(ST Antony's - Macmillan Series) Christopher Abel, Colin M. Lewis (Eds.) - Welfare, Poverty and Development in Latin America (1993, Palgrave Macmillan UK)

St Palgrave Macmillan Series
General Editors: Archie Brown (1978-85) and Rosemary Thorp (1985- ),

both Fellows of St Antony's College, Oxford
Recent titles include:

Christopher Abel and Colin M. Lewis (editors)
WELFARE, POVERTY AND DEVELOPMENT IN LATIN AMERICA
Jeremy Adelman (editor)
ESSAYS IN ARGENTINE LABOUR HISTORY, 1870-1930
Orlando Albornoz
EDUCATION AND SOCIETY IN LATIN AMERICA
Victor Bulmer-Thomas
STUDIES IN THE ECONOMICS OF CENTRAL AMERICA
Colin Clarke (editor)
SOCIETY AND POLITICS IN THE CARIBBEAN
David Cleary
ANATOMY OF THE AMAZON GOLD RUSH
John Crabtree
PERU UNDER GARCfA
Alex Danchev (editor)
INTERNATIONAL PERSPECTIVES ON THE FALKLANDS CONFLICT
Guido di Tella and Carlos Rodrfguez Braun (editors)
ARGENTINA, 194fr83: THE ECONOMIC MINISTERS SPEAK
Guido di Tella and D. Cameron Watt (editors)
ARGENTINA BETWEEN THE GREAT POWERS, 1939-46
Guido di Tella and Rudiger Dornbusch (editors)
THE POLITICAL ECONOMY OF ARGENTINA, 1946-83
Heather D. Gibson and Euclid Tsakalotos (editors)
ECONOMIC INTEGRATION AND FINANCIAL LIBERALIZATION
Anita Isaacs
MILITARY RULE AND TRANSITION IN ECUADOR, 1972-92
George Philip
THE PRESIDENCY IN MEXICAN POLITICS
Alfonso W. Quiroz
DOMESTIC AND FOREIGN FINANCE IN MODERN PERU, 1850-1950
Verena Stolcke
COFFEE PLANTERS, WORKERS AND WIVES
Philip J. Williams
THE CATHOLIC CHURCH AND POLITICS IN NICARAGUA AND
COSTA RICA
Welfare, Poverty
and DevelopiDent
in Latin America
Edited by
Christopher Abel
Lecturer in Latin American History
University College London
and
Colin M. Lewis
Lecturer in Latin American Economic History
London School of Economics and Political Science
In association with
Palgrave Macmillan
©Christopher Abel and Colin M. Lewis 1993
Softcover reprint of the hardcover 1st edition 1993 978-0-333-51737-6
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First published 1993 by

THE MACMILLAN PRESS LTD
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ISBN 978-1-349-11327-9 ISBN 978-1-349-11325-5 (eBook)
DOI 10.1007/978-1-349-11325-5
A catalogue record for this book is available
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10 9 8 7 6 5 4 3 2
04 03 02 0 I 00 99 98 97 96
Contents
List of Tables viii
List of Figures X
Acknowledgements xi
Notes on the Contributors xii
Abbreviations xvi
1 Introduction
Christopher Abel and Colin M. Lewis 1
PART ONE
2 Evolution of Aggregate Welfare and Development
Indicators in Latin America and the OECD, 1950-85
Jose Miguel Alba/a-Bertrand 33
3 Determinants of Social Insurance/Security Costs and
Coverage: An International Comparison with a Focus
on Latin America
Carmelo Mesa-Lago, Maria A. Cruz-Saco and
Lorena Zamalloa 49
4 Urban Wages and Welfare
Ian Roxborough 75
5 Self-Help Housing During Recession
Alan Gilbert 109
6 Growth, Distribution and Basic Needs in Peru
and Colombia
Rosemary Thorp 133
PART TWO
7 Bonos, Benejicios y Bienestar: A Study of Wages,
Work and Welfare on Peruvian Sugar Plantations
Christopher D. Scott 149
v
vi Contents
8 Social Insurance: Ideology and Policy in the

Argentine, c. 1920-66
Colin M. Lewis 175
9 Welfare, Oil Workers and the Labour Movement
in Venezuela
Steve Ellner 201
10 Utopia in Uruguay Redefined: Social Welfare
Policy after 1940
Henry Finch 221
11 Education and Training in Colombia, 1940s to 1960s
Aline Helg 239
12 Puerto Rico: A Model of Welfare Capitalism?
c. 1945-70
Christopher Abel 257
13 Social Equity, Agrarian Transition and Development
in Cuba, 1945-90
Jean Stubbs 281
14 Social Security in Haiti: Informal Initiative in a
Welfare-less State
Mats Lundahl 297
15 Market Modernization Policy in Bogota: Welfare
Consequences for Low-Income Market Sellers
Caroline O.N. Moser 317
16 Politics, Equity and Social Security Policy in Brazil:
A Case-Study of Statecraft and Citizenship, 1965-85
James M. Malloy and Carlos A. Parodi 341
17 Welfare in Nicaragua: The Somocista and Sandinista
Experiences Compared
Peter Sol/is 365
18 The Campaign Against Absolute Poverty in Colombia:
An Evaluation of Liberal Social Policy
Alicia Puyana 387
19 Mobilization and the Quest for Recognition:
The Struggle of Rural Women in Southern Brazil
for Access to Welfare Benefits
Anita Brumer 405
Contents vii
20 Non-Governmental Organizations and Development

in Brazil under Dictatorship and Democracy
Anthony Hall 421
21 Chilean Education Policy: Authoritarianism and
Democracy
Alejandro lara Weitzmann 439
Index 453
List of Tables
2.1 Basic development indicators: Latin American
and OECD countries 34
2.2 Growth rates of population 35
2.3 Life expectancy and infant mortality 35
2.4 Real growth of GOP per capita and income
distribution 37
2.5 Distribution of labour force 38
2.6 Distribution of GOP 39
2.7 Education 41
2.8 Health and nutrition 42
2.9 Service infrastructure 44
2.10 Consumption 45
3.1 Determinants of social security/insurance and
health expenditures, and coverage by authors 51
3.2 Social security indicators in Latin America, 1980 56
3.3 Per capita social security and social insurance
expenditure in Latin America, 1980 57
3.4 OLS regression coefficients on social security
expenditures, to test Hypothesis 1 59
3.5 Indicators on labour, urbanization, structure of
production and public expenses in Latin
America, 1980 63
3.6 OLS regression coefficients on economically
active population coverage, to test Hypothesis 2,
1980 64
3.7 OLS regression coefficients on social insurance
expenditures, to test Hypothesis 3, 1980 67
4.1 Real income in Brazil, 1960-70 76
4.2 Real wages, level of activity and open
unemployment, 1975-81 92
4.3 Latin America: Ratio of formal to informal
labour force 93
4.4 Gross domestic product and functional
distribution of income 98
A4.1 Indices of real industrial wages, 1940-86 104
5.1 Key indicators of the recession in Mexico and
Venezuela 118
viii
List of Tables ix
6.1 Real GOP annual growth rates: Colombia, Peru

and the rest of the world 134
6.2 Estimates of the incidence of poverty circa 1970 135
6.3 Income distribution: Gini coefficients 136
6.4 Welfare indicators 1970-80 137
6.5 Adult illiteracy rate 138
6.6 Welfare ranking in sample countries 139
6.7 Real GOP and apparent food consumption
per capita 140
6.8a Peru: Infant mortality by provinces 141
6.8b Colombia: Infant mortality by departments 142
7.1 Casagrande: Average daily cost of a permanent
labourer, 1965 161
7.2 Contratistas Caiiaveleros: Unit costs of cane
cutting at Tuman, September 1963 162
7.3 Social expenditure on six sugar co-operatives,
1970-71 166
7.4 Social expenditure per member in six sugar
co-operatives, 1971 168
7.5 Direct and indirect earnings of members and
non-members of CAP Tuman, 1971 169
8.1 Ordinary government revenue and social
insurance income 189
8.2 Social insurance premiums as percentage of
general federal government income 192
12.1 Measures of economic success in Puerto Rico,
1940-80 263
12.2 Occupational structure of Puerto Rico, 1930-70 271
18.1 Annual household income, Colombia 390
18.2 Income distribution of the population, by deciles 391
18.3 Structure of central government spending, by
sub-sector, 1970-89 394
18.4 Structure of total investment budget, by agency 395
18.5 Structure of new public investment in education,
1970-90 395
18.6 Character of public investment in the Plan of tbe
Social Economy 1986-89 399
18.7 Total government and total government social
spending as percentage of GOP 400
List of Figures
3.1 SSE/GDP and per capita GDP: 59 countries, 1980 60
3.2 Actual and predicted coverage in Latin America 65
3.3 Actual and predicted SIE/GODP in Latin America 69
4.1 Real wages indices, 1940-86 77
7.1 Dual nature of welfare provision on Peruvian
sugar plantations 151
X
Acknowledgements
The origins of this book lie in a symposium organized at the 44th
International Congress of Americanists held in Amsterdam in July,
1988, and a seminar held at the Institute of Latin American Studies,
University of London, in the following autumn term. We wish to
thank all who participated in discussions in Amsterdam and London.
We have a particular debt of gratitude to Rosemary Thorp for her
contributions to the symposium and for her encouragement in the
preparation of this volume. We are also grateful to the Organizing
Committee of the Amsterdam Congress and to Leslie Bethell, Direc-
tor, and Tony Bell, Secretary of the Institute in London for their
sponsorship in the early stages of the project. Valuable secretarial
assistance has come from Kitty Stubbs at University College London
and from Tess Truman at the London School of Economics and
Political Science. Hazel Aitken helped in the preparation of the ILAS
seminar.
CGA
CML
London
xi
Notes on the Contributors
Christopher Abel is Lecturer in Latin American History at University
College London. His publications include Latin America: Economic
Imperialism and the State [co-edited with Colin M. Lewis) (Athlone
Press, London, reprint 1991) and two chapters on Colombia since
1930 (co-authored with Marco Palacios) for The Cambridge History
of Latin America, Volume VIII (edited by Leslie Bethell, Cambridge,
1991).
Jose Miguel Albala-Bertrand lectures in Economics at Queen Mary

and Westfield College, London. He is author of Political Economy of
Large Natural Disasters (Oxford, 1990) and his recent research
interests include macro models for Latin America. He is a frequent
visitor to Latin America, including his native Chile.
Anita Brumer has studied in France and teaches Sociology at the

Federa.l University of Rio Grande do Sui, Brazil, at Porto Alegre.
Her principal publications are in the fields of rural sociology and the
sociology of labour. Having worked on various aspects of rural
development, she is now researching on gender issues and the impact
of democratization on rural society in Brazil.
Maria Amparo Cruz-Saco teaches Economics at the University of the

Pacific, Lima and is an ASAID Consultant on Health Care in Peru.
She has written several articles on Peruvian economics and health.
Steve Ellner teaches History .at the University of Barcelona, Vene-

zuela. He has written Los Partidos PoUticos y su Lucha por el Control
del Movimiento Sindical en Venezuela, 1936-1948 (Caracas, 1980)
and Venezuela's 'Movimiento al Socialismo': From Guerrilla Defeat
to Innovative Politics (Durham, NC, 1988).
Henry Finch is Senior Lecturer in Economic History at the Univer-

sity of Liverpool. He has published extensively on Uruguay, and is
author or editor of Contemporary Uruguay: Problems and Prospects
(Liverpool, 1989); A Political Economy of Uruguay since 1870 (Lon-
don, 1981); and Historia Economica del Uruguay Contempordneo
(Montevideo, 1980).
xii
Notes on the Contributors xiii
Alan Gilbert is Professor of Latin American Geography at University

College London. He has published on Economic Geography, es-
pecially housing policy. His major books include Latin American
Development (London, 1974), [with Peter Ward) Housing, The State
and The Poor: Policy and Practice in Three Latin American Cities
(Cambridge, 1985), [with Peter Healey] The Political Economy of
Land (Aldershot, 1985) and [with Ann Varley] Landlord and Tenant:
Housing the Poor in Urban Mexico (London, 1990). He is working on
rental housing in Caracas, Mexico City and Santiago.
Anthony Hall lectures in Social Policy and Planning in Developing

Countries at the London School of Economics and Political Science.
Previously, he served as Field Director for Oxfam in Brazil. His
principal publications include: Drought and Irrigation in North-East
Brazil (Cambridge, 1978), Developing Amazonia: Deforestation and
Social Conflict in Brazil's Carajas Programme (Manchester, 1989),
[with David Goodman] The Future of Amazonia: Destruction or
Sustainable Development? (London, 1990), and [with James Midgley]
Development Policies: Sociological Perspectives (Manchester, 1988).
Aline Helg studied at Geneva University and University College,

London, and currently teaches at the University of Texas at Austin.
Her publications include Civiliser le peuple et former les elites. L'edu-
cation en Colombie, 1918-1957 (Paris, 1984) and an essay on Cuba
and Argentina in R. Graham (ed.) The Idea of Race in Latin America
(Austin, 1990).
Alejandro Jara Weitzmann read Economics at the Catholic Univer-

sity, Santiago, Chile. He has published Desigualdad Educativa en
Chile [with G. Briones, L. Egana and A. Magendzo] (Santiago, 1984)
and various articles on Chilean economic and social policy.
Colin M. Lewis is Lecturer in Latin American Economic History at

the London School of Economics and Political Science. His publica-
tions include British Railways in Argentina, 1857-1914: A Case Study
of Foreign Investment (London, 1984) and British Business in Latin
America [co-edited with Rory Miller] (Cambridge, forthcoming).
Mats Lundahl is based at the Stockholm School of Economics. His

publications include Peasants and Poverty: A Study of Haiti (London,
1979) and many articles and chapters on Haitian economics, politics
xiv Notes on the Contributors
and labour. His research now embraces Caribbean and African

Development.
James M. Malloy is Professor of Politics at the University of Pitts-

burgh. He has contributed to various fields of social science research
on Latin America. He is perhaps best known for The Politics of Social
Security in Brazil (Pittsburgh, 1979), and Authoritarians and Demo-
crats: Regime Transition in Latin America [co-edited with Mitchell
Seligson] (Pittsburgh, 1987).
Carmelo Mesa-Lago is Distinguished Service Professor of Economics

and Latin American Studies at the University of Pittsburgh. He is
author of many books and articles on the Cuban Economy, Latin
American Social Security and Health Care and Comparative Econ-
omic Systems, including Social Security in Latin America: Pressure
Groups, Stratification and Inequality (Pittsburgh, 1978); Social Secur-
ity in Ecuador (Washington, 1984); The Crisis of Social Security and
Health Care: Latin American Experiences and Lessons [ed.] (Pitts-
burgh, 1985).
Caroline O.N. Moser lectures in Social Planning in Developing

Countries at the London School of Economics and Political Science
and is currently on leave in the Urban Division of the World Bank.
She is co-editor of Women, Human Settlement and Housing (London,
1987). Her recent articles include 'Gender Planning in the Third
World: Meeting Practical and Strategic Gender Needs' World Devel-
opment XVII, 11 (1989).
Alicia Puyana was educated at universities in Bogota, Prague and

Oxford. She has worked for the Andean Pact in Lima and has
published Economic Integration Between Unequal Partners: The
Andean Pact (London, 1987). She is Directrice of CRESET (Centro
Regional de Los Estudios del Tercer Mundo), a private non-
profitmaking foundation in Bogota, researching into the economics
and international relations of the Third World.
Ian Roxborough, currently Visiting Professor at the State University

of New York at Stonybrook, lectures in Political Sociology at the
London School of Economics. His main publications include Theories
of Underdevelopment (London, 1979) and Unions and Politics in
Mexico: The Case of the Automobile Industry (Cambridge, 1984). He
Notes on the Contributors XV
is engaged upon a major research project examining re-democratiza-

tion during economic crisis in Latin America.
Christopher D. Scott lectures in Economics at the London School of

Economics. His research output includes Machetes, Machines and
Agrarian Reform: the Political Economy of Technical Choice in the
Peruvian Sugar Industry, 1954-74 (Norwich, 1979). He has worked
for the International Labour Office, and has published on rural
labour markets, agribusiness and food policy in Latin America.
Peter Sollis is currently on leave from Oxfam where he is Desk

Officer for Central America, working on relations between NGOs
and grassroots development. He was a regular visitor to Nicaragua
during the 1980s and has contributed to the Journal of Latin Ameri-
can Studies.
Jean Stubbs was resident in Cuba from 1968 to 1987 and is coordina-
tor of the Caribbean Studies Programme at the Institutes of Com-
monwealth and Latin American Studies, University of London. Her
main publications are Tobacco on the Periphery: A Case Study in
Cuban Labour History, 1860-1958 (Cambridge, 1985) and Cuba: The
Test of Time (London, 1989).
Rosemary Thorp is Director of the Latin American Centre,

St Antony's College, Oxford, where she teaches Economics. Her pub-
lications include Peru, 1890-1977: Growth and Policy in an Open
Economy [with Geoffrey Bertram] (London, 1978), Latin America
in the 1930s: The Role of the Periphery in World Crisis [ed.)
(London, 1984); and Inflation and Stabilization in Latin Amer-
ica (London, 1979) and Latin American Debt and the Adjustment
Crisis (London, 1987) co-edited with Laurence Whitehead. She has
most recently published Economic Management and Economic De-
velopment in Peru and Colombia (London, 1991).
Lorena Zamalloa is a consultant on Peru at the Centre for Develop-

ment Studies, University of Pittsburgh, and sometime economist at
the Central Bank of Peru. She is currently completing her doctoral
thesis on Peruvian economics.
Abbreviations
GENERAL
A dE/SSE Administrative Expenditure/Costs as a
percentage of total Security Expenditure
BOLSA Bank of London and South America
CEMLA Centro de Estudios Monetarios
Latinoamericanos
CEPAL Comisi6n Econ6mica para America
Latina (y el Caribe)
CRS Catholic Relief Services
DUP Directly Unproductive Profit-seeking
EAP Economically Active Population
ECLA (C) Economic Commission for Latin America
(and the Caribbean)
FAO Food and Agriculture Organization
GDP Gross Domestic Product
GNP Gross National Product
GNPp/c Gross National Product, per capita
(US$ 1980 in Mesa-Lago)
HE Health Expenditures
HSIE Health Expenditures by Social Insurance
IBRD International Bank for Reconstruction
and Development (World Bank)
ICP International Comparison Project
IDB Inter-American Development Bank
ILO International Labour Office
lSI Import-substituting Industrialization
NAGDP Non-agricultural Output as a percentage
of Gross Domestic Product
NGO Non-governmental Organization
NI National Income
Nlp/c National Income, per capita
OECD Organization for Economic Co-operation
and Development
OREAP Organized Labour as a percentage of the
Economically Active Population
PAHO Pan-American Health Organization
Pa/Act Passive to Active Ratio (Ratio of
xvi
Abbreviations xvii
Membership of Social Insurance Fund

Receiving Pensions/Benefits to
Contributors)
PeEffBe Expenditure on Pensions as a percentage
of Total Benefits Expenditure
PHC Primary Health Care
PHE Public Health Expenditure
Poe Percentage of Population Coverage
POCOM Political Commitment Dummy Variable
PREALC Programa Regional del Empleo para
America Latina y el Caribe
PS/GDP Public Expenditure as a percentage of
Gross Domestic Product
SIE/GDP Social Insurance Expenditure as a
percentage of Gross Domestic Product
SIEp/c Social Insurance Expenditure, per capita
SSE Social Security Expenditure
SSE/GDP Social Security Expenditure as a
percentage of Gross Domestic Product
SSEp/c Social Security Expenditure, per capita
SW/EAP Salaried Workers as a percentage of the
Economically Active Population
TBA Traditional Birth Attendant
TP Total Population
TPHE Total Public Health Expenditure
(including social insurance)
UNESCO United Nations Educational, Scientific
and Cultural Organization
UNICEF United Nations (International) Children's
(Emergency) Fund
UPo Urban population as a percentage of
Total Population
USMIR US Military Intelligence Reports
WHO World Health Organization
YS Age of (Social Insurance/Security)
Programme, number of years
ARGENTINA
AIPP Agrupaci6n de Intelectuales del Partido
Peronista
INPS Instituto Nacional de Previsi6n Social
xviii Abbreviations
YPF Yacimientos PetroUferos Fiscales
BRAZIL
ARENA Alian~a Renovadora Nacional
ASSESOAR Assosica~ao de Estudos, Orientacao e
Assist~ncia Rural
CAPA Centro de Assessoramento do Pequeno
Agricultor
CCPY Comissao pela Criacao do Parque
Yanomami
CEAS Centro de Estudos e A~ao Social
CEB Comunidade Eclesial de Base
CEDI Centro Eucumenico de Documenta~ao e
lnforma~ao
CEPASP Centro de Educa<;ao, Pesquisa e
Assessoria Sindical e Popular
CGT Confedera<;ao Geral do Trabalho
CIMI Comissao lndigenista Missionario
CNS Conselho Nacional de Seringueiros
CONCLAT Confedera<;ao Nacional das Classes
Trabalhadores
CONTAG Confedera<;ao Nacional dos
Trabalhadores na Agricultura
CPI Comissao Pro-fndio
CPT Comissao Pastoral da Terra
CUT Central Onica do Trabalho
FASE Federa<;ao de 6rgaos para Assistencia
Social e Educacional
FUNABEM Funda<;ao Nacional da Beneficencia para
Menores
FUNRURAL Fundo de Assistencia e Previdencia ao
Trabalhadores Rural
lAP AS Instituto Administrativo de Previdencia e
Assist~ncia Social
IBASE Instituto Brasileiro de Amllises Sociais e
EconOmicas
IN AMPS Instituto Nacional de Amparo Medical e
Previdencia Social
INCRA Instituto Nacional para Coloniza<;iio e
Reforma Agr~ria
IN ESC Instituto de Estudos S6cio-Econ0micos
Abbreviations xix
INPS Instituto Nacional de Previdencia Social

LBA Legiao Brasileira de Assistencia
MOB Movimento Democnitico Brasileiro
MIRAD Ministerio de Reforma Agniria e
Desenvolvimento
MOC Movimento de Organiza~ao Comunitaria
MPAS Ministerio de Previdencia e Assistencia
Social
MST Movimento dos Trabalhadores Rurais
Sem Terra
PATAC Programa de Aplica~ao de Tecnologias
Adaptadas nas Comunidades
PDS Partido Democnitico Social
PGC Programa Grande Carajas
PMDB Partido do Movimento Democratico
Brasileiro
PNRA Plano Nacional de Reforma Agraria
POLONOROESTE Programa Integrado de Desenvolvimento
do Noroeste do Brasil
PT Partido dos Trabalhadores
SINPAS Sistema Nacional de Previdencia e
Assistencia Social
UDR Uniao Democnitica Rural
CHILE
ENU Escuela Nacional U nificada
UP U nidad Popular
COLOMBIA
ANDI Asociaci6n Nacional de Industriales
CSTC Confederaci6n Sindical de Trabajadores
de Colombia
CTM Confederaci6n de Trabajadores de
Colombia
DANE Departamento Administrativo Nacional
de Estadfsticas
EDIS Empresa Nacional de Servicios Publicos
FECODE Federaci6n Colombiana de Docentes
FED CAFE Federaci6n Nacional de Cafeteros
FED EGAN Federaci6n Nacional de Ganaderos
FENALCO Federaci6n Nacional de Comerciantes
XX Abbreviations
FUN Federaci6n Universitaria Nacional

