La Oferta

December 7, 2023

COVID-19 opening door to new social contract in Latin America

By Alvaro Mellizo

Lima, Jul 16 (EFE).- Latin America, the continent on which the greatest inequality prevails, is seeing that the Covid-19 crisis is also opening the door to the development of a new “social contract” in which the citizens and the state are redefining the public realm and developing higher-quality social services.

In the five months since the coronavirus pandemic hit Latin America, where the social protection infrastructure is very weak because of an historic disdain among the ruling classes for the wider public and decades of relying on the market to distribute “goods and services,” never-before-seen redistributive policies are being implemented and are receiving enormous popular and political backing.

Universal bonds, massive investments in public health, rising awareness of the needs and the deficiencies in public education and huge amounts in loans to small and medium firms have become regular features of the landscape and, politically and socially, well-accepted in a part of the world where a few months ago they would have been considered prime insults.

“Throughout the region we’re seeing an historic increase in social protection coverage. Everywhere there are special bonds, temporary but generous, which are expanding into sectors that were not considered before. The spending has been incredible but it’s far from being a problem. It had to be done,” Monica Rubio, UNICEF’s adviser for Latin American and the Caribbean on social policies, told EFE.

Rubio, Peru’s former development and social inclusion minister, said that this situation not only constitutes “an enormous change” compared to what had been done in the region, but also often has meant that, for the first time, “the state is fulfilling its role of providing assistance.”

“The important issue that’s coming along now is that it’s being assumed that this expansion of protection systems, which is desirable, may be part of an expansion to permanent coverage. You don’t have to fall into the pattern of permanent subsidies, but it’s certainly necessary to acknowledge that poverty in the region changed and you have to assume that it must be contained,” she said.

Hugo Ñopo, a researcher with the Analysis Group for Development (GRADE), agreed with this assessment of change in the approach to public spending and confirmed to EFE that in Latin America there has been “a swing that’s so fast it’s never been seen before” to a consensus to defend the market above anything else in countries like Peru, Chile and Colombia, at the opposite pole.

“Here, in the last 30 years the diagnosis that the state was a horrible provider of services skyrocketed, and its space was occupied by private entities. And it was positive for some sectors, like telecommunications, but not in others. And we’re seeing that more clearly than ever today, particularly in health care and education, which are not only services, but also basic rights,” Ñopo said.

He added that the problem of administering these services with market mechanisms in times of crisis has motivated populations to begin demanding and apparently achieving better public support to cover basic needs.

In this regard, the position of the business and political sectors is also noteworthy, since they seem to have shifted, although only slightly, in the direction of what the citizens of the region are insisting upon to an ever greater degree.

Overburdened by the terrible prevailing economic crisis, big business groups and organizations, which under “normal” conditions would have vehemently denounced any interference by the state in their activities, have assumed and even welcomed some of these measures.

“The fact that the big companies don’t forcefully oppose these policies says something about the guilt there is, and that they know that there are extremes where something didn’t work properly. The markets are magnificent instruments for allocating goods and services, but they have their limits, and so they need to be regulated,” Ñopo added.

Thus, confronted with the Covid-19 crisis, self-regulation doesn’t make sense and society is once again looking to the state as a provider of such oversight.

Also, in many other cases, the fact that the attention of governments is focusing on defending against Covid-19 is, for the first time in their lives, allowing millions of citizens throughout the region to get help from the state when they most need it.

According to Rubio, the fact that many people have received help from the state or visible improvements in health care coverage, has not only allowed them to see that the public sector offers benefits but that it’s also sensitive to their needs.

“There’s been public pressure. The governments and the political class have responded to what the people are asking for. And even the private sector has seen that it has to support harmony … So, I think that there’s an opening to reform the social contract, to modify what it means to be a citizen in Latin America and for there to be basic minimums that are non-negotiable. And Covid is doing this apparent reconsideration happen,” the former minister said.

Ñopo said that it’s true that the consensus that prevails in the region regarding the market as the main social and political agent had already suffered from “discontent and disaffection,” as could be seen in Chile and Colombia a few months ago, and in many cases the changes now are in response to “a need more than a conviction.”

“Some are able to be temporarily adapting. Argentina and Uruguay, who already had the most developed public services … But it’s true that there’s an aberration in having such low tax pressure, which is useless for offering quality public services. And so it would be very thoughtless or scarcely rational … not to (have) a tax hike,” he said.

But Ñopo also said that this return of the state opens the door to new dangers that recently seemed quite distant, such as the rise in populism.

“The result of this is that now we’re all anxious and looking to grasp at straws, and that is ideal terrain for populism, which can offer security on the surface but make everything worse,” he said.

He also said that the most sensible solutions are to “improve the markets and improve the state.”

“Both those who believed in states and those who believed in markets as saviors have fallen short. What’s needed is to improve both of them,” Ñopo said.