Labor & Social Protections Brief

THE WORLD BANK AND SOCIAL PROTECTION IN LATIN AMERICA AND THE CARIBBEAN


SOCIAL PROTECTION IN LATIN AMERICA AND THE CARIBBEAN

Throughout the world, people confront a variety of risks every day. Individual households can suffer from the illness of family members, loss of a household breadwinner's job, and crime. Entire societies in developing countries can be adversely affected by economic recessions, harvest losses, natural disasters, and wars.

Countries in Latin America and the Caribbean are familiar with the devastating social consequences of economic volatility. The "lost decade" of the 1980s, Mexico's Tequila Crisis of 1994–95, and the recent Argentina crisis and its spillover effects on neighboring countries provide compelling testimony of how volatility can increase poverty, impede low-income families' access to vital social services, and adversely affect entire societies.

Recent surveys from Latin American countries show that the history of repeated booms and busts, combined with fears about the reliability of jobs, have made economic insecurity a major concern among people across the region. Such worries are particularly prevalent among the poor, who tend to be more vulnerable to economic shocks because they have fewer assets with which to manage socioeconomic risks. The region's high levels of income inequality and, in some societies, patterns of exclusion based on race or ethnicity, intensify the difficulties they face.

Social protection interventions

To respond to these crises and future hazards, countries rely on "social protection" initiatives to safeguard the poorest and most vulnerable members and help individuals, families, and communities manage risks better.

Social protection is a collection of measures to improve or protect human capital, ranging from labor market interventions, publicly mandated unemployment or old-age insurance to targeted income support. Social protection interventions assist individuals, households, and communities to better manage the income risks that leave people vulnerable. Specifically, social protection programs seek to:

• Reduce the vulnerability of low-income households with regard to basic consumption and services;
• Allow households to manageincome efficiently over the life-cycle, thus financing consumption when needed;
• Enhance equity particularly with regard to exposure to, and the effects of adverse shocks.

Challenges of social protection in Latin America and the Caribbean

One key challenge of providing adequate social protection in Latin America and the Caribbean is to find ways to expand social insurance coverage for the poor and for people employed in the informal sector. Currently, pension, health, and unemployment insurance systems generally cover only formal sector workers, who contribute to them through their employers. In practice, this means the systems generally cover only the non-poor in most countries.

Ensuring access of social assistance programs by the poorest and most vulnerable people is also a challenge, and can be especially difficult in times of shocks or crises. For example, when countries face crises, government revenues typically drop, even as the number of poor people increases. Given that resources for social assistance are limited, the importance of accurately targeting beneficiaries can not be underestimated. At the very least, countries need solid information on which households, individuals, and groups, including such groups as urban youth and the disabled, are poor and vulnerable.

Social protection and the Millennium Development Goals

Recently, development institutions and borrowing countries have begun to orient social protection programs to help attain the Millennium Development Goals, which were endorsed by the international community in 2000. By providing safety nets and compensating for missing insurance markets or other private risk mitigation instruments, social protection programs create opportunities for poor people to make more productive investments and increase their incomes, thereby helping to reduce poverty, the first millennium development goal. Social protection programs also help to protect and increase family investments in education and health, thereby contributing to the attainment of several human development goals. Social protection programs can also serve to reduce income inequalities in societies, helping foster more pro-poor growth and, thus, more effective poverty reduction.

WORLD BANK SUPPORT FOR SOCIAL PROTECTION IN LATIN AMERICA AND THE CARIBBEAN

As social protection plays a vital role in development for Latin America and Caribbean countries, the World Bank continues to engage in innovative approaches to protecting the poor and safeguarding vital social services in times of crisis. World Bank policy research and financing accounts for a variety of social protection dimensions, including:

Analytical research and policy advice

In 2000, the World Bank published, Securing our Future in a Global Economy, which among other policy recommendations, calls on Latin American and Caribbean governments to adopt counter-cyclical policies that encourage saving when times are good, so that they can expand social assistance programs when times are bad, so as to prevent the erosion of human capital during difficult times.More recently, the Fall 2003 issue of SPectrum magazine highlights recent innovations in social protection programs in Latin America and the Caribbean.
View and download World Bank reports on social protection in Latin America and the Caribbean

