Influence of elites on governments in Latin America contributes to increasing poverty and inequality: Oxfam

Published: 16th November 2018

An analysis of 13 cases reveals how elites in Latin America accumulate power to undermine democratic processes and to create public policies that favor their interests at the expense of the rest of the population. 

Oxfam, in partnership with the Latin American Council of Social Sciences (CLACSO for its Spanish acronym), published today a report of 13 cases demonstrating how political and economic elites manipulate government decision-making processes to advance their fiscal privileges over the rights and benefits of the majority in Latin America, the most unequal region in the world.

The report Captive Democracies: Governing for the Few also analyzes 11 mechanisms by which elites exert their influence on governments. The majority of these practices are legal, yet entirely illegitimate, and include the revolving door phenomenon, fierce lobbying, party financing, the payment of bribes and kickbacks, and media campaigns that manipulate information to position the interests of a few in the public debate, even if this means compromising the well-being of the population. Some of the 13 cases illustrating undue influence mechanisms are paradigmatic, such as the Odebrecht case, which laid bare many of the practices identified in the report and are far more common than is generally believed.

This situation, which Oxfam refers to as “State Capture”, is reflected in the constant obstruction of public policies with redistributive potential. Studies undertaken in numerous countries, including El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic, demonstrate that poverty increased as a result of fiscal policy. The poorest people in these countries did not benefit from the fiscal system, but rather became its financiers.

“Fiscal policy is the most powerful tool governments can use to redistribute wealth and reduce inequality and, consequently, reduce poverty. However, in these countries, fiscal policy led to an increase in poverty. States captured by elites are not fulfilling their obligation to guarantee equal rights for all. We must break with this inacceptable culture of privileges”, said Rosa Cañete, Regional Coordinator of Oxfam’s Even it up campaign in Latin America and the Caribbean. 

In Captured Democracies, Oxfam puts forward a series of recommendations to ensure functioning democracies in which political and economic elites cannot create or shape laws, policies or institutions that cater to interests, undermining one of the fundamental rules of a democratic system: the guarantee of equal rights for all.

“Citizen engagement is key to ensuring a counterweight to the interests of elites in the debate and definition of public policies. Only by strengthening democracy and limiting State Capture by elites can inequality be reduced. And only by reducing inequality, ensuring that public policies don’t privilege the few, will we have a more democratic system,” adds Cañete.

Notes to editors

The study is based on the analysis and systematization of mechanisms identified in 13 cases documented by academics and investigative journalists. 

According to Lustig (2017), around 2011, fiscal policy in numerous countries had the effect of increasing poverty. In other words, after the application of subsidies and indirect taxation such as the value added tax (VAT) and conditional cash transfers, direct taxation and contributions to social security led to an increase in the number of persons with a daily income of less than 4 dollars (PPP). The main causes of the negative or reduced impact of fiscal policy on poverty were indirect taxation and subsidies, which increased poverty in all countries except for Ecuador, Panama and Colombia. 

Download the executive summary here (available in Spanish). 

Contact information

Annie Thériault in Lima, Peru | | + 51 936 307 990 | @annietheri

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