The pandemic has been certainly harsh on poor and vulnerable populations across Latin America and the Caribbean (LAC). Income fell for two-thirds of households and nearly half of workers stopped working, while 16 percent lost their jobs.
But hard as it was, an even more traumatic story would have been written if a similar crisis had hit the region before the 2000s.
Back then, LAC countries didn’t have much of a safety net. In the wake of a strong crisis, most families had to cope by themselves. If incomes fell or jobs were lost, they had to ask friends and relatives for support. Rural families often had some advantage, as they could grow food crops and, if necessary, sacrifice livestock. But urban families had less options. Skipping meals and going hungry was not unusual. In fact, malnutrition rose at times of economic crisis, as programs to support needy families were scarce, with minimal funding from governments, churches or private philanthropy. In 1999 only 3.4 % of households in LAC had access to conditional cash transfers.
The context is now very different. During the crisis unleashed by the COVID-19 pandemic governments were able to respond to hardships 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 managed to marshal significant fiscal resources to fund the response.
As a result, governments throughout the region expanded and created a slew of new programs to cover additional beneficiaries. Data from high-frequency phone surveys implemented by the World Bank and UNDP show just how widespread these efforts were. Coverage of income support programs increased from 22 percent of all households in the region before the pandemic to nearly half receiving support during the pandemic.
Coverage topped two-thirds of households in El Salvador, Bolivia, Guyana, Panama, and Chile. The World Bank supported the scaling up by committing more than US$3.5 billion to 10 COVID-19 related projects in the region, more than a threefold increase from the support provided in the fiscal years prior to the pandemic.
The positive impact was significant. Regionwide, estimates suggest that 28 million more 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 held the poverty rate 1.7 percentage points lower than it would have been without these measures.
Evidence also shows that the pandemic response helped cushion the impact on inequality. All across the region, coverage increases benefited the poorest most. And response measures resulted in income growth for the lowest deciles of the income distribution.
What accounts for this positive response?
Turn back to the mid-1990s, when a growing political and technocratic consensus developed around the need for policies to ensure that the poor have a minimum income floor and that they are protected from various risks. In short order, a quiet revolution unfolded as many governments in the region introduced a new generation of better targeted social protection programs.
Most noteworthy, countries followed the example of innovations in countries like Mexico and Brazil in introducing their successful cash transfer programs targeted to the poor. In many cases these replaced untargeted food subsidy programs. Noncontributory pensions and health insurance were also introduced. By 2019, almost every country in LAC had formal cash transfer programs, covering at least 37 million households (22% of the region’s total) before the pandemic . Importantly, many countries had also invested in building core delivery systems to better identify the poorest and deliver efficiently.
The World Bank has played an important role in the construction of this new safety net infrastructure, supporting its construction in 23 countries with financing and knowledge over the last two decades.
Despite the enormous progress, there is much left to do to bolster the edifice of social protection that has been built in the region. In the short-term, the focus remains on improving delivery systems of these programs, building on the digital innovations that 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 negative global effects on the most vulnerable.
Looking forward, there is a pending discussion on the extent to which scaled-up programs should be maintained as part of a strengthened social protection system within the overall fiscal adjustment that will undoubtedly be necessary.
Further down the road, there are still vital social protection reforms needed in the region to extend social insurance to those without, reform inequitable and, in many countries, fiscally unsustainable pension systems , and promote more integrated social protection systems, with a focus on complementary care and economic inclusion, to raise households out of poverty more effectively.
These much-needed transformations will not be easy, as they require significant structural shifts. So, if we want to be ready before the next disaster or pandemic hits the region, we need to begin building the necessary consensus for social protection reform now.