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Is Latin America Transitioning from Poor Relief CCTs to a More Progressive and Inclusive Vision of Social Security?

10/06/2013

Development Pathways

Despite all the hype around poor relief conditional cash transfers (CCTs) in Latin America, the ideology underpinning social protection in the continent is shifting. While CCTs are targeted at the poor – with the result that the majority of the poor are excluded (see here for an explanation) – a growing number of social protection programmes in Latin America are being introduced that are underpinned by a moreinclusive and progressive vision of social policy. 

In a recent edition of our Pathways’ Perspectives we explained how the main social security scheme in Brazil is the old age pension rather than the much-vaunted Bolsa Familia. It is the old age pension that mainly impacts on poverty and inequality in Brazil, not Bolsa Familia, which, at best, ameliorates poverty for a minority of poor families. Brazil’s old age pension system provides almost universal coverage and, increasingly, other Latin American countries are implementing similarly inclusive schemes that aim to reach broad sections of the population, whether they be poor, near-poor, middle class or, in some cases, the rich. A few examples are:

  • Argentina, in 2009, instituted a new child allowance which, combined with its existing family allowances, ensures that 85% of children aged 0-18 years benefit from social security; in addition, its pension system reaches 93% of older people (mainly through contributory pensions);
  • Bolivia instituted a universal pension – the Renta Dignidad – in 2007 and also has a grant for allchildren entering primary school;
  • Chile’s pension reform of 2008 means that almost all older people now receive a pension;
  • Ecuador’s tax financed old age pension is growing rapidly and currently reaches around 65% of older people; when contributory pensions are taken into account, overall coverage will be much higher;
  • Mexico’s new tax-financed pension system is expected to reach 70% of over-65s in 2013, with many others benefitting from contributory pensions;
  • In Venezuela, pension coverage increased by 600% under Chavez and now reaches almost allolder people;
  • Uruguay has long provided almost universal pension coverage, mainly through a contributory system.

In many cases, the size of these inclusive schemes – in terms of GDP – dwarfs the poor relief CCTs. While the largest poor relief programmes – such as Bolsa Familia and Mexico’s Oportunidades – cost no more than 0.4% of GDP, Bolivia’s old age pension costs 1.09% of GDP, Brazil’s pension 1.5% of GDP, and Argentina’s child allowance 0.53% (with substantially more paid in other family allowances that, together, make coverage almost universal).

The transformation in the nature of social security in Latin America is related to political changes across the continent. As the two articles below explain, politics in Latin America has gradually been moving to the left. Following the fall of right-wing dictatorships in the 1980s and 90s, democracy in most Latin American countries took decades to mature. But, as democracy has become embedded citizens have increasingly voted for left-wing politicians, an unsurprising trend given the high levels of poverty and inequality in Latin America. As the articles describe, the new left-wing governments in Latin America are committed to higher levels of social spending, with some using their natural wealth to increase taxes and promote greater re-distribution.

 http://www.guardian.co.uk/commentisfree/2013/feb/19/no-alternative-latin-america-has-a-few

http://www.guardian.co.uk/commentisfree/2012/oct/09/chavez-victory-beyond-latin-america?INTCMP=SRCH

Since poor relief CCTs are typical examples of neoliberal social security – see my blog here and Pathways Perspective no. 10  – it is unsurprising that the right-wing governments that emerged in the early years of democracy established CCTs as an instrument for reducing social unrest. But, as democracy has strengthened an alliance of poor people and the middle class have begun voting for politicians promoting inclusive schemes. As a result, social security schemes that are inclusive entitlements are becoming the largest programmes in the region, surpassing the better-known poor relief CCTs.

However, as one of the articles notes, progress to a more inclusive social security system has not been smooth, with the continent experiencing some steps backward. Last year’s coup in Paraguay led to a significant reduction in the size of its new old age pension (with the new neoliberal government restricting it to over-72s). And, in Peru, while the current President won the last election by promising a universal pension, once in power he backtracked and implemented a poverty-targeted version.

Yet, despite setbacks, the overall direction of travel in Latin America is towards a more progressive and inclusive form of social security. It is important, therefore, that the myths about Latin America propagated by the advocates of poor relief CCTs are challenged since the misrepresentation of the region’s social security is distorting policy debates in other developing countries. So, the next time you hear neoliberals claiming that Bolsa Familia is Brazil’s biggest social security programme, you’ll be able to correct them.

COMMENTS 2

  • Thanks for this nice update on Latin America.

    I would like to add additonal information concerning Mexico. Only age-qualified residents who receive contributory pensions are excluded from the new non-contributory pension of about 40 dollars a month. The pension test is expected to exclude an estimated 30% of Mexico’s over-65 population from benefits. The new universal minimum pension replaces a pension of about 25 dollars provided by Oportunidades to households for each elderly member aged 70 and older. Oportunidades is a conditional cash transfer scheme, similar to Brazil’s Bolsa Familia, that targets poor families with children in primary school (grades 3 through 6).

    The bottom line is that, beginning this year, every Mexican from age 65 will have a right to at least one pension. That amounts to 100% coverage, and is a wonderful accomplishment, despite the fact that the benefit is too low.

    There is more comment like this on my Thought du Jour blog: http://larrywillmore.net/blog/2013/06/13/stephen-kidd-is-blogging/




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  • Just to give one recent example of the \”misrepresentation\” you cite in your last paragraph, the Economist a couple of weeks ago featured a briefing on poverty (“Not always with us”, June 1st). This contained the patently ridiculous assertion that “Conditional cash-transfer schemes like Mexico\’s Oportunidades and Brazil\’s Bolsa Família have all but eradicated poverty in those countries”. With such simplistically flawed analysis, it is not surprising that the Economist\’s conclusions and recommendations (essentially more of the same) are wrong!




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