(October 2002) Central American countries are urbanizing rapidly (see figure below), at a pace similar to that of their South American neighbors 20 years ago. While the expansion in urban population ensures a steady supply of labor for economic growth, the addition of thousands more people every year — people who have comparatively few resources — strains big cities’ ability to provide basic services to residents. Whether these cities, which are hubs of manufacturing and service industries, can continue as engines of national economic growth or whether, as the just-released World Development Report 2003 warned could happen across the globe, they become mired in poverty, pollution, congestion, and crime depends on their ability to integrate the poor.

Figure 1
Population Living in Urban Areas in Central America, 1970 and 2010


Source: UN, World Urbanization Prospects: The 2001 Revision (2002).

That is the assessment of a new World Bank report, Urban Services Delivery and the Poor: The Case of Three Central American Cities, which explores urbanization in San Salvador, El Salvador; Tegucigalpa, Honduras; and Panama City, Panama. The report maintains that migration from rural areas and natural increase in the cities themselves will continue, and encourages cities to prepare now to manage additional growth.

The big cities in Central America are typically capital cities, and they house a large and growing percentage of their countries’ poor people. These cities also generate a high percentage of gross domestic product — 44 percent in the case of metropolitan San Salvador. Thus, according to the report, cities are well suited for and also stand to benefit from poverty alleviation.

Dimensions of Urban Poverty

Poor households are expanding twice as fast as well-off households, with 15 percent of the poorest households in metropolitan San Salvador reporting births in the last year, compared with just 7 percent of households with the highest incomes (for Tegucigalpa, comparable figures are 18 percent and 4 percent, respectively). Already, in the average poor household in greater San Salvador and in Tegucigalpa, there are four people per bedroom. Heads of poor households have a low rate of participation in the formal labor market (67 percent in metropolitan San Salvador, 77 percent in Tegucigalpa) and a low level of affiliation to the social security system (43 percent and 34 percent, respectively). 

Figure 2
El Salvador’s Poor and Urban Poor, 1992 and 1998


Source: Urban Services Delivery and the Poor, vol. 2.

Improving Services to Benefit the Poor

The report contends that strengthening city governments by building capacity in areas such as data collection, financial management, land and real estate assessment, and poverty monitoring — all in preparation for greater decentralization — would remedy many of the infrastructure and service deficits affecting the poor. Municipalities lack the authority and the resources to establish a public record of the extent, value, and ownership of land, without which they do not receive property taxes that could fund many municipal operations, including conducting household surveys to monitor urban growth and poverty levels.

The effects of weak city governments can be seen in the inadequate delivery of services that, because of their health and savings implications, go a long way toward lifting people out of poverty: access to piped water and sewerage, solid waste collection, and land titling.

National water agencies often still take charge of water delivery. These agencies do not know how many people are in need of service or where gaps in service are because the municipalities lack detailed information. Gaining access to water and sewer connections can take the poor up to five years, and even when people receive access, the hours of service are limited (often fewer than eight hours per day) and the price they pay for services is only slightly less than what wealthy people pay per unit, thanks to imprecisely targeted subsidies. Without clean drinking water, public health may suffer.

Table 1
Percent With Access to Service, by Metropolitan Area

Service San Salvador Tegucigalpa Panama City
Potable water 82 62 88
Sewer 73 37 40
Solid waste collection 72 (4% dump or burn waste) 41 (49% dump or burn waste) 80 (18% dump or burn waste)

Source: Urban Services Delivery and the Poor

Land shortages and obstacles to land titling also make it more difficult to escape from poverty. Because land is in short supply, newly arrived migrants tend to locate in crowded tenement houses in city centers, where they pay rent. Once they have saved money and can afford to start families, they leave the centers for the outskirts of cities. There, they typically take up residence near ravines and other unstable environments where settlement is prohibited, or in areas where the land has not been properly surveyed and registered. Because, according to the report’s principal author, obtaining a title is a bureaucratic nightmare and “there is absolutely no housing — nothing that they can afford,” would-be homeowners often approach informal developers. Informal developers divide land into plots and sell them at reasonable prices to the poor, sometimes allowing them to waive downpayments and interest and to apply lease payments toward eventual ownership. The downside to informal developers — referred to by some as “pirates” — is that they may or may not possess the titles to the land they sell, and agreements with them are not endorsed by the legal system. Settlers are vulnerable to abuse and financial loss, lacking documentation over their “properties.” The losses that these people experience can be high, given that 34 percent of the poor in San Salvador (19 percent in Tegucigalpa and 26 percent in Panama City) invest their own money in renovating their homes. And losses affect subsequent generations, since having a title affects both property value and the ability of the owner to bequeath land.

To address urban poverty, the report recommends that Central American governments take these and other actions:

  • Strengthen municipalities;
  • Reform water tariffs and subsidies;
  • Streamline the issuance of building permits and land titles; and
  • Recognize informal development as an option to provide shelter.

Even though conditions are difficult, there is hope, which is what motivates people to come to the cities in the first place. Slums are constantly improved, as people invest significant amounts of their own money in improving “their” houses. It is a slow process, but the report notes that the people are resilient and hard working. “Many of them succeed and manage to pull themselves out of poverty.”

Allison Tarmann is editor of Population Today.

For More Information

Urban Services Delivery and the Poor: The Case of Three Central American Cities, Report No. 22590 (Washington, DC: World Bank, June 2002) is available through the World Bank’s Latin America and Caribbean division.