ICCE lnstituto Colombiano para Ia
Construcci6n de Escuelas
PEAP Plan to Eradicate Absolute Poverty
PSE Plan of Social Economy
SENA Servicio Nacional de Aprendizaje
UTC Uni6n de Trabajadores Cat6licos
CUBA
ANAP Asociaci6n Nacional de Agricultores
Pequenos
FMC Federaci6n de Mujeres Cubanas
MINAG Ministerio de Agricultura
MINAZ Ministerio de Azucar
MINED Ministerio de Educaci6n
SDPE Sistema Democnitico de Planificaci6n
Econ6mica
MEXICO
CfM Confederaci6n de Trabajadores de
Mexico
PRI Partido Revolucionario Institucional
NICARAGUA
AISSCAP Asociaci6n de Instituciones de Seguridad
Social de Centro America y Panama
COFARMA Companfa de Farmaceuticos
FETSALUD Federaci6n de Trabajadores de Salud
INISER Instituto Nacional de Seguros
INPHU Instituto Nacional para Promoci6n
Humana
INSS Instituto Nacional de Seguridad Social
INSSBI Instituto Nacional de Seguridad Social y
Bienestar
JNAPS Junta National de Asistencia y Previsi6n
Social
PlASS Programa Integrado para Actividades y
Salud Social
PRACS Programa Rural para Acci6n Comunal
UCA Universidad Centro Americana
UNAN Universidad Nacional Aut6noma
Abbreviations xxi
PERU
AFA Archivo del Fuero Agrario
APRA Alianza Popular Revolucionaria
Americana
CfP Confederaci6n de Trabajadores Peruanos
FfA Federaci6n de Trabajadores Azucareros
ORIT Organizaci6n Regional Interamericana de
Trabajadores
sso Seguro Social Obrero
PUERTO RICO
PPD Partido Popular Democratico
URUGUAY
CGTU Confederaci6n General de Trabajadores
de Uruguay
CNT Convenci6n Nacional de Trabajadores
FORU Federaci6n Obrera Regional Uruguaya
UGT Uni6n General de Trabajadores
usu Uni6n Sindical Uruguaya
VENEZUELA
AD Acci6n Democratica
COPEl Comite de Organizaci6n Polftica
Electoral lndependiente
crv Confederaci6n de Trabajadores
Venezolanos
INA VI lnstituto Nacional de Vivienda
INOS Instituto Nacional de Obras Sanitarias
MEP Movimiento Electoral Popular
MIR Movimiento de Ia lzquierda
Revolucionaria
PCV Partido Comunista Venezolana
PDVSA Petroleos de Venezuela SA
URD Union Republicana Democratica
1 Introduction
Christopher Abel and Colin M. Lewis
This introductory chapter performs four functions. First, it identifies

the principal debates about welfare in Latin America. Second, it
pinpoints pressing issues of welfare, poverty and development, and
places them in their historical context. Throughout, the chapter
argues the case for a revised approach to the problems posed by
poverty and for a pragmatic openness to experimentation in confront-
ing them. Finally, it sets out the structure of the volume, indicating
the originality of chapters.
The crises of debt and adjustment and the challenges of redemo-
cratization have meant that recent writing has tended to emphasize
the political and economic rather than the social. 1 The aim of the
book is to redress this imbalance. The approach is determinedly
multi-disciplinary. The book draws upon contributions by econom-
ists, historians, political scientists, sociologists, social anthropologists
and geographers from Latin America, the United States, Britain and
elsewhere in Western Europe. To date the literature has been over-
compartmentalized. Much earlier work - especially by economists
and political scientists - has fruitfully explored the expansion of
institutional provision in social security and, to a lesser extent, the
fiscal and political ramifications of educational and health-care fund-
ing and coverage. Many of these studies draw upon aggregated
official data, for example macro-economic series and public accounts,
which are open to doubts regarding reliability. Perhaps some of these
studies have been overconcerned with institutional arrangements,
and have tended to neglect the needs of recipients. Too often quan-
titative studies pay scant attention to micro-level case-study work
which sheds light on the limits to official welfare provision and the
quality of benefits and payments received. Questions about the dis-
tribution of welfare and access to social security have been tackled
at the micro-level more directly by sociologists, geographers and
anthropologists. Fieldwork of the past two decades also underlines
the significance of informal provision and self-help.
Contemporary crises have highlighted problems of development
and inequity. And, as this book shows, welfare - an increasingly
important matter since the 1920s- is now a burning issue, as workers
1
2 Christopher Abel and Colin M. Lewis
and submerged groups struggle for survival. During the period of

recession and restructuring the Latin American state has retreated:
discretionary spending has been cut back and the real value of ben-
efits has fallen. In such areas as labour-intensive public works pro-
jects, subsidies for food and urban services and the indexation of
pensions, the curtailment of state spending prompted in part by the
IMF has had a negative impact in much of the continent. Fiscal
retrenchment has jeopardized the already precarious livelihoods of
the poor, as well as the standards of living of skilled urban workers
and segments of the middle classes. Many of these groups had experi-
enced absolute improvements in material conditions during the booms
of the 1960s and 1970s.
In phases of boom and stagnation much of the writing about welfare
has emanated from official and institutional sources. By contrast, an
alternative approach which is in essence a view from below is observed
in the publications of geographers and anthropologists. 2 They point to
the strategies of communities, households and individuals who, respond-
ing to economic crisis compounded by institutional retreat, are com-
pelled either to become even more self-reliant or to seek charity from
non-goyernmental agencies. As the main task of international and
national charitable organizations has shifted from short-term disaster
relief to the broader problem of absolute poverty, so their field surveys
have cast new perspectives upon inequality and misery in the continent.
Field research confirms a legacy of poverty resulting from earlier pat-
terns of distorted development that is now exacerbated by protracted
crises of debt rescheduling, capital flight and economic reorganization.
Accordingly this book advances the case for a comparative approach
to welfare. It draws upon distinct methodologies and interdisciplinary
perspectives, elaborated from official documents, agency reports and
field surveys. The content of chapters in the book ranges from the
continent-wide and comparative to national and local-level diag-
noses. Some contributors deploy macro-economic data; others use
interview and questionnaire methods, company documentation and
field-trip briefs. Thus the approach of the volume is multidefinitional,
and the result multidimensional.
THE DEBATES
What are the principal debates about welfare and social justice in
Latin America? This volume pays particular attention to several
Introduction 3
interrelated debates. Probably the most important refers to the

framework and content of welfare provision. Closely associated with
this are the discussions of definition and measurement. These arise
within the context of conflict about the appropriateness to Latin
American conditions of alternative models- the Bismarckian and the
Beveridgian. The crises of the 1980s have raised the possibility of a
third model based upon a reappraisal of the welfare potential of the
informal sector. Controversy also surrounds questions of termin-
ology, especially 'coverage' and 'provision', of demand and of
finance. 3
The formulation of welfare provision has been seen from more
radically divergent standpoints in contemporary Latin America than
in Western Europe. Three different frameworks of provision have
coexisted in Latin America since the 1940s. The first is minimalist:
confining the social responsibilities of the state to ameliorative action
in the event of natural disaster or the ill-health or unemployment of
the ·citizen. The second embodies notions of the safety-net which
guarantees to the individual basic services in health and education
and some provision in old age. The third envisages the eradication of
poverty and inequality through an all-embracing welfare state. With
the probable exception of revolutionary Cuba, the third remains
unrealized, especially in rural areas, for most Latin Americans. The
second framework has prevailed in the larger and intermediate-size
countries for the greater part of the post-war period. From the late
1950s to the mid-1970s a convergence of diverse forces endogenous to
the continent - urbanization and rapid population growth, the gen-
eralized impact of cepalismo, the challenge of revolutionary socialism
and a growth of urban worker and peasant militancy- and of external
pressures - from UNESCO, the IDB, the ILO, the FAO, the
Alliance for Progress, and transnational enterprise - placed welfar-
ism near the centre of the political agenda. Thus a tentative consen-
sus was achieved during the 1960s that depicted a progress towards a
welfare state as embracing
1. the gradual expansion of institutional arrangements for formal

social security (namely the maintenance of income in .the case of
involuntary loss of earnings due to temporary unemployment or
sickness, payment of retirement pensions) and provision of adequate
health care;
2. the universal provision of primary (and, in some cases, secondary)
education;
3. the establishment of basic standards of hygiene, nutrition and

housing;
4. the achievement in the long run of full employment.
Definitions of welfare and social security are neither static nor uni-
formly held. In an early phase welfare meant formal social insurance
provision and the scale of its coverage, in particular (a) absolute
levels of benefits; (b) the proportion of the population insured against
unemployment and ill-health; and (c) the proportion of the popula-
tion qualified to receive old age pensions. Some definitions couch
social security in restricted terms as the provision of income main-
tenance services or a particular type of income maintenance; others
have a more general definition. In 1942 the ILO differentiated social
insurance from social assistance, defining social insurance in terms of
financing through the contributions of potential beneficiaries, while
defining social assistance in terms of means-tested benefits financed
from general taxation.
Now formal and narrow definitions have been overtaken by the
debate about basic needs. 4 In consequence, the definition of welfare
in Latirt America today includes guaranteed minimum levels of nu-
trition, adequate housing and health care, access to education,
reliable public services and a job. The attainment of these objectives
presupposes both continuous economic growth that yields an expan-
sion of fiscal resources and a proficient state apparatus able to raise
and redeploy taxes. Once growth is sustained, then, argue welfare
economists, increased consumption can also be sustainable, and re-
distributive policies can guarantee incremental advances in welfare
for progressively larger segments of the population, thereby further
reinforcing the growth process.
By the early 1960s democratic reformists saw civil liberties as
including access to welfare services, and viewed the construction of
the welfare state as an essential mechanism giving the socially dis-
franchised a stake in the political order. A system of individual
entitlement, collective insurance and state-led regulation gradually
acquired shape amidst fears of demographic catastrophe. This trend
was consistent with ideologies of Christian democracy and social
democracy that assumed explicit institutional forms in Venezuela and
Chile. Christian democracy stressed the organic wholeness of society
and the importance of mutual self-help; social democracy the re-
sponsibility of the state to protect the weak citizen from market depen-
dency. A broadening of democratic support-bases was devised both to
Introduction 5
avert revolutionary challenges and a resurgence of the authoritarian

right. Such aims and assumptions were shattered by uneven economic
performance compounded by a succession of military go/pes begin-
ning with the Brazilian coup of 1964. Thereafter two new options
appeared. One was that of post-1973 Chile, in which accumulation
took priority over welfare consumption. This involved a drastic re-
duction in government spending - rolling back the frontiers of the
state in social and economic policy, in particular privatizing social
security and education provision. A retreat into modified poor law
traditions occurred. Charity was suspected as constituting a disincen-
tive to work, relief was targeted and means-tested, and the welfare of
the entire population was argued to reside in allowing the market-
place to operate with as little disturbance as possible. The other
option was the Brazilian, which was argued in a seminal study by
Rosenberg and Malloy to be predicated upon a trade-off between
curtailment of civil rights on the one hand and an expansion of social
security and selected features of welfare on the other. 5 Some apolo-
gists for the 1964-85 Brazilian regime contend that the restoration of
order and growth and the institutional arrangements of an authori-
tarian regime were essential prerequisites for the realization Qf social
policies consonant with the new definition of welfare outlined above.
How is welfare measured? What are the criteria for gauging both
quantitative and qualitative changes in welfare provision? What shifts
have been observed in the composition of welfare expenditure over
time? Up to 1960 absolute levels of the composition of welfare
expenditure were conventionally measured in terms of the budgets of
responsible bodies. These included autonomous social security funds,
government ministries and private institutions. A change occurred in
the 1960s, when measurement appeared to become easier as central
government assumed more direct responsibilities for the administra-
tion of social welfare through the standardization and centralization
of social security, in addition to its earlier role in the provision of
health and education services. 6 A trend towards centralization of
welfare budgets made possible the more rigorous measurement and
analysis of welfare through the study of changes in the absolute level
and distribution of the budgets of the welfare ministrjes. Similar
appraisals refer to or are based upon changes in welfare expenditure
either in per capita terms or as a proportion of GDP. This ease of
measurement is perhaps delusory. An overreliance upon the public
accounts may result in problems of disguised and/or non-captured
expenditure. Disguised official expenditure is exemplified by the
inclusion of spending on military pensions in the war ministry budget;

non-captured expenditure is illustrated by company pension schemes
and private education.
The Bismarckian model has dominated state welfare provision
and, in particular, social security. 7 This model has had two enduring
features: a heavy stress upon self-financing; and a politically co-
optive role. These aspects were not mutually exclusive: while in some
countries, one or the other was prevalent, in others both played a
significant part. The co-optive element of welfarism was clearly dis-
cernible in earlier corporate welfare and the self-financing compo-
nent was more observed in initial extensions of officially-sponsored
schemes. More ambitious programmes involving the interaction of
the co-optive and the self-financing are features of a recent period.
By the 1920s we see first the genesis and growth of co-optive if
rudimentary corporate welfare provision involving pensions, health-
care and recreational facilities, which were launched mainly by
foreign-owned utility companies and mining and plantation enter-
prises. And secondly we observe the inception of modest official
social security arrangements, which complemented existing public
education as well as specialized pension schemes for the officer corps
and some senior public servants.
The Bismarckian was not the only model to influence official think-
ing about welfare in Latin America. In the 1940s, the Beveridgian
model was held in high esteem in some circles. If the principal
characteristics of the Bismarckian model were self-financing and
selective co-optation, those of the Beveridgian model included uni-
versality of coverage financed from general taxation. Several factors
stimulated interest in the Beveridge Plan elaborated in Britain during
the Second World War and implemented by the post-war Labour
administration of Clement Attlee. Latin American intellectuals and
policy-makers were attracted as much by the emphasis upon simul-
taneous economic and social development - combating the ravages of
the depression of the 1930s and repairing the dislocations of the war-
as by the references of Beveridge to greater social equity and to the
eradication of poverty. Upgrading the quality of human capital and
fostering economic growth were the points at which welfare and
development requirements converged. Concurrent concerns in Bri-
tain, and in other countries of Western Europe where narrower social
insurance measures were being proposed, also found favour in Latin
America, especially where they were intended to promote greater
societal harmony. References to social cohesion were a particular
Introduction 7
feature of the interlude between the end of the Second World War
and the onset of the Cold War when more tolerance was briefly
shown towards the aspirations of organized labour and radical politi-
cal groups in several republics. 8 Finally, given the accumulation of
windfall profits by state commodity and trading agencies at the end of
the war, it appeared that some governments possessed sufficient
resources to finance the construction of Beveridge-style welfare
arrangements. But for most of Latin America the Beveridgian ideal
of a welfare state was utopian because the governments possessed
neither the fiscal nor the administrative resources to implement it.
Furthermore, the high levels of taxation that the Beveridgian welfare
state implied would turn employers and perhaps the upper middle-
class against the government. Workers too might be alienated by the
effects of inflation upon future benefit payments. The apprehensions
of decision-makers seemed confirmed by the shortlived and sup-
posedly all-embracing redistributionist experiences in under-resourced
countries, Guatemala and Bolivia, and by moves towards a com-
prehensive welfare state in the richest countries of the continent,
Uruguay and Argentina. Building a political coalition around
Beveridge-type universal social insurance was a difficult task and was
never fully achieved, since the opportunity to cream off windfall
profits was seldom repeated. Universalism lost prestige and became a
second-best solution, as the more prosperous groups were lured by
private insurance. Thus 'Beveridgian coalitions' were never more
than embryonic; and dismantling their beginnings was an easy task,
as military regimes were to find, at least outside the Southern Cone.
Was the Bismarckian a compelling model? For several int~rest
groups it had a particular appeal. For large corporations - from the
utility companies of the last decades of the nineteenth century to the
transnational corporations of the 1970s to the 90s- the Bismarckian
model had the merits of co-optive potential and relative cheapness.
In addition, the Bismarckian model did little to jeopardize the politi-
cal order and the process of accumulation. These factors explain why
ILO pressure for the modernization of the provision and administra-
tion of welfare and social security was often acceptable to govern
ment and large employers. Perhaps these factors also .explain the
endurance of the Bismarckian model in the face of the revolutionary
socialist challenge from post-1959 Cuba, where a progress towards
equity and universality culminated in the 1970s in the crystallization
and consummation of a fullblown welfare state.
The flaws of the Bismarckian model had always been visible in
terms of limited, sector-specific coverage, the emphasis upon worker

contributions and a narrow range of benefits. However its contradic-
tions were highlighted by the conjuncture of the 1980s. The negative
consequences for social welfare spending of the cumulative impact of
recurrent oil and debt crises converged with growing popular demand
for welfare provision that was a direct consequence of massiVe ur-
banization and demographic change. With the promise of re-
democratization and the deteriorating economic environment, the
dispossessed, the non-incorporated and perhaps above all, the once-
incorporated who had lost their relative privilege, shaped new social
movements that fought to improve living conditions. Consciously
rejecting the patronage mechanisms of a paternalistic state, these
movements of workers and peasants struggled to capture control
over their own destinies. Indeed, some base movements demanded
greater political accountability as a means of ensuring equity sim-
ultaneous with development. 9 The articulation of such demands by
these social groups challenged, first, a legacy of an earlier model that
emphasized development before redistribution, second, the readjust-
ment orthodoxy of the 1980s which sacrificed social expenditure to
budgetary and exchange stability and debt repayments and, third, the
organization of social security as a system of relief administered from
above rather than a system of individual rights and entitlements.
As the experience of the late 1980s and early 1990s is demonstrat-
ing, the survival of civilian regimes depends in part upon the capacity
and determination of democratic institutions to transform themselves
into instruments of effective popular participation which break with
practices of manipulation. 10 It is increasingly evident that the realiza-
tion of worker aspirations to comprehensive welfare is the essential
precondition for the legitimization of democratic structures. Thus a
transition to the welfare state represents an advance beyond piece-
meal co-optation to the realization of civil rights for the mass of the
population.
The exhaustion of the Bismarckian model is reflected in the retreat
of the state, which has left scope for initiative from below. While
traditionalists see the privatization of welfare services and the growth
of the 'informal sector' in negative terms, an alternative view is
possible. But, given the inadequacy of attempts to define the informal
sector, some description is necessary before going further. The main
characteristics of the informal sector were smallness of scale, heavily
personalized relationships, labour intensity and a degree of inde-
pendence from the dominant hierarchies of power and wealth.
Introduction 9
Basic strategies for survival formulated by ad hoc urban and rural

protest groups constituted vehicles for popular participatory democ-
racy and mechanisms of economic and social decision-making. For
example, self-help housing projects (associated with government-
sponsored infrastructure schemes) or local-level health-care pro-
grammes conducted largely by paramedics (involving official or
international agency support) are open to new and dynamic
interpretations. 11 Instead of being regarded as welfare on the cheap,
these schemes should be depicted as triumphs of popular action.
Bombarded with external models, has Latin America finally found in
the informal sector an authentic indigenous route to the eradication
of mass poverty and the fufilment of basic human needs? Will the
institutionalization of the informal sector strategies of the late 1980s
become the official ethos of the 1990s? And does this imply a genuine
democratic enfranchisement of the marginals, or does institution-
alization represent no more than an opportunity for new practitioners
of co-optation and a recourse to the minimalism of the past? An
endemic weakness of liberal democracy in most of Latin America has
been its record in social welfare. The performance of populist, social-
ist and even, at times, authoritarian right-wing regimes has frequently
been more impressive in the scale and scope of their official coverage. 12
The next few years will determine whether or not progress towards
equity is possible under democratic auspices, and whether quantita-
tive and qualitative increases in welfare consumption are simul-
taneously sustainable.
To students of social security the term 'coverage' means the per-
centage of the population contributing to and/or participating in
various pensions and benefit arrangements. Similarly, the term 'pro-
vision' relates to the range of services available. Yet the nature of
provision over time has shifted from a near-exclusive emphasis upon
retirement pensions to one that embraces unemployment benefit,
health care, accident insurance and family benefits. 13 Another major
change to be noted is that benefits that were once available only to
direct participants were later often extended to their dependants.
Equally, the proportion of the population insured has grown. In-
itially, retirement pensions (often non-contributory) were tlte exclusive
privilege of senior military officers and state functionaries. Subse-
quently, other groups of state employees, such as teachers and junior
bureaucrats were included in official schemes. Independently, groups
of workers in public utilities, mining and plantation enterprises were
recipients of company-administered arrangements. Later some of
these groups obtained invalidity pensions and modest health care. A

trend towards standardization of coverage among workers and
bureaucrats in the formal sector was seen in most countries between
the 1930s and 1960s. 14 Inter-related features of this trend towards
standardization included increased official supervision and regulariza-
tion, harmonization of benefits and an increase in the range of
services, and a greater emphasis upon worker contributions. By the
early 1970s more than one-half of the economically active population
in the more advanced countries of Latin America was insured; such
ill-organized groups of workers as domestic servants and rural labour-
ers were theoretically covered by social insurance legislation. While
new institutional benefits were granted from above on an assumption
of worker passivity, many of their recipients were active in struggles
to raise wages, to establish minimum standards of safety and hygiene
at the workplace, and to limit the length of the working day. A
relatively steady progress towards an increase in formalized coverage
stood in sharp contrast with the easy reversals of some improvements
in conditions gained by some groups of workers. The accomplish-
ments of others were fragmented and discontinuous.
A le.ss narrow definition of coverage is applied by radical welfare
economists. They attach a redistributive function to welfare and
social security which can constitute transfer payments to the most
deserving groups in society. Whereas, following the Bismarckian
tradition, scholars of social security legislation assess welfare im-
provements in terms of increases in the proportion of the population
enrolled in contributory schemes, progress for the radical welfare
economists is associated with the funding of welfare and social secur-
ity from general taxation and borrowing. In a system financed by
general taxation, argue the radical economists, the regressive nature
of traditional schemes is obviated, and the poor non-contributor and
non-taxpayer receive the benefits they need. Welfare economists also
emphasize the general redistributive role of major public expenditure
on housing, education and health. Larger definition of the nature of
provision involves (1) reference to the social and the spatial and in
particular the diffusion of benefits to the countryside and areas dis-
tant from major urban centres; and (2) such issues as differential
access and Quality. Access means more than simply the availability of
provision and the right to participate. It implies the physical proxi-
mity to services and the availability of support mechanisms. How can
the peasant or rural labourer take up urban-based tertiary health care
Introduction 11
without help with the upbringing of children, cost of travel and

income maintenance?
Demands for welfare and social security provision have grown
exponentially over time. As the reader will already be convinced, the
means of financing welfare services has become a central debate. Is
funding to come from general revenue or contributions by recipients?
Given the inability and/or unwillingness of most Latin American
governments until recently to enforce progressive direct taxation,
many welfare innovations have been funded by windfall profits
accumulated during export surges or by temporary borrowing sprees.
These practices have four significant consequences. The first is a
tendency to establish incomplete services; for example, to construct
hospitals without purchasing theatre equipment. The second is to
prefer politically prestigious investment in new facilities instead of
maintaining existing ones. The third is ad hoc budgetary arrange-
ments, that make for cut-throat competition for funding between
welfare ministries and agencies. Without secure funding potentially
successful policies are sometimes abandoned in mid-stream, and
continuity of both provision and access is jeopardized. Finally, wind-
fall revenues often underwrite opportunistic enlargement of welfare
provisions to established beneficiaries rather than a broadening of
basic services for the population as a whole. From all this it may
indeed be deduced that the patronage aspect of social policy is
seldom absent. And, as has been stressed above, the financing of
welfare raises the everpresent conundrum of consumption against
accumulation.
It will be clear from this section that the debates about institutional
welfare and security provision have existed in separate compartments
from discussions about basic needs, social debt, poverty and the
character, evolution and potential of the informal sector. This book
sets out to reinvigorate the debate by identifying the diverse historical
origins of formal provision and their main advances, while consider-
ing too the importance of individual and group strategies for survival
and self-improvement.
ISSUES, IDEOLOGY AND CHRONOLOGY
This section considers the ideological dimension of welfare expansion

in Latin America and also questions of periodization. Above all, it
identifies major issues that will be addressed elsewhere in the

volume. These include questions that relate to the origins of press-
ures for welfare extension, beneficiaries (and non-beneficiaries) and
finance. From which quarters did demands for welfare provision
come, and why? The main pressures emanated from would-be ben-
eficiaries, some intellectuals, social reformers, professional poli-
ticians and employers. Welfare provision was also shaped by Catholic
emphases on charity and by humanitarian traditions of social responsi-
bility. Gradually these pressures and influences coalesced in favour
of greater state action in social affairs. Individual initiative was not
abandoned, but collectivist approaches acquired momentum. 15 Liv-
ing standards, the quality of life and, in particular, the alleviation of
poverty shaped much of the behaviour and attitudes of these groups
pushing for greater formal provision as Latin America underwent
processes of economic growth, urbanization and population expan-
sion. Welfare has been seen by some as a basic necessity, by others as
a social and moral imperative, and by others still as a cushion against
political disorder engendered by economic stagnation.
Worker struggle brought substantial victories. In periods of econ-
omic e?Cpansion groups of organized workers secured higher wages,
social security and various welfare benefits which assured them a
share in the fruits of growth. In periods of stagnation and downturn
organized labour fought to maintain levels of consumption in the face
of unemployment, fiscal retrenchment and employer hostility. These
conflicts have been depicted as heroic episodes in a larger drama
culminating in the emancipation of the proletariat. 16 A substantial
literature argues that organized segments of the labour force served
as a vanguard in the transformation of society. But some revisionist
writing has stressed the narrowness of demands posed by a 'labour
aristocracy', concerned less with the emancipation of a submerged
class and more with asserting its formal participation in an evolving
order. Victories by minorities of workers incorporated within the
safety-net of social security and public health care contrasted sharply
with the denial of formal protection for the majority. Hence the
importance to the marginals, the powerless and the dispossessed of
informal self-help strategies and later of new social movements de-
manding generalized welfare as of right.
Employers were predisposed to state welfare provision when they
saw it as a cost-cutting device, but were cautious about an enlarged
state role if it involved greater government intervention at the
workplace, increased bureaucratization and, above all, expense. Em-
Introduction 13
ployers often preferred company provision, viewing it as a component

of industrial relations and a mechanism for keeping the state at
bay while assuring a more stable and docile workforce. Not always
able to resist a drift towards a stronger role for the state, employers
pressed for representation on tripartite boards and councils that
administered social security and welfare schemes. Although the state
acquired a greater formal control over social security, corporations
increasingly saw plant-based welfare (subsidized canteens, nursery
facilities, and better quality health care) as complementary to state
action. Reformulated corporate welfare programmes represented an
investment in human capital and reasserted the place of welfare in
managerial calculations regarding the workforce and its dependents.
Foreign enterprises - in public utilities, banking, oil and sugar-cane -
pioneered some of these programmes. Welfare provision played a
part in the political as well as the economic calculations of foreign
firms. Welfare was an instrument of bargaining with national and
local government, a means of keeping the labour force divided, and a
mechanism for retaining scarce, skilled employees. 17
The impulse for welfare sprang also from intellectuals, professional
politicians and bureaucrats, for whom private sector and chQritable
activity increasingly failed to meet welfare needs. Modernity and
development presumed first a larger role for the state in the definition
and measurement of poverty, and then a transition to a more formal
and supposedly comprehensive social planning. Thus humanitarian
traditions were invigorated by increasing observation of problems of
poverty and deprivation, particularly in the cities. Professional poli-
ticians saw welfare reforms as vote-winning mechanisms that consoli-
dated and enlarged constituencies and forestalled political unrest.
Meanwhile, the dynamics of the welfare bureaucracy rested upon
jobs, status and influence. Technocrats aimed for legitimation through
expertise in evolving a recognizably 'modern' formulation of social
policy and social planning.
Several categories of beneficiary of welfare provision can be ident-
ified. Direct beneficiaries have included recipients of institutionalized
and informal welfare. Examples of this category embrace students,
patients, state pensioners, public works employees and creditors of
self-help savings clubs. A second category consists of welfare profes-
sionals and administrators, who not only receive employment in the
public sector but have been strongly placed to bargain for early access
to non-contributory social security schemes. Possibly, heads of infor-
mal sector networks should also be included in this category, as they
gain economic power and social kudos. A third category consists of

