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LABOUR-LATIN AMERICA: Social Security Is for the Few

Raúl Pierri

MONTEVIDEO, Mar 21 2006 (IPS) - The free-market economic reforms implemented in Latin America in the 1990s and the increase in public spending seen in the past five years have failed to improve social security in the region, where 60 percent of the population still lacks coverage, noted the Economic Commission for Latin America and the Caribbean (ECLAC).

“The region has a low level of coverage. Only four out of 10 people in Latin America and the Caribbean benefit from some kind of social protection system,” said ECLAC Executive Secretary José Luis Machinea Monday at the opening of the U.N. regional agency’s 31st Session, which will run through Friday in the Uruguayan capital.

At a press conference, Machinea, accompanied by Uruguayan Deputy Foreign Minister Belela Herrera, discussed the results of a report to be released Wednesday, which includes an overview of social security coverage in the region and proposes the redesign of health and social security plans and poverty alleviation programmes.

ECLAC estimates that the number of poor in Latin America and the Caribbean rose to 213 million in 2005. That total includes 88 million people living in extreme poverty. In proportional terms, these figures are equivalent to 40.6 and 16.8 percent of the region’s total population.

Machinea, a former economy minister from Argentina, said the neoliberal reforms of the 1990s were not designed in keeping with the reality of the region’s labour markets, the scarce and volatile economic growth, the slow pace of the generation of employment, and the ballooning of the informal economy, which accounted for 47 percent of all economically active people at the start of the current decade.

He also said the increase in public spending on social policies seen in recent years in most countries in Latin America and the Caribbean has not been sufficient to combat poverty, and that an emphasis must be put on productive development and support and incentives for small and medium-sized companies.

In the region, average public spending on social security and social assistance has risen from 12.8 to 15.1 percent of gross domestic product (GDP), which represented a 39 percent increase per person in real terms.

However, social spending varies widely in the region, from Cuba, which dedicates 29.3 percent of GDP to social coverage, followed by Uruguay (20.9 percent), Argentina (19.4 percent), Brazil (19.1 percent), and Costa Rica (18.6 percent).

At the other extreme, the Dominican Republic, El Salvador, Guatemala, Ecuador and Trinidad and Tobago dedicate less than 7.5 percent of GDP to social spending.

But Machinea added that no social protection system and no increase in social spending can resolve the problems of inequality and inequity if the economies in the region do not grow and if they fail to achieve a more diversified productive structure, where small and medium companies play a greater role.

ECLAC forecasts that in 2006, the Latin American and Caribbean region will mark four consecutive years of economic growth at an average annual rate of 4.3 percent, which it considers “insufficient to correct the imbalances affecting labour markets.”

The ECLAC Session, held every two years, is the most important meeting held by this U.N. commission. It brings together ECLAC’s 42 member and seven associate states to debate the region’s economic, social and environmental development, examine the commission’s activities during the previous two years, set priorities and approve the programme of work for the next two years.

Roughly 200 government delegates and 100 representatives of U.N. agencies and civil society organisations are expected to take part this week.

At the ECLAC Session in Montevideo, participants will examine a new report titled “Shaping the Future of Social Protection: Access, Financing and Solidarity.”

A synthesis of the report was presented on Monday by Machinea. In it, ECLAC acknowledges the need to review its previous premises “on the basis of new historical contexts.”

In particular, ECLAC stresses that contrary to the message preached in the 1990s, job creation does not necessarily lead to an improvement in social protection.

The time has come to rethink solidarity-based mechanisms as a means of social protection, the report states, because the labour market has proven incapable of ensuring the creation of quality jobs or providing adequate coverage through contributory protection schemes.

As a result, employment cannot be the sole mechanism for protecting the majority of the population in the short- and medium-term from the risks inherent in poverty, sickness and ageing, it adds.

Machinea commented that in the past “it was believed that employment was the proper channel for social protection, but reality has demonstrated that this channel did not function very well, not only because employment is very high, averaging 10 percent in the region, but also because almost 50 percent of those who work in Latin America and the Caribbean do so in the informal sector, where social protection is minimal.”

The ECLAC report calls on governments to adopt a “social covenant” which would integrate contributory social protection systems – based on employee and employer contributions – and non-contributory mechanisms, financed through general revenues.

It further underlines the need to ensure efficiency in resource use, expand coverage and improve service quality, particularly for low-income sectors.

The report will be officially presented this Wednesday, after the opening of the Session’s ministerial phase.

Those in attendance that day will include Uruguayan President Tabaré Vázquez, U.N. Under-Secretary-General for Economic and Social Affairs José Antonio Ocampo, and Rebeca Grynspan, director of the U.N. Development Programme (UNDP) regional bureau for Latin America and the Caribbean.