Good fiscal policy not only promotes
macroeconomic stability and growth,
it is also a powerful tool for directly
reducing poverty and inequality. Many
governments around the world have
raised and spent funds to build the assets
of the poor and to directly redistribute
income, successfully improving welfare
and constructing more prosperous and
equal societies.
Unfortunately, fiscal policy in Latin America
does not have a good record of reducing
poverty and inequality. Why? According
to the best information available, the
combination of inadequate revenues,
low-quality services and poor targeting
helps explain why poverty has declined so
slowly and why inequality has remained
extraordinarily high.