indirect beneficiaries. These include those firms and individuals pro-
ducing and distributing material goods for welfare consumption - for
example, pharmaceutical and publishing enterprises and public works
contractors. Indeed, the range of individual beneficiaries may be
extended to all those who had some interest in maintaining the
political and economic order, to the extent that this order was legit-
imized by welfare. As an employer and entrepreneur with an interest
in a healthier, better educated and malleable workforce, the populist
state itself may fall into this final category. By the same argument
those agencies to whom the provision of organized social services is
delegated- such as official trade unions, semi-autonomous and state-
assisted private institutions- should here be included.
It is self-evident that not all beneficiaries gained equally. In addi-
tion, no clear linear progression can be seen. The range, content and
quality of benefits has varied over time and space, and by social class,
citizenship, status, age, sex, race and nationality. While some groups
have enjoyed access to the full range of formal benefits available at a
given time, others have gained access only to specific services,
although at times they have been encouraged to aspire to more. A
final group of potential beneficiaries is identifiable - namely semi-
organized groups in the formal sector agitating for incorporation
within the social security network, whose continued exclusion could
destabilize existing arrangements.
Two main groups of non-beneficiaries demand attention. Put
crudely, they are the excluded and the disqualified. In general terms,
the excluded might be depicted, at least from the 1960s, as an
underclass denied full citizenship rights. With greater precision this
group includes proscribed organizations like communist trade unions
under Peronism and peasant leagues under the Venezuelan and
Brazilian military regimes; but it might, indeed, embrace welfare
agencies operating in zones of guerrilla insurgency - in Central
America and some Andean countries - which have come to be
perceived as subversive. As has been stated already, the focus of
welfare activity has been largely urban. Until the mid-1980s most
rural workers lay outside networks of effective social security and
received scant welfare benefits. Even the batllista state in early
twentieth-century Uruguay held back from rural provision. It was
disinclined to intervene in the countryside for fear of upsetting rela-
tions of production. Similarly in Brazil, rural workers were excluded
from the varguista framework. The problem of taking welfare beyond
Introduction 15
urban centres and mining camps was best exemplified by the Bolivian
revolution of the 1950s. A similar pattern of political resistance,
administrative incompetence and cost aborted rural welfare exten-
sion in Brazil and elsewhere in the 1960s and 70s. For much of the
period the issue of welfare in the countryside was confined to the
question of agrarian reform. This was seen as an instrument raising
rural living standards, which presupposed enhanced welfare. The
failures of comprehensive agrarian reform have meant that institu-
tionalized benefits were enjoyed on a significant scale only by work-
ers employed by foreign enterprise. Subsequently, the welfare of
medium-scale farmers increased as a result of income-generating
measures associated with commodities boards and state purchasing
agencies. Only recently have peasants and other rural dwellers se-
cured more generalized benefits. In the 1970s and 1980s, rural work-
ers - some of them proletarianized peasants whose informal welfare
networks had been demolished by the consolidation of capitalist
agriculture - have struggled for recognition and access to incorpora-
tion within formal social security systems. Some transnational agribu-
sinesses have cultivated an image of benevolence by introducing
company welfare policies and extending to their rural operations the
kinds of benefits available to urban workers. 18
Recent social protest movements illustrate the politically and
socially divisive uses of social security legislation and welfare provi-
sion. The practice of selective incorporation inhibited the develop-
ment of working-class consciousness and solidarity. Pre-existing
differentials along lines of occupation and nationality could be ex-
acerbated by differential access to housing, food subsidies and rec-
reational facilities. Welfare provision has functioned both as an
instrument of an offensive against labour and as a mechanism in
processes of the reconstitution of the institutional base of labour.
Possibly another group of losers consisted of rural producers whose
profit margins were squeezed by cheap food policies and forced
resource transfer from the countryside to the towns.
How was welfare financed? Were company programmes funded by
a levy on profits, paid for by a charge against wages or passed on to
consumers through increases in prices? Given the Bismarckian em-
phasis of the majority of social security regimes as stated at the outset,
most benefits were intended to be partly self-financing, involving
tripartite contributions from employee, employer and the state. More
ambitious welfare projects in the fields of health, education and
employment that were supported from the general budget often
involved deficit financing. In this respect welfare projects may have

been an important contributory factor to inflation. Since social secur-
ity has usually been self-financing and welfare expenditure associated
with the inflationary process in Latin America, it is difficult to argue
that they performed or were intended to serve a genuinely redistribu-
tive function. On the contrary, social security levies may have repre-
sented a disguised form of taxation. Social security funds were raided
to fund large public works projects, the main beneficiaries of which
were often engineering firms and their political allies.
All the major recent ideologies that have influenced or evolved
within Latin America have had a welfare dimension. Liberal
traditions, especially in public education, underlined the role of
welfare, in harnessing human potential and assuring individual self-
realization. Welfare issues may be extracted from the powerful his-
toriography that examines whether populism represented a definitive
rupture with a liberal ascendancy. Three major questions arise: how
far were populist welfare measures designed to mitigate social conflict
and to promote class collaboration, and how far to alleviate poverty?
Were the principal welfare changes of the period quantitative and/or
qualita~ive? Was welfare simply one facet of a transition from a
minimalist to an interventionist state? Welfare policy for desarrollis-
tas served two purposes: contributing to social cohesion in a period of
economic change, and promoting consumption. Did cepalismo repre-
sent no more than a shift from ad hoc populist decision-making to
more rational and coherent presentation of the same policies? The
implementation of the welfare state was an aim shared by social
reformists, social democrats, and evolutionary and revolutionary
socialists, who in other respects differed radically. While some envis-
aged a pluralistic democratic system as the framework for the
achievement of welfare goals, others saw parliamentary procedures
as an obstacle and advocated the overthrow of a multi-party system
and its displacement by the single-party revolutionary state. Did the
new authoritarianism reverse the welfare achievements of earlier
decades? Or, in specific cases, did it facilitate a trade-off between civil
rights and welfare gains for minorities?
By the 1940s several Latin American countries had established
piecemeal administrative frameworks for social security in urban
areas. Latin American participation in international fora and mem-
bership of international agencies concerned with security and econ-
omic matters had significant social consequences in the immediate
Introduction 17
post-war period. Some of these agencies - notably the ILO and

UNICEF - played a major part in transmitting to much of Latin
America features of European welfare programmes, such as the
promotion of apprenticeship and other training schemes that fostered
occupational mobility while improving the quality of the workforce.
The foundation of ECLA assured the broader dissemination of these
discussions of social measures complementary to economic policies.
The priority given to social policy and welfare in the Alliance for
Progress highlighted the limits to the practical achievements of past
decades. The Alliance for Progress embraced an explicit commitment
to expanding social security and greater public expenditure upon
education, health and housing. However, these objectives were com-
promised in the mid-1960s by greater military expenditure, which
probably circumscribed welfare advances.
Three broad phases in the institutional framework of welfare provi-
sion can be identified. Until the 1940s diversity and pluralism were
the rule. In a second phase between the Second World War and the
early 1970s, there was a substantial enlargement of public welfare
institutions which embodied a recognition of the state's obligation to
establish, maintain and broaden welfare services. More recently, a
commitment to the realization of a comprehensive welfare state has
been abandoned, and the boundaries of official action redrawn.
Formally, organized welfare in the first phase was delivered by
charities, corporations, self-help clubs and other voluntary associa-
tions, as well as public and/or semi-official agencies. The economic
and social insecurity of the interwar period underscored the weakness
of formal welfare provision. The majority of the workforce was not
insured; charitable and public hospitals offered only limited services.
Most people relied on kinship and neighbourhood networks in both
general crisis- famine, drought, earthquakes, epidemics, unemploy-
ment - and personal suffering - occasioned by unemployment and
ill-health and the need for extra finance in such emergencies as
funerals. These same networks were mobilized to support life-cycle
ceremonies- baptism and marriage- to foster the education of young
people and to resolve housing needs. However, many of these infor-
mal arrangements were jeopardized by the 1930s collapse, evoking a
clamour for more state facilities, especially in education, to make
generational mobility possible. The state sector, weakened by the
crisis, varied in scale and sophistication across the continent. Already
a sharp divergence could be seen between Uruguay, where government
action assumed a broad responsibility for welfare, and several

countries of Central America, where official intervention was nar-
rowly group- and sector-specific.
Several factors account for the trend towards greater formal state
provision in the second phase. An increase in coverage, an extension
in the range of services and a drive towards comprehensiveness can
be explained partly in terms of the post-war conjuncture. The Second
World War triggered a democratic opening, and its aftermath initi-
ated a period of prosperity in which increased state social expenditure
was both demanded and deemed possible. An institutional commit-
ment to welfare was sustained during the long post-war boom be-
cause of the growth in the absolute and relative size of the urban,
industrial population. A growing segment of the economically active
population was now able to make regular social security contribu-
tions; and the state observed the expansion of welfare budgets with
equanimity both because in the medium term contributions exceeded
payment, and because an expansion of the welfare net was politically
feasible and consolidated political support. Concurrently a welfare
state ideology acquired shape and clarity thanks to the crystallization
of a· ~ew stratum of welfare professionals. The industrialization
strategies of CEPAL-ECLA were predicated on the assumption of
growth through political stability that was increasingly recognized to
be possible only through an official commitment to welfare enhance-
ment. The impact of CEPAL's welfare component was continent-
wide; but it was felt earlier in some countries than others and was
implemented with differing degrees of thoroughness.
The third phase witnessed a reappraisal of assumptions and prac-
tices that had matured only at the end of the second. The desirability
of universality and the goals of standardization and harmonization
and the concept of welfare as a basic right of citizenship that had
dominated policy decision in the sixties was rethought in the seven-
ties. The breakdown in the welfare consensus was a consequence of
the nco-liberal ascendancy of the 1970s that was reinforced by the
debt crises of the early 80s. Paradoxically, no new welfare consensus
has yet emerged despite expectations aroused by redemocratization
and an increased level of political participation widely observed in a
proliferation of social protest movements. The advocates of the nco-
liberal ascendancy launched a violent attack upon state welfare.
Exploiting numerous weaknesses of policy - in conceptualization,
articulation, implementation, monitoring and evaluation - they
pressed for a reduced role of the state in the economy and society,
Introduction 19
which involved, in the extreme case of Chile, the privatization of both

social security and a wide range of social services.
A resurgent authoritarian right saw repression as a cheaper option
than welfare and advocated the wholesale dismantling of insti-
tutionalized state provision. 19 Partly ideological, this onslaught was
motivated too by financial considerations. Social security and health
care, in particular, had become expensive, as a consequence of the
ageing of the population· and technological change in many countries.
Costs to employers were argued to be so high that workers were
priced out of jobs. Increasing costs of social benefits and welfare
pressed upon state budgets, and were viewed as an important element
in aggravating both fiscal deficits and inflation, anathema to the
monetarist technocrats so prominently represented amongst the new
right. This thrust in policy was subsequently intensified by the debt
crises. The relative weight of the external agencies also shifted. On
the one hand, the influence of agencies favouring fiscal orthodoxy,
for example, the IMF and the World Bank, had increased; on the
other hand, the influence of such bodies as the ILO and UNESCO
that favoured state welfare has diminished. This continental trend
was strengthened by the defection of the United States from the
welfare consensus of the early 1960s. The broadening gap between
welfare need and welfare provision is now partly filled by the NGOs
and self-help organizations spawned by the social movements of the
1980s, sometimes supported and advised by disenchanted welfare
professionals for whom the practice of functional relations between
the NGOs and the state was no substitute for the ideal of comprehen-
sive welfare provision. There has been, with only one or two excep-
tions, a continent-wide reduction in real expenditure per capita on
health, education and social benefits. Does the retreat of the state
and the resurgence of charitable provision, combined with a do-it-
yourself approach signal a return to the early twentieth century?
In one sense a cycle can be observed - of advance towards and
retreat from institutionalized provision. In another sense a continuity
is seen - diversity and disagreement about the objectives of welfare
exist throughout the period. Indeed, the lines along which the con-
tending forces have been drawn have not - outside Cuba - really
altered. One tradition sees welfare as a set of politically mediated
privileges and an essential ingredient of a system of regulated
citizenship. This approach runs counter to another that has stressed a
progress towards equity, harmonization and universality. What is
more, the advocates of selectivity and targeting have clashed with the
exponents of comprehensiveness. Do social security and welfare have

redistributive functions? Should services be freely available on de-
mand, or subsidized, or self-financing? Is welfare designed to ameli-
orate social and economic problems or to eradicate their causes? In
short, the larger debates about welfare goals echo narrower discus-
sions in health-care circles: should health sector resources be assigned
principally to the curative or the preventative? Arguably, the issue
that had most force is the potentially redistributive function of wel-
fare. How far has redistribution been a goal, and how far a mere
tactic? Assuming that a welfare consensus can be reconstructed, is
a sustained redistributive policy both politically and economically
viable?
THE BOOK
The nature of the welfare debates compels contributors to this

volume to move away from narrow disciplinary visions. Economists,
political scientists and sociologists like Scott, Thorp, Malloy, Roxbor-
ough aJld Jara, display the importance of observing the evolution of
welfare provision over time. Historians, notably Stubbs, do not shy
away from addressing contemporary issues. Geographers and anthro-
pologists consider diverse issues from the macro to the micro-level
and from the continent-wide to the national and the local. What
contributors from all disciplines are concerned with is the impact of
policy changes - whether abrupt or transitional, whether permanent
or reversible. Some chapters underscore the interaction between
institutional welfare provision and informal arrangements, others
stress the struggle of workers to shape both welfare policy and
administration
The volume as a whole demonstrates how welfare debates have
shifted. In the 1960s the view prevailed -virtually unchallenged- that
welfare provision and coverage would expand exponentially within
institutional frameworks under state supervision and guidance.
Today, as this book shows, those mechanistic projections have been
overtaken by a succession of crises that have destroyed earlier op-
timism. Two closely interrelated trends can be observed. One is a sharp
contraction of real welfare expenditure, as a consequence in part of
IMF-inspired austerity programmes, which has provoked a great
emphasis upon self-help and delegation of responsibilities to foreign
and domestic NGOs. The other is primarily ideological: a move from
Introduction 21
the concept of universal welfare and the assumption of a progress

towards equity to the prioritizing of managerial efficiency within a
framework of delegation and privatization and the dogma of mini-
malist and ameliorative social action.
Malloy and Parodi show the interaction of structural, internal and
external crises. First, they examine the increasing cost of a social
security system predicated on goals of universalization, uniformiza-
tion and unification in a period of demographic stability combined
with enhanced life expectancy. Second, they consider the conse-
quences of financing areas like curative health from existing social
insurance schemes without any reform in the system of financing.
Third, they look at the need to redirect resources from welfare
consumption to development investment which caused conflict with
the demands of the newly enfranchised for welfare rights that
complemented newly captured civil rights. Finally, they stress how
efficacy was related to technocratic management style and continuous
incumbency by senior personnel over long periods. These themes,
the politics and the opportunity costs of welfare, resurface in several
other chapters, notably these of Ellner, Finch and Hall.
The diverse chronology of the welfare state in Latin Am~rica is
illustrated by several chapters. Lewis points to an early missed oppor-
tunity for a massive extension of social insurance in Argentina while
Finch's study of Uruguay refers to a precocious example of the
welfare state in Latin America. Finch considers the evolution of the
historic compromise between capital and labour represented by col-
lective wage bargaining, and hints at the Bismarckian undertones of
the batllsta model. Perhaps this explains why Uruguayan employers
viewed the establishment of wage councils as less of a threat to
management control than did foreign companies in the Peruvian
sugar sector and the Venezuelan oil fields. As Scott and Ellner
demonstrate in their respective chapters, state supervision of corpor-
ate welfare schemes or interference in wage bargaining was often
viewed as an unwarranted interference in labour relations. Finch also
analyzes the nature of welfare crisis engendered by a failure to
manage a stable balance between production and welfare consump-
tion in a socially advanced economy. Stubbs illustrates th~ transitions
in perceptions of welfare in a revolutionary socialist state: from
welfare as a privilege to welfare as a right and then to welfare as an
automatic, inalienable entitlement. An overly benefactor state had
then to confront the dilemma of undercutting the sources of funding
of programmes that were crucial to its own legitimization. She goes
on to look at the comprehensive welfare programme undertaken

by the revolutionary state and, like Mesa-Lago, illustrates the con-
vergence of external pressures and the structural financial crisis
of advanced welfare systems in economies with a stable, ageing
population.
Abel also investigates a drive towards near-comprehensive state
welfare. He inquires into the ways in which welfare was linked to
strategies of 'industrialization by invitation', which had the effect of
deflecting pressures for independence in post-1945 Puerto Rico. Con-
fronted by the Cuban revolution, the United States elevated Puerto
Rico into an alternative model of development and welfare. What is
distinctive about socialist Cuba is that the survival and universality of
the welfare state are paramount, and that the commitment is perma-
nent as is an emphasis upon harmonizing provision in rural and urban
areas. Yet in Cuba, as in Brazil, welfare has served a legitimizing
function: the difference being that in Cuba welfare provision is
inclusive, and in Brazil under military rule was exclusive. Yet another
contrast merits attention - between revolutionary Cuba and Nica-
ragua. Whereas what is imperilled in contemporary Cuba is the sur-
vival intact of a mature welfare system, what has been at issue in
Nicaragua- as Sollis shows- is the creation of a welfare system which
could sustain support for the revolutionary state.
Albala provides an international and historical context for the
debate about welfare in the continent. Deploying macro-economic
indicators he examines development and welfare trends in Latin
American countries considered elsewhere in this volume against the
experience of several OECD countries. Roxborough adds definition
to this discussion using real urban wages and household budgeting as
a proxy for welfare consumption, while making salient observations
about the quantity and quality of evidence available. He identifies the
main shifts in welfare provision since the 1930s and pays particular
attention to the impact of the crises of the 1980s upon levels of
welfare and the role of the principal actors - workers, employers and
the state - in shaping welfare policy. He also considers the conse-
quences of changes in household size and the entry of women to the
labour market. While Albala, Mesa-Lago et al. and Roxborough
manipulate macro-economic data for Argentina, Brazil, Colombia
and Mexico in the long run, Puyana and Thorp analyse strategies
designed to meet basic needs in Colombia and Peru during the last
decade. Puyana's approach is essentially that of a development econ-
omist examining public policy decision-making and implementation.
Introduction 23
Puyana shows that political will, competence in public administration

and a determination to attach a genuine priority to social policy are
variables that can be as important as the level of economic activity.
Indeed they can be crucial if electoral rhetoric is to be converted into
policy achievement. Comparable considerations are shown by Jara to
exist in the case of Chile in the narrower context of education policy.
Workers have taken a significant role in the enlargement of welfare
provision. Organized labour - as is contested by the contributors to
this volume - struggled to gain access to social security schemes that
had previously been the reserves of professional groups and military
officers. This view - most clearly stated by Brumer and Ellner -
challenges the orthodoxy that organised workers have been the pass-
ive recipients of welfare provision. What the volume illustrates is a
diversity of worker-struggles. Ellner, looking at the oil workers in
post-war Venezuela, argues that their campaigns for welfare conces-
sions were highly successful but did not serve as a precedent for those
of other groups. The welfare privileges of one group of workers were
not transferable to others; bargaining practices of one group were not
appropriate elsewhere; and oil workers behaved more as an exclusive
enclave group than as a vanguard and took advantage of both com-
pany and state welfare provision. Arguing for a more recent period,
Brumer underlines the possibility of rural workers overcoming prob-
lems of dispersal, internal stratification and discrimination by gender.
Her pioneering chapter explores the struggles of working women to
attain recognition both of their role in the labour market and to
obtain direct access to social security and other provision as of right
rather than as dependants. Recent expansion of the legal framework
of social security to rural workers provided the necessary condition,
and the confused process of redemocratization served as the catalyst
of the new woman's struggle in Southern Brazil.
Moser, using anthropological field-work historically, illustrates the
struggle of market-women in Bogota to control their livelihood and
working environment. Like Brumer, Moser shows how a particular
set of circumstances that threatens the economic wellbeing of a
disadvantaged group induces both collective action on its part and a
reappraisal of its role in society. Provoked by new city .regulations
imposed without consultation that threatened to enhance market
efficiency at the expense of their own welfare, the women stall-
holders fought first to achieve effective self-organization and then to
reverse the regulations. These experiences of the early 1970s demon-
strated a potential for collective action and the possibility that even
fragmented action could yield benefits given the likelihood of incom-

plete enforcement of municipal regulations in Bogota and of their
modification by the next city administration. This study of Bogota
marketwomen focuses upon the specific problems of a poor stratum
of urban society barely incorporated in the formal sector, and
squeezed between bureaucratic impositions and the competition of
street-hawkers of the informal sector who lay beyond the scope of
most city regulation. The contours of this locally-induced crisis are
quite distinct from the generalized problems of poverty highlighted
by the recession of the 1980s.
The chapters of Gilbert and Puyana complement each other. Gil-
bert draws attention to the improvement in the quality of low-cost
self-help housing. Charting the rise in urban owner-occupancy, he
examines variations in the timing, intensity and duration of recession,
and links these to the spatial specificity of housing. He has a broadly
optimistic view, arguing that despite the deflationary consequences of
the recession for the manufacturing and construction sectors, the
urban poor have sought their own solutions to the problems of
housing , enlarging the housing stock and upgrading squatter settle-
ments .and sites-and-service arrangements. They have continued to
finance home building and improvements even in times of downturn,
thus generating employment and income without any threat to foreign
exchange earnings. Arguably, these assumptions may be projected
into the experiences of countries other than Venezuela and Mexico.
Lundahl looks at an extreme case, and his conclusions are more
gloomy. For Haitians, trapped in a near zero-growth economy with-
out formal welfare provision, self-help solutions to the problems of
poverty and welfare depend upon the vitality of kin and neighbour-
hood networks and, by extension, emigration. In Haiti the predatory
state, abdicating any welfare role, has created a climate inimical to
most effective NGO activity. The kinds of NGO participation dis-
cussed by Hall for Brazil and Sollis for Nicaragua have been stifled.
Emigration is the only escape. The contrast with Brazil and other
Latin American countries is startling. As Hall explains, the retreat of
the state has created a vacuum which the NGOs have set out to fill.
Since the 1950s the operations of the agencies have undergone two
major transitions: first from ad hoc relief to an attempt to influence
development strategy, and later from the integration of field projects
with national development strategies to funding and implementation
of regional development programmes. The impact of NGOs has been
enhanced by internal professionalization and the evolution of clear
Introduction 25
career structures that have contributed both to a growth in their

competence in performing brokerage roles at a national level and to
enlarged co-operation in undertaking lobbying activities at an inter-
national level. Their influence has been enhanced too by the proven
effectiveness of many of their community projects at the grassroots
level where their main thrust remains, as well as by their vanguard
role internationally in fostering debate - in particular, media concern
- about poverty, hunger and also sustainable and ecologically
appropriate development. To some extent, however, these gains
have been offset by other problems: in particular, the dissipation of
NGO energies in internal bureaucratic wrangling and the problem of
identification with the policies of particular regimes. Furthermore,
although NGOs have drawn more and more upon local finance and
expertise, they have not been able to count on the kind of well-
established relationships of mutual confidence with governments that
pertains in some parts of sub-Saharan Africa.
Changes over a longer period can be seen in the chapters by Scott
and Lewis, which examine issues of finance at corporate and national
level respectively. Along with Ellner and Finch, Scott and Lewis
point to the range of benefits available to particular groups fo.r some
considerable time. They also detail distinct philosophical assumptions
underpinning welfare extension and enhancement. Scott looks at the
interaction between company provision and growing state involve-
ment, while Lewis diagnoses the fiscal imperative in the expansion of
social security in Argentina. He argues that welfare contributions
represented a convenient and politically acceptable means of increas-
ing government revenue. As Scott shows for Peru, achieving a con-
sensus regarding the funding of welfare was by no means easy. In
Peru, as elsewhere, the financing of welfare for workers was part of
larger processes that determined labour costs and labour reproduc-
tion and related also to the restructuring of the labour market.
Increased welfare for some might well imply less job security for
others.
Helg and Jara illustrate problems of generating and sustaining
consensus in one vital area of welfare- education. At different times
Colombia and Chile have exemplified in acute form conflicting argu-
ments about the role and functions of education. Was education
simply a personal investment in self-improvement or a public responsi-
bility that also facilitated social mobility? For Colombia Helg looks
into the question of educational finance in general and, in particular,
the cost of labour-force modernization. Was this an area of corporate
responsibility or a requirement of government? Furthermore, she

asks how much responsibility in education was delegated by govern-
ment to employers, the Church and other private institutions. Jara is
concerned mainly with the importance of education policy to the
development strategies of successive Chilean regimes - both demo-
cratic and authoritarian - and looks too at changing emphases in
spending in different subsectors of educational provision. He exam-
ines a prioritization of secondary-level training under the military,
which was thrown into doubt during the transition to democracy and
the likely resurgence of an earlier tradition of a welfare state which
saw public education spending as enlarging access and enrolment as
well as promoting social equity.
As the chapters in this book show, the debate about welfare must
simultaneously take cognizance of the following: social rights and
social justice as conscious instruments of statecraft in the univer-
salization of citizenship; the financing and consumption of provision;
the informal sector and institutional arrangements; the macro-level
and the micro-level; definitions, models and concepts, poverty and
basic needs. It will be equally clear from this book that issues of
welfare and equity, downgraded in the development debate of the
1980s, will have to be prioritized in the 1990s if economic advance
within a democratic framework is to be sustained. A commitment to
competition and a retreat from state ownership need not be incon-
sistent with the reinvigoration of official regulation in such areas as
safety and hygiene at work, women's equality and child employment,
and with the consolidation of basic citizens' rights and the enfran-
chisement of workers, peasants and marginals through stated entitle-
ments at the workplace. A pragmatic and pluralistic approach to
welfare, which does not exclude self-help solutions, NGOs and pri-
vate initiative, is called for if individuals and families are to be
protected from the negative consequences of competition, like clo-
sures, unemployment and migration. But even such pragmatism,
necessary because the realization of fully comprehensive welfare
services is beyond the resources of most states, may be anathema to
powerful conservative groups that reject the empowerment of work-
ers, the introduction of irreversible social entitlements and all
discussion of progress towards equity. It remains unclear whether en-
trenched conservative interests, identified with transitions to democracy
so long as they control them and responsive to demands for austerity
programmes so long as their main victims are the poor, will endorse
democratic consolidation when this entails excluded groups obtaining
Introduction 27
a permanent stake in the political and social order through welfare

