social group in the strict sense, sharing

common origins, behavior and relationship with the rest of society. The

descriptive nature of the concept allows it to be used only as a rough

classificatory social category. This explains the concern to identify within

the large group of "the poor" smaller groups that might constitute the targets

of public policy, by means of definitions which reflect the causes rather than

the symptoms of poverty and which are also homogeneous with respect to the

effect of a particular policy (Bell and Duloy, 1974).

This work limits itself to an attempted descriptive quantification

of the poverty situations observable in present-day Latin American societies,

in accordance with specific operative criteria of poverty. The "poor"

comprised in such a cut-off of the social pyramid are no more than a

statistical aggregate. Subsequent multi-variate characterization can serve to

 - 10 -

identify the different human groups which would be the targets of the policies

designed to eliminate or alleviate poverty, and, it is hoped, to continue the

quest for theoretical relationships into which the concept of poverty can be

meaningfully incorporated. Until this is accomplished, the concept is valid

as long as there is no inadvertent crossing of the frontier between the

descriptive and the explanatory and while the value judgments in which the

concept originated are kept clearly in mind.

One can indeed agree with Wolfe when he says that "to prefer the

term 'poverty' to other ways of identifying the disadvantaged group has as

background certain preconceived ideas on the nature of the problem and what

acceptable solutions would be; it also coincides with the blurring of the

subtle ideological or theoretical distinctions characteristic of the Utopias

imagined by committees" (1977, p. 1).

C. The normative nature of the concept of poverty: the satisfaction

of basic needs

In the final instance, the idea of poverty is based on value

judgments as to what the minimum adequate levels of welfare and the absolutely

essential basic needs are and what degree of deprivation is intolerable. Such

judgments consequently imply a reference to some norm of the basic needs and

their satisfaction which makes it possible to distinguish between those who

are poor and those who are not. The concept of poverty is essentially

normative, and its actual content varies as does the norm of basic needs or

welfare on which it depends.

Judgments on the satisfaction of basic needs are individual and

subjective. It is only through a consensus or the exercise of power by those

who share them that they are transformed into social valuations. In a

particular society, different (or even conflicting) collective valuations of

 - 11 -

poverty usually exist side by side: that of the governing authorities, that

of the different intellectual groups, that of the rich, that of the

disadvantaged groups themselves and that of other social groups. It is no

surprise, then, that any discussion on the problem of poverty is plagued by

differences in criteria and norms emanating from different moral and political

valuations of the existing social order and the way in which society should be

organized.

The norms on which the concept of poverty is based, the policies

selected to attack it and the assessments of their viability are embedded in

the same particular valuation. The definition of poverty adopted, whether

explicitly or otherwise, responds to the set of elements making up the value

system of those who formulate the definition.

On occasion, the norm against which poverty is defined is so shot

through with considerations on the viability of the policies designed to

attack it that the latter come to prevail in the definition, giving rise to

what Sen (1978) calls the "public policy approach" to the concept of

poverty. Without going quite so far, there is little doubt nevertheless that

the normative nature of the concept of poverty makes it particularly dependent

on the value system and the political intentions used in examining the poverty

problem. There is in fact no definition of poverty that is neutral in this

respect, and to claim that one's own definition is neutral is to fall to some

degree into "group ethnocentrism" 1 /.

Strategies having the satisfaction of basic needs as their primary

objective originate in a value system that is egalitarian and participatory,

1/ Accustomed to basing our reasoning on a set of axioms geared to the

principle of the ultimte harmonization of interests, economists do not
generally pay attention to this aspect of the normative indicators we
employ.
 - 12 -

which tends to regard as poverty any deprivation -- absolute or relative -- in

the satisfaction of a central core of human needs, whether material or

psychological and political (Hammarskjold Report, 1975; Ghai, 1977). At the

other extreme, conservative value systems tend to establish a poverty norm low

enough to minimize the pressure on total resources and on the social

transformations required to eliminate the problem.

It is conceivable -- though not necessary -- that despite these

differences in the origins of the valuation framework a broad agreement may be

reached on the poverty norm applicable in a society, without foregoing

differences in the social project and in political perspective. In some of

the more advanced societies, official poverty standards tend to reflect a

consensus of this nature.

But even when there is a fair degree of social consensus on minimum

levels of welfare, it is no easy task for the specialist in social sciences to

identify and explain that consensus. The doing so should be "...an objective

exercise. To desribe prevailing prescriptions is in fact a matter of

description, not of prescription" (Sen, 1978; p. 14). Nevertheless, the

social scientist may all too often act as an unconscious servant of

contemporary social values (Townsend, 1974; p. 24).

Furthermore, to establish the poverty norm in terms of the lack of

satisfaction of a central core of basic needs implies to some extent a more

voluntaristic attitude to the final result of the policies designed to

eliminate poverty, as far as satisfaction of individual needs is concerned.

On the other hand, to establish the norm in terms of generic welfare --

indicated solely by the income or consumption level -- implies greater

confidence in the consistency between the individual decisions that maximize

profit and the mechanisms of allocating production resources.

 - 13 -

Obviously, the choice of one or other type of norm is not purely

academic but closely linked to the other components of the valuation, namely

the judgment on the existing social order and the policies regarded as

acceptable. But it is also clear that whatever considerations underlie the

choice of norm and serve as basis to the valuation framework take on a

different relevance in situations of massive misery and underdevelopment or in

affluent societies.

D. Relative poverty and absolute poverty

Poverty is relative only to the extent that the norm against which

it is defined relates to a given social context and refers to a given scale of

values associated with a particular style of living. Within a framework thus

defined, poverty has an absolute dimension as regards human dignity and

relative dimensions as regards average local levels of welfare.

It is of course clear that poverty and wealth are extremes on the

range of social inequalities, which are essentially relative. It is equally

clear that poverty is a state of deprivation -- deprivation always felt in

relation to the welfare of others. But let us agree, nevertheless, that

inequality is not necessarily poverty and that relative deprivation is not

necessarily poverty either. The concept of poverty makes a normative cut in

the more general continuum of inequality, differentiating among the diversity

of situations tht may give rise to feelings of relative deprivation and

dividing society into those who are regarded as poor and those who are not.

The concept of relative deprivaion illuminates a very important

aspect of welfare and is therefore central to the consideration of poverty.

Assessment of one's own welfare depends partly on that enjoyed by the

reference groups with which one compares oneself. The subjective perception

of this welfare, relative to that enjoyed by others, may give rise to feelings
 - 14 -

of relative deprivation. It is to these feelings, and the social actions they

may originate, that the concept of relative deprivation elaborated by Merton

(1957) and Runciman (1966) refers. Townsend (1974), on the other hand,

proposes that a distinction should be drawn between feelings of deprivation

and actual conditions of deprivation, and that the concept of relative

deprivation be used in the latter sense, as an objective means of denoting

situations in which the subject possesses less of a desired attribute than

other persons. But that would require definition of the style of living

generally shared or approved of in each society and discovery of a possible

"point in the scale of the distribution of resources below which families find

it increasingly difficult (proportionate to the diminishing level of

resources) to share in the customs, activities and diets comprising that style

of living" (Townsend, 1974; p. 36). As long as the cut-off point, which

constitutes the poverty criterion, cannot be determined objectively

(Townsend's hypothesis), its specification will continue being a normative

one, the result of a collective valuation.

But even when defined normatively, poverty should refer to the

society's predominant style of living, which creates the desires and imposes

the expectations that give rise to needs. In this sense, the concept of

poverty is always relative. It is dynamic and specific to each society. Its

content varies over time, to the degree that basic needs change historically

in the same society in step with alterations in its lifestyle and with

economic development. It is specific to each society to the degree that the

 - 15 -

content of the concept is different -- for similar norms -- in societies where

different lifestyles predominate!/.

This contextual relativity is present whatever normative bases

underlie the definition of poverty adopted2/. But that does not mean the

definition should necessarily be formulated in relative terms. There is an

absolute dimension to poverty which, without going beyond the context, cannot

be defined only in terms of that context. Like Sen, we believe that "there is

an irreducible core of absolute deprivation in our idea of poverty, which

translates reports of starvation, malnutrition and visible hardship into a

diagnosis of poverty without having to ascertain first the relative picture.

The approach of relative deprivation supplements rather than competes with

this irreducible core of absolute dispossession" (Sen, 1978; p. 11). Our

perception of this irreducible core of absolute deprivation, beyond the

contextual situation of the country or community, is referenced to certain

basic elements of welfare from the lifestyle prevailing in industrial

societies, and which we believe every human being should have the right to.

The absolute norm we follow in defining this irreducible core, whatever the

particular national environment, flows from our present idea of human dignity

1/ This relativity of basic needs and of poverty may be observed even within
a single society, in the sense that relatively autonomous communities or
particular groups may take as their reference point lifestyles that
differ markedly from that prevailing in the national society. But such
differences are gradually declining in importance, given the growing
inter-relationships among communities and groups that are the result of
various economic, political, communications and welfare-service
subsystems (Townsend, 1974). At the other extreme, what is specific in
national needs is also becoming less and less marked, to the extent that
culture is universalized and the style of living predominant in the
developed countries pervades the Third World more and more.

2/ Even the supposedly universal definitions are based -- consciously or

not -- on the lifestyle to which it is thought all human beings have the
right.
 - 16 -

and from that universality we ascribe to basic human rights, whlich ought to be

attainable regardless of any local shortage of resources or any resignation

culturally induced down through centuries of misery and oppression. It is

beyond this irreducible core of absolute poverty that situations of relative

deprivation may be found, definable only in terms of the lifestyle predominant

in each community.

Definitions of poverty in relative terms are based on norms that

attempt to take express account of actual deprivation with respect to average

levels of needs satisfaction in the society in question -- which are thus

taken as representative of the predominant lifestyle -- and at the same time

also attempt to reflect the average availability of resources in the

society. These norms may indicate conditions of relative deprivation with

reference to each of the resources that determine the level of living

(Townsend, 1974), or they may constitute a generic criterion of poverty taken

as a fraction of the average income (Atkinson, 1975). Such relative

definitions of poverty do not prejudge the extent of the problem.

Definitions of the type "the lower x per cent of households", on the

contrary, do prejudge the extent of poverty and imply that it will be always

present, since they are not based on criteria of relative deprivation which

take account of the distance between the lower segment of the pyramid and the

average situation. More than definitions of poverty, they are approximations

of the problem and concentrate on inequality at the bottom of the income scale

(Ahluwalia, 1974).

Definitions of poverty in absolute terms, on the other hand, attempt

to pinpoint the absolute deprivation levels that may result from prevailing

inequalities, on the basis of norms as to the minimum requirements considered

adequate for the satisfaction of basic needs. Even though in formulating such
 - 17 -

norms local conditions and the cultural features of the population are taken

into account, this type of definition of poverty is less tied to the levels of

living actually prevailing in the society or to the average levels of

resources it has available at a given moment, and is rooted more in universal

ideas of human dignity and basic human rights. In very dependent societies,

on the other hand, this constitutes the normative correlate of the orientation

of the style of development toward the patterns of consumption and the forms

of welfare found in industrial societies and in the local upper strata, which,

more than the average level of the traditional lifestyle in these societies,

provide the reference points for evaluating deprivation.

For want of a theoretical framework from which a definition of

poverty could be derived objectively, both absolute and relative definitions

incorporate the discretional aspects of the valuations on which they are

based. The fact that certain norms -- characteristically, those concerned

with nutrition -- underlying absolute definitions of poverty are founded on

technical reasoning does not preclude their incorporating a value element when

consideration is being given to what is adequate in the matter of nutrition,

or a by no means negligible degree of discretion in the assumptions under

which available knowledge on nutrition phenomena is applied in deriving

dietary norms (Rein, 1970). The norms used in establishing other needs than

food are even less likely to be based on scientific knowledge and therefore

have to be founded more explicitly on evaluations as to what the minima

adequate for human dignity are in each societyi/.

1/ Such evaluations are closely linked to the lifestyle viewed as desirable

for a given society. There is little doubt that changes in social values
of the magnitude observed in China -- and perhaps also in Cuba -- have a
decisive impact on the content of certain basic needs (the need for
clothing, with its "social language" function -- to take one of a number
of possible examples).
 - 18 -

Whether we like it or not, the use of one or other type of

definition has different political connotations. Relative definitions have

the advantage of making an unmistakable reference to the prevailing social

inequalities, while absolute definitions can make it easier to isolate the

problem of poverty, diverting attention from the broader debate on the most

adequate income distribution. These implications are clearly seen in the

industrialized societies, and are probably not unrelated to the fact that

official poverty lines in the United States have been based on absolute

definitions (Orshansky, 1965), or to the further fact that in certain Western

European countries minimum welfare benefits are also based on this type of

definition (Sawyer, 1975).

Given the circumstances of the majority of Third World countries,

the implications of both types of definition may be reversed. Relative

definitions of poverty, since they are connected with the average availability

of resources in each society, may be more influenced by views on the degree of

difficulty involved in tackling the problem in these countries than by

considerations of human rights and basic needs. On the other hand, in such

situations of underdevelopment, the absolute core of deprivation acquires a

significance stemming simply from the condition of being human; the relative

definitions of poverty can divert attention fran the requirements for

subsistence by highlighting the general limitation on the country's resources.

E. Poverty and inequality

The fact that poverty -- however defined -- is an extreme

manifestation of economic and social inequalities has on occasion meant that

the two concepts have been employed indiscriminately, whereas, as has already

been pointed out, they are in fact different. It is plain that income

inequalities in the poorest Third World countries are usually so clearly

 - 19 -

linked to generalized situations of extreme poverty that any insistence on a

distinction between the two may appear irrelevant. But it is also plain that

in many Third World societies outrageous inequalities extend beyond the

universe of poverty to affect significant medium strata of the population.

It is also indubitable that "the acceptable term 'poverty' has

become the way of discussing the more disturbing issues of inequality", and

that the "ambiguity of our use of 'poverty' is preventing the full-scale

examination of the issues of inequality" (Miller, Rein, Roby and Ross, 1967;

cit. in Sen, 1978). But, as Sen (1978) argues, the latter provides a good

reason for drawing a distinction between the two concepts.

It is clear that an absolute definition of poverty makes a normative

cut in inequality, and that both may be affected, although differently, by

economic growth. But poverty defined in relative terms also focuses solely on

the inequality between the poor and the rest of society, sidestepping the

inequalities that exist in the latter group and which can change --

significantly, on occasions -- without there being any alteration in the

situation of the poor.

