Social Protection and COVID-19 in Latin America: Building on Achievements

Long queue of people waiting to enter a bank branch in Lima, Peru. © Victor Idrogo / World Bank

The pandemic has certainly been hard on poor and vulnerable populations in Latin America and the Caribbean (LAC). Incomes have fallen for two-thirds of households and almost half of workers have stopped working, while 16% have lost their jobs.

But as harsh as it is, an even more traumatic story would have been written if a similar crisis had hit the region before the 2000s.

At the time, the LAC countries did not have much of a safety net. In the wake of a strong crisis, most families had to fend for themselves. If incomes dwindled or jobs were lost, they had to ask friends and relatives for help. Rural families often had some advantage, as they could grow food crops and, if necessary, sacrifice livestock. But urban families had fewer options. Skipping meals and being hungry was not unusual. In fact, malnutrition increased during times of economic crisis because programs to support families in need were scarce, with minimal funding from governments, churches or private philanthropy. In 1999, only 3.4% of LAC households had access to conditional cash transfers.

The context is now very different. During the crisis triggered by the COVID-19 pandemic, governments have been able to respond to challenges like never before. They used social protection tools like cash transfers, unemployment benefits and wage subsidies to support and protect those affected, including the poor and vulnerable. . And given the unprecedented severity of the crisis, most governments have managed to mobilize significant budgetary resources to finance the response.

AAs a result, governments across the region have expanded and created a host of new programs to cover additional beneficiaries. Data from high-frequency telephone surveys implemented by the World Bank and UNDP show how widespread these efforts were. Coverage of income support programs has increased from 22% of all households in the region before the pandemic to almost half receiving assistance during the pandemic. Coverage exceeded two-thirds of households in El Salvador, Bolivia, Guyana, Panama and Chile. The World Bank has supported the scale-up by committing more than US$3.5 billion to 10 COVID-19-related projects in the region, more than triple the support provided in the fiscal years preceding the pandemic.

The positive impact has been significant. Region-wide, estimates suggest that an additional 28 million people would have been poor in 2020 without these interventions. Even excluding Brazil’s large-scale social protection response, which kept a substantial share of its population out of poverty, social protection kept the poverty rate 1.7 percentage points lower than it would have been without these measures.

Coverage of income support programs before and during the pandemic

% of households receiving support

Source: High Frequency Telephone Surveys

Evidence also shows that the response to the pandemic has helped cushion the impact on inequality. Across the region, increases in coverage have benefited the poorest the most. And the response measures have resulted in income growth for the lowest deciles of the income distribution.

What explains this positive response?

Let’s go back to the mid-1990s, when a growing political and technocratic consensus developed around the need for policies that ensured that the poor had a minimum income and that they were protected against various risks. In a short time, a quiet revolution unfolded as many governments in the region introduced a new generation of better-targeted social protection programs. Most remarkably, countries have followed the example of innovations in countries like Mexico and Brazil by introducing their successful cash transfer programs targeting the poor. In many cases, these have replaced untargeted food subsidy programs. Non-contributory pensions and health insurance were also introduced. In 2019, almost all countries in Latin America and the Caribbean had formal cash transfer programs, covering at least 37 million households (22% of the region’s total) before the pandemic . Importantly, many countries have also invested in setting up basic delivery systems to better identify the poorest and ensure effective delivery.

The World Bank has played an important role in building this new safety net infrastructure, supporting its construction in 23 countries with funding and knowledge over the past two decades.

Despite the enormous progress, much remains to be done to strengthen the edifice of social protection that has been built in the region. In the short term, the focus remains on improving delivery systems for these programs, building on the digital innovations that have emerged through the pandemic response in areas such as social registries and payments. . Social protection programs could again be useful now, in the wake of the war in Ukraine, to mitigate its overall negative effects on the most vulnerable.

Looking ahead, a discussion is ongoing on the extent to which the scaled-up programs should be maintained as part of a strengthened social protection system as part of the overall fiscal adjustment that will no doubt be necessary.

Further down the road, vital social protection reforms are still needed in the region to extend social insurance to those without it, reform inequitable and, in many countries, fiscally unsustainable pension systems. and promoting more integrated social protection systems, with an emphasis on complementary care and economic inclusion, to more effectively lift households out of poverty.

These essential transformations will not be easy, as they require significant structural changes. So if we want to be ready before the next disaster or pandemic hits the region, we need to start building the consensus needed for social protection reform now.

Joel C. Hicks