gains. Conservative interests may, indeed, opt for a standstill in
overall social spending even when a resumption of growth is achieved
and, concerned to preserve the patronage aspect of welfare, may
welcome a revival of political particularism in welfare allocation even
at the risk of heightening tensions. Today an optimist might forecast
the gradual erection of welfare systems which are attuned to the
changing requirements of both employers and users and are com-
mensurate with popular expectations and constituted provisions. But
a pessimistic prognosis might stress both the stagnation of stratified
welfare arrangements and the potential decomposition of incomplete
welfare systems. If welfare provision is to be trapped in a crisis of
underfunding, rapidly expanding demand, policy discontinuity, and
bureaucratic inertia and conflicts that are compounded by clashes
between the executive and the legislature, then optimism about the
permanence of democratic restoration and consolidation may be
tempered. Indeed, a new pessimism may be justified about the likeli-
hood of further cycles of military coups that are smoothed by the
exclusion of large parts of the population from the benefits of the
ruling order.
Notes
1. Paul Cammack and Philip O'Brien (eds), Generals in Retreat: The Crisis
of Military Rule in Latin America (Manchester, 1985); Guillermo
O'Donnell, Philip C. Schmitter and Laurence Whitehead (eds), Transi-
tions from Authoritarian Rule. Latin America (London, 1986); Laurence
Whitehead, 'Debt, Diversification and Dependency: Latin America's
International Political Relations' in Kevin Middlebrook and Carlos Rico
(eds), The United States and Latin America in the 1980s (London, 1986)
Chapter One; Rosemary Thorp and L. Whitehead (eds) Latin American
Debt and the Adjustment Crisis (London, 1987); Stephany Griffith Jones
anct Osvaldo Sunkel (eds), Debt and Development Crisis in Latin Amer-
ica (reissue, London, 1989); Richard Feinberg and Ricardo ffrench-
Davies (eds), Development and External Debt in Latin America (London,
1988). Compare the recent David Felix (ed.), Debt and Transfiguration:
Prospects for Latin America's Economic Revival (London, -1990).
2. Alejandro Portes et al. (eds), The Informal Economy (London, 1989);
A. Portes, 'Latin American class structures: their composition and
change during the last decades', Latin American Research Review, vol.
20, no. 3, 1985, pp. 7-39.
3. James Midgley, Social Security, Inequality and the Third World (London,
1984).
4. Moshe Syrquin and Simon Teitel, Trade, Stability, Technology and Equi-
ty in Latin America, (New York, 1982); G.T. Renshaw (ed.), Market
Liberalization, Equity and Development (Geneva, ILO: 1989); Econ-
omic Commission for Latin America and the Caribbean, Magnitud de Ia
pobreza en America Latina en los alios 80 (Santiago, 1990).
5. Mark B. Rosenberg and James M. Malloy, 'Indirect Participation versus
Social Equity in the Evaluation of Latin American Social Security Policy'
in John A. Booth and Mitchell A. Seligson (eds) Political Participation in
Latin America. Vol. 1, The Citizen and the State (London, 1978), pp.
157-71.
6. Carmelo Mesa-Lago (ed.), Crisis of Social Security and Health-Care.
Latin American Experience and Lessons (Pittsburgh, 1985).
7. James A. Malloy (ed.), Authoritarianism and Corporatism in Latin
America (Pittsburgh, 1977).
8. Leslie Bethell and Ian Roxborough (eds), Latin America between the
Second World War and the Cold War, 1944-1948, (Cambridge, 1992).
9. David Slater (ed.), New Social Movements and the State in Latin Amer-
ica, (Amsterdam, 1985).
10. Howard Handelman and Werner Baer (eds), Paying the Costs of Auster-
ity in Latin America (London, 1989); James A. Malloy and Mitchell
Seligson (eds), Authoritarians and Democrats- Regime Transitions in
Latin America (Pittsburgh, 1987); Larry Diamond, Juan Linz and
Seymour B. Upset (eds) Democracy in Developing Countries, vol. 4.
Latin America (London, 1989).
11. Alan Gilbert and Peter M. Ward, Housing, the State and the Poor. Policy
and Practice in Three Latin American Cities (Cambridge, 1985).
12. James A. Malloy, The Politics of Social Security in Brazil (Pittsburgh,
1974), Carmelo Mesa-Lago, Social Security in Latin America: Pressure
Groups, Stratification and Inequality (Pittsburgh, 1978).
13. Midgley, op. cit.
14. Mesa-Lago, Social Security, op. cit.
15. D.C.M. Platt (ed.), Social Welfare, 1850-1950. Australia, Argentina and
Canada Compared, (London, 1989).
16. Charles Bergquist, Labour in Latin America, (London, 1976); Hobart
Spalding Jr, Organized Labor in Latin America, (New York, 1977); Ian
Roxborough, 'State, multinationals and the working class in Brazil and
Mexico' in Christopher Abel and Colin M. Lewis (eds), Latin America:
Economic Imperialism and the State (London, 1985), pp. 430-50; Rox-
borough, 'The analysis of labour movements in Latin America', Bulletin
of Latin American Research, vol. 1, no. 1, 1981; and most recently, Jean
Carriere et a/. (eds), The State, Industrial Relations and the Labour
Movement in Latin America, vol. 1, (London, 1989).
17. Mira Wilkins, The maturing of multinational enterprise: American enter-
prise abroad from 1919 to 1970, (Cambridge, Mass., reprint 1979).
18. Christopher D. Scott, 'Transnational corporations, comparative advan-
tage and food security in Latin America', in Abel and Lewis (eds), op.
cit, pp. 482-99.
Introduction 29
19. Alain Rouquie, The Military and the State in Latin America (London,
1988); Christian Anglade and Carlos Fortin (eds), The State and Capital
Accumulation in Latin America, vol. 2, Argentina, Bolivia, Colombia,
Ecuador, Peru, Uruguay, Venezuela, (London, 1988). CEPAL Review,
no. 25, April 1985; no. 26, August 1985; no. 28, April 1986; no. 29,
August 1986.
Part
One
2 Evolution of Aggregate
Welfare and Development
Indicators in Latin America
and the OECD, 1950-85
Jose Miguel Albala-Bertrand
This chapter has one very specific purpose: to present and contrast a
set of welfare and development statistics for the period 1950-85,
relating to a number of Latin American countries and the major
OECD economies. The selected data are taken from official sources
and represent standard aggregate indicators of (mostly economic)
development and welfare. The list of Latin American countries in-
cludes the three largest (Brazil, Mexico and Argentina) plus six
others of varied sizes and performances (Bolivia, Chile, Colombia,
Haiti, Peru and Uruguay). In turn, the OECD is represented by the
six major economies (USA, Japan, West Germany, France, the
United Kingdom and Italy).
It would be tempting to say that the figures will speak for them-
selves. But reliance on statistics, especially aggregated ones, is hardly
recommendable. Statistics suffer from a plethora of distortions and
insufficiencies of a technical, organizational and, not least, political
nature (for example, definitions and compilation procedures, cover-
age and field sources, imputation and estimation methods, official
adjustments and 'massaging'). These shortcomings are likely to be
more important in developing countries, especially during periods of
dictatorship. On the other hand, aggregate statistics, even if accurate,
conceal the distribution of welfare and development entitlements
among the various socio-political groupings and regions within a
country. For the countries as a whole, however, we may assume that
trends, rather than single-year figures, are accurate enough to make
this exercise worthwhile.
33
34 Jose Miguel Alba/a-Bertrand
Table 2.1 Basic development indicators: Latin American and OECD

countries
GDP per GDP per Surface Population Urban Literacy Life

capita capita area population rate expectancy
(US$' (ICP)* sq km at birth
OOOs) (USA=JOO) (mil) (mil) % % (years)
1985 1985 1985 1985 c./985 c./985 c./985
LAC
Argentina 2.1 26 2.8 31 84 96 70
Brazil 1.6 26 8.5 136 73 78 65
Mexico 2.2 (25) 2.0 79 69 90 68
Uruguay 1.7 28 0.2 3 85 95 71
Chile 1.4 27 0.8 12 83 94 71
Colombia 1.3 23 1.1 29 67 82 65
Peru 1.0 18 1.3 20 68 85 60
Bolivia 0.5 10 1.1 6 44 74 61
Haiti 0.03 6 27 38 53
OECD
USA 16.4 100 9.4 239 74 99 75
Japan 11.3 81 0.4 121 76 99 78
UK 8.4 72 0.2 57 92 99 75
France 9.5 81 0.5 55 73 99 77
Italy 9.5 65 0.3 57 67 98 77
Germany 10.9 87 0.3 61 86 99 75
SOURCES: UN, IBRD.

• ICP: International Comparison Project.
t Relative purchasing power parities to that of the USA.
POPULATION, LIFE EXPECTANCY AND INFANT

MORTALITY (TABLES 2.2 AND 2.3)
During the period studied, growth rates of population in Latin Amer-

ica (Table 2.2) have steadily fallen to around 2 per cent per year,
notably in Brazil from a high of 3.1 per cent in the fifties to some 2.2
per cent in the eighties. In contrast, OECD countries show a fall in
rates of population growth to around 0.4 per cent per year from about
1 per cent over the same period. In West Germany, population
actually declined. Life expectancy at birth (Table 2.3) for the Latin
American countries (LACs hereafter) in the eighties is comparable to
that of OECD countries in the fifties, with the exception of Bolivia,
Haiti and Peru. Conditions in Argentina, Uruguay and Chile, how-
ever, resemble the state of OECD countries in the sixties. But for all
LACs there has been a significant improvement in life expectancy
during this 35-year period.
Welfare and Development Indicators 35
Table 2.2 Growth rates of population (average annual rates), per cent
1950--60 1960-70 1970-80 1980

LAC
Argentina 1.9 1.6 1.7 1.4
Brazil 3.1 2.8 2.4 2.2
Mexico 3.1 3.3 2.9 2.3
Uruguay 1.3 1.0 0.4 0.8
Chile 2.3 2.2 1.7 1.7
Colombia 3.0 3.0 2.2 2.2
Peru 2.6 2.9 2.7 2.6
Bolivia 2.2 2.4 2.6 2.8
Haiti 1.7 2.0 1.9 1.9
OECD
USA 1.7 1.4 1.0 0.8
Japan 1.2 1.1 1.1 0.6
UK 0.4 0.6 0.1 0.1
France 0.9 1.1 0.5 0.4
Italy 0.7 0.7 0.6 0.2
Germany 1.0 1.0 0.0 -0.1
SOURCE: UN.
Table 2.3 Life expectancy and infant mortality
Life expectancy at birth Infant mortality (under 1yr,

(years) rate per 1000 live births)
1950160 1960170 1970180 1980185 1950160 1960170 1970180 1980190
LAC
Argentina 64 66 68 70 63 59 45 34
Brazil 52 57 61 63 128 105 85 67
Mexico 53 60 64 67 106 82 65 46
Uruguay 67 68 69 70 55 48 44 36
Chile 55 60 66 71 122 100 58 21
Colombia 53 57 61 64 113 79 63 51
Peru 45 51 57 59 153 131 108 93
Bolivia 41 45 48 51 173 161 145 117
Haiti 40 45 50 53 207 160 128 102
OECD
USA 69 71 73 75 28 25 16 11
Japan 64 70 75 78 35 18 10 6
UK 68 71 73 77 25 20 16 9
France 69 72 74 77 33 22 14 8
Italy 68 71 73 77 50 36 21 12
Germany 68 70 72 75 40 24 20 10
SoURCE: UN.
In LACs, infant mortality (Table 2.3) is still generally high, es-

pecially in Bolivia, Haiti and Peru, despite notable improvements since
the fifties. The highest reduction in the rate has been achieved by
Chile, from 122 per 1000 live births in the fifties to 21 in the eighties.
The Chilean position today is comparable with that of OECD coun-
tries in the sixties.
GROWTH RATE OF GDP PER CAPITA, INCOME

DISTRIBUTION, SECTORAL SHARES OF EMPLOYMENT
AND GDP (TABLES 2.4, 2.5, 2.6)
For LACs, the growth rates of GDP per capital (Table 2.4) have been
generally disappointing. On the whole, rates have been small but
positive for most of the period, except for 1980--85 when the majority
of LACs exhibited substantially negative rates of growth. For the
whole period, the unweighted averaged accumulated growth of GDP
per capita is 65 per cent, with a wide dispersion ranging from an
exceptional 221 per cent for Brazil to a regressive -13 per cent for
Uruguay. Mexico is the second best performer with 148 per cent
followed Colombia with 92 per cent. Argentina and Chile show a
meagre 31 per cent and 35 per cent, respectively. In these two
countries and in Uruguay governments embarked upon ambitious
monetarist programmes in the seventies. The result was negative or
close to zero growth in GDP per capita from the mid-1970s to the
early 1980s. OECD countries, in turn, also experienced reductions in
growth rates in the period 1980--85. But for the period 1950--85 as a
whole, GDP growth per capita averaged 400 per cent in the OECD
countries. However, here too there was a wide dispersion ranging
from a remarkable 1240 per cent for Japan to a 105 per cent for the
USA. This marked contrast between OECD and Latin American
countries may well be interpreted as representing a widening of the
output gap.
Income distribution statistics (Table 2.4) are shown for the only
available years and are presented just as an illustration. They do not
capture the substantial structural changes undergone by most LACs
(and some OECD countries) in the last 15 years. It is widely believed
that income distribution may have worsened further in the late 1980s
rather than improved (see also footnote to Table 2.5).
The share of the labour force (Table 2.5) in agriculture has fallen
significantly for most LACs, shifting generally towards industry but
Table 2.4 Real growth of GDP per capita and income distribution
Average annual real growth rate Accumulated Income distribution per percentile of
per capita growth per household income•
c~ita
1950 1960 1970 1980 1950 19. 0-85 Lowest Second Third Fourth Hi~hest Hi~hest
to to 10 to 10 % 20% quintile quintile quintile 2% 1%
1960 1970 1980 1985 1985
% % %
LAC
Argentina 1.4 2.4 0.9 -3.9 0.77 31 4.4 9.7 14.1 21.5 50.3 35.2 1970
Brizil 3.1 2.9 6.2 -0.5 3.4 221 2.0 5.0 9.4 17.0 66.6 50.6 1972
Mexico 2.4 3.6 3.5 -0.5 2.6 148 2.9t 7.0 12.0 20.4 57.7 40.6 1977
~y -1.5 0.0 3.1 -2.9 -0.4 -13 5.5 - - - - 19.2 1976<t
1.2 1.8 1.0 -1.9 0.9 35 4.4 9.0 13.8 21.4 51.4 - 1968
Colombia 1.3 1.9 3.2 0.4 1.9 92 3.5 - - - - 31.9 1970
Peru 2.6 2.2 1.2 -2.9 1.3 56 1.9 5.1 11.0 21.0 61.0 42.9 1972
Bolivia -2.1 2.4 1.1 -4.9 -0.3 -11 3.5 8.0 12.0 15.5 61.0 35.7 1968"
Haiti - -0.2 2.8 -2.7 0.5 13
-
OECD
USA 1.5 3.0 1.8 1.9 2.1 lOS 5.3 11.9 17.9 25.0 39.9
7.3 10.1 8.0 3.2 7.7 1240 8.7 13.2 17.5 23.1 37.5 22.4 1979
Lam 2.4 2.4 2.4 1.8 2.3 123 7.0 11.5 17.0 24.8 39.7 23.4
~-· '~l1979
France 3.5 4.8 4.5 0.6 3.7 261 5.5 11.5 17.1 23.7 42.2 26.4 1975
Italy 5.4 4.9 4.5 0.7 4.3 339 6.2 11.3 15.9 22.7 43.9 28.1 1977
Germany 6.8 3.9 3.5 1.5 4.3 330 7.9 12.5 17.0 23.1 39.5 24.0 1978
- - T7 ""1.9
SouRCES: UN, IBDR, AID Development Digest (Oct. 1971).
• Notice that this calculation takes as a unit the household income whatever the household size. Therefore, it should not be taken as a proxy for income
t distribution among percentiles of population.
Montevideo region, salaried only.
~
-....1
~
00
Table 2.5 Distribution of labour force, per cent
Average annual
growth of population Agriculture Industry Services
of working age
(15-64 years) circa circa circa
1950-75 1975-85 1955 1965 1980 1955 1965 1980 1955 1965 1980
LAC
Argentina 1.5 1.2 26 18 13 30 34 34 44 48 53
Brazil 2.9 2.9 61 49 31 16 20 27 23 31 42
Mexico 3.0 3.6 62 50 37 15 22 29 23 29 35
Uruguay 0.8 0.6 22 20 16 25 29 29 55 51 55
Chile 2.1 2.5 41 27 17 24 29 25 35 44 58
Colombia 2.9 3.1 59 45 34 16 21 24 25 34 42
Peru 2.6 3.2 60 50 40 18 19 18 22 32 42
Bolivia 2.2 2.6 76 54 46 10 20 20 14 26 34
Haiti 1.7 2.1 85 77 70 6 7 8 9 16 22
--
OECD
USA - 1.4 - 5 4 - 35 31 - 60 66
Japan - 0.9 - 26 11 - 32 34 - 42 55
UK - 0.5 - 3 3 - 47 38 - 50 59
France - 0.9 - 18 9 - 39 35 - 43 56
Italy - 0.9 - 25 12 - 42 41 - 34 48
Germany - 0.7 - 11 6 - 48 44 - 41 50
SOURCES: UN, IBRD.

Table 2.6 Distribution of GOP, per cent
Agriculture Industry Services

1955 1965 1986 1955 1965 1986 1955 1965 1986
LAC
Argentina 17 17 13 36 42 44 47 42 44
Brazil 25 19 11 24 33 39 51 48 50
Mexico 18 14 9 31 31 39 51 54 52
Uruguay 16 15 12 26 32 33 58 53 56
Chile 14 9 27 40 59 52
Colombia 37 30 20 22 25 25 41 46 56
Peru 24 18 11 30 30 38 46 53 51
Bolivia 28 23 24 38 31 23 34 46 52
Haiti 49 51 13 15 38 34
OECD
USA 5 3 2 39 38 31 56 59 67
Japan 23 9 3 28 43 41 49 48 56
UK 5 3 ·2 48 46 43 47 52 55
France 11 8 4 48 39 34 41 53 63
Italy 21 11 5 37 41 39 42 48 56
Germany 8 4 2 53 53 40 39 43 58
SOURCES: UN, IBRD.
more especially services. Save for Argentina, Colombia and Uru-

guay, this relative fall has been accompanied by a rise in the absolute
number of workers engaged in agriculture (not shown in the table).
OECD countries, however, show an increase in the service sector at
the expense of both agriculture and industry. The main difference in
this shift towards services between the two sets of countries is that for
the OECD the service sector represents largely business and financial
services whereas for LACs it represents largely the 'informal sector'.
The counterpart of the above shares is the sectoral distribution of
GDP (Table 2.6). For LACs, there has been a steady fall in the share
of agriculture in GDP and a general rise of the shares of industry and
services. For OECD countries, as stated above, the rise ln the share
of services has been at the expense of both agriculture and industry.
The main difference between the sets of countries is that for the
OECD countries the average annual sectoral growth rates for the
period have been positive, whereas for some LACs they have often
been negative, especially in the period 1980-85, notably for Haiti,
Uruguay, Argentina (industry), Peru (industry), Mexico (industry)

(not shown in the table).
LITERACY AND EDUCATION (TABLE 2.7)
Illiteracy rates have fallen significantly, notably in Mexico. Except for

Argentina, Uruguay and Chile, which show rates of around 5 per
cent, other LACs still have high levels of illiteracy. Haiti is the worst
performer with 62.4 per cent illiteracy, followed by Bolivia and Brazil
with around 24 per cent. The number of pupils per teacher has
decreased at primary level but generally increased at secondary level.
The primary level pupil-teacher ratios for LACs, around 1985, are
comparable to those of OECD countries around 1960. Primary
school enrolment rates in LACs are generally high, except for Haiti
and Bolivia, and have improved significantly over time in all LACs.
Secondary level enrolment rates, although notably improved since
the sixties, are still relatively low, especially in Haiti, Brazil and
Bolivia, but now compare with those of the OECD countries in the
sixties. Expenditure on education as a share of total government
expenditure has fallen significantly in all countries since 1970, notably
in Argentina, Brazil and Bolivia. This does not necessarily mean a
fall in actual terms for government expenditure as a percentage of
GDP has generally increased. But the trend shows a shifting of
expenditure priorities.
HEALTH AND NUTRITION (TABLE 2.8)
Population per physician and medical assistant has declined sig-

nificantly since 1960, but for most LACs the figure is still high (es-
pecially population per medical assistant) when compared with the
OECD countries around 1960. The best population-physician ratio
belongs to Argentina, but the most notable improvements belong to
Bolivia, Brazil and Uruguay. The last country also exhibits the best
improvement in the ratio of population per assistant. The number of
hospital beds per thousand inhabitants has generally declined in Latin
America. This is also true for the USA and the UK, although availa-
bilities here are still higher than in the best Latin American country
(Argentina).
Daily calorie intake per capita has remained generally static in both
Table 2.7 Education
Illiteracy rate No. of pupils per No. of pupils per Enrolment Enrolment Govt expenditure
% of population teacher 1st level teacher 2nd level 1st level 2nd level on education, % of
aged 15 years & over Gross enrolment rate Gross enrolment rate total expenditure
circa circa circa circa circa
Imwmi~I~~~~~Imi~ 1~ 1970 1985 1~ 1970 1985 1970 1985
LAC
Argentina 13.6 7.4 4.5 22 19 20 7 7 8 98 101 108 23 45 70 20.0 6.0
Brazil 50.5 33.8 22.3 37 24 25 3 9 14 95 84 104 11 26 35 8.3 3.0
Mexico 43.2 25.8 9.7 44 46 34 13 15 17 80 104 115 11 22 55 16.4 11.5
Uruguay - 6.1 4.6 33 30 24 13 11 12 - - - -24 - - 9.5 7.1
Chile 19.8 11.0 5.6 - so 33 9 17 15 109 118 108 39 69 14.3 12.5
Colombia 37.7 19.2 17.7 38 38 33 11 17 20 77 108 117 12 25 so
Peru - 27.5 15.2 34 36 34 12 17 23 83 105 122 15 30 65 22.6
Bolivia 67.9 36.8 25.8 29 27 25 7 15 18 64 76 91 12 24 37 31.3 11.6
Haiti 89.5 78.7 62.4 43 41 40 13 15 24 46 53 78 4 6 18
OECD
USA 36 22 20 18 19 21 118 109 101 86 100 99 3.2 1.7
Japan 35 26 24 25 18 18 92 104 101 74 86 96
UK 24 23 18 18 - - 92 104 101 66 73 89 2.6 2.1
France 29 26 19 26 16 14 144 117 114 46 74 96
Italy 22 22 17 12 12 11 111 110 98 34 61 75 16.1 7.2
Germany 30 26 17 - 20 14 133 - 96 53 - 74 1.5 0.6
~
....
Table 2.8 Health and nutrition ~
Doctors: Medical assistants: Hospital beds Calories available: Proteins available: Govt expenditure
population per population per per 1()()() inhabitants per capita daily per capita daily on health
doctor assistant calories (1000s) grammes as% of total
expenditure
circa circa circa circa circa circa
r~wm1~1~wm~1~wm1~1~1m1~1~1m1~ 1970 1~
LAC
Argentina 681 529 376 - 628 620 6.4 5.6 5.3 3.1 3.3 3.2 100 105 103 0.9 1.3
Brazil 3411 2081 683 2571 2932 1263 3.2 3.7 4.1 2.4 2.5 2.7 60 60 61 6.7 6.4
Mexico 1880 1553 1035 8243 1432 707 1.7 1.4 1.0 2.6 2.7 3.1 65 67 76 5.1 1.4
Uruguay 2180 915 534 - 2593 2136 5.5 5.9 4.8 2.8 3.0 2.8 84 88 84 1.6 4.8
Chile 1648 2160 1231 741 491 371 3.7 3.8 3.4 2.6 2.6 2.5 70 70 73 8.2 6.0
Colombia 2603 2237 1195 - 2158 982 2.8 2.3 1.7 2.2 2.3 2.5 51 50 56
Peru 1962 1643 1111 3630 2002 1412 2.4 2.2 1.6 2.3 2.2 2.1 62 58 58 6.1
Bolivia 5218 2018 1537 4170 2395 5816 1.8 2.2 3.6 1.8 2.0 2.1 49 53 54 6.3 1.4
Haiti 12848 11582 7179 - - 3981 0.6 0.8 0.9 2.0 1.9 1.8 46 45 45
OECD
USA 750 630 480 - 140 1]0 9.1 7.7 5.5 3.3 - 3.7 - 8.6 11.6
Japan 930 890 700 310 240 200 9.1 12.5 12.5 2.7 - 2.7
UK 940 810 650 210 170 100 11.1 10.0 7.1 3.3 - 3.1 - 12.2 12.6
France 930 750 450 - 270 100 8.3 7.1 12.5 3.3 - 3.4
Italy 640 550 220 1330 470 250 9.1 11.1 11.1 3.1 - 3.5 - 13.5 9.9
Germany 670 570 400 370 270 150 11.1 11.1 12.5 3.1 - 3.5 - 17.5 17.9
SoURCES: UN,IBRD.
Note: These data should be taken with caution, especially medical assistance.
These data are rather incomplete. 'Doctors· refers often to public sector health only.
The trends, however, might be about rights.
sets of countries, but most LACs exhibit an availability per capita

comparable to that of Japan. The difference is that in Japan avail-
ability can be assumed to be evenly distributed among the popula-
tion. In LACs, such an assumption is unwarranted. Availability of
proteins per capita shows a similar behaviour to that of calories.
Finally, expenditure on health as a share of total government
expenditure has fallen generally in LACs, except in Uruguay, and is
very much lower in LACs than in OECD countries. This reflects
again more a shift in priorities than an absolute fall in expenditure on
health.
SERVICE INFRASTRUCTURE (URBAN POPULATION)

(TABLE 2.9)
Urban population has increased further since 1960 and it is generally

high as compared to OECD countries, except in Bolivia and Haiti.
The main difference is that the bulk of the urban population in LACs
is concentrated in one or a few cities of over 500 000 inhabitants.
Since 1960 networks' infrastructures (piped water, sewerage systems
and electricity) have extended their coverage, reaching a higher
proportion of the urban population in Latin America. Piped water
and electric light reach most of the population (except in Haiti),
notably in Chile and Uruguay. The coverage of sewerage systems is
still low, but on average systems reach around 50 per cent of the
urban population; the proportions are as high as 69 per cent in
Colombia and as low as 32 per cent in Brazil.
Government expenditure on housing, amenities and social security
and welfare as a percentage of total government expenditure has
generally increased in LACs and compares favourably to that of
OECD countries.
CONSUMPTION (TABLE 2.10)
There has been a significant increase in both the consumption of

energy per capita and selected consumer durables per thousand
people, since 1960.
The present levels of the consumption of consumer durables in
Latin America compares with those of OECD countries in around
1960. The best ratios are for Argentina and Uruguay and the worse
Table 2.9 Service infrastructure (urban population)
t
I 2 3 4 5 6
1960 1985 1960 1980 1960 1970 1980 1960 1970 1980 1960 1970 1980 1970 1985
LAC
Argentina 74 84 54 60 65 70 68 - 34 40 85 - 95 20 33
Brazil 46 73 35 52 55 53 80 - 25 32 73 76 88 35 24
Mexico 51 69 36 48 68 82 62 - so 51 - 81 85 25 11
Uruguay 80 85 56 52 74 82 99 51 52 51 88 89 91 52 so
Chile 68 83 38 44 74 81 95 60 40 64 86 90 95 40 43
Colombia 48 67 28 51 79 98 86 61 64 69 83 88
Peru 46 68 38 44 47 51 61 30 41 48 51 54 72 1 3
Bolivia 24 44 0 44 56 58 82 - 22 37 76 76 - 0 6
Haiti 16 27 0 56 25 45 37 - 19 39 27 27
OECD
USA 70 74 61 n 35 31
Japan 62 76 35 42
UK 86 92 61 55 27 30
France 62 73 34 34
Italy 59 67 46 52 45 30
Gennany n 86 48 45 47 51
SOURCES: UN, IBRD.

