Ernesto Canales: “We were not surprised to see Peru in the top 3 most unequal countries in the world”

Latinometrics is an informative bulletin that tells stories through data that comes from public sources, according to Ernesto Canales, co-founder of this proposal with whom we talked about one of his recent reports, “Dominican Republic, Peru and Mexico are among the most unequal countries in the world according to figures from the World Inequality Database (WID)”, whose data from Peru were disseminated by this means. After the publication, specialists in the subject pointed out that these data to measure inequality are imprecise in the case of Peru and lead to an erroneous conclusion. Canales tells us how they did the analysis, where they agree with the critics and where they don’t.

They maintain that the Dominican Republic, Peru and Mexico are among the most unequal countries in the world. How did you come to this conclusion?

It comes out after taking all the countries that are part of the WID database and comparing them one by one, making a kind of ranking, which consists of seeing in which country the largest amount or the highest percentage of income is concentrated in the top 1% of income received. They represent it on a map (…), but in that way it doesn’t tell you which are the worst and which are the best. So that is a good example of what we do; it is taking the information and presenting it in a way that is more digestible for the average person.

So, you retrieve the data from these countries to make this graph.

Yeah, well, I didn’t read the report itself. [el Informe de Desigualdad Global 2022]I only looked at the data, in the database [del WID]to make an independent analysis.

There are specialists who question the WID data. They point out that the methodology in the case of Peru is not reliable. Did you notice anything suspicious in these data?

i read the thread [de Twitter] by Saki Bigio and I found his point extremely interesting, especially with regard to large fluctuations in Peru. That is something that we had not observed, because our graph is from a moment in time. I do agree with Bigio that this fluctuation in Peru is strange, that there is a fluctuation of 10% of income accumulation for the top 1%, from year to year; it does indicate something very drastic happening in the country or that there is something strange in the data. It would be very beneficial to have a discussion with those who put together this database to ask them how this could possibly be happening.

The graph that you constructed shows the ranking of countries by income.

Exactly, we are talking about income and we, in our analysis, made it very clear that this was looking at income, not wealth in general. We were very careful with our language (…). In the Peruvian case, Bigio points out that there is no public wealth data, that there is no wealth or inheritance tax (…). It seems to me that, if there is no public wealth data, that in any case does not discredit that the annual income that is reported in the country is going into the hands of the top 1%, because even one could think: “Well, if there is no public wealth data, then there is a chance that there is even more wealth accumulated in the top 1% than anyone knows about.”

What other data or reports do you think support this conclusion? Because they were not surprised to see Peru, Mexico among the most unequal…

I went to investigate a little more and it seems that there are surveys that show that a large percentage of Peruvians consider that the inequality between rich and poor is very serious. Those are surveys; So, that’s another way of looking at it (…). The magnitude and precision of this inequality, it is very difficult to give a number and say “I am 100% sure that this is the number”, but that this is a problem in Latin America, it is. So we were not surprised to see Dominican Republic, Mexico and Peru in it top 3. If we are surprised to see them, for example, on top of Nicaragua and other Latin American countries.

Can you trust the Gini coefficient?

I would think so. I am not an expert on the subject, but I know that the World Bank reports the Gini coefficient. Nothing more than a coefficient that is saying something a little different from what the WID says. The Gini does speak a little more about wealth and wealth inequality, whereas this metric [el WID] is based 100% on income. Another difference is that they are based on more data sources than the Gini coefficient. They are based on national accounts, surveys, fiscal data, wealth rankings, and I would imagine that sometimes the availability of these sources varies greatly from country to country.

Should the rich pay more taxes in Latin America?

I think it’s difficult to answer that question at a general level because I don’t know what the tax rate is at the different levels in each of the countries.

The IMF says that the rich should pay more taxes in Latin America.

The rich have access to resources that give them the opportunity to evade more taxes. As for whether they should pay more tax, and whether that’s going to fix problems, that’s a very complicated issue.—I am from Mexico— because there is also the problem of corruption and distrust in the Government to use our taxes in a responsible manner.

In the publication that you make, you include Mexico. Has a colleague questioned this?

No, notice that on the Mexican side there wasn’t that much… But I did see a much stronger response from the Peruvian side, that is, questioning the data more on the Peruvian side than on the Mexican side. And that the majority of our audience is Mexican, because, since I am Mexican and my partner is also, we touch on more issues related to our country, but with everything and that there was no questioning of the data on the Mexican side that I would have seen.