The Foreign Service Journal, November 2007

Dual Economies and the Rural/Urban Divide If there is one characteristic of Latin American societies that has changed remarkably little over time, it is their dual nature. It is not the fault of globalization or the Washington Consensus (the pro-free trade views that emerged from the Washington- based institutions such as the World Bank and IMF) that Latin American societies are divided, nor that their economies reflect these fault lines. But fairly or not, the Washington Consensus is widely blamed for failing to narrow the massive equality gap in Latin America. Consider Mexico, which in many ways is a wealthy country. Some of the world’s richest men and women (including the world’s wealthiest indi- vidual, Carlos Slim) are Mexican; the large cities are filled with expensive cars and houses; and there is a rela- tively large and thriving middle class. For these groups, free trade and democracy has been a boon. The same goes for those regions of Mexico fortunate enough to be located near the right markets, roads, schools and other infrastructure. Yet those excluded from these gains are numerous; similar to most countries in the region, more than 40 percent of the Mexican population live below the poverty line. They are disproportionately from rural areas, and often from certain regions, such as the south of Mexico. The rural/ urban divide is one of the defining characteristics of the dualistic Latin American economies. It is also one of the most damaging, particularly because research (see de Ferranti and Perry, “Beyond the City: The Rural Contribution to Development”) sug- gests that improvements in agricultur- al output cause a doubling of overall national growth; that is, an increase of 5 percent in agricultural output leads to 10-percent growth nationwide. Thus, the stagnation we see in the Latin American countryside repre- sents not only misery for rural resi- dents, but also a lost opportunity to jumpstart the overall economy. Those migrating to the U.S., not surprisingly, are largely from these areas. According to Manuel Orozco (“Remittances to Latin America: Is- sues and Perspectives on Develop- ment”), 10 predominantly rural states account for the majority of emigration from Mexico. Between 1993 and 1997, 46 percent of Mexican migrants to the U.S. came from towns with fewer than 2,500 inhabitants. For the 2001-2004 period, this proportion grew to 51 percent. The income gap between rural and urban Mexico is intimately related to the U.S.-Mexico income gap. To N O V E M B E R 2 0 0 7 / F O R E I G N S E R V I C E J O U R N A L 51