1. Urban population, per cent
2. Urban population in cities of over 500,000 people, per cent of urban population
3. Population with access to piped water, urban, per cent
4. Urban population served by sewerage systems, per cent
5. Occupied private dwelling units with electric light, per cent
6. Government expenditure on housing, amenities, social security and welfare(% of total expenditure)
Table 2.10 Consumption
Energy consumption
per capita
(kg of coal Radios Televisions Telephones Passenger cars Private
equivalent), (per 1(}()() (per 1(}()() (per 1(}()() (per 1(}()() consumption
J(}()()s population) population) population) population) (as% ofGDP)
circa circa circa circa circa circa
z~zmz~z~wm~1~wm1~ 1~ 1970 1985 1~ 1970 1985 1965 1985
LAC
Argentina 1.2 1.8 2.4 170 380 400 22 146 200 63 66 120 23 60 125 69 77
Brazil 0.4 0.6 1.5 65 108 350 17 64 130 14 21 80 8 24 80 67 76
Mexico 0.8 1.1 2.0 89 275 350 18 59 110 14 30 90 13 24 65 72 64
Uruguay 1.0 1.1 1.3 315 356 600 10 92 130 56 77 125 39 43 100 68 73
Chile 0.8 1.3 1.3 131 150 350 0.1 53 120 25 37 60 8 19 55 73 69
Colombia 0.5 0.7 1.1 125 105 200 10 39 100 19 39 52 6 12 20 75 68
Peru 0.4 0.7 1.0 114 142 200 3 30 50 11 25 30 8 18 20 59 71
Bolivia 0.2 0.3 0.5 73 93 100 - - 65 7 10 30 3 4 15 74 85
Haiti 0.02 0.04 0.1 6 20 25 0.5 2 4 1 - - 2 3 8 90 83
OECD
USA 8.4 11.4 12.0 941 1414 2100 308 413 650 - - - 340 433 550 63 66
Japan 1.4 3.9 4.9 132 223 700 73 219 550 - - - 5 85 300 59 58
UK 4.8 5.6 5.6 290 626 1000 211 294 400 - - - 106 211 300 64 62
France 2.9 4.7 5.5 240 315 1000 42 216 300 - - - 121 254 380 57 61
Italy 1.5. 3.4 4.0 160 217 250 42 182 280 - - - 40 190 350 60 61
Germany 3.9 5.7 6.4 287 323 400 84 275 350 - - - 78 223 380 56 56
SoURCES: UN, IBRD.

~
Vl
for Haiti, Bolivia and Peru. The distribution among the population is
certainly not accounted for. Cheaper consumer electronics, however,
are only a phenomenon of the last decade and consumption of these
items is expected to increase significantly towards the mid-1990s,
especially in developing countries, as OECD markets are becoming
saturated. It should be observed that 250 units (radios, TVs) per
thousand population implies around one unit per household (4 mem-
bers) on average.
Finally, private consumption as a percentage of GOP has generally
been high and has often increased since 1965. This has unfortunately
occurred often at the expense of investment (e.g. Chile, Uruguay,
Argentina).
CONCLUSIONS
The picture for LACs, contrary to that of OECD countries, is hardly

homogeneous. There is diversity in performance between countries,
between periods and between items.
Populations are growing at a slower pace than 35 years ago, despite
significant reductions in infant mortality and notable improvements
in life expectancy. Haiti, Bolivia and Peru, however, are still poor
performers on all three counts. OECD countries, in turn, are now
facing nearly stagnant or declining populations.
The accumulated growth of GOP per capita for LACs over this
period has been generally disappointing, especially in the period
1980-85. The monetarist experiments in the Southern Cone (Argenti-
na, Chile and Uruguay) in the 1970s and early 1980s resulted in a near
zero or negative growth for the period 1973-85. Income distribution
must have worsened further in the face of the socially exclusionary
economic reforms attempted during that period in most LACs. Un-
employment has been high for much of the latter period as well. Debt
burden and the slowdown of international trade do not permit an
optimistic outlook for the 1990s in terms of GOP growth.
The sectoral distributions of labour and GOP have shifted further
away from agriculture to especially the service sector. In OECD
countries this sector represents essentially financial and business ser-
vices, whereas in LACs this is mainly made up by the underemployed
and the 'informal sector'. Literacy and other indices of education
have generally improved in LACs, but there are still countries with
unacceptable records on these counts, notably Haiti and Bolivia.
Health and nutrition indicators exhibit a more homogeneous im-

provement in LACs, but Haiti is still a poor performer. In LACs,
urban populations are on average as high as in OECD countries
(excluding Haiti and Bolivia), but contrary to the OECD, these are
highly concentrated in one or only a few cities. At any rate, the
percentage of urban populations served by piped water, electricity
and sewerage systems has increased significantly since 1960. Con-
sumption of consumer durables has increased markedly since 1960,
and is expected to reach much higher levels towards the mid-1990s,
especially in the area of consumer electronics.
Finally, judging by the composition of government expenditure
there appears to have been a shift in priorities away from education
and health towards other categories of expenditure, especially de-
fence and 'unspecified items'.
3 Determinants of Social
Insurance/Security Costs and
Coverage: An International
Comparison with a Focus on
Latin America
Carmelo Mesa-Lago, Maria A. Cruz-Saco
and Lorena Zamalloa
This chapter shows at the international level and with recent data that
social security expenditures are positively correlated, with per capita
income one broad indicator of economic development. It also iden-
tifies the principal determinants of social insurance population cover-
age and expenditures in Latin America.
INTRODUCfiON
Social security costs have been escalating among developed coun-

tries, inducing both considerable literature and policy reforms (Bos-
kin 1977, CED 1984, Ferrara 1980, 1982, Rosa 1982, ILO 1984). This
phenomenon is also present in developing countries but scant in-
formation is available on its magnitude, causes, and effects. The
Latin American region is particularly important in this respect be-
cause several of its nations introduced social insurance 1 schemes in
the 1920s and 1930s, and rapidly expanded its population and risk
coverage. In the late 1960s and early 1970s social insurance expendi-
tures as a percentage of GDP in two of these countries (Chile and
Uruguay) reached a level only surpassed by some industrialized
European countries. Some experts blamed this excessive burden as
one reason for the economic deterioration suffered by these pioneers
of the Welfare State in the Western Hemisphere. Although substan-
tial social insurance reforms were undertaken by several Latin Amer-
ican countries in the 1960s and 1970s (largely aimed at reducing
costs), still in 1980 five of them had social insurance costs between 9
and 11 per cent of GOP - the highest in the developing world
49
50 Carmelo Mesa-Lago, Maria A. Cruz-Saco, Lorena Zamalloa
(Mesa-Lago 1986a). The economic crisis of the 1980s has badly

affected Latin America and made the need to reduce social insurance
costs without damaging the progress achieved in this field even more
important. Because of its relatively advanced level of development
among LDCs and its pioneering experience with social security within
the Western Hemisphere, Latin America constitutes an important
case study.
This chapter has a threefold purpose: (1) to test the hypothesis- at
the international level and with recent data - that a positive correla-
tion exists between social security expenditures and economic de-
velopment; (2) to explore the major forces shaping social-insurance
population coverage in Latin America; and (3) to find the principal
determinants of social insurance expenditures in the same region.
REVIEW OF THE LITERATURE
During the past two decades, several studies have analysed the determi-
nants of social security/insurance and public health expenditures as
shares of GOP or national income. Table 3.1 summarizes the major
findings of eight case studies based on international comparisons.
Abel-Smith (1967), Paukert (1968), ILO (1970), and Wilensky
(1975)- although, in this latter case in an indirect way- support the
hypothesis that a positive correlation exists between economic de-
velopment (measured by GOP or national income per capita) and
social security expenditures as a percentage of GOP (SSE/GOP) or
national income (SSE/NI). However, Paukert and ILO have added
that this relationship becomes negative among the more developed
countries, i.e., those with GOP per capita levels higher than $1500
(Paukert 1968) or alternatively higher than $1700 (ILO 1970) (both
sums based on 1963 dollars). Conversely, Aaron (1967) has shown
that, in developed countries, the correlation between economic de-
velopment and SSE/GOP is positive but insignificant, and Zschock
(1986), when testing this relationship with health care expenditures
by social insurance in Latin America, has found that it was not
statistically significant. Yet, since Aaron's study was applied to
developed countries, it has been argued that his sample fell into the
range of richest countries for which the hypothesis had also been
rejected (Paukert and ILO). However, this argument cannot be
applied to Zschock's results, still leaving unanswered the question on
the validity of the hypothesis in developing countries. Furthermore,
most of the above-cited authors did not test their hypothesis with
Determinants of Social Insurance/Security Costs 51
Table 3.1 Summary: Determinants of social security/insurance and health

expenditures and coverage by authors
Authors Number and

(year of type of Dependent Finding:
publication) country Date Method variable* independent variable
Aaron 22 developed 1949--57 Multiple SSE)'N, Age of the system
(1967) countries regression SSE I is the most
(spending 5% important
or more of determinant of SSE/
national income NI. Per capita
in SS) national income is
insignificant but it is
an important
determinant of
SSEptc· Per capita
income elasticity of
SSE/NI and SSEptc
is less than one: the
wealthier a country
is, the less
proportionately it
spends on SS.
Abel-Smith 33 countries 1961 Multiple HEINl Positively correlated
(1967) regression with Nlp/c
Paukert 48 countries 1963 Linear SSE/GDP Positively correlated
(1968) regression (but low) with
GDPpte in all
countries. However,
for countries with
GDPpte of $1500
and over, SSE/GDP
~eclines as GDP pte
mcreases.
ILO (1970) 43 market 1963 Linear SSE/GDP Positive relationship
economies regression with GDPpic·
However, for
countries with
GD~f'c higher than
$17 , the
relationship
becomes negative.
Wilensky 64 LDC and 1966 Multiple SSE/GDP Positively correlated

(1975) developed regression with age of the
countries programme and age
of the population,
which in turn are
determined by
GDPptc·
continued on page 52
Table 3.1 continued
Authors N11mberand
(year of type of Dependent Finding:
publication) country Date Method variable• independent variable
PAHO 16 Latin 1975 Linear PoCffPo Positively correlated
(1977) American regression with GDPptc and
countries negatively
correlated with Gini
coefficient.
Zschock 18 countries 1975-77 Multiple HSIE/GDP Positively correlated

(1983) including 13 regression with GDP .,,c in all
Latin American countries, but not
countries significant for 13
Latin American
countries. TPHE/
GDP Not significant
Deviney 20 developed 195(}-1970 Zero order SSE/GDP Strength of the

(1983) market and correlation, state (e.g.
economies 196(}-1970 linear centralization
regression resources) in 196(}-
70 but not in 195(}-
60. In the latter,
non-agricultural
labour is a
complementary
explanatory
variable.
• Abbreviations, see page xvi.
systematic correlation exercises among a large number of countries

discriminated by different levels of development. Finally, data used
in most of those studies are two to three decades old.
Another important explanatory variable of social security spending
has been the age of the programme (Aaron 1967, Wilensky 1975) as
measured by the number of years since the introduction of the first
programme. Deviney (1983) added a political dimension to the de-
bate by measuring the strength of the state on the rate of change of
SSE/GOP. His results show that political variables alone do not
generate such change.
The only study of determinants of social security coverage of the
population in Latin America is PAHO (Panamerican Health Or-
ganization) (1977) which found it positively correlated with GDPp/c
and negatively correlated with the Gini coefficient (i.e., the lower the
inequality in income distribution, the higher the social security cover-

age, and vice versa). Zschock (1983) did not study this aspect.
HYPOTHESES
Hypothesis l
Social security spending as a share of GOP is positively correlated

with per capita income as a broad indicator of economic develop-
ment:
SSE=SSE(X1) (1)
and SSE, 1 > 0
where SSE represents social security expenditure as a share of GOP

(SSE/GOP) and X1 is an indicator of economic development.
We tested this hypothesis using different groups of countries: (1) all
countries that report to the ILO their SSE/GOP (50 countries) comp-
lemented with non-reported figures from Latin America (nine coun-
tries) obtained from Mesa-Lago (1985); (2) among all 59 countries,
we separated those having a relatively high per capita income from
those having a relatively low per capita income; and (3) all 20 Latin
American countries alone, using data from Mesa-Lago (1985).
Since its inception in the 1920s-1930s, social insurance in Latin
America has basically followed the Bismarckian model. Social in-
surance is narrower than social security in terms of both the social
risks it embraces 1 and its population coverage: the salaried labour
force and its dependents, vis-a-vis all the population. Social insurance
is financed by contributions based on salaries paid by the employee,
the employer and, in some countries, the state, while social security
tends to be financed, at least partly, by general taxes. Currently, in
Latin America, only Cuba has a comprehensive social security system
although a few other countries (e.g., Argentina, Brazil, Chile, Costa
Rica, Uruguay) have gradually moved from social insurance towards
social security. Therefore, in Latin America, social insurance is a
more refined and accurate variable than social security to test if its
expenditures as a share of GOP are positively correlated with per
capita GOP.
Hypothesis 2
Coverage of the economically active population (EAP) in Latin

America has been determined by the pressure of occupational groups
and/or the initiative of the state:
COV = COV(X2,X3) (2)

and covx2• covx3 > 0,
where COV is the statistical coverage of the EAP in terms of pen-
sions (for which the most reliable coverage data are available), X2
represents the pressure groups component, and X3 represents the
initiative of the state.
The formulation of our second hypothesis is based on the debate
that has arisen concerning the main forces influencing social in-
surance population coverage in the region. One explanatory framework
emphasises pressure groups as the predominant factor. Occupational
groups such as the armed forces, civil servants and the labour aris-
tocracy, blue- and white-collar workers in key industrial activities and
services, to cite the most relevant, exert pressure on the state to
obtain social security concessions (Mesa-Lago 1978). The other ex-
planatory framework stresses the role of the state, within populist or
bureaucratic government models, in shaping the evolution of social
security and the coverage of the population. According to this point
of view, the state exercises its political power using social security as a
means to neutralize, control, and co-opt pressure groups (Malloy
1978).
Data do not permit exclusion of one or the other of these compet-
ing hypotheses because of the complementarity between pressure
groups and state initiative.
Hypothesis 3
A more accurate specification of the social-insurance system expendi-

ture as a share of GOP needs to include 'structural' and 'efficiency'
variables of such a system:
SIE = SIE(X4,X5) (3)

and SIE.4 > 0, SIE.s < 0
where SIE is social insurance expenditures, and X4 and X5 respect-

ively represent the structural and the efficiency variables.
Structural variables, shaped by country-specific history and institu-
tions, include: (a) the size of the social insurance system as indicated
by the population coverage; (b) the age of the system as measured by
the number of years since its inception; and (c) its degree of maturity,
represented by either the active/passive ratio or the pension share of
total benefit expenditure.
The efficiency component attempts to capture the influence of the
quality of the service. For example, two countries with similar levels
of economic development and social insurance coverage may have
divergent social insurance costs. The country that allocates a higher
proportion of its GDP to social insurance may have a higher number
of physicians, nurses or beds per insured population than the country
that allocates a lower proportion of its GDP to social insurance. It
could also be the case that the country with a higher share has a less
efficient administration than the other country. Thus, as formulated
by our hypothesis, the structural component measures the portion of
total expenditures that is explained by the evolution of the social
insurance system, and the efficiency component measures the portion
of said expenditures that is explained by the quality of the service,
which can imply either additional costs or lower costs. 2
ANALYSIS
We used Ordinary Least Squares estimations to test linear, multi-

variate equations (as generally formulated in (1), (2), (3)) based on 1980
data from 59 countries for which figures were available, as well as the
20 Latin American countries. The non-Latin Carribean countries
were excluded because they tend to have a social security (rather than
insurance) system and a pattern of evolution that differs from the rest
of the countries in the region. 3 Since we are dealing with cross-
sectional estimations a caution note is needed for interpreting the
results. The estimated average parameters obtained summarize the
experience of countries of the same region with similar social in-
surance patterns. Hence, they help test the existence of 'common
co-relations' for the year of the estimation. 4
Tables 3.2 and 3.3 present some relevant information on the 20 Latin
American countries.
VI
0\
Table 3.2 Social security indicators in Latin America, 1980
GNP1 ,~ PoC!f.Po PoCIE~Pe SSEIGDP SIE!GfP YS PaJ~,ct PeEITBe Ad£/SSt

(/) (2) (3) (4)c (5) (W (7) (8) (9)
Country $1980 % % % % %
I. Vcnczucla 3630 45 50 3 1.3 14 0.06 33 14.0
2. Uruguay 211111 tiJ 81 11 8.1 76 0.65 79 7.7
3. Aracntina 2390 79 tiJ 10 11.9 76 0.32 55 4.4
4. Chile 2150 67 62 11 11.0 56 0.46 53 7.5
5. Mexico 2090 53 42 3 2.9 37 0.08 21 18.0
6. Cuba 2070 100 93 9 8.6 59 0.21 44 -
7. Brazil 2050 96 96 5 5.2 46 0.18 45 12.1
8. Costa Rica 1730 76 68 9 7.5 39 0.06 21 6.9
9. Panama 1730 so 46 7 6.1 39 0.12 34 5.8
10. Paraguay 1300 18 14 2 1.0 37 0.07 31 6.2
11. Ecuador 1270 8 23 3 3.7 45 0.15 48 13.5
12. Colombia"' 11!10 12 22 4 2.8 34 0.05 20 10.5
13. Dominican Republic 1160 8 14 2 0.7 33 0.05 21 22.0
14. Guatemala 1080 14 33 2 1.6 11 0.06 14 11.7
15. Peru 930 17 37 3 2.6 44 0.09 35 11.5
16. Nicaragua 740 9 19 2 2.3 25 0.08 16 13.7
17. El Salvador 660 6 12 2 1.3 11 0.08 18 14.0
18. Bolivia 570 25 18 3 2.9 27 0.33 40 19.3
19. Hondurash 560 7 14 3 0.9 9 0.02 7 16.1
20. Haiti 270 I 2 I 0.1 15 - 10 7.3
SouRCES: Mesa-Lago 1985. World Bank 1982. and ILO 1985b.

Notes
a Countries arc ranked in the table according to per capita GNP.
b Percentage of the total population covered by the health care programme and that.of the EAP covered by the pension programme.
c Social security expenditures include public health expenditures.
d Social insurance expenditures exclude public health expenditures. Figures for Mexico. Panama. and Nicaragua relate to 1981. and that for Argentina to 1983.
e The at:e of the programme relates to the first pension law. and in countries with multiplicity of social insurance funds it relates to the law of the first major fund
established.
f Quotient of demographic burden. e.g. number of passive insured (pensioners) divided by the number of active insured (contributors).
g 1979.
h 1982.
Table 3.3 Per capita social security and social insurance expenditures in
Latin America, 1980
SSEl',c S/Eetc
(lj (2}
Country $ $
1. Venezuela 118.26 51.25
2. Uruguay 338.47 249.24
3. Argentina 557.50 663.40"
4. Chile 273.13 273.13
5. Mexico 80.55 77.87b
6. Cuba 186.03 177.76
7. Brazil 102.40 106.50
8. Costa Rica 190.80 159.00
9. Panama 127.33 110.96b
10. Paraguay 28.08 14.04
11. Ecuador 58.52 54.13
12. Colombia 79.40 37.00
13. Dominican Republic 23.86 8.35
14. Guatemala 18.46 14.77
15. Peru 33.60 29.12
16. Nicaragua 15.72 18.08b
17. El Salvador 14.88 9.67
18. Bolivia 26.60 25.70
19. Honduras 18.90 5.67
20. Haiti 2.52 0.25
SOURCES: ECLA 1985, and IMF 1986.

a 1983.
b 1981.
SCOPE AND LIMITS
What common variables have influenced population coverage and

social insurance spending as a share of GDP in Latin America? No
previous work has addressed a similar question.
First, the test of the coverage hypothesis contributes to an ongoing
debate on the determinants of coverage in Latin America. Second,
the social insurance spending analysis resembles Aaron's inquiry
(1967) on the common determinants of SSE/GDP within developed
economies. However, the present study departs from Aaron's in two
ways: (1) the sample of countries and the period of analysis; (2) the
fact that a particular 'stylised' feature of Latin America is used: social
insurance rather than social security schemes; and (3) the decomposition
of the factors influencing social insurance spending into 'structural'

and 'efficiency' variables. 5
EMPIRICAL EVIDENCE
Social Security Expenditures
The hypothesis that a positive relationship exists between the social

security expenditure share of GDP (SSE/GDP) and GNP per capita
(GNPp/c) is tested using data from 59 countries. We also have tested
the hypothesis independently using three sub-groups: 'higher income'
among the 59 countries, 'lower income' among the 59 countries, and
the 20 Latin American countries, all of which are 'lower income' with
the exception of Venezuela. 6 The estimated coefficients are given in
Table 3.4.
We found a weaker positive correlation between SSE/GDP and
GNPp/c among 'higher income' (wealthier) countries (column 2) than
among either 'lower income' (developing) countries, the pooled set
of 59 countries and the Latin American countries (columns 1-4).
These findings are similar to those of Aaron's (1967) concerning
higher income countries as well as the ILO (1970) and Paukert (1968)
concerning the relationship between lower and higher income coun-
tries (except that both found a negative relationship among higher
income countries). We performed a Chow test to evaluate if the
estimated coefficient is the same among both samples ('higher in-
come' and 'lower income'): the calculated F value is 7 .76, significant
at the .01level. Figure 3.1 shows a plotting of actual observations and
the estimated trends.
A similar regression was estimated for Latin America alone, using
social insurance expenditures as a share of GDP (SIE/GDP) instead
of social security expenditures (SSE/GDP). The results, presented in
column 8, are quite similar to the ones in column 4. Similar to
Aaron's result, we found that per capita social security expenses
(SSEp/c) are positively and significantly correlated with GNPp/c (col-
umns 5-7). 7 But, in contrast to his study, our estimates show that
GNPp/c was consistently s•gnificant when correlated with SSE/GOP
for low income economies, Latin American economies, and all 59
pooled countries, as has been discussed above. Our results for Latin
America differ from Zschock's, who found no significant correlation
in that region between GDPp/c and social insurance health expendi-
Table 3.4 OLS Regression coefficients on social security expenditures to test Hypothesis 1
Dependent variable: SSEIGDP Dependent variable: log SSEplc Dependent variable SIEIGDP
Independent
variables 'Higher 'Lower Latin 'Higher Latin Latin
All income' income' American All income' American American
countries countries countries countries countries countries countries countriesa
(1) (2) (3) (4)/a (5) (6) (7) (8)
GNP.,...c 1.650* 1.001* 3.544* 3.557* 3.656*

(.139) (.296) (.458) (.596) (.637)
Log (GNPpte) 1.910* 1.536* 1.736*
(.089) (.086) (.156)
Intercept 2.549* 9.085* -.803 -.351 -10.178* -6.611* -8.608* -1.063
(.910) (2.722) (.650) (.986) (.719) (.755) (1.146) (1.054)
R.2 .705 .271 .670 .658 .894 .914 .865 .639
F-value 139.758 11.399 59.753 35.634 456.919 318.315 122.995 32.893
Std error 4.769 5.844 1.798 2.019 .779 .351 .485 2.159
Mean 10.407 17.514 3.537 4.842 5.030 6.823 4.043 4.274
Sample size 59 29 30 19 55 31 20 19
Standard errors are given in parentheses.

• Sign is as expected and is statistically significant at the .01 level.
a Excluding Venezuela.
V\
\C
35
+
30
lower Higher +
income income
25 countries countries
+
20
~ + +
.5
21 15 +
+
~ 10
rJl
+
+
+
5
+
0
+
US$3000
-5
4 6 8 10 12 14 16
Per capita GNP. in thousands US dollars, 1980
+actual
Figure 3.1 SSE/GDP and per capita GNP: 59 countries, 1980

SOURCE: Table 3.2
tures as a percentage of GDP. One explanation for this may be that

we used total social insurance expenditures (rather than health ex-
penditures alone): usually the more developed a country, the older
and more mature is its pension programme, thus increasing its pen-
sion share in total social insurance expenditures; conversely, in less
developed countries, the highest share of expenditures is that of
health insurance. Another explanation could be that as GNPp/c
increases so does the share of private health care spending hence
reducing the share of social insurance spending.
Aaron's (1967) finding that the income elasticity of social security
expenditures is less than one was not supported as our estimated
coefficients, shown in columns 5 to 7 of Table 3.4, are greater than
one and statistically significant.
We obtained estimations of the above defined elasticities for five
Latin American countries for which data were available for the
1960-80 period: Costa Rica, Chile, Mexico, Peru, and Uruguay over
the periods: 1961-65, 1965-70, 1970-75, 1975-80 (Mesa-Lago 1985).
As is the standard procedure, elasticities were defined as the percen-
tage change of per capita social insurance spending (at market prices)
over the percentage change of per capita GDP (at market prices),
both expressed in their national currencies. Only in the case of
Uruguay was the elasticity less than one.
For all five countries the elasticity declined during the period of
observation. Costa Rica and Mexico had very high elasticities (above
2.0), particularly during the 1960s. These countries had relatively
young social insurance schemes that rapidly expanded coverage dur-
ing that period. In the case of Costa Rica, extension of coverage to
dependants of insured occurred in the second half of the 1960s. The
calculated elasticities declined during the 1970s, explained, at least in
the case of Mexico, by a very rapidly increasing GDP based on the oil
boom. Conversely, countries that by the 1960s had relatively mature
social security systems, such as Uruguay and Chile (as well as Peru,
an 'intermediate' case), showed lower elasticities. These countries
faced extremely high social insurance costs in the late 1960s, and
encountered serious financial difficulties that led them to reforms
partly aimed at reducing social security expenditures.
Summarizing the results concerning our first hypothesis: (1) There
is a strong positive correlation between SSE/GDP and GNPp/c in the
'lower income' countries, which also include the ·Latin American
region. (2) This significant correlation weakens among the 'higher
income' countries. (3) Contrary to Aaron's (1967) findings on the
existence of a less than unit elasticity of social security expenses, we
found evidence that this elasticity is higher than one. (4) However,
for five Latin American countries for which historical data from 1960
to 1982 exist, the income elasticity declined over time; only in Uru-
guay, a country that has a 76-year-old system, was the elasticity less
than one. (5) Finally, we replicated Aaron's (1967) estimations using
per capita figures for social security spending and GNP for our set of
observations for 1980, and found a positive co-movement between
these two variables.
Coverage
We used two proxies for the political pressure that occupational

groups exercise on the state in Latin America, namely: (1) the
percentage of salaried workers over the economically active popula-
tion (SWIEAP); and (2) the percentage of organized labour (OREAP).
In the Bismarckian model, the salaried labour force, the main be-
neficiary of social security protection, ought to play an important role
as a pressure group. We tested this hypothesis, expecting a high
positive correlation between salaried workers and coverage. 11 In view

of the difficulties found in capturing the variable occupational group
pressure we added other variables related to labour, structure of
production and urbanization in Latin America.
To capture the effect of the state's initiative towards expanding
population coverage and social security programmes we introduced a
dummy variable called 'political commitment' (POCOM) whose
value is one when the state's initiative is present, and zero when it is
absent. A value of one was assigned to the dummy in each country
when any of the following features were present: (1) The obligation
to provide universal coverage is established in the national constitu-
tion and the government has implemented it (e.g., Cuba). (2) The
constitution or a law makes compulsory the expansion of social
insurance coverage and/or provides welfare pensions and health-care
to the indigent population, mandates which have been largely ful-
filled (e.g. Uruguay, Chile, Costa Rica, and Panama). (3) Coverage
has been granted to underprivileged groups, difficult to protect, such
as the rural and urban-marginal sectors (e.g. Brazil and Mexico). The
Argentine case is a particular one, where the extension of coverage
was accomplished due to the power of pressure groups, the initiative
of the Peronist-corporatist state, political mobilization, and legisla-
tion. The countries that had a political commitment to expanding
social security coverage were: Argentina, Brazil, Chile, Costa Rica,
Cuba, Mexico, Panama, and Uruguay.
Table 3.5 shows the values of the added variables related to labour,
structure of production, and urbanization in Latin America for 1980;
the estimation results are shown in Table 3.6. Independently it can be
observed that the most important explanatory variable is the percent-
age of the salaried labour force (SW/EAP), followed by per capita
GNP (GNPp/c), the percentage of urban population (UPo), and the
percentage of the non-agricultural GOP (NAGDP), in that order
(columns 1-4). Taken two explanatory variables together (as re-
ported in columns 5-7) the lowest standard error of the regression
is obtained using SW/EAP and GNPp/c, which also explains .717
of the dependent variable. If the 'political commitment' dummy
(POCOM) is regressed with another explanatory variable, the good-
ness of the fit improves. Particularly, the best fit is obtained when
SW/EAP and POCOM are regressed jointly (column 8) implying that
social insurance coverage in Latin America can best be explained by
both the percent of salaried workers over EAP and the state's initia-
tive in granting social insurance services to segments of the popula-
Table 3.5 Indicators on labour, urbanization, structure of production and

public expenses in Latin America, 1980
SWIEAP OREAP UPo NAGDP PSIGDP

(1)" (2)d (3)b (4)b (5]<
Countries % % % % %
1. Venezuela 64.1 48.8 83.0 94.3 22.0
2. Uruguay 69.4 25.0 84.0 88.9 21.8
3. Argentina 71.2 33.0 82.0 89.4 19.0
4. Chile 55.1 33.7 80.0 87.9 28.0
5. Mexico 44.3 24.0 67.0 91.6 17.5
6. Cuba 88.8 69.1 69.0 88.8 39.0
7. Brazil 65.3 13.6 68.0 86.3 19.0
8. Costa Rica 75.2 11.4 43.0 82.2 25.0
9. Panama 63.2 12.9 54.0 91.0 32.7
10. Paraguay 36.7 5.0 39.0 70.5 10.1
11. Ecuador 47.6 15.0 45.0 87.9 15.2
12. Colombia 53.3 19.4 70.0 80.6 13.5
13. Dominican Rep. 51.3 8.8 51.0 79.8 16.9
14. Guatemala 47.2 10.0 39.0 75.2 14.3
15. Peru 41.8 25.0 67.0 91.5 21.1
16. Nicaragua 5.o· 53.0 77.4 28.9
17. El Salvador 59.2 8.0 41.0 72.2 17.2
18. Bolivia 38.2 11.8 33.0 81.7 13.8
19. Honduras 45.4 10.0 36.0 71.5 19.8
20. Haiti 16.6 1.0 28.0 67.8 17.3
SOURCES:
a ILO.
b World Bank.
c International Monetary Fund and Economic Commission for Latin
America (ECLA). Public Expenditures, as cited by the IMF, include
current and capital expenses belonging to central governments such as:
general public services, defence, education, health care and social
protection, housing, community services and other.
d Estimates from:
US Department of Labour, Country Labour Profile; the American
University, Foreign Area Studies, Area Handbook for Cuba; Central
Intelligence Agency, The World Factbook, 1986.
e Before the Nicaraguan Revolution.
tion. With this specification, both variables are significant, .793 of the
dependent variable is explained, and the standard error decreases to
13.2. Columns 11 to 13 in Table 3.6 show the results of regressions
using two explanatory variables and the POCOM dummy. The re-
sults are fairly similar in terms of their goodness of fit. However, it
~
Table 3.6 OLS regression coefficients on economically active population coverage• to test Hypothesis 2, 1980
Dependent variable: PoCIEAP