Even when the concept of inequality is also given a normative

content which reflects a moral evaluation -- as an alternative to the

descriptive application of the concept of inequality to cases in which income

or wealth are simply different (Bauer and Prest, 1973; cit. in Atkinson, 1975)

-- that evaluation is probably based on ethical ideas different from and

broader than those underlying the "rights" and "needs" in which the concept of

poverty is rooted.

Nevertheless, even though the two concepts are different and

constitute different normative dimensions of the idea of justice, the

situations which both attempt to express are related causally. The causes of
 - 20 -

poverty lie in the same mechanisms that determine the general inequalities

prevailing in each society, while the transformations required to eradicate it

form part of the process of profound change toward a just society.

The fact that we concentrate our attention on poverty should not

become a substitute for a preoccupation with inequalities in the distribution

of welfare. The narrowest view of poverty conceals, behind the appearance of

pragmatism, a simplistic diagnosis of its causes and for that reason carries

within itself the seed of the failure of actions geared ot its definitive

eradication.

Furthermore, neither should consideration of the range of poverty

situations obscure these facts: that there exists a stratification within the

universe of poverty; that, below the minimum thresholds set for the

delimitation of poverty, inequalities of welfare -- or, in strict terms, of

deprivation -- are found among the poor; that, from the poverty threshold to

situations of greater indigence, there exists a gradation of levels of

deprivation that may have radically different consequences as far as

deterioration of the human condition is concerned.

III

POVERTY AND BASIC NEEDS

The realization that recent economic development in the Third World

has brought little benefit to the poor in those countries has given a new

slant to thinking on development. The gradual emergence of this new thought

was first seen in the strategies devised for the creation of employment (ILO,

1972) and in the transfer of the focus of development firstly to

"redistribution with growth" (Chenery et al., 1974) and then to development

centered on basic needs (Hammarskjold Report, 1975; ILO, 1976; Streeten,

 - 21 -

1977a), which emphasizes the satisfaction of those needs among the mass of the

poor in the shortest possible time (Ghai, 1977).

At least in the Third World, the eradication of poverty and the

satisfaction of the basic needs of the population are one and the same

thing. Both concepts are normative, and may be defined according to the same

norms.

Poverty, however, is too frequently defined on the basis of norms

that cover only situations of "critical" deprivation, or a determined

percentage of the population at the base of the income pyramid. The attack on

poverty is also too frequently conceived of from the standpoint of assistance,

implying no profound reorientation of the prevailing style of development. In

addition, anti-poverty programs almost always consist of actions designed to

increase the incomes of the poor.

When the goal is to satisfy basic needs, however, the extent to

which the whole style of development must be recast if poverty is to be

elimminated is thrown into greater relief. Furthermore, the actions involved

affect not only the incomes of the poor, but also -- and very particularly --

their access to key social services. Generally speaking, special importance

is given to channeling specific resources toward specific groups, with more

emphasis on the nature of what is provided than on income (Streeten, 1977b).

This situation is becoming responsible for the identification of use

of the concept of poverty with the more conservative policies for mitigating

it, while use of the basic needs concept is associated with the more radical

strategies for refocusing development and reorganizing the social order.

However, when it is accepted that the causes of poverty are rooted in the

functioning of the socio-economic system along with income inequalities, the

squandering of non-renewable resources and the concentration of power, the

 - 22 -

goal of eliminating it definitively implies the same structural

transformations as does the satisfaction of basic needs. It may also even

entail profounder transformations than those allowed for under strategies

spuriously vaunted as concentrating on "basic needs" simply because greater

importance is given to the total investment in social services.

At all events, such uses are becoming established. In the context

of those meanings, policies for the alleviation of poverty may eventually do

no more than form part of broader programs for the satisfaction of basic

needs, the final objective of which would be the eradication of poverty, with

all the changes in the style of development that such a goal implies.

The basic needs concept is more clearly instrumental. It is linked

to the idea that, for development plans to focus eliminating situations of

deprivation, they must incorporate specific objectives aimed at satisfaction

of those needs. The concept of poverty, being aggregative, only allows

formulation of a general objective with respect to its mitigation or

eradication.

From another standpoint, the concept of poverty, since it is

descriptive of a social situation, offers more possibilities of analysis and

diagnosis. Although it only allows identification of a statistical aggregate,

the poor, it permits subsequent analysis of their social and economic

characteristics and the identification of poor groups which might be the

target of specific policy packages,as Bell and Duloy suggest (1974). The

basic needs concept, on the other hand, focuses on satisfaction levels in each

group of needs, without necessarily integrating the different characteristics

of the needy or their possible relationships with other aspects of the

functioning of the socio-economic system.

 - 23 -

There is nothing to prevent the concepts of poverty and basic needs

from sharing the same normative content, so long as they fit within the same

value system and are situated in the same position with regard to the

prevailing social order. This would make it possible to take advantage of the

analytical benefits in the use of the poverty concept and the instrumental

benefits belonging to the basic needs concept when formulating strategies for

the eradication of poverty and the establishment of more just societies. The

non-satisfaction of basic needs could constitute a specific and operative

element through which to define poverty.

Nevertheless, even though the basic needs concept may serve to

define poverty, it is restricted to the material dimensions of deprivation.

In its wider sense, the concept includes psychological and political as well

as material wants (Hammarskjold Report,1975). This multi-dimensional aspect

is what makes it particularly attractive for the new currents of thought on

development: the emphasis on economics has tended to blot out the ultimate

policy goal, which is not only to eradicate physical poverty but also to

provide all human beings with the opportunity to realize their potential

fully. The current demand is for development to be centered on man and his

needs. If this is done, the basic needs concept is converted into an

illuminating organizing instrument, which throws light on an entire field of

other questions (Streeten, 1977b, p. 4).

From this viewpoint, the concept of basic human needs could bring

together a more precise and wider range of norms for a juster society than

that implicit in the reduction of resource inequalities.

A. Material components of basic needs

The basic needs that serve to define poverty. are, like poverty

itself, relative to the environment. They are specific to each country and
 - 24 -

dynamic. But at their center, as with the concept of poverty, there is an

absolute core of needs, the satisfaction of which is more a question of the

current idea of human dignity than of the levels of welfare and resource

availability prevailing in each country.

The concept of basic needs is not new, having provided the

foundation for much analytic work on poverty from Rowntree's time (1901) to

our own. In Western industrial societies, the extent of the needs viewed as

minimal has varied with increasing economic and social progress and the

transformation in the functions of the State. From the mere subsistence-level

provisions accepted toward the end of the last century as covering

physiological needs for the maintenance of life and ability to work, the

content of the minimum or basic needs concept has expanded to the point where

what are regarded as minima at the present day cover not only the

physiological but also the sanitary and social requirements dictated by the

idea of human dignity current in contemporary society, so that any lack of

insufficiency a household may suffer does not affect the normal physiological

development of its members, their social participation, the maintenance of

their self-respect or that of the community in which they live (Lamale, 1958;

Franklin, 1967). In the industrialized societies, this trend reflects the

changes observable in those societal values which underlie the varied

redistributive programs characteristic of the welfare State, which aim at

everything from income maintenance to subsidized public education, housing and

health programs.

The criterion of normal development and social participation against

which the industrial societies measure basic needs forms part of the common

property of mankind. But this does not mean that it would be valid simply to

transplant the same standards to the developing world.

 - 25 -

However, since all men are regarded as equal, it has to be

recognized that there exist here and now certain absolutely minimum levels for

satisfaction of the needs universally regarded as essential for a decent life

-- levels which it is imperative to attain. This is not to say that the

content of the basic needs concept may not be specific to each country, or

that it may not vary as social progress is achieved. But there is litle doubt

that the evolution of the basic needs concept in the industrialized societies

influences the degree of latitude at present accepted in the application of

this concept to less developed societies. The progressive universalization of

culture and in particular of consumption patterns makes the application of

universal standards to certain basic needs increasingly feasible.

The Action Program adopted by the World Conference on Employment

perhaps reflects the consensus already reached on the content of the basic

needs concept as an essential facet of development policies. The taking up of

a concept of development focused on basic needs means that the latter -- as

interpreted in the Program -- combine two elements: in the first place,

certain minimum requirements of households, usually met through private

consumption such as adequate food, lodging, clothing and some household

articles; and in the second place, such essential services -- provided for and

by the general community -- as water supply, sanitary services, public

transportation, health care, education and culture. Access to freely chosen

employment also forms part of any basic needs policy, as both a means and an

end, since it not only provides the individual with an income but allows him

an essential feeling of self-respect and dignity (ILO, 1977, p. 24).

There is likely to be fairly general agreement on a central core of

basic needs such as this, although the concept can be broadened to include

additional elements such as fuel, transportation, entertainnent or the

 - 26 -

supplementary private consumption expenditure required for access to public

education and health services0

The actual content of the central core of minimum basic needs should

be specific for each country. Climatic, geographical, cultural and socio-

economic differences shape such needs, although not perhaps to the point where

any substantial differentiation arises!/. It is on considering the content of

basic needs in terms of goods that greater specificity by country is reached

and that the sovereignty of the consumer and the utility functions of the

planner may come into conflict.

B. Non-material basic needs

Even the broadest definition of the basic needs concept would be

incomplete if it were restricted to material needs. Only the exigencies of

measurement can justify concentration on those basic needs that are

material. However, the satisfaction of them as a universal imperative has

sense only in a social context characterized by effective enjoyment of the

fundamental human rights. These are at least the rights and liberties

enumerated in the United Nations Universal Declaration of Human Rights. But,

as Ghai and Alfthan (1976) point out, three other important values are also

closely related to development focused on basic needs -- equality, self-

sufficiency and participation. To the extent that basic needs are socially

determined, any acute differences in welfare levels in the particular society

weight against effective achievement of basic needs goals. National or

regional self-sufficiency in the satisfaction of basic needs is essential,

given the present international situation and the need to break away from

1/ An illustration of the extent of this differentiation is found in the

calorie targets set for each region of the world by FAO in 1970: the
difference between the highest (for North America) and the lowest (for
Asia) was no more than 23 percent (FAO, 1970, p. 491).
 - 27 -

inherited or imposed structures. Participation by the entire community in the

making of social decision, besides being an end in itself, is also an

essential means of securing basic needs efficiently and with the necessary

social mobilization. In the final instance, only the people themselves should

decide the extent, content and priority of their own basic needs (Ghai and

Alfthan, 1977).

IV

THE MEASUREMENT OF POVERTY

Given the difficulties inherent in defining poverty as an

interactive social situation rather than as a simple juxtaposition of wants,

it is no surprise that the operative definitions are restricted to material

deprivation or that measurements are made in terms of the inadequacy of

household resources in reaching determined levels of economic welfare -- at

the expense of other dimensions of poverty such as actual psychological

deprivation, specific cultural patterns and social or occupational

marginalization, which are not taken explicitly into account.

Since poverty is regarded as a normatively unacceptable lack of

welfare, it is necessary to resort to measurement of the levels of living that

may provide a basis for defining poverty operatively and identifying -- by

means of this normative cut-off point -- those households that are to be

regarded as poor.

A. Measurement of levels of living

The level of living of a household is the degree to which it

satisfies its needs in accordance with its preferences. To reach this level

of utility, the household can put into practice a set of feasible decisions on

the allocation of its available resources, within the setting created by

external conditions beyond its control.

 - 28 -

It would be ideal if levels of living could be measured in terms of

utility or of the degree of needs satisfaction. The problem of the

interpersonal comparability of measurements of individual utility!!, however,

precludes that possibility, which would involve the objectivization -- or

perhaps only the collectivization -- of subjective judgments.

The conventional hypothesis underlying the theory of consumption is

that each household allocates its resources so as to maximize some index of

utility, a function of the amounts it acquires of each good.

This assumption can be criticized on the grounds that households are

not always efficient optimizers or that the information on which they base

their choices is incomplete or distorted. A more general criticism is that

the functioning of the economy is imperfect enough to limit access to certain

goods and services and foster the consumption of others, thus inducing choices

that lead to lower levels of living than could in fact be attained with the

same resources.

On the basis of these and other arguments2/, proposals have been

made for the measurement of levels of living by means of some combination of

indicators representing the physical inputs in the satisfiers contained in the

goods consumed (Drewnowski, 1970). The problems of comparability and

aggregation involved, however, continue to weigh against such proposals.

On the other hand, if the assumption as to consumers' optimization

of utility is accepted it becomes possible to measure levels of living in

1/ Such as those now being tested in the examination of self-evaluated

welfare (see, for instance, Andrews and Crandall, 1976), or the
estimation of individual utility functions (Van Herwaarden, Kapteyn and
Van Praag, 1976).

2/ Which are concerned more with not taking into consideration all the
resources that have an impact on the level of living.
 - 29 -

terms of household resources. From this standpoint, the dimension of the set

of opportunities open to the household -- represented by all the feasible

choices it has -- serves as a good conceptual point of departure, as suggested

by Carmel Ullman Chiswick (1976), for defining a measure of the level of

living of the household. Furthermore, such a conceptualization has the

advantage of highlighting the extent to which the level of living is

determined by factors beyond the immediate control of the household, and the

extent to which it is independent of the lifestyle the household actually

selects from the range of opportunities within its reach.

Part of a household's resources are the time and skills of its

members, which they can apply to remunerative activities or other tasks,

depending on the constraints imposed both by the labor market which they have

access to and by the social environment. Or they may own businesses or assets

which product income or can be sold to finance consumption expenditures and

which, in any event, give them security and social recognition. Finally, the

location of the household in relation to institutional welfare systems can

bring its members social security benefits or assistance or access to

subsidized education, health and housing systems.

It is from applying these resources and exercising these rights that

households obtain the current income and allowances -- in cash, in kind and in

free or subsidized services -- with which to ensure the satisfaction of their

needs.

The immediate utility the household as a whole obtains depends on

how much and what they decide to consume, on the effective access they have to

the markets in which the required goods are sold, on the prices they face and

on the degree of actual access to free social services.

 - 30 -

In addition, decisions on how much income to spend and how much to

save, as well as those on how available time should be utilized, have an

impact on both the dimension of the resources that will be available to the

household in the future and the utility it obtains immediately.

An ideal measure of levels of living should also take into account

household size and composition, intra-family distribution of goods and the

possible existence of economies of scale in the consumption of large

households.

