First published in Revista Summa, El Heraldo, El Capital Financiero and Prensa Libre.
Poverty remains a harsh reality for millions of people in Central America and the Dominican Republic. Despite the progress made, the region still faces major challenges in closing poverty and inequality gaps.
In Central America and the Dominican Republic, one in three people lives on less than $8.30 (2021 PPP) per day a rate higher than the Latin American average, where one in four people remains in that situation. Even more concerning , for many households, poverty is not a temporary stage, but a persistent condition. In the region, most poor households remain in this situation year after year, perpetuating a cycle that spans generations.
Regional averages hide very different realities. Countries like Honduras and Guatemala have the highest poverty rates—49.8% and 47%, respectively. In contrast, the Dominican Republic and Costa Rica show the lowest levels 14% and 12.6%. In the Dominican Republic, poverty dropped significantly between 2014 and 2024, from 33.5% to 14%. Panama, meanwhile, represents a paradox: it is the richest country in Central America but has yet one of the highest inequality rates in the region, with one in five people living in poverty.
Poverty levels in the region are linked to low education quality, limited investment in infrastructure, exposure to climate shocks, and high levels of violence. Added to this are high levels of informality tied to the limited capacity of countries to generate quality jobs,an essential factor for reducing poverty.
Latin America and the Caribbean’s experience shows that poverty reduction is driven by labor market dynamism. Between 2016 and 2024, employment and income growth explained 37% of poverty reduction. This pattern is repeated in El Salvador and the Dominican Republic, where increasing employment rates and labor income have been the main drivers of progress. Over the last decade, these factors account for about 74% and 62% of poverty reduction, respectively, showing that employment remains the most effective way to transform lives and achieve social mobility.
In these countries, havinga job also improves people’s opportunities. In the Dominican Republic, it increases the probability of moving out of poverty by 13.5 percentage points and joining the middle class by 21 points. In El Salvador, the effects are 9.5 and 8.8 percentage points, respectively.
However, labor market benefits are not visible across all countries in the region. In Guatemala, falling real incomes reflect stagnant productivity and limit households’ purchasing power, while Panama continues to struggle to create quality jobs, affecting the poorest families.
What should be done? Countries in the region still need to implement social policies that help reduce inequalities by improving access to basic services and economic opportunities, especially in the most disadvantaged areas. It is essential to invest in education, health, and training so people can access better jobs. Investment should also be encouraged in sectors that generate quality employment, ensuring good infrastructure and connectivity. Finally, strengthening families’ resilience to difficult situations—such as climate shocks—through better protection and risk management systems is crucial.
The evidence is clear: creating quality jobs helps lift families out of poverty. But achieving long-term reduction requires commitment from everyone: public and private sectors, academia, civil society, and international organizations. Poverty cannot be solved through isolated efforts; it is a challenge that demands coordinated action.