Independent
variables (I) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11) (12) (13)
GNPp1c 24.622* 12.114:1: 12.366* 7.550

(5.643) (5.906) (4.801) (4.733)
SWIEAP 1.414* 1.006* 1.194* 1.067* .794* .610t .642t .553:1:
(.256) (.307) (.331) (.285) (.247) (.263) (.250) (.282)
OREAP .342 .365
(.328) (.233)
UPo 1.070* .529t .522t .341
(.272) (.250) (.217) (.199)
NAGDP 2.276*
(.655)
POCOM 31.244* 35.765* 37.446* 27.695* 27.604* 31.531*
. (8.040) (8.123) *(8.016) (7.994) (7.891) (7.701)
Intercept 3.497 -35.068 18.858 -147.278 -31.746 -30.036t -46.207* -14.453 7.551 -3.533 -14.725 -24.028:1: -8.899
(9.983) (14.498) (16.216) (54.654) (13.396) (15.247) (14.229) (11.959) (6.981) (11.356) (11.422)(12.615) (11.990)
R2 .500 .622 .446 .381 .717 .624 .686 .793 .760 .751 .812 .816 .811
F-value 19.038 30.631 15.488 12.092 20.308 15.935 20.662 35.570 29.505 28.139 26.850 27.527 26.676
Std error 20.549 17.874 21.643 22.871 16.395 17.830 16.293 13.215 14.895 14.510 12.620 12.488 12.655
Me au 41.895 41.895 41.895 41.895 41.895 41.895 41.895 41.895 41.895 41.895 41.895 41.895 41.895
Sample size 19 19 19 19 19 19 19 19 19 19 19 19 19
Standard errors are given in parentheses.

• Sign is as expected and is statistically significant at the .01 level.
t significant at the .05 level.
:j: significant at the .1 level.
a Excluding Nicaragua.
100,-------------------------------
90
80
70
80
0~----------------------------------------------~
-10-t-..,----,---,--..,----,,--,-----.---,,--,-----,--,--,-----.--,--,--- --.--.--l
0.27 0.58 0.57 0.88 0.83 1.08 1.18 1.18 1.27 1.3 1.73 1.73 2.011 2. 7 2.09 2.15 2.38 2.81 3.83
Per capita GNP, in thouaanda US dollara

__ predicted + actual
Figure 3.2 Actual and predicted coverage in Latin America
should be pointed out that the SW/EAP variable is only marginally

significant when regressed together with additional explanatory vari-
ables, su~gesting a problem of multicolinearity. 9 Another interesting
point is that using a third explanatory variable improves only mildly
the fit that was reported in column 8, where SW/EAP and the
POCOM variables were used as regressors. Therefore, we used the
estimated coefficients of that formulation, column 8, to compare both
actual and fitted or predicted coverage (see Figure 3.2).
The predicted values for the economically active population's
coverage using salaried workers and the political commitment vari-
able approximated coverage in 14 out of 19 countries. 10 However, the
predicted values strongly underestimated the actual coverage in
Venezuela, Brazil, and Peru. On the other side, they strongly over-
estimated the actual coverage in Panama and El Salvador. In the case
of Brazil, the underestimation is explained because in this .country the
expansion of social security has been a target for the government in
order to cover the rural area (FUNRURAL), 11 which has a very low
percentage of salaried labour force. It is interesting to note that the
POCOM and the SW/EAP variables have not totally captured the
Brazilian efforts to extend coverage. The results for El Salvador,
Panama, Peru, and Venezuela suggest that, as for Brazil, that cover-
age depends on variables that have been excluded from the overall,
estimated formulation or that a simple dummy for POCOM is in-
adequate to differentiate commitment levels.
Summarizing the results concerning our second hypothesis: (1) The
SW/EAP variable explains .622 of the dependent variable, thus pro-
viding evidence that the pressure group's hypothesis holds if the share
of salaried workers in the labour force is interpreted as a proxy for
workers' pressure. With respect to the percentage of organized
labour we encountered serious. flaws when attempting to update and
complete a series for 1980. 12 The lack of significance of this variable
in some regressions (columns 6 and 13) was attributed to the inad-
equate quality of the data; further research is needed to be able to use
reliable figures on the percent of organized labour. (2) The political
commitment variable was found to be an important determinant of
coverage in Latin America. Note that the state's initiative hypothesis
was not independently tested but in conjunction with the pressure
groups hypothesis. Jointly taken, salaried workers and the political
commitment variable, as shown in column 8, give the best fit, i.e. this
specification explains .793 of the dependent variable. (3) Th(( results
suggest that the pressure groups and state's initiative hypotheses are
mutually reinforcing and that they should be considered simul-
taneously. (4) The larger residuals for Venezuela, Brazil, Panama,
Peru, and El Salvador indicate that country specific variables in-
fluencing coverage exist and have not been taken into consideration,
and therefore, that individual specifications should be formulated for
them.
Social Insurance Expenditures
Table 3.7 shows the estimation results for the dependent variable
social insurance expenditures as a share of GDP (SIE/GDP). Inde-
pendently (see columns 1-4), the highest correlation was obtained
using the age of the system (YS), followed by the total population
covered (PoC/TPo), the economically active population covered
(PoC/EAP), and the passive-to-active ratio (Pa/Act). These variables
are long-run or structural in nature because they reflect institutional
features (e.g., maturity of the system) or are the outcomes of histori-
cal processes (commitment to expand coverage).
Columns 5-7 show the results when two of these variables are
regressed jointly: YS and PoC/TPo combined explain .763 of social
Table 3.7 OLS regression coefficients on social insurance expenditures to test Hypothesis 3, 1980
Dependent variable: SIEIGDP

Independent
variables (J)a (2l (3)a (4)a (5)a (6)a (7l (B)b (9)b (IO)" (ll)" (12)" (13)"
YS 0.148* .096* .132* .127* .084* .100* .119* .086* .076*

(.243) (.027) (.022) (.026) (.027) (.028) (.025) (.028) (.027)
PoCITPO .085* .047t .065* .046t
(.016) (.016) (.015) (.017)
PoCIEAP .096* 0.044§
(.020) (.021)
PS/GDP .148:j:
(.061)
A dE/SSE -.170 -.135 -.121 -.128
(.104) (.090) (.101) (.088)
PalAct 14.608* 8.400t
(3.751) (3.054)
SWIEAP .046 .048 .080*
(.035) (.034) (.035)
POCOM 2.658* 2.316*
(.123) (1.211)
Intercept -1.251 .931 1.938:j: .240 1.161 3.722t .375 1.367 .887 .033 -4.512t -2.548 -.725
(1.032) (.813) (.864) ( .870) (1.006) (1.368) (.719) (1.893) (1.619) (1.898) (1.676) (1. 757) (2.112)
ll-2 .666 .607 .440 .554 .763 .740 .716 .693 .n8 .741 .730 .783 .798
F-value 36.861 28.784 15.1n 23.337 29.969 26.615 23.732 21.315 22.045 17.218 23.930 21.388 17.805
Std error 2.039 2.212 2.639 2.356 1.717 1.799 1.879 1.937 1.646 1.819 1.859 1.667 1.606
Mean 4.337 4.337 4.337 4.337 4.337 4.337 4.337 3.889 3.889 3.978 3.978 3.978 3.978
Sample size 19 19 19 19 19 19 19 19 19 18 18 18 18
Standard errors are given in parentheses. § significant at the 0.1 level.

• Sign is as expected and is statistically significant at the .01 level. a Excluding Haiti.
t significant at the .02 level. b Excluding Cuba. 0\
:j: significant at the 0.05 level. c Excluding Nicaragua and Cuba. ....:1
insurance expenditure; YS and the public expenditure share over

GOP (PS/GOP) combined explain .740 of the dependent variable;
and PoCffPo and PalAct together account for .716 of it. Not re-
ported in the table is a joint regression using YS and PoT/EAP, the
latter instead of PoCffPo. The fit showed that PoC/EAP is also
significant, but the coefficient of determination of this specification is
lower (.729), while the standard error of the regression increases
from 1.717 to 1.836 (see column 5).
Columns 8-10 include administrative expenditures as a share of
total social security spending 13 (AdE/SSE) together with alterna-
tive explanatory variables. This is an efficiency variable because it
represents a financial allocation factor whose value is expected to
decrease hand-in-hand with increases in the SIE/GDP variable.
Therefore, the expected sign on the coefficient of AdE/SSE is nega-
tive. As can be observed in columns 8-10 the estimated coefficient
has the expected sign, however, the significance level is less than 90
per cent. Notwithstanding this latter fact, we selected the specifica-
tion reported in column 9 to calculate the fitted values of SIE/GDP
primarily because we wanted to include the most adequate efficiency
indicator in our specification. 14
As was argued above, regressions using YS, PoCfi'Po, and the
efficiency variable AdE/SSE yielded the best fit (column 9) explaining
.778 of the dependent variable and showing the lowest standard error
of the regression. By adding AdE/SSE, we obtained some improve-
ment in both the R-squared and the standard error as compared to
the results in column 5. The latter may be used as an alternative
specification, if the efficiency variable is not included. The actual and
fitted values of SIE/GDP (based on column 9) are plotted in Figure
3.3 which shows that the predicted values approximated the actual
values of SIE/GDP in 16 out of 19 countries. 15 Important outliers
occurred for Brazil, Paraguay and Chile. The first two countries
report lower spending values than predicted, while Chile spends
more than expected. This might be one of the reasons why a struc-
tural reform of the social insurance scheme was introduced in Chile
during the 1980s.
Our results show that the age of the system is an important ex-
planatory factor of social insurance expenditure share of GOP in
Latin America. Similarly, in his study, Aaron (1967) found that this
variable had played an important role within the rich countries in
1960. A second explanatory factor is the size of the coverage. We
used both total covered population and economically active covered
population, and found that any of these formulations have signifi-
Arg
12
11 \
\
10
I
\
8 Uru\
I
I
6 I
I
I
I
I
"+,'t
4
I
3 Peru Col I
I
Gua 'I Yen
"-, I
ROom
'¥
2.09 2.15 2.39 2.81 3.83
Per capita GNP, in thousands US dollars

~Predicted + ICIUII
Figure 3.3 Actual and predicted SIE/GODP in Latin America
cantly influenced social insurance spending in the region. Finally,

when we added the efficiency variable, as represented by AdE/SSE,
the goodness of fit improved slightly and the sign of the coefficient
was as expected.
Comparable data for population coverage are difficult to obtain.
Since we found (p. 61) that salaried workers (SW/EAP) and the
political commitment dummy (POCOM) were common variables
that explained the expansion of coverage in Latin America, particu-
larly of the EAP, we performed regressions using those two variables
as joint surrogates for coverage. Results are given in columns 11-13,
show that the explanatory power of the surrogates is important as
expected.
The results of this section can be summarized as follows: (1) The
age of the system and the covered population, as structural variables
determining SIE/GDP, were found to be statistically significant. (2)
The efficiency variable (AdE/SSE), for which international compara-
tive data existed, improved the fit when it was used. (3) The largest
residual was obtained for Chile, showing that the predicted percent-
age of social insurance spending was approximately a third lower than
its actual value in 1980. (4) As surrogates for covered population we
70 Carmelo Mesa-Lago, Maria A. Cruz-Saco, Lorena Zamal/oa
used the variables that were the most important determinants of

coverage, i.e. salaried workers and the political commitment dummy.
The goodness of the fit using the two previous variables plus the age
of the system and the efficiency variable was adequate.
SUMMARY AND CONCLUSIONS
The first concern of this paper was to test whether a positive corre-
lation exists between social security expenses share in GDP and econ-
omic development. For lower income countries, including Latin
America, this hypothesis was confirmed but for higher income coun-
tries the proposition weakens while earlier studies usually showed a
negative correlation. The per capita social insurance spending elas-
ticity was greater than one in Latin America in the 1970s, which
opposes Aaron's findings concerning richer countries. For five coun-
tries for which data exist from 1960 to 1980 - Costa Rica, Chile,
Mexico, Peru, and Uruguay- income elasticities declined over time.
An unanswered question is whether the social security share declined
as the high elasticity would imply, when incomes declined in Latin
America after 1981.
Regarding Latin America, we found that the percentage of salaried
workers over the economically active population and a political com-
mitment dummy (proxies for pressure groups and state initiative
respectively) jointly explained .793 of the economically active
covered population. The large residuals for Venezuela, Brazil, Pana-
ma, Peru, and El Salvador suggested that country-specific case stu-
dies are needed to analyse these relations in more detail.
The age of the system, its population coverage and its efficiency
(represented by the share of administrative expenses) together ex-
plained .778 of social insurance spending over GDP. The outlier in
this regression based on 1980 data was Chile, which was spending a
very large share in social insurance given the age of its system, its
coverage and administrative expenses. The Chilean system has since
then been reformed to lower costs.
Notes
We thank Gene W. Gruver and Steven L. Husted from the University of
Pittsburgh, and William P. McGreevey from the World Bank for their
valuable comments and suggestions, as well as Keun Namkoong for some

ideas which were incorporated in this chapter.
1. In this chapter social security includes social insurance (pensions,
sickness/maternity, employment-injury and unemployment compensation),
family allowances, national health system or public health, and social
assistance.
2. For example, later in the chapter a ratio of administrative expenses to
total social insurance costs is used, expecting that the more developed
the country is, and the more proportion of its GOP it allocates to social
security, the 'more' efficient the system should become and the lower
such ratio should be. Thus, the expected sign of the relation is negative.
3. Most of the data used in our Latin American comparisons were obtained
from a questionnaire sent out in 1983 and answered by 20 Latin Amer-
ican countries with the support of the Economic Commission for Latin
America (Mesa-Lago 1985). In addition, we relied on statistical year-
books, technical reports and publications, as well as field research con-
ducted in eight countries (Chile, Colombia, Costa Rica, Cuba, Ecuador,
Mexico, Peru and Uruguay). We completed our set of information using
specialized statistical data from the International Labour Organisation
and the World Bank.
4. A step further in the analysis would involve the use of time-series
estimations on a case-by-case basis in order to help find evidence of
causalities or co-movements among the same variables that were shown
to be significant at the cross-sectional level.
5. For the present analysis we have not included some factors whose rel-
evance ought to be tested in future research, among these: (1) institu-
tional characteristics of social insurance organizations, such as stratified
vis-a-vis unified systems, and direct vis-a-vis indirect patterns of health
care provision, and (2) statistically comparable indexes that measure
health care facilities per insured (hospital beds, number of physicians,
nurses, etc.). In addition, future research should improve the measure-
ment of economic development.
6. Countries with per capita income higher than $3000 are considered
'higher income' countries; otherwise, they are considered 'lower income'
countries. Most developing countries fall into the latter category. Follow-
ing the World Bank classification, all low- and middle-income econ-
omies are within this group, excluding Venezuela, Trinidad and Tobago,
Greece, Singapore and Israel.
7. Column 5 shows the results for 55 countries for which data were avail-
able; column 6 offers the results of 31 countries that allocated to social
security spending more than 5 per cent of GOP; column 7 shows the
Latin American countries only. In all three cases the R-squares are high.
8. We acknowledge that SW/EAP may represent something d.ifferent (e.g.
administrative facility to collect social insurance taxes). However, to
perform a more accurate testing of the pressure groups hypothesis,
reliable data on major, common pressure groups in Latin America
should be available, e.g. relative size of the military and civil service,
degree of unionization and strikes.
9. A colinear relationship among the variables means that they tend to
72 Carmelo Mesa-Lago, Maria A. Cruz-Saco, Lorena Zama/loa
move in the same direction among countries. We found a high positive

correlation (.6 and above) among all the variables except between SW/
EAP and NAGDP. One way of dealing with the problem of multico-
linearity is to delete one or more of the colinear variables from the
regression, which we did.
10. The residuals between actual and fitted values in 14 cases are lower, in
absolute value, than the standard error of the regression.
11. FUNRURAL is an assistance fund for rural workers that was instituted
in 1971.
12. Data on the percent of organized labour force (OREAP) are not reliable
because: (a) unions tend to overestimate their members, and (b) illegal
federations are not included. The data available are gross estimates and
inconsistencies are common, e.g. according to the CIA (1986), the
percentage of organized labour force in Brazil in 1970 was 50 per cent;
twelve years later it decreased to 12 per cent.
13. Because social insurance programmes have been in operation in Latin
America for at least 20 years, the age of such programmes should not
affect the percentage of administrative expenditures over total spending.
14. The results from regressions using alternative measures of efficiency (e.g.
social-insurance hospital beds and physicians per insured) are not re-
ported in Table 3.7. Estimation using these variables did not yield the
expected results, possibly because these alternative efficiency measures
are not strictly comparable on an international basis. Countries use
different criteria and assumptions to register their data. For example,
some countries only report the number of beds and physicians belonging
to the hospitals and clinics that are under the direct social insurance
administration, while others include contracted establishments and
physicians that provide services under the indirect system. Additionally,
in some countries physicians work full-time while in others they work on
a part-time basis. Divergent percentages on hospital occupancy and
average days of stay are also crucial in evaluating efficiency of hospital
beds. With respect to the number of employees of the social insurance
system, we found that information for the stratified systems undervalue
the number of employees compared with the unified systems, for which
better estimates exist. More research and better data are needed to refine
these indicators in order to use them adequately.
15. The residuals between fitted and actual values in 16 cases are lower, in
absolute value, than the standard error of the regression.
References
Aaron, H. (1967) 'Social Security: International Comparisons', in Studies in

the Economics of Income Maintenance, edited by 0. Eckstein (Washing-
ton, DC), pp. 13-48.
Abel-Smith, B. (1967) An International Study of Health Expenditure and Its
Relevance for Health Planning. WHO Public Health Paper No. 32
(Geneva).
The American University, Foreign Area Studies (1978) Area Handbook for
Cuba (Washington, DC).
Boskin, M.J. (1977) Crisis in Social Security (New York).
Central Intelligence Agency (1986) The World Factbook 1986 (Washington,
DC).
Committee for Economic Development, Program Committee (1984) Social
Security: From Crisis to Crisis? (New York).
Dawson, R.E. and J.A. Robinson (1963) 'Interparty Competition, Economic
Variables and Welfare Policies in the American States'. Journal of Politics
25: 265-89.
Deviney, S. (1983) 'Characteristics of the State and the Expansion of Public
Social Expenditure'. Comparative Social Research: the Welfare State
1883-1983, edited by R.F. Tomasson (Connecticut), pp. 151-74.
Economic Commission for Latin America (1985) Economic Survey of Latin
America (Santiago de Chile).
Ferrara, P. (1984) Social Security: Averting the Crisis (Washington, DC).
- - (1980) Social Security. The Inherent Contradiction (Washington, DC).
Fry, B.R. and F.F. Winters (1972) 'The Politics of Redistribution'. American
Political Science Review 64, 508-32.
International Labour Organisation (1970) Efectos Macroeconomicos de Ia
Seguridad Social (Geneva).
- - (1984) Into the Twenty-First Century: The Development of Social Secur-
ity (Geneva).
- - (1985a) The Cost of Social Security: Eleventh International Inquiry,
1978-1980 (Geneva).
- - (1985b) Yearbook of Labour Statistics, 1980-1985.
Malloy, J. (1978) The Politics of Social Security in Brazil (Pittsburgh).
Mesa-Lago, C. (1978) Social Security in Latin America: Pressure Groups,
Stratification and Inequality (Pittsburgh).
- - (1984) Social Security in Ecuador (Washington, DC).
- - (1985) El desarrollo de Ia seguridad social en America Latina (Santiago
de Chile).
- - (1986a) 'Comparative Study of the Development of Social Security in
Latin America', International Social Security Review 34 (February): 127-
52.
- - and W. De Geyndt, (1986b) Colombia: Social Security Review
(Washington, DC).
Panamerican Health Organisation (1977) Discusiones tecnicas (Washington,
DC).
Paukert, F. (1968) 'Social Security and Income Redistribution: Comparative
Experience', in The Role of Social Security in Economic Development,
edited by E.M. Kassalow (Washington, DC).
Rosa, J., ed (1982) The World Crisis in Social Security (Paris) ..
Social Security Institutions: Statistical Yearbooks of selected countries.
United States Department of Health and Human Services, Social Security
Administration (1986) Social Security Programmes Throughout the World
-1985 (Washington, DC).
United States Department of Labor, Country Labor Profile: Selected
countries.
Wilensky, H.L. (1975) The Welfare State and Equality (Berkeley, Calif.)
World Bank (1982) World Development Report 1982 (New York).
Zschock, D.K. (1986) 'Medical Care under Social Insurance in Latin Amer-
ica', Latin America Research Review 21, 99-122.
- - (1983) 'Review of Medical Care under Social Insurance in Latin Amer-
ica'. Unpublished manuscript (Washington, DC).
4 Urban Wages and Welfare
Ian Roxborough
This chapter examines real wage trends in the more populous coun-
tries of Latin America since 1940, and discusses the relationship
between wages and welfare. This is an area bedevilled by consider-
able problems with the data. The first problem relates to coverage.
The most easily available official sources provide data for industrial
wages, rather than for wages for all urban workers. Consequently,
the data analysed in this chapter are both highly aggregative and of
limited coverage. Secondly, depending on the methodology employed
by the various national governments, the statistics on industrial wages
may be more or less skewed in favour of large establishments. Since
there is a positive correlation between establishment size and the
level of wages paid, this means that national statistics are subject to
varying degrees of overestimation. Thirdly, and perhaps more impor-
tantly, the evidence on trends in real wages is highly sensitive to the
particular cost-of-living deflators employed. As illustrated in Table
4.1, a major difference in the results can be obtained when two
distinct cost-of-living deflators are applied to Brazilian wage data in
the period 1960-70.
Faced with these methodological problems, the following pro-
cedure has been adopted: firstly, a series of real wage indices drawn
from official sources are presented for several countries. Secondly, a
more detailed discussion is presented on the data for Brazil, Mexico
and Colombia. The data for these countries are, on the whole, better
than for the rest of Latin America, though controversies remain.
THE BROAD PICTURE
Figure 4.1 presents the trend in real wages of industrial workers for
the more industrialized countries of the region. It is a composite wage
index derived from three different sources (see appendix for a meth-
odological note on the indices). Although there is considerable varia-
tion in national experiences, the following general remarks seem to
be in order. There was a widely-experienced decline in real wages
during the Second World War in Latin America, followed by a long
75
76 Ian Roxborough
Table 4.1 Real income in Brazil, 1960-70
Per cent change in monthly mean real income, 1960-1970,

in cruzeiros of 1970
(using GDP (using DIEESE
deflator) cost-of-living index)
%change %change
Income class
Lowest decile +28.00 +5.8
Second decile +20.83 -0.2
Third decile + 18.31 -2.2
Fourth decile +14.58 -5.3
Fifth decile +9.45 -9.6
Sixth decile +6.33 -12.1
Seventh decile +7.69 -11.0
Eighth decile +20.89 -0.0
Ninth decile +34.75 +11.4
Highest decile +66.87 +37.9
SOURCE: R.E. Smith, 'Wage Indexation and Money Wages in Brazilian

