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Regional Meeting for the Americas 2-5 May: Extending social security in Latin America and the Caribbean

The main problem with social security systems in Latin America and the Caribbean is their limited coverage in terms of the number of workers and family members protected, the range of risks covered and the quality of protection. In some countries, coverage has decreased even further over the past 15 years, according to the report prepared for the ILO Regional Meeting for the Americas. The report sets a global target for governments and the social partners to increase social protection by 20 per cent of the region's total population between 2006 and 2015. ILO Online spoke with Michael Cichon, head of the ILO's Social Security Department.

Article | 03 May 2006

ILO online: What are the main reasons for the limited coverage of social protection schemes in Latin America and the Caribbean?

Michael Cichon: The situation can be partly explained by the structure of the region's labour markets, with a high informal component and atypical patterns of work which hinder the development of traditional protection systems, such as contributory social security systems. This inevitably leads to considerable inequalities, which must be counteracted. One example is what is termed the "social protection paradox", whereby workers who are best positioned in the labour market receive more and better protection. Low coverage can also be ascribed to the nature of the protection systems themselves which, for the most part, are dependant on the economic cycle, and usually suffer from short-comings with regard to institutional management. For example, they collect very little, contributions are often evaded and the quality of service is poor.

ILO online: What can be done to improve the situation?

Michael Cichon: Creative initiatives are needed to increase social protection in the region. Such initiatives must be cautious from the fiscal and financing point of view, since it has been observed that the parameters usually defining protection systems do not appear to be neutral in terms of employment-generating incentives. Accordingly, a feasible global target that might be set by governments and the social partners could be to increase social protection by 20 per cent of the region's total population between 2006 and 2015.

ILO online: How can the proposed target be achieved?

Michael Cichon: There are three strategies which governments and social partners should take into account. First of all, very clear priorities must be identified in each country. One initial way of prioritizing work in this area is to take into account the target population. Therefore, the idea here would be to design and implement protection systems for traditionally unprotected groups, particularly workers and their families in the informal economy and the rural sector. Another way of prioritizing is according to the type of risk to be covered. Medium- or high-income countries in the region could focus on unemployment protection, while low-income countries could emphasize on the provision of health care to a greater number of people in particular.

Secondly, cost-effective protection mechanisms must be devised which take into consideration the heterogeneous characteristics of the region's labour market. One viable strategy would be to offer non-contributory assistance programmes for the more informal sectors, while contributory mechanisms would be more appropriate for the more formal sectors of the labour market.

Thirdly, action must be taken to strengthen the institutions involved in existing protection systems, in order to optimize social protection management. The idea is to support policies aimed at improving the contribution collection process and reducing social security contribution evasion, by adopting administrative reforms and providing better information for insured persons. At the same time, discretional political intervention in the programmes should be limited in order to prevent resources from being used for arbitrary policies with objectives that are not directly related to social protection.

ILO online: What is the role of the social partners in this?

Michael Cichon: None of this action will be possible without the participation of the social partners through social dialogue. To this end, an additional measure would be to promote social dialogue on social security reform processes. It is important to ensure the transparency of this process, and it is therefore essential to ensure that the social partners have access to statistical and qualitative information concerning the different social protection programmes and schemes, and to set up systems to disseminate information and provide training to the social partners so as to improve the technical quality of the proposals and discussions on public policy reform in this area.

ILO online: Can you give us an example of new measures taken to extend protection?

Michael Cichon: One such example is that of rural pensions and old-age insurance in Brazil. In 1995, action was taken to introduce a State and municipality decentralization process, with new schemes for financing pensions through tax and the presence and regulation of private health service agents. The new old-age pensions have had a qualitative and quantitative impact. In August 2001, 6,638,711 people in rural areas benefited from such pensions. They alleviate poverty, covering 88 per cent of elderly people who receive less than twice the monthly minimum wage and contributing at least 50 per cent of the monetary income of poor rural households.

ILO online: What has the ILO been doing over the last five years to extend social protection in the region?

Michael Cichon: Technical assistance activities aimed at extending social security coverage were provided to countries like Argentina, Costa Rica, Chile, Nicaragua, Paraguay, Peru and Uruguay. We also conducted studies on the labour situation and the coverage of social protection, and analysed data so that governments and other authorities can promote institutional reform and the extension of social security coverage on the basis of social dialogue.

ILO online: What has been the impact of these technical cooperation activities and the studies?

Michael Cichon: The activities mentioned above have led to reforms in several countries. In Argentina, social security benefits are being extended to groups affected by the economic crisis (2001-02) and will include coverage for old age, disability, survivors, occupational hazards and unemployment. In Peru, the ILO is supporting the preparation of a project to strengthen the Health Care Insurance Institution, to extend coverage to unprotected population groups and to improve the scheme's management. In Costa Rica, a tripartite agreement was reached to assure the sustainability of the pension scheme in coming years.

There has been also progress in the extension of social security coverage to groups which have traditionally been excluded or marginalized. In Honduras, with a strong emphasis on social dialogue, new and innovative ways have been found of insuring rural workers, domestic workers, homeworkers, independent workers, members of cooperatives, etc. In Paraguay, social security coverage has been successfully extended to domestic workers, and in Chile there has been extensive dialogue and debate on extending social protection to independent workers. In Brazil, the Government is extending employment insurance to workers released from forced or slave labour ... just to cite a few examples. The ILO will continue to provide support to help expand and modernize and strengthen existing systems, and develop new social protection schemes.

Note 1 - Decent work in the Americas: An agenda for the Hemisphere, 2006-2015, Report of the Director-General, Sixteenth American Regional Meeting, Brasilia, May 2006.