Protecting the vulnerable in the world’s most unequal region

Bernardo Kliksberg

The World Bank has predicted that Latin America will grow at a rate of only 0.3 per cent in 2009, fifteen times less than average rate of 4.7 per cent over the last five years. Such a drastic drop in the growth rate would have a severe impact on any economy, but in the world’s most unequal region, the consequences are likely to be even worse. At least 4 million jobs will be lost. The decrease in remittances from abroad will seriously affect 20 million families who depend on them. The region was already behind on meeting its Millennium Development Goals, especially in terms of maternal mortality and school drop-out rates. Despite progress, social security coverage is low and unemployment insurance is extremely limited. To strengthen public policy in Latin America is not a choice; it is the only way to prevent a potentially explosive situation. Progressive leaders must take the following steps:

Prioritise protection of the weakest
Over 35 per cent of the region’s population lives in poverty. Poverty rates are much higher among indigenous populations (80 per cent), Afro-Americans and the elderly. Unlike the middle and wealthy classes, these groups do not have savings to protect them from the crisis. Without public policies to aid them, they are defenseless. Instituting such policies might be difficult, but it can be done. One example is the way Brazil was able to implement the largest social programme in its history, Bolsa Família, which protects 12 million of the poorest households. Conditional cash transfer programmes that currently apply to over 80 million people must be strengthened and expanded.

Promote youth education and employment
One in every four young people is outside the educational system and the employment market. Youth unemployment is double the general rate. Vigorous policies to promote youth employment and education must be designed. Chile, among others, has had very good experiences of public-private partnerships in this area. Argentina, in recent years, has also implemented creative programmes to encourage secondary school completion, and aid in establishing small businesses and cooperatives.

Invest in health and education
Investment is urgently needed in health and education services, which in the majority of our countries are inadequate. The crisis could be lethal, increasing the already high levels of infant mortality, maternal mortality and malnutrition. And the damage caused by this could be irreversible. Costa Rica, where health and education are constitutionally enshrined, has immediately allocated the required resources for further investment.

Utilise public spending to generate employment
Public policy must focus on the internal market. What is necessary now is the extension of credit; support for small and medium sized businesses; and investment in infrastructure, transport and other areas with a direct impact on employment. Amongst other initiatives, the strong public works programmes being implemented in Argentina, Mexico and Ecuador, point in the right direction.

Review the fiscal system
The current fiscal system, which is regressive and inefficient, must be reviewed. It is possible to make it more progressive, and reduce the current tax evasion rates of 50 per cent. This would result in greater revenue that could be utilised for the initiatives mentioned above. Other potential sources of income could come from introducing taxes on luxury goods and expenses, eradicating corruption, and reducing military spending, which increased by 91 per cent between 2003 and 2008.

Forge alliances
Leaders will have to forge a widespread consensus for the policies described above and also for other responses to the crisis. They must build alliances with the private sector through the increasingly prevalent concept of corporate social responsibility. Engaging civil society by encouraging volunteer work will also be necessary in social initiatives.

Will it be feasible to implement the ideas described above? Latin America has some advantages, which will be useful for the process of implementation. It has survived the market fundamentalism of the 80s and 90s, which caused disastrous damage. Those experiences have led the great majority to reject market fundamentalism. On the other hand, there is an active process of democratisation. In the last three years, over 80 per cent voted for change. From these election results, it is clear that people favour economic models with a human face. Citizens not only support, but are demanding, policies that put people first.

Bernardo Kliksberg is principal adviser to the Latin American Regional Office of the United Nations Development Program (UNDP)