July 2 (Bloomberg) -- The number of Mexicans living in poverty will increase this year by more than 4 million people from 2008 because of the recession, according to the World Bank.

Mexico may need three years to return to the poverty levels it had before the recession, according to a report by World Bank economists to be distributed at a meeting of regional finance ministers in Chile tomorrow. The report, obtained by Bloomberg News, defines Latin Americans living on less than the equivalent of $4 a day as poor and those subsisting on less than the equivalent of $2 as extremely poor.

World Bank projections suggest that this year there will be “8.3 million more poor people than in 2008 in Latin America and the Caribbean,” the economists wrote. “About half of the people that will fall into poverty are in Mexico.”

The economic contraction in the first half has been “severe,” according to the central bank, as the global crisis saps demand for exports and spurs job losses. Goldman Sachs Group Inc. forecasts Mexico’s economy will shrink 8.5 percent this year, the biggest annual contraction since 1932.

Last year, President Felipe Calderon announced a program to boost aid to more than 5 million of Mexico’s poorest families by 22 percent to 655 pesos ($49.36) a month. His goal is to decrease extreme poverty -- defined as families unable to pay for a basket of basic foodstuffs -- by 30 percent by 2012. In 2006, 10.6 percent of the population was in the lowest income group.

The number of people living in extreme poverty in Latin America may increase by as many as 3.6 million this year, the report says.

An annual decline in gross domestic product of more than 3 percent in a Latin American country would result in a 4.4 percent increase in poverty, the report said, calculating the figure using past economic data in the region since 1981.

Mexico’s unemployment rate rose to a record 5.31 percent in May as factories exporting to the U.S. trimmed payrolls as demand fell. Industrial production in April fell the most since the peso crisis 14 years ago.

To contact the reporter on this story: Sebastian Boyd in Santiago at sboyd9@bloomberg.net; Jens Erik Gould in Mexico City at jgould9@bloomberg.net

Last Updated: July 2, 2009 18:33 EDT