Social Policy in Latin America:
Characteristics, Causes, and Consequences
David Rockefeller Center for Latin American Studies
Harvard University
February 22, 2011
James W. McGuire
Department of Government
Wesleyan University
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 inkind 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 Periods
of 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 4
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 assistance
Family allowances, social pensions, fee waivers, emerg. emp.
Food subsidies, food baskets, milk programs, school meals
Fairly extensive in Costa Rica; not so much elsewhere
Public provision of basic social services
Education: low access above primary, low quality, top-heavy
Health care: low access, low quality, top-heavy
Family planning: varied by country, best in Chi, CR, Mex
Water and sanitation: poor outside wealthy urban neighb. 5
Truncated Welfare State: Consequences
Contributory 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 6
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
Privatization
Civil service layoffs
Trade and capital market liberalization
Domestic market deregulation
Spending 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 Pensions
Pub PAYG --> Priv IRAs in Chi, Mex, Bol, El S, Nic, DR
Pub PAYG --> Priv IRA option in Col, Per
Pub PAYG --> Priv IRA add-on in Arg, Cos, Uru
Pub PAYG kept in Brz, Cub, Gua, Hon, Pan, Par, Ven
Contributory Health Insurance
Chile: Private financing option (ISAPRES) as of 1981
Brz 93, Col 93, Cos 95, Uru 05: unified health systems
Argentina: obras sociales (unions) prove hard to reform
Peru: ESSALUD begins to pay private providers in 1997
Mexico: Popular health “insurance” introduced in 2003
Unemployment insurance
Minimal 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
Water and sanitation
Cheap connections in slums (e.g., Brazil’s PROSANEAR)
Privatization in some cases (e.g., Arg prov. of Corrientes)
Family planning
Fertility now low (TFR ≤ 2.5 in most larger countries)
Minimal progress, & some regress (Nica), in reprod. rights 11
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)
5.
Democracy (electoral incentives, intra-party competition, freedom of information,
freedom to organize, sense of equality if the country has been democratic a long time)
6.
Civil society involvement (interest groups, issue networks, social movements)
7.
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?
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Thank You!
Contact: jmcguire@wesleyan.edu
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