Aiding Latin America's Poor

(excerpt) Social policy in Latin America has traditionally failed to benefit the poor. Throughout most of the twentieth century, the main redistributive efforts in the region went into building welfare states. Yet unlike their European counterparts, these Latin American welfare states are highly “truncated,” meaning that whatever their nominal degree of universality, in fact they only cover those with formal employment. The poor, being mostly outside the formal sector of the economy, are outside the ambit of the welfare state as well. Latin American social-insurance programs—maternity and family benefits, health insurance, old-age pensions, and disability benefits—typically began as emoluments meant for relatively small groups such as state employees, armed-forces personnel, and those working in certain favored industries. The welfare state’s coverage gradually expanded throughout the twentieth century until most formal workers came under its umbrella, though even then agricultural workers were almost always left out.

Once nominally financed by contributions, most of these programs are now in fact funded more or less directly by taxes. Because “the regressivity in social insurance schemes has not been helped by any significant progressivity in tax financing,” these schemes foster a “reverse Robin Hood effect” in which the poor are made to pay for the benefit of the rich. Latin American social policy, in other words, has mostly worked backwards, making preexisting economic and social inequalities wider rather than narrower.

Alberto Díaz-Cayeros is associate professor of international relations and Pacific studies and director of the Center for U.S.-Mexican Studies at the University of California, San Diego. Beatriz Magaloni is associate professor of political science at Stanford University. This essay is based on a paper presented at an April 2009 conference in Bratislava funded by the United Nations Democracy Fund.