Manufacturing 1964-1978', PhD, University of Illinois, 1985, p. 121.
period of growth of wages. For many countries the1950s and 1960s

were periods of fairly steady improvements in real industrial wages.
This long period of growth faltered, and in many cases came to an
end, in the mid-seventies. The period of the 1970s (until the onset of
the debt crisis in 1982) was one of considerable diversity in national
experience, with erratic performance of real wages in a number of
countries. The immediate aftermath of the 1982 debt crisis was gener-
ally a substantial reduction in wage levels, but by the mid-eighties
some countries, notably Brazil, appeared to be resuming a more
satisfactory path of wage growth. At the end of the 1980s, it was still
unclear whether these promising signs heralded the long-term re-
sumption of the post-war pattern of growth in real wages, or whether
this recovery was a momentary blip, deriving in large part from the
temporary success of Brazil's Cruzado Plan of 1986. The last year of
the decade and the first six months of 1990 witnessed severe
economic dislocation in Peru, Brazil and Argentina, with an attend-
ant decine in real wages. The prospects for the Mexican economy
were uncertain and, although the prices and incomes policy instituted
in December 1987 had slowed down the erosion of purchasing power,
there was in 1989 little sign of any sustained upward movement of
Urban Wages and Welfare 77
Argentina Brazil
100
0 0
1930 1940 1950 1960 1970 1980 1990 1940 1960 1960 1970 1980 1990
year year
Chile Colombia
140 400
120 300
100 200
80 100
60 0
1930 1940 1950 1960 1970 1980 1990 1930 1940 1950 1960 1970 1980 1990
year year
Mexico Peru
180 300
160
140 200
120
100 100
80
60 0
1930 1940 1950 1960 1970 1980 199( 1930 1940 1950 1960 1970 1980 1990
year year
Figure 4.1 Real wages indices, 1940-86

SouRcE: See Appendix to this chapter.
Note: Vertical scales vary from graph to graph.
wages. Given the continuing failure to deal with the debt problem
and the failure to resume satisfactory economic growth, there was
every reason to be pessimistic with regard to the resumption of
long-term wage growth.
78 Ian Roxborough
THE MARKET OPTIMIST VIEW
In recent years a number of writers from a variety of theoretical

positions, but including many associated with the World Bank, have
argued that the high growth rates of economies like Brazil, Mexico
and Colombia have, in the post-war period, led to a steady process of
labour absorption, to a tightening of urban labour markets, and hence to
a steady growth of real wages. 1 This has been most pronounced for
skilled workers and professionals, given the shortages of human
capital and hence the large returns to education. This trend in wages
has worked partly through a process of upward wage drift within
firms, where employers have attempted to retain skilled workers by
upgrading them, and partly through a widespread process of upward
mobility in the labour market. Both of these factors mean that compari-
sons of the incomes of comparable groups of workers at different time
points underestimate the growth of incomes for individuals, since many
individuals have moved from one group to another during the period
over which measurements have been made.
The market optimists have presented a powerful argument, backed
by substantial empirical data. There are, however, reasons for cau-
tion. As this chapter will attempt to demonstrate, the market opti-
mists tend to downplay the importance of institutional factors, and
their lines of reasoning are sometimes questionable. Before entering
a detailed discussion of the market optimist view and its implications,
we will take a closer look at the information on wages for three
countries, Brazil, Mexico and Colombia. These countries were
chosen since they have been studied in detail by the market optimists.
They are also three of the largest and most industrialized countries in
the region. Together with some passing references to Argentina and
Peru, this provides a coverage of over four-fifths of the urban work-
ing class in Latin America. Generalization to the other countries of
Latin America is risky, particularly in the light of the particularly
impressive growth performance of Brazil, Colombia and Mexico in
the post-war period, but in terms of sheer numbers of workers, the
coverage is pretty reasonable.
BRAZIL
There is considerable evidence to support these market optimist

claims. In a study of real living standards for urban workers in Sao
Paulo between 1930 and 1975, John Wells concluded that while the
real wage for unskilled workers had remained static, the wages of
skilled workers had risen. 2 While the long-run trend is evident, there
were differences in the rate of growth of wages during different
sub-periods. Real wages fell during the Second World War as unions
accepted a no-strike policy in support of the Allied war effort and as
inflation accelerated. The end of the war saw a burst of strike activity
to recover the losses that had been sustained, but a rapid move to the
right in Brazilian politics led rapidly to the reimposition of authori-
tarian controls on unions. 3 Throughout the 1950s Brazilian unions
were relatively weak, though they did manage to carry out some im-
pressive strikes, and the government of Joiio Goulart (1961-4) was one
of rapidly increasing union militancy and growth in nominal wages. 4
With the replacement of Goulart by a military coup in 1964 there
was a shift in economic policy which produced a sharp recession in
1964-7 and wages fell by perhaps 20 per cent, though they began to
recover thereafter until hit by another recession in 1973. Despite the
weakness of the unions, the dynamism of the economy led to a tight
labour market and renewed recovery of wages, until the very sharp
drop in 1987. Moreover, direct evidence of consumption supports the
view of rising real wages. Expenditure on food, clothing and housing
accounted for 80 per cent of working-class budgets in the 1930s; by
the 1970s these items had dropped to 65 per cent.
Wells has also published survey data showing that Brazilian
workers were able to purchase a number of consumer durables such
as televisions and refrigerators. While the ownership of such con-
sumer durables was correlated with income, the interesting finding is
that some households at all income levels had access to these goods
(albeit in varying degree). 5 According to Wells, two factors explained
increases in the living standards of the Sao Paulo working class since
1930. The first was the rise in wages for skilled workers, and the
second was the increase in the proportion of better-paid workers in
the labour force. With industrialization there had been a change in
the composition of the Sao Paulo work force, with increasing percen-
tages of people working in industry and a higher ratio of skilled
workers. These two factors meant an overall improvement for the
working class as a whole, though those workers who remained in the
low-paid, unskilled sectors of the labour market did not see their real
incomes rise.
This general picture has been supported in detail by Samuel Mor-
ley, who has argued that, despite the increasing inequality of income
80 Ian Roxborough
experienced by Brazil in the 1970s, there was a general improvement

for virtually the entire population. 6 Morley is careful to point out the
continuing high levels of poverty in Brazil, and by no means con-
dones the rising inequality which characterized the 'Brazilian mir-
acle'. Nevertheless, his examination of the evidence leads him in the
direction of a generally positive conclusion concerning the trend of
real wages.
MEXICO
There are several empirical studies of real wage trends in Mexico. 7

They show a rise in wages during the Cardenas period (1934-40), a
sharp drop during the 1940s, stagnation until about 1952, and then
a long period of steadily rising wages until the mid-seventies. After a
brief decline in the mid-seventies, wage growth picked up again, only
to fall precipitously after the 1982 debt crisis. Disagreements between
authors are minor. They debate whether wages rose as much as they
appeared during the late 1930s, and whether they fell as drastically as
they seemed to during the Second World War.
Although most previous studies have indicated a rise in real wages
during the Cardenas period followed by a sharp decline during the
Second World War, Peter Gregory believes that the rise in real wages
during the Cardenas government was more apparent than real. His
argument is that the survey of wages was biased towards the larger
establishments which were more likely to observe the minimum wage
legislation. He argues, plausibly, that 'the minimum wages estab-
lished during the initial 1934-35 years were well in excess of the
market price of labour'. 8 Consequently, those firms that paid the
legally-established minimum were in effect paying their workers more
than they could otherwise have obtained purely as a result of market
forces. During the 1940s the value of the minimum wage declined and
moved into line with the real market rate. For workers in this sector,
the period between 1934 and 1946 did, indeed, see a rise and then a
fall in wages. However, this sector of industry, from which the official
data were generated, was atypical of industry as a whole. Gregory
estimates that the legal minimum wage probably served only as an
effective wage for about 20 per cent of total employment in the late
1930s or early 1940s. Consequently, data on wages for this period are
drawn from an incomplete and biased sample. This would not matter
if the distribution of workers between the large and small firms had
remained constant. This was unlikely, however, and Gregory argues

that 'although wages in the canvassed sectors may have been falling in
real terms, a shift of labor from even lower absolute wage sectors
could have resulted in a rising average wage. The unweighted wage
data do not fully reflect the impact of probable changes in the
occupational structure within the industrial sector, which may have
been moving toward more skill-intensive employments ... Wages
for urban unskilled labor beyond the scope of legal minimum wage
coverage could have been rising in real terms at the same time that
wages in the surveyed sector were declining'. 9
This is an appealing argument in many ways, though it rests on a
whole series of questionable assumptions. However, detailed indus-
trial wage data analysed by Jeff Bortz cast some doubt on Gregory's
conclusions. Bortz shows that in the period after 1939 there was an
across-the-board fall in real wages for all industries, including
construction. 10 Since most construction workers are unskilled, a
priori arguments that the wages for unskilled workers rose during this
period are likely to carry little weight.
Peter Gregory and Timothy King both argue that the fall in wages
during the 1940s was more apparent than real. King uses an index of
minimum wages as his basis and says, reasonably enough, that
although the real minimum wage declines in this period, 'With no
shortage of unskilled labour, there may have been little tendency for
real wages to rise .. .' 11 and that the decline was exaggerated.
However, the data on industrial wages also show a decline, and this is
harder to explain. Both Gregory and King argue on a priori grounds
that real industrial wages could not have fallen. King's argument rests
on an assumption about the link between wages and political stab-
ility. He says, ' ... one cannot. believe that political stability could
have so easily endured if real wages had halved at a time of such rapid
overall growth. ' 12 The assumption about the relationship between
wages and political stability is debatable. The assertion that political
stability endured easily in the 1940s is inaccurate. Widespread discon-
tent in union ranks over wages created a major crisis in 1947-8;
political stability was threatened, and it took a massive government
purge of the major industrial unions to bring the situ11tion under
control. 13 It should come as no surprise that a sudden fall in real
wages such as occurred in many Latin American countries during the
Second World War should threaten political stability; what is more
striking, however, is the ease with which governments were able to
respond to the political challenge. A combination of direct attacks on
82 Jan Roxborough
the labour movement and a gradual resumption of real wage growth

served to remove any effective challenge by the organized working
class. As we shall see, there are lessons to be drawn for the 1980s.
What both of these market optimists underplay in their analy-
sis of Mexican wage trends in the thirties and forties is the role of
institutional factors, in particular, strong unions and a pro-labour
government (Cardenas 1934-40), and later a decidedly anti-labour
government (Aleman 1946-52), in shifting the parameters of the
urban labour market.
After a few years of stagnation, wages in Mexico then experienced
slow but steady growth between 1952 and the mid-1970s. Following
the shake-up of the Mexican unions in 1948, the major labour organ-
ization, the CTM (Confederaci6n de Trabajadores de Mexico)
adopted a basically cautious and conciliatory posture, allowing wages
to lag substantially behind productivity growth, and seldom going on
strike. By the 1970s however more militant forces within Mexican
unionism had begun to challenge the CTM's subservience to the
state, and this decade saw a rise in industrial conflict. A recession in
the mid-seventies brought with it a slight drop in wages and heralded
the beginning of the economic crisis that was to culminate in the debt
crash of August 1982. However, the oil boom that occurred in the
latter years of the decade disguised the underlying disequilibria and
postponed the onset of the crisis. During these years real wages for
low income workers rose rapidly.
Finally, the onset of the debt crisis brought with it a dramatic fall in
wages of some 37.5 per cent between May 1982 and November 1985.
Wages continued to fall, though more slowly, for the rest of the
decade. 14 A fall in wages of this magnitude is striking. If the data are
correct, individuals and households must have had to make major
adjustments. However, non-monetary components of wages are
likely to have been sticky downwards and therefore the fall in living
standards may well have been substantially less.
The paucity of studies on household consumption in Mexico makes
it difficult to draw firm conclusions from the available data. However,
it seems clear that between 1963 and 1975 low-income households
increased their expenditure on consumer durables not only in abso-
lute but also in proportional terms. 15 However, a study by Nora
Lustig of household consumption between 1968 and 1977 found that
the proportion of expenditure on food, drink and tobacco increased
for all income groups, which is contrary to expectations derived from
Engel's law. 16
COLOMBIA
As in most of Latin America, the Second World War saw a drop in

real wages in Colombia and the re-emergence of labour militancy at
the end of the war. However, the union movement rapidly came
under attack by the government which defeated a number of import-
ant strikes between 1945 and 1948. Divisions in the labour move-
ment between Communists and Liberals, and the internal divisions
within the Liberal Party expressed in the rise of Jorge Eliecer Gaitan,
exacerbated the difficulties facing the unions. Simultaneously, the once-
dominant CfC (Confederaci6n de Trabajadores de Colombia) was
challenged by the support given by the government to a new Catholic
labour confederation the UTC (Uni6n de Trabajadores de Colombia),
which, in the ten year state of siege following the Bogotazo of 9 April
1948, became the principal union organization in the country. 17
With the militant unions defeated and repressed, and with a rather
timid Catholic organization representing the bulk of organized
workers, it is hardly surprising that wages stagnated in Colombia
between the Second World War and the end of the 1950s. 18 There-
after, according to both Mohan and Urrutia, there was considerable
growth in real wages for most categories of urban workers, including
those at the lower end of the labour market. 19 The 1960s saw a
reinvigoration of unionism in Colombia, with the UTC losing its
previously dominant position, the CTC recovering some of its
strength, the emergence of a new Communist confederation, the
CSTC (Confederaci6n Sindical de Trabajadores de Colombia), and a
marked increase in strike activity. 20 However, the union movement
remained divided, despite increasingly successful attempts at coor-
dinated actions.
While real wages in industry rose during the 1960s, they fell be-
tween 1972 and 1977, though part of this decline was offset by an
increase in fringe benefits, and wage growth was once again
resumed. 21 The real wages of the very poor increased rapidly in the
decade of the 1970s, at a much faster rate than the growth in real
wages in manufacturing. Indeed, it appeared that this decade saw the
elimination of surplus labour in agriculture. For the first time, real
agricultural wages began to rise. According to the market optimists,
Colombia's successful economic growth strategy had brought not
only sustained improvements in the standards of living of most urban
wage earners, but also appeared to be about to spread its benefits to
rural workers as well.
84 Ian Roxborough
This evidence from wage trends was supported by studies of family

consumption. Urrutia looked at the income and consumption of a
sample of rich and poor families in Cali over the period 1970-80.
Both groups spent a declining percentage of their income on food,
with the proportion of income of poor families spent on food declin-
ing from 79 per cent in 1970 to 51 per cent in 1980. 22 This was a clear
indication of rising real standards of living.
HOUSEHOLD CONSUMPTION
We have seen that for both Brazil and Colombia, empirical evidence
on household consumption displays similar trends to the data for real
wages. The Mexican evidence is fragmentary and inconclusive.
Nevertheless, the argument that rising real wages are translated into
a rise in consumption is a reasonable one. However, the relationship
between household consumption and wages is complex. Phillip Mus-
grove has argued that the per capita level of consumption in a
household is a function of three variables: the number of income
earners in the household, the level of income of each of those
earners, and the number of dependants in the household. Generally
speaking, most dependants are likely to be children. Families typi-
cally go through a life cycle. As children are born they are a burden
on family finances until they are old enough to enter the labour
market and/or to care for younger children and family income falls.
During the time when the mother has to devote time or money to
caring for the children, her earning potential is significantly reduced.
However, with the passage of time, the children cease to be economic
burdens and become economic assets, and the mother is freed to
return to the labour market, resulting in a rise in family income.
Musgrove's conclusions, based on studies of Chile, Colombia,
Peru, Venezuela and Ecuador, are that while low wages and unem-
ployment 'bear some relation to poverty ... neither relation is as
strong as might be expected. In contrast, poverty is quite markedly
associated with large household size and with low overall employ-
ment rates, both of which reflect large numbers of children per adult
member'. 23 If we take the per capita level of household consumption
as a measure of welfare, then the most important link between wages
and welfare seems to be the number of children in a family. For most
families, therefore, poverty is a life-cycle phenomenon, though its
duration may be quite lengthy.
LOW-WAGE EARNERS
There is some direct evidence on the wages of workers in the bottom

end of the labour market, though these data are less reliable, and
usually available for only short time periods. We would expect the
bottom end of the urban labour market to be comprised of women
and young people, along with workers in small establishments, the
service sector, construction, and the informal sector. Wages in this
segment of the labour market might be expected to be low and static.
The available data for Mexico, Brazil and Colombia tend to contra-
dict the expectation that wages in these sectors are static. At least
during short periods of high growth, wages for construction workers
and for domestic servants appear to have risen. Gregory's data for
Mexico show that, as one would expect, there is a positive correlation
between wage level and size of establishment. 24 More interestingly,
they also indicate that, for the period 1960-75 the rate of growth of
real annual remuneration of workers in small service and commercial
establishments was higher than for those in large establishments, and
that the remuneration of workers in small industrial establishments
rose faster than that of workers in all but the very largest. 25 He also
shows that real wages of domestic servants rose from a base of 100 in
1963 to 128 in 1970, stabilized, fell back in 1974-5 to their original
level, and then rose to 242 in 1981, reflecting the oil-induced expan-
sion of the late seventies. 26 Data for construction and other
low-income workers in Colombia presented by Urrutia and Mohan
indicate a broadly comparable rapid growth of wages at the bottom
end of the labour market in the 1970s. 27 Similar results are reported
by Morley for Sao Paulo in the seventies. 28 These authors conclude
that even if this trend is a response to short-term cyclical changes in
the labour market, it challenges the assumption of unlimited supplies
of unskilled labour.
How are we to interpret these data which purportedly show rising
real wages for unskilled workers in the 1970s? It may be that this
period witnessed the beginning of the end of generalized labour
surpluses in the economy as a whole. Certainly, the evidence from
Colombia indicating the beginning of a rise in real wages for rural
workers is consonant with this interpretation. 29 Although neither
author presents data of a quality comparable to Urrutia's, both
Morley (for Brazil) and Gregory (for Mexico), argue- (though with
some qualifications) - that these countries have also recently entered
the phase where there is no longer a massive surplus of labour held in
86 Ian Roxborough
the countryside. 30 If this is so, it marks a major shift in the structure

of the labour market in these countries.
MOBILITY
The fact that a statistical average rose might thus obscure divergent
trends within the category of wage-earners. Particular attention
therefore needs to be paid to low income workers. How many people
were trapped at the bottom end of the labour market? Certainly there
have always been large numbers of urban workers whose earnings
have been pitifully low. However, there is some evidence, albeit
fragmentary, to suggest an important life-cycle effect. In the first
place, very low wages are strongly correlated with youth. It is young
workers who are disproportionately badly paid. Many of these people
move on to better, and more highly renumerated, jobs. Their low
incomes, while real enough, are likely to be temporary. How much
their low incomes result in very poor standards of living will depend
to some extent on whether they live with their parents, or whether
they have to support themselves (and possibly a family). There is no
clear evidence on this, though it seems plausible to assume that many
of these badly-paid young workers live at home with their parents.
A particularly articulate exponent of the view that high rates of
occupational mobility mean that wage and income statistics for cat-
egories of people underestimate the rate of growth of incomes for
individuals is Samuel Morley. 31 Nearly all studies of wages and in-
comes present data for categories. The time series used in this chap-
ter are wages for industrial workers in employment (often in large
establishments) at a series of points in time. Studies using income
distribution data derived from census returns typically compare the
incomes of deciles of the population at different time points. In the
normal course of events there is a flow of individuals through categ-
ories over time. For example, the industrial workers of 1970 will be a
partly different group of people from the industrial workers of 1960.
By 1970 some of the 1960 industrial workers will have died, retired,
found alternative employment, or become unemployed. And in 1970
many of the people employed in industry will have only recently
entered the industrial labour force. These factors will hold whether
the industrial labour force is static, expanding or contracting, and
whether or not individuals experience social mobility of any kind. But
it will matter if they do experience some sort of mobility or improve-
ment. As Morley argues, many of the individuals who comprised the

xth decile of the income distribution in 1960 will, by 1970, have
moved to the x+nth decile. Even if the distribution of income has
remained constant, and even if average incomes have not risen, at
least some individuals will have experienced a net improvement in
income. Add to this the fact that GNP per capita has risen fast
enough wholely or partly to offset any worsening in the distribution of
income, then it is the case not only that all or most income deciles
have experienced a net improvement but also that many individuals
will in addition have experienced a net improvement due to mobility
across deciles. Because of mobility, analyses based on categories
understate the improvements experienced by individuals.
Much of this argument hinges on the nature of the mobility pro-
cess. This is a complex phenomenon, about which there is as yet little
empirical evidence. It does appear from studies done in Brazil and
Mexico32 that there has been substantial upward mobility of an intra-
generational kind. Contrary to expectations, in Colombia Urrutia
found little evidence of social mobility in his sample. 'Most indi-
viduals . . . remain in the same occupational category over time . . .
the rise in income of the low socioeconomic group resulted more
from increases in the number of family members in the labor force
and from higher earnings than from the occupational mobility of the
father or mother over time. ' 33
Although the Brazilian and Mexican material indicate high levels
of social mobility, a number of caveats need to be added. In so far as
arguments about social mobility underpin market optimist reasoning,
a critique of their assumptions suggests the need for greater caution.
Firstly, movement from rural to urban areas is always defined as
mobility. While this is a reasonable assumption, it is something that
needs to be 'factored out' of any account of the urba11labour market.
Since a substantial portion of the mobility reported stems directly
from rural to urban migration, it seems that published studies sub-
stantially overstate the amount of mobility within the urban arena.
Secondly, the blue-collar/white-collar divide still seems to be a major
barrier to mobility. Much of the reported mobility appears to be
within, rather than between, the manual and non-manual segments of
the labour market. This does not mean in any way that the observed
mobility is unreal or unimportant. But it is as well to remember that
apparently high rates of mobility are compatible with a considerable
degree of class structuration, and this significantly reduces equality of
opportunity.
88 Ian Roxborough
TRADE UNIONS
Most of the market optimist writers argue that changes in real wages
are a response to changes in the supply and demand for labour, and
that the determining background factors are the rate of growth of the
economy on the one hand, and the rate of growth of the economically
active population on the other. In this model, trade unions and
labour legislation may have short-term effects on wages, but these
will be in the nature of temporary distortions. There is, however,
some evidence to suggest that trade union strength needs to be
analysed in more detail, though its results are at times paradoxical.
It would not be surprising if there were a correlation between
union strength and wage growth. A rise in economic activity would,
in general, lead to a tightening of the labour market which would, in
turn, lead to wage increases. Unions could be expected to take
advantage of the tight labour market to increase their coverage and
role in wage negotiations. Whether union strength has any indepen-
dent effect, however, is more problematic. At least one study of this
topic (in Argentina) has concluded that unions do not exert any
independent power. At most they act to defend members' nominal
wages from falling behind inflation. 34 The interesting question,
however, concerns shifts in the general level of wages. Here the
evidence from Brazil, Colombia and Mexico is of little relevance,
since unions in those three countries have had little effective power
for most of the post-war period. At various brief moments in the
1950s and 1960s and then in a sustained manner during the 1970s,
unions in these countries displayed an increased level of militancy. In
the short run this seemed to pay off, though the increased militancy
often occurred in the context of an economic and political crisis which
was subsequently resolved in a manner detrimental to workers' im-
mediate interests. Argentina, however, which has had a more mili-
tant union movement, offers an interesting case.
It seems clear from figure 4.1 that real industrial wages in Argen-
tina rose precipitately during the first Peronist government, and
that they subsequently fluctuated around a higher level than had
previously been the case. A sizeable drop in real wages in 1959 was
the result of a major devaluation, and it was not until the mid-sixties
that wages began to grow once more. The considerable fluctuations
around this trend are, of course, a result of changing government
policy. with workers obviously doing less well under authoritarian
regimes. During those periods when governments were willing to
allow money wages to be determined through collective bargaining,
according to Adriana Marshall, trade unions were able to maintain

real wage levels and acted to further homogeneity of wages across
different industrial sectors. 35 Fluctuations aside, it does seem to be
the case that the massive increase in union organization associated
with Peronism moved wages up to a new level. Despite the economic
difficulties of the later years of the Peronist government and the
subsequent productivity offensive, 36 real wages remained high, even
though they did not rise in line with productivity increases. Only the
military dictatorship of 1976-83 was able to reduce wages dramati-
cally (by about 40 per cent). 37 Even this government, following the
debacle of the Malvinas/Falklands war, allowed wages to rise once
more.
Ironically, it was under the elected government of Raul Alfonsfn
that real wages dropped most dramatically. Here the prolonged
impact of the debt crisis, together with the continual confrontation
between the Peronist trade unions and the Radical government, led
eventually to a collapse of the austral, and a lurch towards hyperinfla-
tion in mid-1989. Real wages dropped by about 50 per cent.
Clearly, union strength alone is insufficient to explain the be-
haviour of industrial wages. Of greater importance is the attitude of
the government towards organized labour. When the government is
favourable to labour, unions can use their bargaining power to push
wages above prevailing rates. In some instances this may move wages
to a new historical level. However, government opposition or econ-
omic crisis can also shift wage levels down again.
In a study of Peru in the period 1939-58, Bill Warren has argued
that trade unions do exert pressure on wages during those periods
when governments are not hostile to unions. After a fall in real wages
during the Second World War, Peruvian workers were able to take
advantage of the democratic opening in the immediate post-war
period to drive up wages, only to see this trend reversed after the
military coup by General Odr{a in 1948. With the return to democ-
racy in 1956 renewed union activity led to a recovery of real wages. 38
There are several variables here: the degree of government authori-
tarianism or hostility to unions, the level of economic activity, and
the degree of union power. Government tolerance for .unions is a
precondition for them to use such market power as they may have to
push up wages. The evidence from Argentina and Peru seems clear:
unions can and do have an impact on real wages, both in the long run
and in the short run. But the ability of unions to shift the parameters
of the labour market depend on a sympathetic attitude on the part of
government. And when government adopts a markedly anti-labour
90 Ian Roxborough
stance and is prepared to confront the labour movement, it can also

shift wages downwards. While market forces are important, they do
not in themselves always entirely determine the course of real wages.
Market optimists tend to view government actions in terms of
whether or not they distort the labour market. It seems more reason-
able, however, to adopt a more institutionalist approach, seeing
government policy as an integral component of the labour market.
A MYTH OF MARKET FAILURE?
The market optimist model of the urban labour market is basically a