Proposals have been put forward for composite indicators that take

into consideration in some fashion not only the purchasing power available to

a household but also the dimension of its resources and its actual access to

specific goods and services. Townsend (1970)' proposes that account be taken

not only of current money income, but also of social security benefits, assets

(including education), remunerations in kind and the value of job fringe

benefits, the value of the public social services received, production for

self-consumption and gifts in kind or help received from others. Weisbrod and

Hansen (1968) have proposed an index combining income and net worth. Morgan

and Smith (1969) combine real income indicators with an evaluation of the time

devoted to leisure. The difficulties of conceptualization and measurement

inherent in such proposals, however, make it difficult to get away from

utilizing income or consumption as the isolated indicators nearest to the

objective measurement of levels of living.

Household income may be defined in a way that covers all current

receipts, whether they originate in the production process or in transfers,

and whether they are receipts in cash, in kind or in imputed gains from goods

produced for self-consumption. It may also be defined net of taxes and other

contributions, as in the concept of disposable income employed in the national

 - 31 -

accounts system recommended by the UN (1968). Although no conceptual pitfalls

exclude a definition of household income that takes account of the real value

of the free or subsidized public services to which each household may have

actual access (which is the concept of total income proposed by the UN in

1972), the incorporation of such services into the measurement of income is

conditional upon the possibilities of their being measured in each case. In

practice, measurements of current household income do not include the imputed

benefits from those services, nor do they provide any indication at all on the

degree of actual access to them.

Even when these measurement problems can be overcome and the concept

of current income made sufficiently broad, the measurement of levels of living

obtained would still be imperfect. Firstly, because it is influenced by

household decisions on participation in the work force but does not take note

of the amount of free time resulting from them. Secondly, because it reflects

assets in accordance with their current yield and consequently does not

reflect the contribution of wealth to the level of living -- in the absence of

a perfect capital market -- in terms of security and opportunities for

expenditure. Of course, both problems tend to become irrelevant toward the

base of the social pyramid, where, on the one hand, the supposed

substitutability of income and free time is very doubtful -- as is, by

extension, the premise that the latter is in fact an important component of

the level of living -- and where, on the other hand, not many options exist

for application of the scant assets actually possessed.

Current income measures the purchasing power of the household before

the latter reaches any .decision on how much to consume and how much to save.

From this point of view, income is superior as an indicator of household level

of living to consumption, which reflects no more than present utility without

 - 32 -

taking account of the degree to which savings increase the present value of

the expected levels of future consumption.

However, the measurement of current income is subject to transitory

fluctuations which affect levels of living temporarily. In a study of

poverty, it would be particularly important to examine more permanent levels

of living so as to be able to distinguish between chronic and "transient"

poverty situations. From this point of view, an acceptable measurement of

permanent income would be the preferred option. But attempts to estimate

permanent income with data from Latin America for one-year reference periods

have not been accurate enough to allow this indicator to be employed as a

measurement of levels of living (Ferber and Musgrove, 1976).

Current consumption is less subject than current income to

transitory fluctuations and could therefore give a more stable measurement of

permanent levels of consumption, even if one does not anticipate the

increments expected in those levels as a result of current savings!/.

One practical consideration gives an additional reason for employing

consumption: it tends to be estimated with greater accuracy than current

income.

The same total amount available for consumption expenditure can,

however, represent different degrees of real purchasing power for households

which have to pay different prices. Whenever such differences do exist, they

have a greater effect on low-income households, which direct a higher

1/ To the extent that the reference period for measurementx of income and
consumption can be extended, the transitory variations diminish in
importance and both measurements approach their permanent levels. In
fact, according to the permanent income hypothesis, if the reference
period used were sufficiently long expected consumption values would
approach permanent income levels so closely that both would provide the
same indication on levels of living.
 - 33 -

percentage of their expenditure to the satisfaction of basic needs and

therefore have only a narrow margin for maximizing their utility by

substituting goods to which different price sets apply. Such differences in

prices, and in conditions of access to goods, affect comparisons of urban and

rural levels of living particularly.

The welfare of the members of a household depends not only on its

available purchasing power but also on the number and characteristics of the

family members who endeavor to satisfy their needs through that power.

The possibility of taking household size into account, then, gives

sense to the expression of levels of living on a per capita basis, even though

this is not the sole factor determining intra-family welfare. It may also be

argued that family members of different age groups make different demands on

the household consumption budget, so that family size should be measured in

adult-equivalent unitsl/.

Allowance should also be made for the economies of scale which

benefit large households, but they are very difficult to estimate. Finally,

the assumption that all the resources of all the members of the household are

pooled to finance joint family consumption may be borne out to different

degrees, since some members may keep back part of their personal income to

finance a level of living above the average of their particular household.

B. Poverty lines

Given the essentially normative nature of the concept of poverty, it

has to be measured as standards or levels of living, which may be formulated

in either relative or absolute terms.

1/ Since equivalencies differ depending on the expenditure category, they

also necessarily differ depending on the income or consumption level
(Howe, 1974).
 - 34 -

Poverty lines are those normative cut-off lines on the economic

welfare dimension of the social pyramid. They represent levels of living

below which a household or a person is regarded as poor, and therefore serve

to identify the poor. However, the utilization of arbitrary percentages of

the population at the base of the distribution pyramid to represent the poor

does not serve to express levels of living, not even in terms of the

inequality in those levels. Such utilization is therefore not a measure of

poverty itself, despite many claims to the contrary (e.g. Szal, 1977). It is

no more than a heuristic manner of referring to poverty.

The conceptual and operative problems surrounding the measurement of

poverty are consequently the same as those encountered in the measurement of

levels of living.

Poverty may be measured through the actual access to goods that

satisfy needs or through the resources disposable for the acquisition of those

goods. The first implies the direct identification of situations of

deprivation with regard to each group of needs, since it does not call for

particular assumptions on consumption behavior (Sen, 1978). However,

individual preferences are passed over in the ranking of the different needs,

and therefore also in the maximization of individual utility. On the other

hand, the measurement of poverty from the standpoint of resources does give

this flexibility but assumes that the household optimizes its welfare under

conditions of perfect information. From the point of view of measurement,

poverty too is a multi-dimensional concept, which would be applied ideally by

establishing normative standards of satisfaction or adequacy for each

representative indicator, whether of a group of needs or a type of resource,

depending on the focus chosen for measuring levels of living.

 - 35 -

It is possible to measure poverty in terms of a multi-variate

definition that takes account of different dimensions of welfare; however, it

is a cumbersome procedure, requiring explicit handling of the existence of

situations of "partial" poverty (i.e. with respect only to some of the

dimensions of welfare). Multi-variate defintions of this type can

nevertheless be the most appropriate for the formulation and follow-up of

development strategies oriented toward basic needs satisfaction (Ghai and

Alfthan, 1977), even if their usefulness for other purposes is limited.

More general uses call for measurements of poverty through

indicators which combine the various dimensions of welfare.

In the final instance, the aggregation of multiple level-of-living

indicators which express degrees of satisfaction of different needs in a

single composite indicator implies the adoption of assumptions on the rate of

substitution among satisfiers of those needs (Drewnowski, 1977). Something

similar occurs with the aggregation of measurements relying on indicators of

different types of resourcesi!. This partly explains the extended use of

income or total expenditure on consumption as isolated indicators of levels of

living, and the drawing of poverty lines in terms of income.

From this point of view, income may be considered as an indicator

that combines -- in a specific fashion -- different dimensions of the level of

living. From the needs standpoint, it is a combination of the different

satisfiers at market prices, assuming perfect substitutability among them.

From the resources standpoint, it is a combination of all types of resource in

accordance with their current or imputed market yields, also assuming perfect

substitutability among them.

1/ Townsend's analysis (1970) of the various aspects to be taken into

account in the definition of poverty is illuminating in this respect.
 - 36 -

The utilization of income in measuring poverty is founded on its

undoubted property for synthesizing -- despite the limitations pointed out so

far -- the household resource base which dictates the family level of

living. Perhaps its greatest shortcoming as a composite resource indicator is

that it does not take account -- unless a special measurement effort is made

-- of real access to free or subsidized public services.

On moving directly from resources to needs, additional constraints

appear. To take income as a composite indicator of needs satisfaction

involves major assumptions, which become particularly rarefied in poverty

situations. As Streeten (1977b) points out in this regard, consumers are not

always efficient optimizers -- especially not in the spheres of nutrition and

health; neither does the distribution of satisfiers within the household

necessarily ensure the equitable satisfaction of each family member's needs.

Further, the poor may be confronted with prices different from those paid by

other groups and with special difficulties of access to specific goods and

services.

The drawing of poverty lines in terms of income or total consumption

expenditure therefore implies the setting of norms for the minimum quantum of

resources required, whether as a function of average community welfare, if a

relative definition is adopted, or in terms of the satisfaction of a set of

basic needs, if an absolute definition is employed. In both instances, the

poverty lines synthesize a judgment as to what the minima would be below which

only unacceptable situations of deprivation would exist. They should be

interpreted as overall statistical yardsticks that serve to delimit situations

of poverty and their magnitude, since they are drawn according to heuristic

procedures which can be no more than approximate and which, in practice,

contain an irreducible degree of arbitrariness. Despite that, the size of the

 - 37 -

population which falls below the poverty lines is of indubitable social

significance, and the subsequent examination of its characteristics from

different data bases and through a range of analytical methods reveals the

possibiility of researching the causes of the poverty syndrome.

If poverty lines are to fulfill their discriminating function

adequately, it is obviously necessary to draw sets of lines for each country,

indicating the basic needs in households with different characteristics and

whose levels of living are not directly comparable. Such sets should at least

include the various lines produced by application of the same normative and

estimative criteria to households of different sizes in urban and rural areas.

C. Drawing of relative poverty lines

As stated earlier, definitions of poverty in relative terms based on

income or total consumer expenditure endeavor to put into operation an idea of

welfare that is minimally adequate in relation to the average values

prevailing in the particular society.

A summary method of drawing relative poverty lines consists in

making them a fraction of average income (Atkinson, 1975) or of some other

position of income distribution (Szal, 1977).

A more sophisticated method -- and one with greater statistical

requirements -- is to draw poverty lines from Engel curves which relate

expenditure on food (or also on clothing and housing) to total income,

selecting as the poverty criterion a certain ratio which allows determinaion

of the corresponding income segments. This method, employed at one time in

the U.S. (BLS, 1960) and currently employed in Canada (Love and Oja, 1977),

requires postulation of the proportion of income devoted to basic items of

consumption, in accordance with actual patterns of expenditure, as an

indicator of relative household welfare; it also requires the making of a

 - 38 -

normative choice as to what proportion of spending on basic items reflects a

minimally acceptable situation.

D. Drawing of absolute poverty lines

The most time-honored method (Rowntree, 1901) of quantifying minimum

standards for basic needs in terms of income or consumption expenditure is

that of fixing detailed norms for the minimum quantities of provision

(calories, protein, housing, household articles, etc.) that will satisfy each

need or group of needs regarded as basic, translating them into quantities of

the specific goods required!/ and evaluating these at the prices the

households in question must pay.

Another method has been developed which takes food as the basis for

establishing absolute poverty lines. The starting point consists in

determining in detail the cost of a normative minumum diet established for

each family type. The income corresponding to the poverty line can be

estimated on the basis of a proportion of income expended on goods as shown by

Engel curves synthesizing the actual behavior of households (Orshansky, 1965),

or on the basis of the total expenditure of the marginal household which

acquires only the minima stipulated on the basic items (Kahn, 1976). Bardhan

(1970) has utilized this method for India, but applying relationships between

required expenditure on food and total actual consumption. Dandekar and Rath

(1971) employed a somewhat unusual variant of this method, by drawing poverty

lines as the level of total consumption expenditure at which a diet of the

required calorie content is actually consumed, without specifying its cost.

1/ As Pyatt and Thorbecke (1975) indicate in their useful analysis of this

problem, "the formulation of how commodities provide wants is usually
assumed to be linear"; this constitutes a dispensable restriction, which
excludes complementarity among goods.
 - 39 -

Finally, the legal minimum wages of a country have on occasion been

used (Fishlow, 1972) as absolute poverty lines.

E. Poverty measures

The count of the number of households below the poverty lines is the

most widely used measure of poverty, providing an initial approximate idea of

the magnitude of the problem. This measure of the "incidence of poverty" does

not take account, however, of either the degrees to which the incomes of the

poor fall below the poverty line or the inequalities between households at

different poverty levels (Sen, 1976).

Alternatively, it is possible to measure the inadequacy of the

incomes of the poor, this being the aggregate resource gap of the poor as a

group with respect to the poverty line. This measurement -- and the

normalized version of it, the average percentage income gap -- does not take

account of the number of the poor, nor is it sensitive to changes in the

inequalities among them. In view of the limitations inherent in these

methods, Sen (1976) has axiomatically derived a poverty measure that combines

both of them and incorporates income inequalities among the poor.

Further on, these measures of poverty will be examined in detail

when they are applied in evaluating the dimensions of poverty in the Latin

American countries.

A METHOD OF DRAWING POVERTY LINES

FOR LATIN AMERICAN COUNTRIES

A. The method selected

The method chosen here for drawing poverty lines depends very much

on the operational objectives set up, the degree of precision possible in

accomplishing them and the nature of the available data base.

 - 40 -

The view taken was that this initial, regionally focused approach to

the problems of estimating basic needs, identifying the poor and assessing the

extent of poverty in the various countries could tolerate a certain degree of

inaccuracy provided the results obtained for each country were basically

comparable and would allow an evaluation of the poverty existing in the

region. The estimation procedures were designed, however, so that the

determination of basic needs would be as specific as possible for each

country.

The poverty lines drawn were based on diet, an estimation being made

of the cost of a food basket to cover minimum nutritional needs adequately.

The lines correspond to a figure put at double that minimum food cost, on the

grounds that such a sum would cover the value, at current prices, of the goods

required to satisfy the basic needs which are usually satisfied in these

societies through private consumption expenditure. The lines therefore

represent minimum estimates of the private consumption expenditure required to

satisfy basic needs, and they imply that households are classified as poor if

their purchasing power is less than twice the cost of a nutritionally adequate

food basket.

The components of basic needs that should be satisfied through free

public services provided by existing institutuional systems are not covered in

these estimates, which allow only for the private consumption expenditure

associated directly or indirectly with access to and utilization of such

public services.

The minimum food basket in each country was based on minimum

nutritional requirements, taking account of the composition of national supply

in each food group, per-calorie prices for each food type and dietary

habits. These baskets were valued at retail prices.

