ECLAC Proposes a New Social Cohesion Covenant for Latin America and the Caribbean

The Economic Commission for Latin America and the Caribbean (ECLAC) proposes adopting a pact of social cohesion to overcome the vulnerability in which most of the population of Latin America and the Caribbean live, in its report, Productive Development in Open Economies, which this United Nations body is presenting to the region's governments at its Thirtieth Session, in San Juan, Puerto Rico.

The social cohesion covenant must involve active labour market policies based on some elements of solidarity to finance social protection services. To progress in long-run competitiveness, ECLAC also recommends measures to improve education and its financing, as well as strengthening the ability to absorb new technology.

The social cohesion covenant proposed by ECLAC should involve at least four elements:

• Consistent fiscal and price and income policies

• Explicit recognition of the need for active employment policies and support for the informal sector

• A generous but financially viable social protection programme

• A strong emphasis on education and training.

The labour flexibility achieved by economic reforms must be combined with greater social protection, ECLAC proposes. Countries should now develop a solidarity-based welfare system able to protect citizens from new risks and uncertainty arising from changes in the structure of production.

In the past decade, Latin America posted a dramatic worsening in employment problems. With some fluctuations, the unemployment rate rose to unprecedented figures in the past 13 years: from 6.9% in 1990 to 8.6% in 1997, 10% in 2000, and 10.6% in 2003.

In this period the region grew just 2.6%, which was not enough to generate productive employment for the work force, which has been growing at 2.5% per year. Given that growth has been volatile and low, the employment rate has fallen more than it has risen.

Income from employment is the main source of resources for covering basic needs among the region's families. Because of this, the sharp rise in unemployment in Latin America and the Caribbean from 1990 to 2003 worsened problems of equity. From the perspective of social welfare and growth, no important progress has been achieved since 1990.

Because of the new relationship between competitiveness and labour, processes of more openness bring social risk. Job security declines and uncertainty rises. Although deregulation of severance and job security have made it easier for companies to adapt to new economic conditions, the lengthy lack of employment and its becoming more precarious have turned economic weakness into social vulnerability.

Many workers lost jobs covered by contracts and social protection in the formal sector and had to accept legal contracts offering fewer guarantees, intended to encourage temporary and occasional work. Moreover, with differentiated contracts, solidarity-based systems among workers have grown weaker.

Education to Face the Challenges of Greater Competitiveness
In terms of the role of education, ECLAC considers it important to recognize the need to constantly adapt the educational system to the challenges of competitiveness. This requires, among other elements, an increase in high school graduation rates, the system's adaptation to the demands of the labour market, and a reduction in the international gap reflecting the social use of information technologies.

ECLAC indicates that, while repetition rates in public primary schools have fallen and registration in secondary education has risen, these are still lower than improvements in the same indicators in other region's around the world. Another limitation on productive and competitive development that requires correction is the low productivity of education provided to the poorest sectors, due to the poor distribution of resources.

See chart: Labor Market Adjustment and Poverty Indicators