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Social Policy in Latin America:Characteristics, Causes, and Consequences
David Rockefeller Center for Latin American StudiesHarvard University
February 22, 2011
James W. McGuireDepartment of Government
Wesleyan University
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Categories of Social Policies in Latin America
• Contributory social insurance against the "four basic risks" (old age, disability, illness, and unemployment)
• Social assistance, i.e., general revenue-funded cash or in-kind transfers to poor or otherwise vulnerable (e.g., elderly) individuals, households, or communities
• Public provision (at the central, provincial, or municipal level) of general revenue-funded education, health care, nutrition, family planning, water, and sanitation services
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Research on Social Policy in Latin America
• For many years, most research on Latin American social policy focused mainly on contributory health and retirement insurance.
• For the past few years, research has focused mainly on new forms of social assistance (e.g., social investment funds, microfinance, conditional and unconditional cash transfers).
• The public provision of general revenue-funded basic social services has been relatively neglected. Why?
• Social insurance is where most of the money is
• Studies of welfare states in wealthy countries tend to• dichotomize social insurance and social
assistance• be preoccupied with spending and income
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Three Periodsof Latin American Social Policy
1920-1980: Truncated welfare state• included most formal-sector workers• excluded most urban and rural poor people• centered on unsustainable social insurance
1980-1990: Debt crisis
1990-2011: Reinvigorated welfare state• Market reforms to social insurance• New forms of social assistance• Improvements in some forms of public provision
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Truncated Welfare State: Characteristics
Contributory social (health and retirement) insurance Earliest in Arg, Brz, Chi, Costa Rica, Cuba, Uruguay
State mandated/subsidized; also state pays for own employees“Truncated” to urban formal-sector workers
Social assistanceFamily allowances, social pensions, fee waivers, emerg. emp.Food subsidies, food baskets, milk programs, school mealsFairly extensive in Costa Rica; not so much elsewhere
Public provision of basic social servicesEducation: low access above primary, low quality, top-heavyHealth care: low access, low quality, top-heavyFamily planning: varied by country, best in Chi, CR, MexWater and sanitation: poor outside wealthy urban neighb.
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Truncated Welfare State: ConsequencesContributory social insurance Absorbed more money than either of the other two categories Enabled by state subsidies for import substitution industrializ. Benefited the not-so-poor and middle classes, not the very poor Over time, contributors declined relative to beneficiaries
Social assistance Some programs helped those they reached, but reached few
General revenue-funded social services Health care: disappointing health status, access a big issue Education: disappointing attainment, quality a big issue Fam planning: contributed to fertility decline in some countries Water and sanitation: access below 50% in poorer countries
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Debt Crisis of the 1980s: Causes
• Single-minded pursuit of premature heavy import substit.
• Poor administration and maturation of social insurance
• Loan pushing by petrodollar-laden international banks
• Rise of US interest rates after 1979 oil price hike
• Low commodity prices
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Debt Crisis of the 1980s: Consequences
• Stabilization policies and free-market reforms (distinction) Goals: make the state solvent & markets more efficient
PrivatizationCivil service layoffsTrade and capital market liberalizationDomestic market deregulationSpending cuts (including subsidies and social spending)
• Consequences: harsh for not-so-poor; not so harsh for very poor Lower employm, spending: inevitable; mainly hurt not-so-poor Privatization: very poor had subsidized insolvent state firms Lower inflation: big benefit to the very poor, who use cash
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Post-1990 Changes to Social Insurance
Contributory Retirement/Disability PensionsPub PAYG --> Priv IRAs in Chi, Mex, Bol, El S, Nic, DRPub PAYG --> Priv IRA option in Col, PerPub PAYG --> Priv IRA add-on in Arg, Cos, UruPub PAYG kept in Brz, Cub, Gua, Hon, Pan, Par, Ven
Contributory Health InsuranceChile: Private financing option (ISAPRES) as of 1981Brz 93, Col 93, Cos 95, Uru 05: unified health systemsArgentina: obras sociales (unions) prove hard to reformPeru: ESSALUD begins to pay private providers in 1997Mexico: Popular health “insurance” introduced in 2003
Unemployment insuranceMinimal in Arg (12% coverage), Brz (6%), Chile
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Post-1990 Changes to Social Assistance
• Targeted distribution supplants universal subsidies (e.g., for food)
• Social investment funds (e.g., PRONASOL in Mexico)
• Microfinance (e.g., MiBanco in Peru)
• Conditional cash transfer programs (e.g., Bolsa Família in Brazil)
• Non-contributory pensions (e.g., BonoSol in Bolivia)
• Integrated anti-poverty programs (e.g., Chile Solidario)
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Post-1990 Changes to Basic Social Service Provision
Basic health services Improved maternal and infant care (e.g., Argentina’s Plan Nacer) Health team programs: (e.g., Brazil’s PSF, Costa Rica’s EBAIS) Rights-based initiatives (e.g., Chile’s Plan AUGE)Basic education Chile but not elsewhere: vouchers, subsidies to private schools Decentralization of education administration in most countries Resour. to impov. sch. (Brz FUNDEF, Mex CONAFE, Chi P-900) Pre-school programs
Family planning Fertility now low (TFR ≤ 2.5 in most larger countries) Minimal progress, & some regress (Nica), in reprod. rights
Water and sanitation Cheap connections in slums (e.g., Brazil’s PROSANEAR) Privatization in some cases (e.g., Arg prov. of Corrientes)
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Impact of post-1990 Social Policy Reforms on Well-Being
Contributory Social Insurance Pensions: coverage fell in ctries that privtzd. (Mesa-Lago 2008) Health insurance: coverage fell in most ctries (Mesa-Lago 2008)
Social Assistance Social investment funds: don’t reach the very poor (Tendler 2000) Microfinance: reach 10m, but not v. poor (Weiss/Montgomery 04) CCTs: poverty, child labor fell; school, health utiliz rose (IDB 09)
Public Provision of Basic Social Services Improved mat/child health: IMR fell sharply (esp. El S, Peru) Health teams: reduced IMR in Brz (Macinko 06), CR (Rosero 04) Water privatization: reduced IMR in Arg (Galiani et al. 2005) Pre-school: raised 3rd Gr test perf in Arg (Berlinski et al. 2008)
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Determinants of Social Policies in Latin America
1. Bureaucratic initiative (politicians; ministerial, social security, etc. officials)
2. Economic forces (e.g., fit with prevailing economic model; financial solvency
of social insurance programs; popularity of market-based solutions)
3. Existing social policy arrangements (legal, institutional, political constraints)
4. International factors (involving war (e.g., World War II), ideological conflict (e.g.,
the cold war), international organizations, bilateral foreign aid, foreign study and
training, global norms, national prestige, and foreign models)
• Democracy (electoral incentives, intra-party competition, freedom of information,
freedom to organize, sense of equality if the country has been democratic a long time)
• Civil society involvement (interest groups, issue networks, social movements)
• Partisanship (party of what ideological stripe controls govt.; presupposes democ.)
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Unresolved Issue
• Basic education, health care, family planning, water, and sanitation services that can dramatically improve the well-being of the poor are easy to identify and not costly to fund.
• Why aren't such interventions made almost everywhere, given that they are technically, administratively, financially quite feasible and often rewarding politically?