 - 41 -

This procedure offers a number of advantages vis-a-vis the direct

use of household budget survey results. The estimated expenditure represents,

first of all, the purchasing power necessary for the satisfaction of basic

needs rather than what is actually spent by those who satisfy -- inter alia --

their minimum basic needs. In addition, it avoids the problems of

comparability affecting most surveys as a result of the possibly different

goods content of the expenditure of different households on the same

consumption item, since few surveys indicate prices and quantities. Finally,

it enables poverty lines to be drawn for any country and period even if the

results of a household budget survey are not availablle.

B. Nutritional requirements and determination of the contents of a

minimum food basket

The contents of the minimum food basket for each country are

determined so that it satisfies minimum nutritional needs, taking account of

the real availability of each type of food in the particular country, but

offering no possibility of substituting one type of food for another without

raising the cost significantly!!.

The minimum energy and protein needs utilized by sex and age (see

Annex A) were selected according to the standards recommended by the Food and

Agriculture Organization and the World Health Organization (FAO/WHO, 1973).

The assumptions currently used in studies of this type (FAO, 1962 and 1963,

for instance) were also adopted: a moderately active population and average

weights of 65 k for adult males and 55 k for adult females; no account was

taken of the possible effect of climatic differences, given the lack of

1/ In a work (Tejo Jimenez, 1976) which supplements this present one, a

detailed listing is given of the criteria and procedures employed in
estimating the minimum food baskets utilized here.
 - 42 -

quantifiable data and the interdependence between climate and physical

activity (FAO/WHO, 1973).

Protein!! as well as calorie needs were used in order to ensure more

specific estimation of the minimum basket for each country. It is recognized,

nonetheless, that an adequate calorie intake almost always implies an adequate

intake of proteins and other specific nutrients2/.

This was the basis on which minimum daily per capiLa calorie and

protein requirements were established for the average composition by sex and

age of the population of each country around 1970. The results obtained,

given in Table 1, show average national energy requirements that differ, as a

maximum, by four percent (between 2,260 and 2,350 calories per day per capita)

and protein requirements that differ by less than eight percent (between 40.2

and 43,3 grams pe, day per capita). It should be remembered that on applying

these results uniformly within each country, the needs of households with a

composition older than the national average are somewhat underestimated, while

those of households with a composition younger than the average are

overestimated. Although this may be the case in principle, independently of

household size, the tendency for larger households to show a younger age

composition than the average means that the procedure utilized is likely to

overestimate their nutritional requirements to some extent.

1/ The FAO/WHO (1973) figures on protein requirements deal with high-quality

proteins (obtained from eggs or milk). It is considered that the
composition of the diet in developed countries results in average quality
of protein intake of the order of 80 percent of that of eggs or milk,
while in developing countries -- excluding extreme situations -- average
quality of protein is in the vicinity of 70 percent. The latter
assumption was applied uniformly in obtaining the figures on protein
requirements given in Annex A.

2/ See Sukhatme (1970), for example.

 - 43 -

TABLE 1

MINIMUM PER CAPITA FOOD-ENERGY AND PROTEIN NEEDS

Food-Energy Needs Protein Needs

(calories per day) (grams per day)

Argentina 2348 43.3

Bolivia 2346 41.3
Brazil 2317 40.2
Colombia 2291 40.8
Costa Rica 2310 41.3
Chile 2318 42.0
Dominican Republic 2287 40.6
Ecuador 2292 40.8
El Salvador 2288 40.7
Guatemala 2306 41.1
Haiti 2307 41.3
Honduras 2287 40.7
Mexico 2285 40.8
Nicaragua 2280 40.4
Panama 2306 41.4
Paraguay 2272 40.4
Peru 2304 41.1
Uruguay 2334 43.3
Venezuela 2259 40.9

Source: Author's estimates based on FAO/WHO (1971) recommendations.

For each country, the minimum food basket that would satisfy the

nutritional needs identified was estimated on a predominantly normative or

standard basis, even when account was also taken of the relative availability

of foods and consumer habits in each case. In theory, the minimum-cost diet

could consist of the pair of foodstuffs with the lowest per-calorie price and

the lowest protein price, respectively, but this would be completely unreal.

In order to avoid this trivial conclusion, the base taken was the composition
 - 44 -

of the apparent consumption of foodstuffs!', which reflects both the relative

availability of each food and national average consumption patterns.

For each country, approximately 40 staple foods were selected,

representing over 95 percent of the total apparent consumption of

foodstuffs. The apparent per capita consumption of these constitutes the

average diet. The first step in identifying the minimum standard diet was to

reconcile the caloric and protein intakes obtained from the average diet with

the minimum requirements established in each case2/. At the same time, the

role of foods with higher per-calorie and protein prices was reduced in favor

of lower priced items, in accordance with the values shown in Tables 2 and 3.

These substitutions, however, were made within the range allowed by

a set of constraints designed to reconcile commonly accepted nutritional norms

with prevailing dietary habits:

(i) adopt either apparent consumption or actual consumption of egg

protein by the lower income strata, whichever is greater;

(ii) complete with milk proteins up to 15 percent of protein requirements

or respect actual consumption by the lower income strata, whichever

represents the higher consumption of milk;

(iii) meat consumption should not be less than the equivalent of five

grams per day per capita of protein or than actual consumption by

the lower income strata;

1/ As shown by the FAO Food Balance Sheets issued in 1975 for the period
1960-1975.

2/ In the majority of countries examined, apparent per capita consumption of

the foods selected led to energy intakes higher than the minima
necessary. In other countries -- Colombia, Ecuador and Honduras --
energy intakes were below the minima.
 - 45 -

(iv) maintain an intake of fish protein similar to average apparent

consumption;

(v) sugar intake should not be over the equivalent of 270 calories per

day per capita or actual consumption by the lower income strata,

whichever is greater;

(vi) consumption of tubers should not be lower than actual consumption by

the lower income strata in the case of tubers with a per-calorie

price higher than that of cereals or legumes; the purpose of this

constraint is to give proper weight to the complementary role these

foods play in culinary habits;

(vii) adopt the proportion of vegetables apparently consumed, and a

maximum equivalent to 50 calories per day for fruit (the incmne

elasticity of which is considerably higher than that of vegetables),

since these foods are of particular importance in the provision of

minerals and vitamins and the achievement of a balanced diet;

(viii) adopt the same proportions for calories obtained fromn oils and fats

as shown by the figures on apparent consumption, given the degree to

which they are a culinary complement to other foods and the fact

that their per-calorie prices tend to be comparable with those of

cereals;

(ix) cereals and legumes should not exceed 60 percent of total energy

requirements.

Adoption of the figures on actual consumption by the lower income

strata -- in accordance with the information set out in Annex C -- as minimum

substitution bounds was a means of respecting the basic features of the

dietary habits of the population and also the variety in economic

circumstances which those habits reflect and which may not be discernible in
 -46

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 - 48 -

the prices considered. Account was also taken of available nutritional

recommendations concerning specific foods in the exceptional case of countries

in which such recommendations have been issued and were applicable to present

purposes (for example, Servicio Nacional de Salud, Chile, 1974). In all

cases, care was taken not to go too far beyond apparent consumption averages,

on the grounds they are indicative 6f the actual availability of each food in

the particular country.

The composition of the standard basket within each group of foods

was estimated to reflect the composition of apaarent consumption in those

cases -- the majority -- in which it responded to the price ratios per calorie

and per protein unit. Whenever that did not occur, the nutritive contribution

of the particular food group was assigned in a higher proportion to the

cheapest food in it, up to the limit allowed by the habits of the lower income

strata, culinary substitutability and the national capacity to produce that

food.

Table 4 shows the estimated minimum food baskets. Although the

procedures employed tend to average out situations on a national level,

application of these standard baskets to urban population groups is not too

arbitrary. They may, however, constitute unreal standards as far as some

segments of the rural population are concerned, even though, in overall terms,

national figures on domestically produced foods are confirmed to a reasonable

degree by the apparent consumption statistics which served as starting point.

C. Estimation of minimum food budgets

It would be ideal for our purposes if the minimum food basket could

be valued at the actual prices paid by each low income group. For that, it

would be necessary to have detailed data on prices and quantities from surveys

of consumer spending. But even so, in information of that type the

 -49-

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 - 50 -

specification of goods is usually uncertain, a fact which casts doubt on the

application of implicit prices to the standard basket. For this reason, and

because of the need to employ a method that is independent of the results of

those usually sporadic surveys, estimation of the cost of the minimum basket

was based on current retail prices gathered by national statistical systems.

In most Latin American countries, these prices are those prevailing in the

capital city or its metropolitan area; only a handful of countries gather

price information on other cities systematically!!, and in no country is

information on rural prices gathered in a systematic way.

In consequence, minimum food budgets were estimated for the capital

cities of the countries under consideration. Their subsequent adjustment to

obtain budgets that could be broadly applied firstly to the urban population

as a whole and then to the national population as a whole, is based on the

scant information available on regional price differentials.

For all foods, the prices selected were those of the lowest quality

varieties included in retail price surveys. In the case of foods for which

that source did not include prices, recourse was had to other sources or to

the prices of the nearest substitutes with similar nutrient content. Annex B

lists consumer prices in each capital city as of mid-1970, since it was these

that were used in assessing the minimum food budgets given in Table 5.

Although these results are expressed in expenditure per day per person, they

reflect average annual norms.

As any significant bias in the prices employed in calculating cost

of living indexes can affect the level of the poverty lines, a validation

exercise was carried out to ensure as far as possible that those prices were

1/ In Brazil, retail price statistics over 87 cities; in Colombia, 7; and in

Mexico, 9.
 - 50 -

specification of goods is usually uncertain, a fact which casts doubt on the

application of implicit prices to the standard basket. For this reason, and

because of the need to employ a method that is independent of the results of

those usually sporadic surveys, estimation of the cost of the minimum basket

was based on current retail prices gathered by national statistical systems.

In most Latin American countries, these prices are those prevailing in the

capital city or its metropolitan area; only a handful of countries gather

price information on other cities systematically!!, and in no country is

information on rural prices gathered in a systematic way.

In consequence, minimum food budgets were estimated for the capital

cities of the countries under consideration. Their subsequent adjustment to

obtain budgets that could be broadly applied firstly to the urban population

as a whole and then to the national population as a whole, is based on the

scant information available on regional price differentials.

For all foods, the prices selected were those of the lowest quality

varieties included in retail price surveys. In the case of foods for which

that source did not include prices, recourse was had to other sources or to

the prices of the nearest substitutes with similar nutrient content. Annex B

lists consumer prices in each capital city as of mid-1970, since it was these

that were used in assessing the minimum food budgets given in Table 5.

Although these results are expressed in expenditure per day per person, they

reflect average annual norms.

As any significant bias in the prices employed in calculating cost

of living indexes can affect the level of the poverty lines, a validation

exercise was carried out to ensure as far as possible that those prices were

1/ In Brazil, retail price statistics over 87 cities; in Colombia, 7; and in

Mexico, 9.
 - 51-

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 - 52 -

the lowest available on the metropolitan marketsl/. The Joint Program on

Latin American Economic Integration (ECIEL) investigated 1968 and 1973 prices

in the member countries of the Latin American Free Trade Association, the work

for 1968 giving prices for two, and sometimes three, qualities of each food.

Re-costing of minimum food baskets at the average prices for each product

given by that Progranm2/ resulted in budgets somewhat higher than those based

on cost of living indexes for the same period. However, these are themselves

between 6 percent and 10 percent higher than the budgets obtained by re-

costing minimum baskets on the lowest ECIEL price in each case3/. To the

extent that ECIEL figures accurately reflect the spectrum of consumer food

prices in the Latin American metropolitan areas, the prices currently employed

in drawing up cost of living indexes tend to fall in the lower half of the

spectrum, and therefore are not the lowest prices available on each market.

However, their utilization in calculating standard budgets for poor groups is

appropriate, since it is not reasonble to assume that these groups always have

access to the lowest market prices or, by the same token, that they pay

premiums to obtain differentiated products to the same extent as middle-class

groups.

1/ Or, in more rigorous terms, the lowest prices that current statistical
surveys can capture.

2/ Data kindly supplied by ECIEL.

3/ Despite this, they are below the minimum food budgets obtained by
Arellano (1975) for the LAFTA countries at 1968 prices. For all
countries, he made uniform use of the diet established by the Chilean
National Health Service (1974) and applied ECIEL price data to it;
although, as indicated, the latter tend to be somewhat lower than those
applied in the present work, the basket utilized is between 10 percent
and 15 percent more expensive -- depending on the particular country --
than the baskets here estimated for each country.
 - 53 -

The need to have poverty lines applicable to urban households as a

whole and to all households in each country inevitably leads to rough

approximations in the assessment of the corresponding minimum food budgets,

given the scant information available on inter-regional price differentials.

The periodic retail price surveys conducted in Brazil, Colombia and

Mexico capture prices in a number of citiesl/. In Argentina, price surveys

have been carried out in certin provincial cities at the same time as the

metropolitan area survey!/. In Mexico, the Comision de Salarios Minimos

(1964) collected price data on urban and rural areas in the major states. In

a number of cases, household budget surveys provide data on food prices in

both urban and rural areas3/. Tejo Jimenez (1976) collated these sets of

regional food price data; although no clear tendencies are discernible as

common to all countries, fresh foods and those making up the staple diet

usually cost less in non-capital cities than in metropolitan areas; foods

produced in geographically concentrated locations (winter fruit, milk

products, fish and shellfish) or which are imported tend to show higher

prices, the same being true of processed foods.

On weighting price differentials by the composition of standard

minimum baskets, the food budgets obtained for non-capital cities are somewhat

lower than those estimated for capital citie94/. In Brazil, the existence of

1/ Brazil, IBE (Yearbook); Colombia, DANE (Bulletin); Mexico, DGE

(Yearbook).

2/ Argentina, Comite Coordinador de Emenestros de Costo de Vida en el

Interior (1967a, 1967b).

3/ Honduras, DGEC (1970); Peru, Ministry of Agriculture (1975).

4/ Colombia, five percent lower; Mexico, from two percent to 8 percent

lower, depending on what data base is used; Peru, six percent lower;
Honduras, 12 percent lower. In Argentina, the budgets are similar to
those estimated for the metropolitan area.
 - 54 -

a multipolar urban network complicates the picture: the minimum budget

calculated on average prices taken over 87 cities is three percent higher than

that estimated for Rio de Janeiro but six percent lower than that calculated

on Sao Paolo prices.

There would therefore seem to be general justification for assuming

minimum food budgets for non-capital urban areas to be five percent lower than

those estimated for the capital city of each country.