Regional lending for social protection

In addition to generating more analytical research on social protection issues, the Bank has substantially increased its lending to support social protection programs in the region, which quadrupled from the early to the late 1990s, rising from $777 million in 1990–95 to $3,587 million in 1996–2000. In fiscal year 2003, Bank lending for social protection in Latin America and the Caribbean totaled nearly $900 million. The Bank's social protection portfolio of US$1.3 billion is comprised of 16 different regional projects, in addition to components of adjustment loans, environmental projects and technical assistance.


PROJECT ACHIEVEMENTS

Jamaica: Social Investment Fund Project
In the 1990s, an estimated 28% percent of Jamaicans lived below the poverty line, and living conditions had been deteriorating due to macroeconomic problems. The Government of Jamaica sought to address the situation through small-scale social investments. From 1996 to 2001, the Jamaica Social Investment Fund (JSIF) approved a total of 381 sub-projects, including 176 financed by a US$20 million World Bank loan. It is estimated that more than one million Jamaicans benefited directly or indirectly from projects in roads, education, and water and sanitation. In rural areas of Jamaica, where poverty is most prevalent, road projects produced overall reductions in farmers' traveling expenses and times. In addition, nearly 11,000 people - the majority of whom are from rural communities with limited or no access to potable water - benefited from improvements in primary water sources.

Peru: Programmatic Social Reform Loan II
The second programmatic social reform loan (PSRL) highlights the important role civil society can play in the design, monitoring, and evaluation of social protection programs. Supported by a US$100 million loan from the World Bank, the objective of the PRSL was to achieve greater stability, efficiency, and transparency of social expenditures; while increasing the participation of civil society in the allocation and control of these expenditures. Under the program, food distribution programs were consolidated, the public pension program was strengthened, and some expenditures for defense and internal security were redirected toward education, health, social protection, and rural infrastructure programs. In addition, an emergency workfare employment program that was launched under the PRSL led to the creation of some 127, 000 short-term jobs.

Argentina: Third Social Protection Program (Trabajar)
In 1998, the World Bank approved a US$284 million loan to finance the third phase of the Trabajar program. Upon completion of the project in 2002, the workfare program had generated 464,102 temporary jobs for poor, unemployed workers and financed about 26,500 small projects. Workers received an initial monthly wage of 200 Argentine pesos, which over time was reduced to 160 Argentine pesos. The projects, which on average operated on a budget of less than $100,000 and employed around twenty people, focused on urban roads (23%), sewerage and drainage (15%), housing and social assistance infrastructure (each accounting for about 10%), schools and secondary roads (each for about 8%), and community gardens and potable water (each accounting for about 5%). For more information on the program, please see Income Gains to the Poor from Workfare: Estimates for Argentina's Trabajar Program

Ecuador Social Development Project: Education and Training
This US$89 million loan, approved in 1991, was designed to improve the quality and administration of basic education and vocational training services for the poor in Ecuador. Financing from the project was used to provide 270,000 children in marginal urban areas with improved access to primary education. In addition, 4,300 children benefited from access to pre-primary education, 6,500 students gained access to lower secondary education (grades 7-9), and 5,500 teachers benefited from improved physical conditions (infrastructure, sanitary facilities and furniture), textbooks, workbooks, teachers' guides, reading books and other learning materials.

Mexico Labor Market and Productivity Enhancement Project
The $174 million adjustment project, approved in 1992, provided support for labor force modernization while facilitating employment of hundreds of thousands of unemployed workers during the country's economic crisis in the mid-90s. After the project was completed in 1998, nearly 1.5 million workers benefited from 120,000 training and ancillary events. The project also developed information systems, strengthened administration in the Secretariat of Labor and Social Welfare, and promoted labor related studies and research within the academic community.

For more information about the Bank's work on social protection in Latin America and the Caribbean, see

 All projects


Updated November, 2003