Options for Social Policy in Latin America: Neo-Liberal versus Social Democratic Models

In her paper, prepared for the UNRISD programme on The Future of the Welfare State, Evelyne Huber focuses on experiences in four countries: Chile, Argentina, Brazil and Costa Rica. Although no regime of social protection in Latin America approaches the degree of coverage provided by European welfare states, these nations are among the most advanced in the region in terms of their social programmes.

After providing historical background on the evolution of social policy regimes in each case, Huber explains how existing configurations of political power affected patterns of reform from the 1970s onward. Having crushed political opposition, the Chilean military regime pursued an exclusionary
strategy, involving extensive privatization, which has further polarized access to social services, insurance and pensions. In contrast, the Brazilian military, and groups involved in the subsequent transition to democracy, attempted to gain popular support through expanding entitlements —
instituting universal health care and a basic minimum wage for rural people. These measures have, however, been stymied by the primitive nature of health services in the poorer regions of the country, by reliance on high-cost private providers and by a pervasive structure of patronage which filters
access to benefits.

An attempt by Argentine governments to restrict publicly-funded pension systems and social insurance met with strong public resistance. The adequacy of public pensions has nevertheless eroded markedly — as is the case throughout the region; and growing numbers of the employed are
turning to supplementary private programmes. It is only in the case of Costa Rica that severe austerity measures have been accompanied by sustained progress toward a universalistic welfare regime. Since the health care system is public, there is no difference in the facilities available to the insured and uninsured. Distinctions within the pension system have also been lessened through phasing out special treatment for civil servants; and those without coverage are entitled to a means-tested welfare pension which is impartially administered.

To improve the situation in all four countries, significant additional resources must be allocated to social policy. And since the constraints of international competition militate against increasing employer contributions and thus labour costs, more of these resources will need to come out of general revenue. Whether this is possible depends, of course, on a number of factors, including the political coalitions that can be formed in support of tax reform, the capacity of the state to enforce tax legislation, and the rate of economic growth. Administrative reform is also essential, in order to
improve the use of existing resources.

Huber argues that extending the scope for universalistic social policy — in health care, insurance and pensions — is desirable not only from the standpoint of equity, but also from that of efficiency. The greater the discretionary power to deliver differentiated public services, the larger the opportunities for corruption and patronage. She also reminds us that in a region marked by widespread poverty and under- or unemployment, private contributory schemes for ensuring social welfare are simply not a viable option for the majority.