Data on urban-rural price differentials is even more limited. In

the rural areas of the three countries for which there is data available,

fresh food prices are seen to be systematically lower than those recorded in

urban areas, and therefore even lower than those prevalent in capital

cities. Prices of processed products or those brought in from outside the

particular region are, on the contrary, consistently higher than those

recorded in non-capital cities. Costing of standard minimum baskets at rural

prices gives the following results: in Mexico, a budget 13 percent lower than

in the Federal District (and 10 percent lower than in other urban areas); in

Peru, 15 percent lower than in Lima (and nine percent lower than in other

urban areas); in Honduras, 20 percent lower than in the Central District.

At all events, these prices cover only a part of rural consumption,

since a significant percentage of needs are met from own-account production.

This percentage varies greatly from one region to another, depending on

whether subsistence or commercial agriculture predominatesl/, but the limited

1/ The Peruvian survey, for example, showed proportions of own-account

produced food that varied from 11 percent in areas where agriculture is
more commercial to between 50 percent and 75 percent in areas where
subsistence farming predominates.
 - 55 -

evidence availablel/ tends to indicate that the imputed prices for own-account

produced staple foods rarely differ by more than 20 percent fromn those

recorded in rural markets.

These circumstances, taken as a whole, suggest that it is reasonable

to regard the cost of standard minimum food baskets in rural areas as 25

percent below the budget estimated for the capital city of the particular

country.

Table 6 shows the minimum food budgets costed in accordance with

these criteria for the capital cities, for urban households as a whole and for

rural areas. It is doubtful, however, whether the last-mentioned standards

would be valid for specific segments of the rural population, given the

variety of situations affecting the availability and cost of the goods

concerned. For that reason, each estimated rural-area budget will be used

only as a tool in estimating the minimum food budget applicable to the

particular national population as a whole.

D. Relationship of food expenditure to other consumption expenditure

The drawing of poverty lines based on minimum food budgets requires

that standard relationships between food expenditure and other consumption

expenditure be established. Even though this operation can in practice be

based only on the observed behavior of households, the alternative choices

offered by the corresponding Engel coefficients have different conceptual

implications.

Use of the percentages of total consumption that low income

households devote to food, although reflecting the allocation of resources by

households in extreme conditions of want, also implies an assumption that

1/ Mainly the National Food Consumption Survey, Peru (Ministry of

Agriculture, 1975).
 - 56 -

expenditure on food has the same income elasticity as expenditure on other

items. Actual consumption patterns, however, reveal that when their incmne

increases poor households prefer to put a higher percentage of that increase

into other items.

TABLE 6

DAILY PER CAPITA COST OF MINIMUM FOOD CONSUMPTION

ESTIMATED FOR URBAN AND RURAL AREAS, 1970
(in local currencies)

Urban
Metro- Other
politan Urban Average Rural b National c
areas a areas b Urban c Averages

Argentina 1.29 1.29 1.29 0.97 1.22

Brazil 1.22 1.22 1.22 0.92 1.06
Colombia 4.42 4.20 4.26 3.32 3.87
Costa Rica 1.77 1.68 1.73 1.33 1.48
Chile 4.00 3.80 3.89 3.00 3.63
Honduras 0.52 0.49 0.50 0.39 0.42
Mexico 3.17 3.01 3.06 2.38 2.80
Peru 9.61 9.13 9.35 7.21 8.28
Uruguay 78.06 78.06 78.06 58.55 73.32
Venezuela 1.77 1.68 1.71 1.33 1.60

aFrom Table 5.
bEstimated as per the criteria discussed in the text.
cWeighted averages for each national population.

Use of the proportions of income spent on food by all households

(Orshansky, 1965) implies a view that households which rise above the poverty

threshold consume as much on non-food items as other households. But the

further they go beyond that threshold, households devote higher percentages of

their consumption to non-food items. Application of the relatively lower

percentages of food spending in these households to others with an income just

above the poverty threshold can lead, as Friedman indicates (1968), to

 - 57 -

overestimation of both the poverty line and the magnitude of poverty. It

seems more appropriate to use the proportions spent by those households in the

group where food expenditure is somewhat higher than the minimum budget

established.

Table 7 shows food expenditure as a percentge of total private

consumption (based on available survey data) for the groups of households that

are closest to that definition and which therefore constitute the groups most

relevant for the purposes in view. Percentages are also given for all the

households covered by each survey.

Since the level of aggregation in which the data are available is

not the most desirable, interpretation of the coefficients of food expenditure

given in Table 7 should take account of the location of the group selected as

relevant and the relationship between its average expenditure on food and the

minimum food budget established in each case. For Argentina, Chile and

Venezuela, where the group observed is low-income but on average spends

considerably more on food than the minimum budget, the most pertinent group of

households for this analysis is a sub-group with an even lower income, which

probably has a higher coefficient of food expenditure than the larger group it

forms part of.

Bearing this in mind, it may be concluded that urban households

which spend somewhat more on food that the minimum budget allows will devote

-- in any Latin American country -- between 40 percent and 50 percent of their

total consumption expenditure to that item. The location of each country

within this interval reflects in considerable measure the relative degree of

development of the part of the economy being observed, which in some cases is

the more developed urban-area segment.

 _ 58 -

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 - 59 -

Urban-area poverty lines have therefore been taken as corresponding

to private consumption budgets amounting to double the corresponding minimum

food budget.

Uniform application of this norm may lead to a certain degree of

underestimation of the poverty existing in the relatively more developed

countries or areas, where the propensity to consume other goods is somewhat

higher than the food coefficient at the income levels in question. There are

advantages, nonetheless, in employing a uniform standard for all the Latin

American countries in a regional evaluation such as the present one, since

that allows the method evolved to be applied even where no recent, reliable

family budget survey data exist.

The same reasoning can be used to justify uniform application of a

single food budget/total expenditure ratio to all households, without looking

at their composition and size. Even though it is important to make this

distinction in national-specific evaluations of povertyl!/ and crucial in the

implementation of anti-poverty programs, the greater accuracy the distinction

would allow in this regional evaluation is achievable for certain countries

1/ Orshansky (1965) uses different coefficients for the US: 0.27 for two-
person households and 0.33 for those with three or more members; for one-
person households, she assumes the poverty line to be 80 percent of that
drawn for a couple, on the grounds that "the lower the income, the more
difficult it would be for a single person to reduce sur-h items as housing
and household appliance costs below the minimum for a couple".
 - 60 -

only and would have no relation to the degree of accuracy achieved in other

aspects of the estimations madel/.

As far as rural areas are concerned, the little information on rural

household consumer patterns2/ suggests that the groups which are relevant for

this analysis devote more than half their total expenditure to food, depending

on how self-consumption by farm households is valued. The undoubtedly greater

preponderance of food in the quantum of rural household consumption is

probably offset -- in the value of total consumption -- by the lower unit

values of the own-account produced food consumed and by the higher prices

these households pay for certain non-food goods. Even so, and in line with

the evidence referred to, the norm adopted in estimating rural-area poverty

lines is that expenditure on non-food items represents only 75 percent of the

value of the corresponding minimum food budgets. The poverty lines applicable

at the national level incorporate this criterion, appropriately weighted.

The norm underlying the drawing of poverty lines accepts that a sum

similar to the minimum food budget adequately covers the other basic needs

generally satisfied through private consumption, the grounds for this being

the assumption that households above the minimum food threshold are also above

the minimum thresholds for other basic needs. There is a risk, however, in

using this assumption without seeking some additional verification as regards

1/ Information available on this question comes from the survey conducted by

the Joint Program on Latin American Economic Integration (ECIEL)
(Musgrove, 1976) and is limited to the differences among households of
different size within the urban population as a whole and not within
specific income groups. One- and two- person households tend to spend on
food between one percent and four percent less of their total consumption
than all households taken together. Households with three to five
members have food coefficients similar to the average, while those with
six to eight members allocate between one percent and 4 percent more of
their spending to food.

2/ Coming from national surveys in Mexico and Peru and set out in Annex E.
 - 61 -

expenditure on housing and those costs that are complementary to access to

free public services.

E. Housing needs and expenditure

A family's need for housing requires that it have a dwelling which

possesses the essential services, allows minimum adequate occupation density

and independence and affords sufficient shelter against the elements, in

conditions of stable tenure and at a reasonable distance from the place of

work. Poverty lines should cover the resources needed to ensure access to a

dwelling that meets these requirements in minimum fashion. However, it is no

easy task to express this need with precision or in a way which accomnmodates

the realities of each country.

In the majority of cases, the formulation of minimum housing

standards for urban households is complex and subject to considerable

variation because of differences in physical environment, in city size, in the

material available locally and in the cultural characteristics of households

(United Nations, 1977). Furthermore, it is usual to find biases originating

in the social values of those formulating the standards (Mabogunje, Misra and

Hardoy, 1976). The definition of minimum housing needs is therefore more

arguable than the establishment of minimum food needs, and the use of national

standards may lead to less realistic appraisals of the housing situation in

which large groups of families find themselves.

In addition, quite apart from the validity a set of housing norms

may have at the micro-economic level, family housing situations when taken

individually, are very much determined by the prevailing restrictions on

access to the housing market and to urban services.

High unit costs of construction, as well as the systems of financing

prevailing in the "private conventional housing" market (i.e. the type of

 - 62 -

dwelling demanded by the middle and upper strata of the population, which have

the main voice in this market), block access to it for large sectors of the

population. Low-cost public housing programs, with generous terms of payment,

are of very limited scope and are still inaccessible to the groups at the

bottom of the scale1/. This is reflected in the magnitude of the quantitative

deficits traditionally estimated as that proportion of the population without

a "normally adequate" or "conventional" dwelling -- in some Latin American

cities, between a third and a half of the total population (World Bank, 1975;

United Nations, 1977).

A large number of the households in this situation are found in

shantytowns and illegal squatter settlements on the outskirts of urban areas,

locations lacking in running water, local services and adequate physical

access. Amelioration of such situations is beyond the purchasing power of the

individual households affected, as the provision of services to these

settlements depends on public urban infrastructure investment programs, while

access to locations with services is denied to them by high urban land prices.

It appears that "housing poverty" could well be more widespread than

poverty defined in terms of a minimum purchasing capacity, and may also affect

large segments of the working and urban middle classes, in the sense that

their real aspirations are to the conventional type of dwelling produced by

the private market2/.

But doubts as to the true extent and actual characteristics of the

housing problem arise when an examination is made of the conventional

1/ See, for example, Utria (1966b), Altimir (1969), Tabak (1973), Rosenbluth
(1976).

2/ This factor may give rise to marked biases when the poor are identified
principally on the basis of housing indicators.
 - 63 -

standards used in defining housing deficits, their economic feasibility and

their technological pertinence to the realities of the particular country

(World Bank, 1975) (Mabogunje, Misra and Hardoy, 1976), and also when note is

taken that "the majority of peripheral settlements are the result of ingenious

efforts by low-income families already established in the cities to satisfy

their own needs for housing and security ... " by means of non-conventional

housing "solutions" (ECLA, 1975).

In these circumstances, the only possibility is to ask what private

expenditure is normally required to gain access to a dwelling that can be

considered minimally adequate, given the limitations imposed by the current

supply of housing, building materials and serviced urban land. However, the

reply will be valid only in the individual case. Solution of the housing

problem for all families that might consider themselves -- even on the most

realistic criteria -- to be inadequately housed would in the majority of

countries require mobilization of resources, planning efforts, enforcement of

housing standards and modification of the functioning of the private housing

market -- on a scale beyond the possibilities that exist for making stop-gap

adjustments in the prevailing system.

The heuristic procedure utilized here to ensure that the estimates

on which poverty lines are based allow reasonable coverage of the resources

needed in finding an imaginative solution, on the individual plane, to the

low-cost housing problem consists in verifying whether the annual expenditure

on housing by the groups of households examined for purposes of determining

the ratios between food and other expenditure covers the annual cost of a

relatively conventional minimum dwelling.

Computation of that annual amount, the results of which are set out

in Table 8, is based on the cost of a dwelling having 60 m2 of total area

 - 64 -

(i.e. approximately 12 m2 of livable space per person) at unit construction

costs brought below the private market average by design econamies, and on the

assumption that the cost of serviced land equals 25 percent of basic structure

costi/. A third assumption is that a 25-year loan at 10 percent per annum

exists for the total purchase price -- the most favorable terms available.

Resulting total annual housing costs, expressed as monthly installments, equal

one percent of the value of the purchase price of the dwelling, which is the

usual rental percentage in many Latin American cities.

Table 8 also shows annual expenditure on housing by the households

selected as relevant for analysis of the consumption patterns applicable to

poverty thresholds. In some cases, this expenditure is higher than the

estimated annual purchase cost of a minimum dwelling, but, generally speaking,

this is due to the fact that these averages include imputed rents for owner-

occupied dwellings, a factor that tends to be overestimated in the surveys

which are the source of the data. Taking this into consideration, actual

expenditure on housing by households somewhat above the food threshold tends

to be equal to or lower than the annual purchase cost of a minimum dwelling of

the conventional type. This estimate, nonetheless, serves only as a rough

frame of reference for the extremely wide range of specific situations and

requirements. In many cases, actual family expenditure on housing corresponds

to imaginative solutions for the satisfaction of housing needs in an

unfavorable environment.

1/ For information on the grounds underlying this assumption, see World Bank
(1975a), Annex 4, and United Nations (1977), Table 14. 100 m2 lots at
2
prices between US$4 and US$9 per m are envisaged. These figures apply,
in the majority of cases, to semi-urbanized areas where only essential
services are provided.
 - 65 -

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 - 66 -

Both sets of circumstances lead to a conclusion that the poverty

lines drawn at double the minimum food budget allow reasonable coverage -- in

the countries examinedi/ -- of the resources essential for renting a minimum

dwelling, or purchasing it if adequate financing is available. In any event,

the fact that this type of financing is scarce, and that the rental market for

low-cost dwellings is limited, makes it necessary to view housing needs fron a

wider standpoint than that of poverty.

F. Access to public services

The welfare of low-income groups depends heavily on whether or not

they have access to free or highly subsidized public services such as

education, health care and recreation!!. In practice, inequalities of access

to these services in some countries impair the distribution of welfare

obtained through private consumption and aggravate the incidence of poverty.

This suggests the need to take account of the actual access of each

household to these services when minimum private consumption budgets are being

computed, so that the dimensions of poverty can be ascertained with greater

1/ Perhaps with the exception of Brazil (see Table 8).

