Literacy – a lot of words have two levels of meaning. Literacy and literate are one/two of them.
Simple literacy, if you will, is the ability to read and write.
Literate is also used of people and cultures to refer to a high level of cultural development, most obviously in belles-lettres and other creative word work.
We need to define which level we are talking about when we say someone is literate. My friend, Brian and I often remind ourselves that we are very literate people. We can glance at a text and determine all sorts of things about it; we can detail a line of writing; we are able to do these things in more than one language. We must remember that our students are not there yet.