World Bank researchers announced last month that the developing world has reached a milestone. The number of people living on less than $1 a day is now below the one billion mark, news that was overshadowed by the growing ethics scandal surrounding World Bank president Paul Wolfowitz.

And according to data from the International Monetary Fund, next year the total economic output of the developing world will match that of the 30 wealthiest nations combined.

Although there are about four times as many developing countries as wealthy ones, the figures still indicate an improvement in the lives of millions. If poverty reduction were to continue at its current pace, by 2015 the poverty rate would be less than half the 1990 level, which would achieve the first of the United Nation’s Millennium Development goals.

While these facts look good on paper, they don't tell the whole story. Rather than revealing a worldwide trend in poverty reduction over the past 25 years, the numbers point to the phenomenal economic growth of one country in particular—China. Setting aside China’s population, the number of people living in poverty is actually slightly higher than it was in the early 1980s, even though the percentage of the world’s population defined as “poor” has fallen 10 percent.

As for the rest of the world, there doesn’t seem to be any clear trend: poverty could get better or it could get worse. China and neighboring India are also responsible for the developing world’s greater share of the economic pie. Slice them out and emerging countries have lost out to rich nations.

It may not come as a surprise that sub-Saharan Africa, with its frequent warfare, government corruption, and public health disasters, has found it hard to compete. But what about Latin America, which seems so well positioned and yet has failed to show consistent signs of economic growth?

Between 2002 and 2005, the average per capita output growth (a measure of wealth) in Latin American countries trailed that of every other emerging region, including sub-Saharan Africa—this despite the spread of democracy in Latin American countries and the best, if misconceived, efforts of wealthy governments to drive fiscal reform. High expectations for Latin American development in the early 1990s have not been met. And they probably won’t be for at least the next 15 years, according to a recent paper Sebastian Edwards, a former World Bank chief economist for Latin America.

While governments in the region have improved in terms of financial stability and openness to trade, Edwards found that “more important factors” for long-term growth showed no progress. Property rights are not adequately protected; the courts are not sufficiently independent; and Edwards calls the state of education “deplorable.” In 2003, eighth-graders in Chile, the region’s shining star, placed 39th in mathematics and 37th in science in a ranking of 44 countries. As for higher education, the Times of London’s 2004 list of the 200 best universities in the world included institutions in India and China but not a single Latin American school.

Joining a long list of critics, Edwards says that the recent elections of populist leaders in Bolivia and Ecuador, among other countries, demonstrate an unwillingness to commit to the reforms needed to increase efficiency and reduce government size.

Investors, however, don’t seem to agree with Edwards’ assessment. Morgan Stanley Capital International’s Latin America index is up nearly 300 percent over the past five years, outperforming other regional emerging-market indices.

Edwards has a number of explanations for this discrepancy. He points to cheap stock valuations in the past, Latin America’s attractiveness to portfolios in need of diversification, the recent worldwide boom in commodity prices, and the importance of regional stability in drawing capital. For their part, investors are betting against the odds in hoping for a sustained period of growth in Latin America. History shows that the region has traditionally suffered from a pattern of short-term expansions being followed by extended periods of no growth or outright decline.

But are there countries that could buck that trend and justify the high expectations?

Edwards notes positive prospects for Chile, Mexico, Peru, and Costa Rica. He also points out that Latin American countries have become better able to withstand currency crises of the kind that wreaked havoc on government coffers and employment in the 1990s. But in terms of overall poverty, the picture is contradictory: While the percentage of the population living on less than $1 a day has declined, the number of people below that line has increased by 20 percent.

And a report last week from the United Nations showed that, contrary to economic theory, income inequality has increased because of globalization.

Also to be considered are the geopolitical risks involved in falling further behind China and India. “Slowly, Latin America will move back in relative terms,” Edwards said. “As a consequence, the region will become even less central politically and diplomatically.”