2/ In view of the direct impact these specific services -- which substitute

for private consumption expenditure -- have on the welfare of each
households, further imputation to households of the cost of collectively
shared "public goods" (Aaron and McGuire, 1970) proves, in the best of
circumstances, to be a problem either remote from the present analysis or
best left aside, as proposed by Meerman (1977), on the grounds that,
given their inevitability, they should be regarded as general public
services.
 - 67 -

precision, but, unfortunately, only very few quantitative studies are

available on this question!/.

In consequence, it cannot be said which of the households below the

poverty lines based on private consumption have effective access to free

public services and are therefore less poor than households with the same

purchasing power but no access to them. Perhaps more significant still is the

lack of knowledge on households which may show consumption expenditure above

the estimated poverty lines while being deprived of education, health and

sanitary services and therefore unable to satisfy their basic needs.

In these circumstances, it is only possible to ascertain whether

poverty-line budgets allow reasonable coverage of the complementary private

consumption expenditure households have to incur to ensure their access to

free public services, since capacity to sustain that expenditure is a

necessary -- though not sufficient -- condition for securing such access.

The surveys referred to in Table 7 show that the households selected

as relevant for analysis of the consumption patterns applicable to poverty

thresholds had direct education-related expenditure of US$4-10 and health-

related expenditure of US$30-80 per year per household in 1970. These amounts

were barely sufficient to cover complementary expenditure on school supplies

and medicines, respectively.

Beyond this verification, the only possibility is to reflect on the

reach of public social infrastructure services in each country and on the

1/ Attention is drawn to the study by Selowsky (1976) on the distribution of

public services by income groups in Colombia, which included a survey on
the actual access of households to the following: education, health
care, electric power, running water, sewerage, public lighting and trash
collection. Also notable is the study by Foxley, Aninat and Arellano
(1976) on the incidence of public expenditure; it included an examination
of the distribution of expenditure on education and health care, based on
the results of user surveys.
 - 68 -

probability that the poor have access to them. In itself, this question is

important in the inter-regional comparison of the results obtained, since if

that probability is less in one country than in another, the former may have

more instances of non-satisfaction of basic needs than are apparent fran the

poverty lines.

As the provision of social services in the Latin American countries

is predominantly publicl/, national differences in the reach of these services

is reflected approximately by the indicators given in Table 9.

The magnitude of each indicator can be taken as representing the

probability of access the population of the particular country has to the

various services. If the service were equitably distributed, this probability

would be the same for all social strata. However, everything points to the

fact that low-income groups experience the greatest difficulties of access to

available social services and that their probability of access is therefore

below the average. And perhaps that probability diminishes even further the

less extended a particular service is, since restricted conditions of supply

tend to favor access by the middle and higher groups in the population.

This line of reasoning is borne out by an examination of Table 9,

which shows that children from poor households in Argentina or Chile have a

seven percent probability of not attending primary school, while that

probability is over 40 percent in Ecuador and Mexico. The probabilities of

non-access to secondary schooling are over 70 percent in some countries and as

high as 85 percent in others.

Likewise, the probabilities of access to health care services are

triple (in Argentina and Uruguay) or double (in Brazil, Chile, Costa Rica and

1/ Whether provided by public agencies or, as with health care services, by

the social security system.
 - 69 -

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 - 70 -

Panama) those observed elsewhere (in Colombia, Mexico and Peru); confirmation

of this is seen in the differences in the probability of death between one and

four years of age. The probability that the low-income urban population will

have potable water supply is considerably less than 70 percent in almost all

countries in the region, while the probability they will have sewerage service

is barely 35 percent.

It should also be remembered that this rough attempt to summarize

the situation as regards probable access among the poor to public services

excludes any consideration of the differences in the quality of these

services, as between countries or as between poor and more affluent groups.

The appreciable differences in the probabilities of access to

education and health care among low-income population groups in the various

countries examined blur to some extent the comparability of those estimates of

the poverty dinmension obtained from private consumption poverty lines.

Probabilities of access to urban infrastructure services, on the other hand,

seem to have no significant effect on that comparability. This is not to say,

however, that, in combination with problems of access to adequate housing,

they are not typical of the housing deficit situations which affect more

households in each country than those lying below the national poverty lines.

That being so, further attention should be given to the problem of

access by the poor to each type of public service so that the present figures

on the incidence of poverty in Latin America obtained from the study of

private consumption may be qualified in some fashion.

G. Resulting poverty lines

Table 10 shows the poverty lines estimated according to the

procedures explained. Given for each country in its own currency at 1970
 - 71 -

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 - 72 -

prices, they signify the levels below which households are regarded as being

unable to satisfy their basic needs.

"Destitution lines" are also given, corresponding to the cost of

each country-specific minimum food basket, it being very probable that

households with total incomes below these levels suffer severe nutritional

deficitsl/.

The poverty lines are expressed in national currencies so they may

be compared unequivocally with household incomes in the particular country.

The widespread practice of expressing them in dollars leads to all the

difficulties inherent in the international comparison of prices and of the

purchasing power of different currencies.

In order to facilitate comparison of the poverty lines obtained for

the Latin American countries both among themselves and with those employed in

worldwide studies (World Bank, 1975b; ILO, 1976), conversion into dollars is

nonetheless conveinent. This has been done in Table 11 in two alternative

ways, the first of which utilizes dollar exchange rates2/.

The estimated minimum food budgets -- which we have also taken as

constituting destitution lines -- vary from US$70 to US$130 (at 1970 prices)

per capita per year, depending on the country. This relative uniformity can

be ascribed to the absolute nature of the poverty criterion utilized and to

the application of the same procedures in establishing consumption standards.

1/ All reference to "extreme", "grave" or "critical" poverty has been

avoided since these adjectives have no precise conceptual content.

2/ In order to avoid possible distortions resulting from the restricted

applicability of official exchange rates, use is made of the average
exchange rates at which each country paid for its imports.
 -73-

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 - 74 -

The corresponding lines of absolute poverty therefore vary between

US$1$50 and US$250 (1970 prices) of annual household consumption per person,/.

These levels are somewhat higher than those employed in the

previously mentioned global studies to obtain regional estimates of poverty.

For the most part, the differences are ascribable to the fact that the present

estimates are explicitly normative and more area-specific.

The World Bank (1975b) uses two arbitrary lines of US$50 and US$75

(1969 prices) per capita to estimate the numbers of the poor in the developing

countries. However, these lines tend essentially to reflect subsistence

conditions prevailing in the rural areas of Asia and Africa, where 80 percent

of the developing world's poor are concentrated (World Bank, 1975b, p. 79) and

include only a very modest allocation for basic non-food needsll.

ILO (1976) sets a minimum subsistence income of US$50 per capita and

a poverty line of US$100 for Asia, and on that basis estimates a "destitution"

line of US$90 per capita and a "serious poverty" line of US$180 per capita per

annum for Latin Americ,3/.

The poverty lines shown in Table 11, converted to dollars in terms

of exchange rates, represent the sum in international-trade dollars that would

be needed to purchase the staple basket within the particular country, but

they may be deceptive to the extent they suggest a lesser quantum of goods --

1/ It may be useful to know that these sums would be US$205 and US$340,
respectively, at 1975 prices.

2/ Similar estimates, from the same source, on the minimum nutritional needs
of the rural population of certain Latin American countries are
comparable in value to the minimum food budgets employed in the present
text for rural areas and which vary between US$65 and US$100 (1970) per
capita.

3/ On "the hypothesis that a typical basket of products consumed by the poor

which costs one dollar in Western Europpe may be bought for 20 cents in
Asia .... and 36 cents in Latin America". (ILO, 1976, p. 23).
 - 75 -

by comparison with the industrialized economies -- than that actually

involved. For instance, they are not directly comparable with real per capita

income in the countries to which they apply when that incomne has been

calculated in dollars using purchasing power parities that match each

country's price levels with those of the US up to the point at which they

represent the same purchasing power (Gilbert and Kravis, 1954; Kravis,

Kennessey, Heston and Summers, 1975). Even less do they represent the sums

that would be required in the U.S. to pay for an"equivalent" staple basket.

In all the Latin American countries in 1970, purchasing power parities with

the U.S. were lower than the respective exchange rates (ECLA, 1977) as a

result of lower relative price levels for the goods which make up the

expenditure component in GDP. Put in other terms, the internal purchasing

power of the local currency equivalent of one dollar at the exchange rate was,

in all countries, superior to that of the dollar.

The usefulness of the second criterion employed in Table 11 is

therefore apparent, as it allows the conversion of poverty lines to dollars

through purchasing power parities of the Latin American countries employed at

the present time by ECLA (1977). According to this second criterion, the

estimated minimum food budgets would be between US$90 and US$150 per capita

and the lines of poverty between US$160 and US$300 per capita per annum.

But even this conversion criteria only takes account of general

price levels in each country and in the U.S. Private consumption price levels

in the Latin American countries may prove to be 30 percent and even 40 percent

below the U.S. level (Braithwaite, 1968; Grunwald and Salazar, 1975).

Consequently, the internal purchasing power of certain Latin American

currencies in relation to consumption goods may be over 60 percent higher than

it is internationally. Given the even lower relative levels of staple food

 - 76 -

prices, the purchasing power of the same currencies in relation to this class

of goods is higher still. An approximate costing of the standard staple food

baskets at the prices paid in the U.S. for goods as nearly similar as possible

resulted in food budgets of between US$240 and US$300 (1970 prices) per capita

per annum, and over US$400 for Argentina and Uruguay1/ (V. Annex D). Although

these calculations are biased toward overestimation, owing to the inevitable

inclusion of better-quality goods that make up the basic Latin American

baskets, they do demonstrate that in Latin America the latter probably cost

well under 50 percent of what they would in the industrialized countries.

International comparison of the poverty lines estimated for the

Latin American countries may leave an impression they are too high. From the

standpoint of guaranteeing mere subsistence at the cheapest cost possible,

that may be true. But the poverty lines estimated here correspond to a

standard of basic needs satisfaction in the framework of the patterns of

consumption, expectations and technology of needs satisfaction projected by

the style of development prevailing in the Latin American societies. In terms

of the distinction drawn by Sen (1978), these lines are more "cultural" than

"physiological". The definition of dietary standards that take account of

local habits, and the estimation of standard minimum budgets based on actual

allocation of resources to each group of goods, mean that these absolute

poverty lines have been drawn with reference to the predominant style of

living.

This predominant lifestyle, to which the great majority of the

population of Latin America aspires -- in actual fact, and from a deep sense

1/ Compared to the $330 per capita minimum food budget covered by the
poverty line of $992 per capita per annum estimated in 1970 for a four-
person family by the U.S. Social Security Administration (1975).
 - 77 -

of conviction, which is the source of its predominance -- is not necessarily

expressed in the magnitudes associated with average welfare. It is the

lifestyle projected from the industrialized countries and which, in Latin

America, is transmitted through consumer marketing, the mass media and the

values of the leading groups.

This accounts for the considerable uniformity in the style of living

to which the mass of the population in almost any Latin American country

aspires, a uniformity that lies beyond any differences in welfare or resource

levels. As far as the procedure of measurement was concerned, this fact

facilitated the drawing of poverty lines based on specific norms for each

country but which responded to the same normative criteria. Nevertheless, it

was the poverty lines applicable to urban areas that were drawn on a specific

basis; the lines applicable to the rural population were derived from the

former, so that lines applicable on the national scale could be obtained.

Apart from the scant nature of the data available on levels of living in rural

areas, already referred to, it might be argued that rural communities do not

share the lifestyle seen in the cities of Latin America. This is undoubtedly

the case as far as average levels of living are concerned, but the extent of

rural emigration to urban areas demonstrates that the lifestyle which may be

considered predominant, and which is in evidence among affluent urban groups

and in the attractions of the urban environment, is also the point of

reference and aspiration for the majority of the rural population. In those

countries where the traditional lifestyle of the rural community continues to

exert an attraction -- though at welfare levels which are higher than the

present average -- our poverty lines will tend to overestimate the magnitude

of rural poverty to some extent.

 - 78 -

At all events, the poverty lines estimated here constitute a valid

tool in the present exercise, aimed at obtaining a comparative evaluation of

poverty. They may also provide the starting point for closer research in each

country, but for that purpose they would of course have to be verified through

actual field studies. Furthermore, they might be utilized in the formulation

of policy, although in that case the particular Government should review the

underlying normative criteria to ascertain whether they coincide with its own

judgments.

VI

THE EXTENT OF POVERTY IN THE LATIN AMERICAN COUNTRIES

Estimates are that 40 percent of households in Latin America live in

poverty, meaning that they cannot purchase the minimum basket of goods

required for the satisfaction of their basic needs, and that 20 percent of all

households live in destitution, meaning that they lack the means of buying

even the food that would provide them with a minimally adequate diet.

These estimates have been obtained by applying the lines of absolute

poverty and destitution to approximate distributions of households by level of

per capita consumption in the major countries of the region.

A. The data on income distribution and consumption

The reasons why per capita household consumption provides the best

approximate measure of the level of living have already been given.

Therefore, the poverty lines estimated as per capita figures for all

households, regardless of their size, should cut off the distribution of

households by size of their per capita consumption.

Data on the distribution of income by size, collected during one or

more household surveys conducted about 1970, are available for each of the

countries considered (V. Annex E). For some countries, it was also possible
 - 79 -

to obtain special tabulations on the distribution of households by levels of

per capita consumptioriL. In the remaining cases, estimates of the incidence

of poverty had to be based on available distributions by household income

level and per capita income level, and on data showing the ratio existing

between the distribution of households according to those concepts and

according to per capita consumption.

In Latin America, household income as measured through household

survey data is very often significantly underestimated, and to degrees that

differ depending on the type of income (Altimir, 1975). Such biases lead to

overestimation of poverty defined in absolute terms, and, since they differ

according to the type of income, they also affect the measurement of poverty

defined in relative terms. It is therefore necessary to adjust distributions

by income levels when they show significant bias, in an attempt to cancel out

its effects.

Given the limitations of the data available, all surveys taken

around 1970 in the countries considered were used simultaneously in estimating

the incidence of poverty, provided they were reasonably reliable; these are

the surveys listed in Annex E. A number of them cover urban areas only,

although there is at least a survey having national coverage for almost all

the countries; in these cases, estimates were made at both levels.

The poverty lines given in Table 10 were recalculated at the prices

in force during the period of reference of each survey so that they could then

be used as cut-offs on the respective distributions.

1/ These tabulations were kindly provided by the Office of the Coordinator,

ECIEL Program, from survey data obtained in Colombia, Chile, Ecuador,
Peru and Venezuela.
 - 80 -

Annex E indicates the percentages of households below the lines of

poverty and destitution obtained when drawing those lines across the original

distributions available from each survey, depending on whether households are

classified according to total household income, per capita household income or

per capita household consumption. As a rule, these results are affected by

biases of under-declaration and by omissions associated with the concept

utilized, and, in the majority of cases, because they are based on total

household income rather than per capita consumption.

So as to have estimates of the incidence of poverty in each country

that would be more precise and more easily compared, survey results were

adapted in successive steps. In the first instance, the distributions by size

for each income type were adjusted to the corresponding estimates from the

national accounts, in an effort to cancel out the effects of under-declaration

and omission in each survey. Further corrections were then made to reconcile

distributions by income level with the concept of disposable household income.

The proportion of households in which per capita consumption lies

below the poverty line is generally lower than the proportion of households in

which total income falls below the corresponding lines of poverty per

household'/. The regrouping of households occurring with the conversion from

per household figures to per capita figures may have some influence on this

result, although on occasions it has a slight effect in the opposite

direction. But what does deternine that result, in almost all the household

budget surveys analyzed, is that the households at the base of the pyramid

show more expenditure than income. Even allowing for the general

1/ In general, the transformation of poverty lines from per capita figures

to per household figures was effected by employing average household
sizes around the poverty threshold.
 - 81 -

underestimation of income in some of the surveys, between 30 and 60 percent of

households with lower incomes show consumption/income ratios considerably

greater than unityl./

It has been suggested that these results are caused by short-term

disequilibria in many consumption units due to purchase of durable goods and

receipt of transitory income (Musgrove and Howe, 1973; Prieto Duran, 1977).

But the widespread occurrence of such situations and their systematic

appearance in all the surveys weakens this explanation. Another possible

source of real dis-saving may be found in the nominally growing indebtedness

in periods of inflation. But even so, the impression lingers that consumption

is measured more accurately than income -- even after more or less general

adjustments are made to this variable -- or that income measurement does not

fully capture the accumulation of resources that low-income households manage

to obtain in order to cope with their deprivation.

These lines of reasoning and the information obtained from certain

surveys were used as the basis for transforming distributions by income level

into assumed distributions by per capita consumption, the latter being

regarded as reasonable approximations, at least for the lower half of the

pyramid.

B. The incidence of poverty

Data from the various surveys conducted in each country served as

the basis for estimating the indexes of the incidence of poverty presented in

Table 12. These reveal the percentage of poor and destitute households in the

urban areas of each country examined and at the national level. The table

also slhows the percentages of incidence deduced residually for rural areas,

1/ V. Junac (1976) and Musgrove (1976).

 - 82 -

but, given the limited nature of the basic data and the procedures utilized,

these percentages should be regarded as no more than rough approximations of

the extent of rural poverty.

TABLE 12

ESTIMATES OF THE INCIDENCE OF POVERTY AROUND 1970

% of households % of households
below the poverty line below the destitution line
Urban Rural National Urban Rural National

Argentina 5 19 8 1 1 1
Brazil 35 73 49 15 42 25
Colombia 38 54 45 14 23 18
Costa Rica 15 30 24 5 7 6
Chile 12 25 17 3 11 6
Honduras 40 75 65 15 57 45
Mexico 20 49 34 6 18 12
Peru 28 68 50 8 39 25
Uruguay 10 --- --- 4 --- ---
Venezuela 20 36 25 6 19 10
Latin America 26 62 40 10 34 19

In certain countries (Brazil, Colombia, Honduras), over a third of

urban households were in a poverty situation, unable to cover their basic

needs. In Mexico, Peru and Venezuela, between 20 and 30 percent of urban

households were poor. In countries such as Costa Rica, Chile or Uruguay,

however, the incidence of urban poverty was between 10 and 15 percent.

Argentina showed an even lower incidence, only five percent of urban

households living in poverty.

The incidence of poverty among the population as a whole in each

country is considerably higher than in urban areas, as a consequence of the

more widespread poverty in rural areas. In countries such as Honduras, it can

be said that two thirds of the population was living in poverty around 1970.

In Brazil, Colombia and Peru, poverty affected between 45 and 50 percent of

 - 83 -

all households. In Mexico, over a third of the total population was poor,

while in Costa Rica and Venezuela poverty affected 25 percent of the

population. In Chile, however, approximately only one-sixth of all households

were poor, while in Uruguay the proportion was probably lower; in Argentina,

it is very likely that less than 10 percent of the population was poor.

These estimates of the incidence of poverty at the national level

incorporate an evaluation of the extent of rural poverty assessed on normative

standards more comparable with urban standards than many anthropologists

working in the region's most traditional and conservative rural communities

would think desirable. It must also be recognized that available figures on

rural incomes are less reliable than those measuring urban incomes.

Despite these shortcomings, the percentages of incidence of rural

poverty included in Table 12 and derived from the incidence estimated to exist

at the national and urban levels provide a fairly good indication of the

relative magnitude of the problem in each country. The extent of rural

poverty would certainly not be less than 20 percent in Argentina, Costa Rica,

Chile or Uruguay. In Colombia, Mexico and Venezuela, it could affect between

a third and a half of the rural population. In Brazil and Peru, over two-

thirds of rural households are probably poor. In countries like Honduras,

poverty may be so widespread in the countryside as to affect three-quarters of

the rural population.

Within the framework of these estimates on the incidence of poverty,

attempts have also been made to isolate the probable incidence of situations

of destitution or, where the purchasing power of a household is too low to

cover even the cost of minimum food needs. The figures given in Table 12 may

be taken as relatively more reliable for urban areas than for rural areas,

where such situations are more difficult to assess using an overall yardstick.
 - 84 -

In countries like Brazil, Colombia, Honduras and Peru, between 10

and 15 percent of urban households may have been destitute or indigent. In

the other countries, there was thought to be 5 percent destitution, the one

exception being Argentina, where levels of urban destitution were

negligible. As a general rule, between a third and a half of the urban poor

were also destitute.

Judging by the information available, and after making the

adjustments mentioned already for underestimations, omissions and changes in

concepts, the national-scale estimates obtained suggest that in Brazil,

Colombia and Peru, the number of destitute households may have amounted to and

even exceeded 20 percent of the population, so that approximately half their

poor were also destitute. In Mexico, destitution affected 12 percent of the

population and in Venezuela 10 percent, the implication in both cases being

that roughly a third of the poor were destitute. In both Costa Rica and

Chile, destitution affected slightly over five percent of all households. In

Argentina, only a very minor proportion of the poor were also destitute.

It would also seem from Table 12 that in countries like Honduras the

majority of the poor are destitute, a situation which therefore extends to

between a third and a half of the general population.

The extent of destituion in rural areas, which underlies these

estimates drawn up on the national scale, needs to be interpreted with

considerable caution. One question that arises is whether the destitution

lines can be applied uniformly to all the rural areas of a country, mainly in

view of the effect that production for self-consumption can have in enabling a

household to adapt successfully to an extreme scarcity of resources. Another

problem arises from the fact that adjustments made to the original data base,

for underestimation of both production for self-consumption and wages in kind,

 - 85 -

were based on general criteria that may not reflect the diversity of

situations observable among rural households with very low incomes.

But even if these caveats are respected, the estimates of rural

destitution given in Table 12 are still an indication that in some cases the

problem is of terrifying magnitude. More than half the rural population in

Honduras, and approximately 40 percent of it in Brazil and Peru, may be living

in destitution. Extreme deprivation may affect roughly 20 percent of rural

households in Colombia, Mexico and Venezuela. Only in Costa Rice and Chile

would rural destitution be as low as 10 percent, while in Argentina it is

perhaps of negligible significance.

It may be stated that the estimates of the incidence of poverty

obtained are the lowest that can result from application of the normative

standards formulated. Annex E sets out the figures that would be obtained in

the first instance if poverty lines were directly applied to the original data

generated by each survey -- as published by the entities which carried them

out -- before any adjustment for underestimation or any attempt to convert

them into the concept of per capita household consumption. In all cases,

these figures would give percentages of incidence of poverty higher than those

estimated in Table 12.

There is, moreover, a possible source of underestimation of poverty

in the adjustments based on the average ratios for each type of income and

socio-economic group, which possibly exaggerate to some extent the magnitude

of the components omitted by the poor when reporting the size of their

incomes.

Taken as a whole, the countries examined in this exercise hold 80

percent of the regional population. The results obtained for each of them

served as the basis for estimating functions of the incidence of poverty among
 - 86 -

the urban population and in the population as a wholel, which were then

utilized in approximating the percentages of households afflicted by absolute

poverty and by destitution in the entire Latin American population.

According to these approximations, 40 percent of Latin American

households were poor, the incidence of poverty among urban households being 26

percent and among rural households 60 percent.

As may be seen from Table 13, these estimates are close to those put

forward by ILO (1976) for the region as a whole. On the other hand, they are

considerably higher than those used by the World Bank (1975), which result

from utilization of a single overall poverty line drawn on the basis of

conditions prevailing in Asia, and which reflects standards that prove very

low for Latin America.

It is consequently apparent that in Latin America around 1970 there

were almost 40 million urban poor, and, if one accepts that there were also 68

million rural poor, in the region as a whole 107 million persons -- 21 million

households -- were then living in poverty. Furthermore, almost half these

households were indigent, without sufficient resources to provide themselves

even with a minimum adequate diet, let alone their other basic needs.

1/ These functions, estimated for eight countries, were:

H(P)NAC = 244,03 - 31,97 ln PIBPC r2 = 0,744

(4,883) (4,119)
H(P)URB = 154,05 - 19,93 ln PIBPC r2 = 0,661
(4,078) (3,397)
H(I)NAC = 182,34 - 25,52 ln PIBPC r2 = 0,727
(4,381) (3,948)
H(I)URB = 67,79 - 9,15 ln PIBPC r2 = 0,675
(4,034) (3,506)

where: H(P) : percentage incidence of poverty

H(I) : percentage incidence of destitution
PIBPC: GDP per capita in 1970 dollars.
 - 87 -

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 - 88 -

C. The poverty gap

Indexes of poverty incidence measure the percentage of the

population that is poor without indicating the extent to which the incomes of

the poor lie below the poverty line.

Assuming, with Sen (1976):

n: the total population

z: the income corresponding to the poverty line

q: the number of poor persons (whose yi ' z)

m: the average income of the poor

m*: the average income of the population

Yi: the income of the individual i

ci: the consumption by the individual i

then the measurement of the incidence of poverty is:

H = i1
n
But for each individual i,

9 z Yi-
an equation that defines his income gap with respect to the poverty line. The

aggregate poverty gap would then be:

T = 9g = q(z - m)
i=

This measure does not show the number of poor persons, but only the

aggregate income shortfall of all the poor taken as a group, or, in other

words, the total amount of income that would bring all the poor -- whatever

their number -- up to the poverty line.

 - 89 -

However, as Sen (1976) points out, that measure can be easily

normalised as a percentage per capita gap which indicates the average income

shortfall of the poor as a group with respect to the poverty line:

T z-m
qz z

Sen (1976) has called attention to the fact that T and I are

insensitive to relative income differences among the poor, while H is

insensitive to the distance at which the poor stand below the poverty line.

It is for those reasons that he proposes an index which incorporates income

inequalities among the poorl/. As the estimates of the extent of poverty

given in this text are based on grouped data, this index may prove deceptive,

since only income differences between groups of the poor could really be taken

into consideration, within-group income differences being left to one side;

the result would be no more than a partial approximation to the weighting by

rank order required by Sen's poverty index.

1/ Sen's poverty index (1976) is:

P = H[l - (1-I) (1 - G(q/q+l))]

where G is the Gini coefficient of income distribution among the

poor. For large q , this expression becomes:

p = i [I + (1 - I)G]

while its standardized value, when each Yi = m , is:

P = II x 1 - q/n(z-m/z) .

Sen's proposed measure of poverty uses an ordinal approach to welfare

comparisons, assigning a greater weight to the income of a poorer person,
on grounds of equity. It is this weighting by rank order than has the
effect of correcting the average deficit of the poor by the Gini
coefficient of their income distribution, weighted by the ratio between
the average income of the poor and the poverty line.
 - 90 -

This present study therefore restricts itself to computing the

poverty index, without considering income distribution among the poor:

P = H x I =
n
Z-m
z
= T
nz
;

in other words, the aggregate income gap of the poor is being expressed as a

fraction of the total inccme required to maintain the entire population at the

acceptable minimum level represented by the poverty line. This index takes

into consideration both the proportion of the poor within the population (H)

and their average income gap (I).

The poverty gap T may likewise serve as a base for other

indicators. Since the poverty lines represent consumption levels, and since

Yi = Ci , an index may be formulated to express the additional consumption

T the poor would need to raise themselves to the poverty level as a fraction

of aggregate consumption.

A more frequently used index relates the poverty gap T to the GNP

of the particular country. Perhaps it would be more appropriate to express --

as Sen (1976) points out and as Anand (1977) in fact does -- the poverty gap

sa a fraction of total household income:

M = T P
nm* m*

and also, as Fishlow (1972) does, to compute the complementary index F

which expresses the poverty gap as a percentage of the total income of the

non-poor:

F =
nm* - qm
 - 91 -

Nevertheless, as Anand (1977) points out, these indexes are not so much

measures of poverty as indicators of the degree of effort required to

alleviate it, since they are sensitive to any change in the aggregate income

of the population above the poverty line, even though the income of the poor

might remain unchanged.

Table 14 sets out estimates of the income gap of the poor on a

national scale for each of the countries examined, in terms of the various

indicators analyzed, together with the estimated incidence of poverty (H).

TABLE 14

ESTIMATES OF VARIOUS MEASURES OF THE INCOME GAP

OF THE POOR, BY COUNTRY, AROUND 1970 a/
(percentages)

H I P M F

Argentina 8 25.5 2.0 0.6 0.6

Brazil 49 46.2 21.6 7.0 7.6
Colombia 45 48.8 19.9 8.0 8.8
Costa Rica 24 43.6 9.9 3.6 3.8
Chile 17 43.3 6.2 2.1 2.2
Honduras 65 50.9 30.8 17.4 20.9
Mexico 34 39.2 12.4 4.1 4.3
Peru 50 55.2 26.1 11.8 13.1
Venezuela 25 37.5 7.1 2.5 2.6

a/ V. test for definition of each.

In the formulation of policies designed to attack poverty, great

caution should be exercised in interpreting the meaning of indicators deriving

from the concept of the poverty gap.

 - 92 -

In conceptual terms, the poverty gap reflects the proportion of the

community income that would have to be transferred directly -- without

leakages -- to the poor in order to raise them, at a given moment, to the

minimum levels of purchasing power that would enable them to satisfy their

basic private consumption needs.

It would be naive, however, to treat this measure of the poverty gap

as indicative of the actual amount that would have to be transferred in order

to eliminate poverty in each country. In the first place, to raise low

incomes permanently requires investment rather than current transfers of

incane, and in trying to obtain an approximate idea of the resources involved

capital/income ratios of at least 2 would have to be contemplated, not to

mention complementary investments in infrastructure, training and additional

financing. Secondly, allowance would have to be made for the size of the

leakages of resources to be expected in administering new redistribution

schemes through bureaucratic machinery never highly regarded for its

efficiency. In the third place, allowance would have to be made for the

diversion of resources by the beneficiaries of poverty-alleviation programs

themselves to ends not consistent with the objectives of those programs,

diversions which may well prove less effective in satisfying their basic needs

over the longer terunJ/. When general policy measures that call for indirect

action are being considered, thought would likewise have to be given to the

proportion of the resources mobilized for those measures that benefit other

1/ It may be useful to recall, in this respect, that the allocation of a part

of income to the satisfaction of needs that may be regarded as not
essential for subsistence but which are "culturally'" basic was taken into
account in the drawing of poverty lines according to the procedures
explained earlier.
 - 93 -

groups in the population, and which therefore cannot be accounted for as

offsetting the poverty gap.

Finally, it should be remembered that these measures of the gap take

no account of the magnitude of the penury of access to basic public services

which afflicts the poor, so that they consequently given no indication of the

size of the social resources that would have to be applied in providing such

services.

If these caveats are heeded, the estimates of the poverty gap

presented in Table 14 can, in the majority of cases, furnish a comparative

idea of the relative degree of sacrifice that would be involved in strategies

designed to alleviate poverty in various Latin American countries.

The indicator I is a measure of the depth of poverty: in almost

all the countries in question, the poor as a group have an average purchasing

power from 40 to 55 percent below the poverty line. Only in Argentina, where

the national incidence of poverty (H) is considerably less than that observed

in the other countries, is the average deficit in purchasing power as low as

25 percent.

The indicator P , which combines the incidence of poverty (H) with

its average depth (I), shows that in some countries (Brazil, Colombia,

Honduras, Peru) the aggregate income gap of the poor amounts to between 20 and

30 percent of the total income the poor as a group would need to put them

uniformly at the level of the poverty line. In others (Costa Rica, Mexico),

this indicator is in the vicinity of 10 percent, while in Argentina, Chile and

Venezuela it is significantly lower.

The poverty gap, as a proportion of total household income (M) or,

even more significantly, of the total household income of the non-poor (F),

gives an idea of the magnitude of the problem in each country, in terms of

 - 94 -

resources. In countries such as Honduras, income shortfall of the poor

amounts to 20 percent of the aggregate income of the non-poor, and in Peru to

13 percent. In countries with a high incidence of poverty but a better

overall situation, like Brazil or Colombia, this insufficiency represents less

than 10 percent of the income of the non-poor. Even in Mexico, and also in

Costa Rica, this indicator is around five percent. In countries with a lower

incidence of poverty, the aggregate poverty gap is still less: a little over

two percent in Chile and Venezuela, and below one percent in Argentina.

For the majority of countries in Latin America, the dimensions of

the poverty problem appear manageable, at least as regards the magnitude of

the economic resources involved and bearing in mind the considerable

additional resources that would be required in providing basic public

services.

At all events, the magnitudes of these indicators cannot be taken as

direct measures of the feasibility of implementing particular programs or

strategies designed to eliminate poverty. The poverty existing in the Latin

American countries is rooted, historically and technologically, in their

present style of development. To reorient that style so that basic needs

satisfaction became one of the community's highest priorities would involve a

significantly greater proportion of resources as well as considerably more

social conflict than such measures themselves would seem to suggest.

D. The relative dimension of poverty

The dimensions of poverty examined up to this point have been those

associated with situations of absolute deprivation defined against norms taken

to reflect the minimum physiologically and culturally adequate levels of life

that allow for a dignified existence and for participation in the predominant

style of living.
 - 95 -

This exercise in evaluating the poverty problem in semi-developed

countries would not be complete, however, without a glance at the dimensions

of the problem when viewed from the standpoint of a relative definition which

assesses deprivation in terms of the average levels of needs satisfaction in

each society.

A comparison of the two types of poverty measures throws light on

such important facets of the problem in each country as: how much inequality

there is in absolute poverty; how far the norms of basic needs satisfaction

lie from average resource availability in that country; the extent to which

existing inequalities may give rise to relative deprivation that goes beyond

the absolute minima.

The same body of data on the distribuion of income and consumption

in each country has been used to draw lines of relative poverty according to

the norm suggested by Atkinson (1975), namely that relative deprivation be

defined as less than half the average per capita income of all households.

Although arbitrary, this norm has the advantage of being based on an

unambiguous notion of social justice, the unequivocal nature of which is

highlighted by the fact that the most affluent 10 percent of households

usually have an income five times the average. The results obtained are set

out in Table 15.

For the majority of countries, when poverty is defined thus it

affects a significantly higher proportion of the population than when it is

defined according to absolute norms. Even in those countries with the highest

incidence of absolute poverty, application of the relative norm raises the

number of households regarded as poor by between two and five percent. Where

the incidence of absolute povety is less severe, relative deprivation will

affect between 10 and 20 percent more households. In countries such as

 - 96 -

Honduras, however, the magnitude of absolute poverty exceeds the proportion of

households that would fall below the relative norm, linked, as it is, to the

country's scarce average resources.

TABLE 15

ESTIMATES OF RELATIVE POVERTY, AROUND 1970

% of households below the a/

line of relative poverty a
Urban National

Argentina 27 28
Brazil 52 54
Colombia 43 48
Costa Rica 34 36
Chile 38 39
Honduras 40 58
Mexico 44 48
Peru 34 48
Uruguay 25 --
Venezuela 37 38

Generally speaking, there are fewer disparities among the Latin

American countries when poverty is measured in relative terms than when it is

measured in absolute terms. Among countries with an approximately similar

degree of social inequality, it is in those where average resource

availability is lower that the incidence of absolute poverty is clearly more

severe.

The differences in relative poverty on the national scale shown in

Table 15 reflect differences in the degree of inequality between the lower

half of the social pyramid and the rest of it. In the countries where those

inequalities are greater, half the population live below the relative norm,

and in the remaining countries -- with the exception of Argentina, and perhaps

Uruguay -- something over a third of them do.

 - 97 -

In part, these differences are a result of the inequalities

prevailing within the rural sector. There is greater uniformity in the

incidence of poverty in urban areas, where it is defined with respect to

average urban income. It will be observed from Table 15 that, in almost all

countries, from 35 to 45 percent of the urban population is below the relative

norm. Only in the urban areas of Brazil can somewhat over half the population

be regarded as living in relative deprivation. At the other end of the scale,

relative poverty affects approximately a quarter of the urban population of

Argentina and Uruguay.

 - 98 -

Annex A

FOOD NEEDS ASSUMED

Table A-1

FOOD ENERGY NEEDS PER CAPITA FOR A_b7ODERATELY ACTIVE-/

POPULATION; ADJUSTED FOR WEIGHT- BY AGE AND SEX
(calories per capita per day)

Children Additional for

both~
both Adolescents Adultsprgato pregnant or
sexes Males Females Males Females nursing woman

Under age 1 1090

1- 3 1360
4- 6 1830
7- 9 2190
10-12 2600 2350
13-15 2900 2480
16-19 3070 2310
20-39 3000 2200
40-49 2850 2090
50-59 2700 1980
60-69 2400 1760
70 and over 2150 1540

SOURCE: Calculated as per needs established by FAO/WHO, Technical Reports

Series No. 552, Technical Bulletin No. 52, 1971.
a/ Frame of reference: the activities of a population are generally
classified as light, moderately. active, very active or extremely
active.

b/ Assumption: male and female adults, 65 and 55 kg., respectively

(in developing countries).
 - 99 -

Table A-2

MINIMUM INTAKE OF HIGH-QUALITY PROTEIN AND PROTEIN OF 70% QUALITY

(grams per capita per day)

Age and sex High-quality a/ Adjusted b

protein needs- Intake -

Children
1-3 16 23
4-6 20 29
7-9 25 35
Adolescent males
10-12 30 43
13-15 37 53
16-19 38 54
Adolescent females
10-12 29 41
13-15 31 45
16-19 30 43
Adult males 37 53
Adult females 29 41
Supplement pregnant woman 5.5 7.9
Supplement nursing mother 17 24.3

SOURCE: Calculated as per needs established by FAO/WHO, Technical

Report Series No. 552, Technical Bulletin No. 52, 1971.

a/ Provided by milk or eggs.

b/ Assumed that the quality of the protein obtained from the diet in
the Latin American countries is about 70 percent of that obtained
from milk or eggs.
 -100-

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 Annex e

ESTIMATES OF THE INCIDENCE OF POVERTY AROUND 1970, BY COINTRY, BASED ON ORIGINAL PATA_/
OBTAINED FROM AVAILABLE HOUSEHOLD SURVEYS
(percentages of ill households covered by each survey)

Slscrlhotion by levels of:

Total vanita Per cavita
Title of Survey E.ec.ting ageacy.L/ Coverage./ Year household hoosehold ho-sebeld
tnco=e incorue covouryt ion
Hoo.eholds below lIne of:
Poverty Indigence Poverty Indigence Poverty Indlve-ce

Argentina E.coesta sabre Presoponston Fa=iliares INDEC/ECIEL AM 1070 l.A 0.3

Encoesta de Empleo y Deoexpleo INDEC AM IQ7n 2.3 n.4 5.( 0.4

Brazil Censo de Poblocion N 1°70 63.5 ?5.6

Pesquisa Nacional por Axostra de Doaicilios IBGE N 1972 SS.9 33.6
U 1072 46.0 20.0

Coloabia Eocoesca de Presopoestos Failiares CEGE/ECIEL U(4CP) 1967 30.6 5.3

AM IQ67 22.2 4.6 2?.R 3.g
Encoesta de Hogares DANF. N 1970 64.7'/ 3o.223/
I! 1070 52.65. 25.2.c/
E-cuenta National de Hogares - Etupo 2 DANE 1(7CP) IQ70 26.0 6.n
Enc esta Naciosal de Hogares - Etapa 6 DANE N 1972 91.2d/ 64.33_/ 75.6±' 5 7.4d
Estodio sobre la Diatribociox de los
Servicios Busboy CCD/Bco.Mondial N 1974 65.3 36.9
U 1Q74 6n.1 32.2
Encuesta Nacioxal de Hogares - Etapa 9 DANE U 1975 66.4±/ 37,2d/
Couca Rica Eecoe.to de Hogares par Monestreo DGEC N(NA) 1067 29.,2/ 11.4d/ 29.7c/ 12.7±'
U(NA) 1067 28.2/ 8.94d/ 29.55! 10 47/
Sentiaa Fncuesta de Hogares por Muestreo DGEC U(PA) 1971 26.4±/ 6.6d/ 7a.2_/ 0.7±/
E.ccesta de Pre...poestos F-miliares IECES N 1971 24.3 10.4 27.9 5.7
ti 1931 16.2 2.0
AM 1071 14.P9 2.0

Chile Encoesta Nacionai sobre Ingresos Fa=iliares INE N 196R 29.5 Q.,
U I%6R 16.6 4.2
AM 1960 9.9 I.
Encoesta de Fresupoestos Fa=ilJares INE/ECIEL AM IQ68 8.2 1.6 0.7 1.1

Hondoras Encoesta de Ingresos y Gastos Fa-iliares DEGC N 1967 77.4 64.0

OT 1967 52.2 18.6
AM 1967 37.0 12.7

Mexico Estodis de InBresos y Gastos de las Fa=iliaa FCOYFX.SA N 1067 39.0 15.6 0O.1t'/ s oe/
I 1967 24.0 5.7

Per. Encuesta do Presopoestos Familiares CISEPA/ECIEL AM 1968 17.7 4.5 12.4 1.q
Encuenta do Hogares OTEMO U 1970 31.8 14. 3
At 1970 23.7 7.2
Encoenta Nacianal do Conoomo de Ali.eetos ENCA N 1072 60.1 30.7
1! 1972 36.7 14.R
AM 1972 19.2 2.H 20.8 6.0 17.° 1.0

Urogoay Encoesta de Preoupo.escot Fa=iliares U de R/ECIEL AM 1967 13.4 4.2

Encoesta de Hogares DiGEC AM 1060 2R.2d/ 8.6d/

Veoezuela Encoesta do Presopaestos Faxiliares BCY/ECIEL AM 1966 5.6 0.0 9.6 1.2
Estodio del Mercado Real de Vivienda
ax Vexe.oela BNA y P U 1970 22.3 7.8
A.M 1970 10.3 3.0
Eac.eeta de Hogares DGEC N 1971 28.R 10.5 28.0 11.7

a/ Not adjosted for axdorestimatioa or definition of income.

b/ N - entire country; U - total popalation or all orhan areao in the country; AM - oetropolit.n area of capital or cqnctrys m-in rban nucleas;
(N)CP - (nomber of) major cities In the country; (NA) - non-agricultural popolation.

c/ Dintributino is by icooe level of head of hoonehold.

d/ Distribatiox is by level of primary household income.

e/ Shwo. distributioo by level of total household consamotion.

T.N. BCOMEX.SA Banco de Comercla Exterior, S.A., Mexico

BCV Banco Central do Vemecuela
BNA y P Banco Nacianal Agrario y Popular
CGD Camaro de CGaercio de Daitama (Depta. do Boyaca)
CEDE Centro de Estudios sobre Desarrollo Ecoxoilco
CISEPA Centro de Investigaciones Sociales, EcanxmIcan, Politicas y Antropologicas
DANE Departaexnto Adninistrattv- Nacional do Estadletica
DGEC Direccixa-Gener-i do Estadisltia y Cena.s
ECIEL Programa de Estudios Conjxtos sobre InteRraclox Economica Latinoaoericana
ENCA Encoesta Nacional de Consu.= de AlieNEos
IBGE Inatituto Brasilelro de Geografla e Estatistica
IECES Instituto de In-estigac-i-es, Escuela de Ciencima EconrlIcaa y Sociales
INDEC Instittao Nacioxne do Estadiatica y Cenaos
11 Inastituto Nacional de Estadiatica
 - 104 -

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