long-run model. It assumes that wages are a function of the rate of
growth of the national product, the rate of growth of the economi-
cally active population, and the distribution of income between capi-
tal and labour. It argues that labour markets in Latin America have
functioned quite well, and that they are not marked by institutional
rigidities or by widespread dualism. Human capital theory, rather
than institutional segmentation, explains the different behaviour of
skilled and unskilled wages. As one of the studies in this area has
argued, the notion that there has been widespread 'market failure' in
Latin America is a myth. 39
The debunking of the myth of market failure is, of course, a logical
consequence of the abandonment a few years previously of the myth
of marginality. Theorists of marginality had argued that migrants to
the big cities were disadvantaged vis-a-vis workers born in the city,
particularly as regards participation in the urban labour market and
in access to adequate housing. As a result, their living standards
would, it was thought, be inferior to those of workers born in the
cities. Detailed empirical investigation indicated that the theory of
marginality was a gross oversimplification, and on the whole, mig-
rants were not markedly disadvantaged vis-a-vis natives. 40 The cor-
ollary of this version is that far from urban labour markets working
imperfectly, workers were distributed among the available jobs large-
ly according to the predictions of human capital theory.
THE OPERATION OF LABOUR MARKETS
The market optimist attempt to revise prevailing structuralist notions

that labour markets in Latin America are characterized by imperfec-
tions and rigidities has not gone unchallenged. Some simple econo-
metric analyses carried out by ILO's Programa Regional del Empleo
para America Latina y el Caribe (PREALC) suggest that there is
still considerable surplus labour in the economy. PREALC argues
that, contrary to standard models of the relationship between wages
and employment, an increase in wages does not lead to an increase in
open unemployment. Rather, an increase in economic activity leads
both to an increase in wages and to a reduction in unemployment. For
twelve countries changes in wages, rates of growth of the national
product and levels of open unemployment were compared for two
periods, 1975-8 and 1978--81. For the period 1975-8 there is a nega-
tive correlation between changes in wages and changes in unemploy-
ment. In Argentina, Panama, Peru and Uruguay wages dropped
while unemployment rose or stayed constant. In Chile and Colombia
wages rose while unemployment dropped. Had there been no surplus
labour in these economies a rise in wages would have led to greater,
not lesser, unemployment. For the period 1978--81 there appears to
be no discernible relationship between these two variables. PREALC
concludes that 'the level of open unemployment responds more to
changes in the level of activity than to variations in real wages'. 41
Surplus labour is absorbed when the economy expands, and a tight-
ening of the labour market permits real wages to rise.
The PREALC data contained in Table 4.2 suggest, that at least in
the short run, urban labour markets in Latin America are charac-
terized by a certain degree of segmentation and some amount of
surplus labour. Of course, since the market optimist model is a
long-run model, the two approaches are not necessarily incompat-
ible. Nor is either approach incompatible with a model of the labour
market, such as that suggested by Bill Warren, to the effect that trade
union and government policy can have an effect on wages. It seems
clear that wages of unionized workers are more sensitive to govern-
ment incomes policy (in the form of attempts to halt the upward drift
of nominal wages in inflationary periods) than are the wages of the
non-unionized. Whether in the long run unions are capable of alter-
ing the overall level of wages is another matter. The evidence from
Argentina suggests that the functional distribution of jncome be-
tween capital and labour can, indeed, be shifted in favour of labour if
there are major institutional changes like mass unionization which
affect the labour market. Conversely, a major defeat of the unions,
such as occurred in Mexico and Peru in 1948, can shift the balance in
favour of capital and serve to prevent wages from growing rapidly.
92 Ian Roxborough
Table 4.2 Real wages, level of activity and open unemployment, per cent
Annual growth Variation in wages Changes in open

of product unemployment
wm wi we
1975-78
Argentina 1.6 -50.4 -54.9 -55.9 0.2
Brazil 6.6 3.5 13:3 12.0 0.6
Chile 7.2 30.0 20.6 44.4 -1.7
Colombia 6.1 9.4 13.3 5.1 -2.0
Costa Rica 6.9 25.3 31.3 34.9 0.4
Jamaica -2.1 -17.2c 4.0
Mexico 6.6 7.9 8.0 -0.3
Panama 3.6 -11.7 -11.7 1.0
Peru 0.5 -32.0 -27.4 -38.6 0.5
Trinidad and Tobago 9.9 8.8c -1.7
Uruguay 4.1 -16.8 -26.3 -25.9 1.6
Venezuela 6.1 -19.6 2.1 -3.2
1978-81
Argentina 0.2 8.9 19.9 0.7"
Brazil 3.5 -10.2 -6.3 -15.5 1.7b
Chile 6.7 -0.6 18.1 23.6 -4.3
Colombia 4.1 20.3 7.4 14.3 -0.8
Costa Rica 0.6 1.8 0.7 1.4 3.3
Jamaica -3.8d -12.0c 5.o·
Mexico 8.5 -9.0 -5.7 -2.4
Panama 5.0 2.1 -2.5 2.0d
Peru 3.9 13.8 2.6 2.6 -1.2
Trinidad and Tobago 4.9d 5.1" 1.8"
Uruguay 4.1 -15.1 -15.0 -13.6 -3.4
Venezuela -0.1 -3.0 -12.8 1.9
SOURCE: Programa Regional del Empleo para America Latina y el Caribe

(PREALC), Empleo y Salarios (Geneva: ILO, 1983) p. 30.
wm urban minimum wages.
wi manufacturing wages.
we construction wages.
a 1978-80.
b preliminary estimate.
c total wages.
d 1978-9.
One should also bear in mind the possibility that strong and militant
unions may, over the lung run, discourage investment and thereby
retard the rate of growth of the national product. This would mean
that real wages grew more slowly than they might otherwise have
done. 42 Argentina might be cited as an instance of a strong union
Table 4.3 Latin America: Ratio of formal to informal labour force
1950 1960 1970 1980
Urban:
Formal 30.1 34.9 39.8 44.6
Informal 8.7 10.6 11.5 13.8
Domestic 4.7 5.0 5.4 5.6
Total urban 43.5 50.5 56.7 64.0
Agriculture 55.3 48.4 42.4 35.3
Mining 1.2 1.1 0.9 0.7
Total 100.0 100.0 100.0 100.0
Ratio of formal 3.5 3.3 3.5 3.2
to informal
SouRCE: Programa Regional del Empleo para America Latina y el Caribe

(PREALC), Mercado de Trabajo en Cifras, (Geneva: ILO, 1982) p. 34.
movement acting as a disincentive to capital accumulation, though

clearly the reasoning here is rather hypothetical.
WAGES AND WELFARE
It would, of course, be best to measure directly working-class con-

sumption and effort expended. This would give a more or less direct
measure of welfare. While wages are one of the determinants of
welfare, they are only a part of the picture, and a focus on wages
alone may lead to systematic distortions.
However, if we are concerned with trends over time, then the
evolution of real wages may serve as a proxy for the evolution of
welfare for urban wage-earners. But for this to be so a number of
assumptions have to hold. Firstly, the ratio of formal sector workers
to informal sector workers must be constant. As Table 4.3 confirms,
this was indeed the case. Secondly, we need to consider the propor-
tion of income earners in a family. It is clear that there has been a
sizeable and sustained increase in the participation of females in the
labour force. Other things being equal this would mean an increase in
the number of income earners per household over time. Thus, one
would expect a net increase in consumption per capita, though to
offset this one would have to make allowance for the extra effort
expended by working women, and the increased strains in the domes-
94 Ian Roxborough
tic unit resulting from the fact that there are now fewer full-time
housewives. It is difficult to evaluate the costs to the household of
increased female labour force participation, but on the whole it seems
reasonable to conclude that it leads to a net increase in welfare. One
factor which might run counter to this line of argument would be an
increase in the number of female-headed households. While there
does appear to be an increase in these, it does not seem likely that
this trend has been sufficient completely to counteract the general
positive impact on household welfare of working wives.
Regarding family size, recent estimates suggest that population
growth is beginning to slow down in Latin America, and that this
phenomenon is most marked in urban areas as conscious steps are
taken to limit the number of children. A reduction in the number of
children means a net improvement in welfare for the household as a
whole, though this is offset at a later stage in the family life-cycle by
the fact that there are fewer income earners in the household. On the
whole, given that children will eventually leave the household, and
given that wages earned by young people are well below those earned
by adults, the net effect on per capita consumption of a reduction in
family size is almost certain to be positive. {I leave out of account
here the possibility that a large number of children may be a valued
consumption good in its own right.) In sum, the assumption of no
change in the proportion of income earners per household probably
seriously underestimates the degree to which wages are a good in-
dicator of welfare. Welfare trends are likely to rise more steeply than
those of real wages.
Thirdly, we need to discuss the relationship between wage rates
and net earnings. The key variable is take-home pay, rather than
hourly rates of pay. A major shift in the number of hours worked or
in taxation of earnings from wages would make wage rates a distorted
measure of trends in take-home pay, and would therefore bias the
estimate of welfare. An increase in the average number of hours
worked per week would make pay rates an underestimate of in-
creases in welfare, while an increase in rates of taxation would have
the opposite effect. It seems reasonable to assume that hours worked
have not increased markedly since 1940, and may well have declined.
Certainly, such legislation as has been introduced has been in the
direction of a reduction of the legal work week. The same pay for
fewer hours work is a clear increase in welfare. However, if, as seems
likely, workers have continued to work the same number of hours as
before, their earnings will have risen because of increased overtime
payments, contributing to an increase in welfare through greater

income. In any case, it is likely that, if anything, trends in wage rates
underestimate rather than overestimate the increase in welfare. Nor
is it very likely that there has been a marked increase in taxation of
wage-earners, since most pay only very small amounts of tax, though
the trend would certainly be in this direction.
Fourthly, several non-wage components of welfare need to be
considered. Has the time and/or the cost of travel to work changed?
Has the physical and/or psychological stress of work altered? Have
housing conditions in particular, and urban services in general, im-
proved or deteriorated? Has medical and educational provision
altered? And finally, have some of the less tangible aspects of urban
life, like crime rates and pollution, changed so as to have a major
impact on the welfare of urban workers?
The answers to these questions, in so far as they can be more than
speculations, are various. It is probable that, with the spatial expan-
sion of Latin America's cities, both journey-to-work time and cost
have increased. Has stress at work increased? The data on this permit
no reasonable answer. As far as housing conditions and general
urban services are concerned, there is a great deal of evidence to
suggest that there has been improvement over time. On the other
hand, pollution seenis to have risen markedly in many urban areas,
and impressionistic evidence suggests that the incidence of crime in
working-class neighbourhoods has either increased or remained con-
stant. On balance, it seems reasonable to conclude that deterioration
in some areas has been compensated for by improvement in others,
but more research needs to be done before any satisfactory answers
to these questions are available.
Fifthly, if we are to use real wages as a proxy measure for welfare,
we need to know something about the ratio of money wages to
non-monetary benefits provided by employers. In the unionized sec-
tor of the economy, particularly in countries with experience of rapid
inflation, the non-monetary component of the total wage bill can be
substantial. Probably it has risen over time, and therefore the use of
either wage rates or earnings is likely to underestimate total worker
remuneration, particularly in the unionized sector, and hence wage
trends are likely to underestimate trends in welfare.
Finally, we need some estimate of changes in social security
coverage and benefits. While the experience in this area has varied
considerably from country to country, it seems that coverage has
increased in both Mexico and Brazil, even if benefits have risen only
96 Ian Roxborough
marginally. In any event, the conclusion must be that real wage

increases understate the improvement in welfare.
To summarize, although the data may underestimate welfare gains,
it seems reasonable to use real wages as a proxy for welfare consump-
tion by urban wage-earners provided that one is concerned with
trends rather than with point estimates. These considerations are
valid even before taking into account Morley's observation that,
owing to occupational mobility, measures of the income of categories
or groups underestimate the growth of personal income. We must
therefore conclude that, following a sharp decline in the Second
World War, the real wages - and hence the welfare - of most urban
wage-earners in the larger and more industrialized countries of Latin
America rose during the lengthy period from the end of the 1940s to
the mid-1970s. There were some important differences between
countries in this chronology, and in some there were larger short-
term fluctuations than in others. Nevertheless, for most countries in
the region the fifties, sixties and seventies were decades of rising real
wages. They rose fastest and almost continuously for skilled workers,
and slowly and at times not at all for workers at the lower end of the
labour market. Real wages on the whole rose less rapidly than
productivity, and labour's income share generally deteriorated. But
for individual workers, this was generally a time of real improvement
in welfare. In the 1970s a general tightening of the labour market
seems to have enabled low-wage earners to increase earnings at a
faster rate than skilled workers, but there was great variation in
national experiences and the evidence is fragmentary. The long
period of improvement was then brutally brought to a halt by the
onset of the generalized economic crisis which began in the second
half of the 1970s and came to full flower with the Mexican debt panic
of August 1982.
THE DEBT CRISIS
Since 1982, and for some countries since the mid-1970s, there has
been a marked deterioration in the welfare of urban workers. Health,
nutrition, infant mortality, educational enrolment and food consump-
tion have all suffered. 43 This is reflected in the statistics on real wages,
though in some cases these tend rather to understate the decline in
welfare. According to the PREALC data presented in the Appendix
and in Figure 4.1 until 1986 the impact of the debt crisis on wages
varied considerably from one country to another. While the fall in

real wages has been pronounced in Mexico and Peru, its impact has
been uneven in Brazil and Argentina, and has not been felt in
Colombia. Some care needs to be taken with these data: the debt
crisis is far from being resolved and the apparent improvement in
1986 appears to have been shortlived. Much of the improvement of
wages in 1986 was a result of the impact of the Brazilian Cruzado Plan
of 1986 which reactivated the economy and raised both employment
and real wages for a brief period. With the collapse of the Plan after
the October 1986 elections, real wages of Brazilian workers, particu-
larly those in the public sector, have been badly hit.
In both Mexico and Argentina studies commissioned by the World
Bank suggest a clear decline in welfare. 44 The only exceptions to a
very gloomy picture appear to be Colombia and Chile. In both cases
there has been no dramatic fall in real wages in the eighties. In
Colombia this is because the level of indebtedness has been low and
because the government took early steps to open the economy to
international forces. In Chile the policy of export promotion has
continued to stand the government in good stead. Although the
Chilean economy is quite unstable and vulnerable to sudden shifts in
the international environment, its very openness has meant that the
debt crisis has not had the same sort of devastating impact on real
wages as has been the case elsewhere. The restructuring of the
Chilean economy after the military intervention of 1973 meant that
by the time of the debt crisis, wages had already been drastically
reduced and large sectors of the Chilean economy had already been
forced to become more efficient and internationally competitive.
In Latin America as a whole, the debt crisis has led to a redistribu-
tion of income away from labour to capital. As the figures from
PREALC in Table 4.4 show, the cost of the present crisis has been
born almost exclusively by labour.
In addition to a decline in wages, the debt crisis has brought with it
a sizeable rise in urban unemployment, and with it, urban poverty.
Whereas it used to be the case that the bulk of poverty was located in
the countryside, this is no longer so. Estimates by PREALC indicate
that in 1980 60 per cent of the poor in Latin America lived in the
countryside; in 1985 51 per cent lived in rural areas. 45 Considerable
increases in open unemployment in urban areas were to a large extent
responsible for the increase of poverty in Latin America's cities.
The profundity and duration of the debt crisis require us to ask a
number of questions about its likely impact on the functioning of
98 Ian Roxborough
Table 4.4 Gross Domestic Product and functional distribution of income•

(per cent)
1980 1983 1985 1985-90

GDP (1980 = 100) 100.0 96.7 102.6 2.6
External transfersb 2.2 6.9 7.5 5.3
Gross national income at
market prices 97.8 89.8 95.1 -2.7
Depreciation 6.1 6.5 6.7 0.6
Indirect taxes after
subsidies 7.3 7.2 8.9 1.6
Net national income at
factor cost 84.4 76.1 79.5 -4.9
Labour income 34.9 30.0 30.1 -4.8
Capital income 49.5 46.1 49.4 -0.1
Functional distribution
of income<
Labour 41.5 39.4 37.9 -3.6
Capital 58.5 60.6 62.1 3.6
SOURCE: Programa Regional del Empleo Para America Latina y el Caribe,

(PREALC), Meeting the Social Debt (Geneva: ILO, 1988) p. 21.
a Weighted average of Brazil, Colombia, Costa Rica, Ecuador, Jamaica,
Mexico, Panama, Paraguay, Uruguay and Venezuela. Each entry, except
for the GDP, is expressed as a percentage of the GDP of each year. The
1980-85 variation refers to percentage point variations in the GDP be-
tween 1980 and 1985.
b Defined as the net transfer of capital abroad plus the variation in terms of
trade.
c Expressed as percentages of the net national income at factor cost.
labour markets in Latin America. Earlier in this chapter we noted the

conclusions of the market optimists that there was little evidence of
dualism in urban labour markets and that the excess supply of labour
in the countryside appeared to be drying up. Taken with the down-
turn in the rates of growth of population, this led to relatively
optimistic conclusions about long-term trends in real earnings. The
debt crisis, however, as we have seen, produced a decline in econ-
omic growth and a massive drop in real wages in some countries. This
must cast doubt on the analyses of the market optimists. Of course, if
the structure of the labour market remains the same, once growth is
resumed in Latin America, it would be reasonable to expect a re-
sumption of wage growth. If historical experience is repeated, we
might expect wage increases to lag behind productivity growth, and
for there to be a lengthy lag before real wages regained the levels of
the mid-seventies. Wages would grow faster once unemployment had

been brought down to a level where demand for labour would push
up wage rates. Whether these trends occur depends on a variety of
government policies affecting the labour market.
POLICY PERSPECfiVES
The studies of the operation of urban labour markets carried out by

PREALC suggest that a reactivation of the economy will simul-
taneously raise real wages and lower unemployment. As this chapter
has argued, an institutional improvement in the power of the trade
unions is likely to be translated into an improvement in wages and
into a redistribution of income from capital to labour. In terms of the
direct impact on the welfare of urban workers, both a reactivation of
the economy and an enhancement of union power will have desirable
effects.
However, there is the danger that policies designed to further these
goals may increase the rate of inflation and/or reduce the level of
investment. Since wages are sensitive to inflation, and since in the
long run increased investment is a precondition of rising real wages,
any policy package must take these factors into consideration. In the
absence of a rapid general recovery of the world economy and a
massive programme of debt relief, orthodox stabilization measures
are unlikely to produce the desired effects. As Manuel Pastore has
argued, while the orthodox stabilization policies recommended by
the IMF appear to have no discernible effects on economic growth,
they do have clear and negative effects on income distribution. Be-
cause IMF programmes require government spending cuts, and be-
cause these are unlikely to occur at the expense of powerful elites,
they typically involve a reduction in wages. The share of wages in
national income declines and the functional distribution of income
worsens. Examining eighteen Latin American countries over the
period 1965-81, and using the same criteria for the evaluation of
policy performance as the IMF, Pastore concludes that 'the single
most consistent effect the IMF seems to have is the redistribution of
income away from workers'. 46
Partly as a result of the perceived failure and the high political costs
associated with orthodox stabilization policies, the years since 1982
have seen various attempts at heterodox stabilization policies.
Briefly, these policies aim to achieve economic equilibrium through
an expansion of output rather than through a reduction in effective
demand and attempt inter alia to control inflation by a wage-price
100 Ian Roxborough
freeze. The key difference with the orthodox policies promoted by

the IMF is that real wages tend to rise in heterodox stabilization
programmes and the adjustment process is growth-led, rather than
having a recessionary impact. These policies must inevitably be
attractive for democratically elected governments. However, hetero-
dox stabilization policies run the risk of rapid collapse if they are not
implemented in optimal conditions. Heterodox policies, like any
other policy, have to achieve a minimal level of technical competence
and coherence to be effective. Some solution to the question of
distortions in relative prices needs to be worked out if bottlenecks,
black markets and suppressed inflationary pressures are not to
appear. Nor will it be sufficient to treat inflation purely as a matter of
expectations: other components of inflation must be recognized and
tackled.
Both the market optimists and the exponents of institutional rigidi-
ties agree that if the economy is reactivated, an adequate supply of
labour is likely to be forthcoming. The problem then is one of
commodity prices and profits. If commodity prices can be kept in
something like relative equilibrium (no easy task), then the question
becomes one of whether businessmen believe that they will make
adequate levels of profit. In so far as businessmen's decisions hinge
on the posture adopted by organized labour, there are lessons to be
drawn from the period of the Second World War. During the war the
majority of unions in Latin America accepted no-strike pledges in
order to aid the Allied war effort. With substantial war-induced
inflation, real wages dropped and the end of the war saw a move by
unions to regain their position. In a number of countries this in-
creased militancy of organized labour coincided with other factors to
increase political tension to crisis levels. In the majority of cases the
crisis was resolved by government-sponsored attacks on the more
militant unions and support for the moderate wing of the labour
movement. After the defeat of the radical challenge, the long post-
war boom saw a gradual rise in real wages, and this took the edge off
labour militancy. What was striking about this was that a quite small
rate of increase of real wages was sufficient to dampen working-class
unrest.
If any lesson can be drawn from the 1940s, it is that even a
moderate resumption of wage growth will go a long way towards
reducing the militancy of organized labour. Even without regaining
previous wage levels, several years of constantly rising real wages will
facilitate labour peace. Despite the gravity of the debt crisis, there is
no reason for undue pessimism. The sharp decline in real wages that
has occurred need not necessarily result in hightened political insta-

bility. If the right sort of growth and adjustment strategies are
adopted, organized labour can contribute positively towards political
stability. There is nothing inevitable about the continuation of the
decline in the welfare of the urban working class which has character-
ized Latin America in the 1980s. Neo-Keynesian policies and hetero-
dox stabilization programmes provide a potential way to resume the
growth in working-class welfare that characterized Latin America
during the long post-war boom. But the success of these policies
depends not only on technical matters but also on the disposition of
all three major actors, unions, business and the state, to accept some
form of social pact. This in the end is a political problem.
Notes
1. The key works of the market optimists are S. Morley, Labour Markets
and Inequitable Growth: The Case of Authoritarian Capitalism in Brazil
(Cambridge, 1982); R. Mohan, Work, Wages, and Welfare in a Develop-
ing Metropolis: Consequences of Growth in Bogota, Colombia (Oxford,
1986); M. Urrutia, Winners and Losers in Colombia's Economic Growth
of the 1970s (Oxford, 1985); P. Gregory, The Myth of Market Failure:
Employment and the Labor Market in Mexico (Baltimore, 1986).
2. J. Wells, 'Industrial Accumulation and Living Standards in the Long
Run: the Sao Paulo Industrial Working Class, 1930-75', Journal of
Development Studies, vol. 19. nos. 2, 3, 1983.
3. L. Werneck Vianna, Liberalismo e Sindicato no Brasil (Rio de Janeiro,
1978); T. Harding, 'The Political History of Organized Labor in Brazil',
PhD, Stanford University, 1973; R. Maranhao, Sindicato e Democratiza-
ctio (Sao Paulo, 1979); J. French, 'Industrial Workers and the Origin of
Populist Politics in the ABC Region of Greater Sao Paulo, Brazil,
1900-1950'. PhD, Yale, 1985.
4. L. Almeida Neves, CGT no Brasil, 1961-1964 (Belo Horizonte, 1981);
J.A. Moises, Greve de Massa e Crise Polftica (Sao Paulo, 1978); T.
Harding, op. cit.
5. J. Wells, 'Underconsumption, Market Size and Expenditure Patterns in
Brazil', Bulletin of the Society for Latin American Studies, no. 24, March
1976.
6. Morley, op. cit.
7. Gregory, op. cit.; J. Bortz, 'Industrial Wages in Mexico City, 1939-
1975', PhD, UCLA, 1984; J. Bortz, 'El Salario Obrero en el Distrito
Federal, 1939-75', lnvestigacion Economica, no. 4, Oct-Dec 1977; M.
Everett, 'La evoluci6n de Ia estructura salarial en Mexico, 1939-63',
Revista Mexicana de Sociologfa, vol. 42, no. 1, Jan-Mar 1980.
8. Gregory, op. cit, pp. 223-4.
9. Ibid. pp. 222-3.
10. Bortz, 'Industrial Wages ... ', op. cit.
102 Ian Roxborough
11. T. King, Mexico: Industrialization and Trade Policies since 1940 (Oxford,
1970), p. 27.
12. Ibid.
13. There is now a sizeable literature on the 1948 crisis. See, inter alia, V.
Durand, La Ruptura de Ia Naci6n (Mexico, 1986); I. Roxborough, 'The
Mexican Charrazo of 1948', Kellogg Institute Working Paper, 1986; I.
Roxborough, 'Mexico' in L. Bethell and I. Roxborough (eds), Latin
America between the Second World War and the Cold War (New York,
forthcoming).
14. I. Roxborough, 'The Economic Crisis and Mexican Labour' in G. Philip
(ed.), The Mexican Economy (London, 1988).
15. D. Felix 'Income Distribution and the Quality of Life in Latin America',
Latin American Research Review, vol. 18, no. 2, 1983, pp. 12-13.
16. N. Lustig, Distribuci6n dellngreso y Crecimiento en Mhico (Mexico,
1981), p. 24.
17. D. Pecaut, PoUtica y Sindicalismo en Colombia (Bogota, 1973); K.
Medhurst, The Church and Labour in Colombia (Manchester,1984); M.
Urrutia, The development of the Colombian Labor Movement (New
Haven, 1969).
18. A. Berry and M. Urrutia, Income Distribution in Colombia (New
Haven, 1976).
19. Mohan, op. cit.; Urrutia, op. cit.
20. Pecaut, op. cit., pp. 264-6.
21. G. Perry, 'La Experiencia Colombiana' in H. G6mez et al., Sindicalismo
y PoUtica Econ6mica (Bogota, 1986), p. 67.
22. Urrutia, op. cit., p. 62.
23. P. Musgrove, 'Household Size and Composition, Employment, and
Poverty in Latin America', Economic Development and Cultural Change,
vol. 28, no. 2, Jan 1980, p. 265.
24. Gregory, op. cit.
25. Ibid. p. 232.
26. Ibid. p. 245.
27. Mohan, op. cit. p. 102; Urrutia op. cit. p. 24.
28. Morley, op. cit. pp. 184-6.
29. Urrutia, op. cit.
30. Morley, op. cit. p. 257; Gregory, op. cit. p. 139.
31. Morley, op. cit.
32. Ibid.; J. Pastore, Desigualdade e Mobilidade Social no Brasil (Sio Paulo,
1979); J. Pastore, 'Desigualdade e Mobilidade Social: Dez Anos De-
pois', in E. Bacha and H. Klein (eds), A Transictio Incompleta, vol. 2
(Rio de Janeiro, 1986); E. Contreras Suarez, Estratificaci6n y movilidad
social en Ia ciudad de Mhico (Mexico, 1978; H. Munoz et al., Migraci6n
y Desigualidad Social en Ia Ciudad de Mhico (Mexico, 1977).
33. Urrutia, op. cit., p. 66.
34. L. Montuschi, El Poder Econ6mico de los Sindicatos (Buenos Aires,
1979), p. 146.
35. A Marshall, 'Labour Markets and Wage Growth: the case of Argentina',
Cambridge Journal of Economics, March 1980.
36. On the productivity offensive, see D. James Resistance and Integration
(Cambridge, 1988).
37. H. Dieguez and P. Gerchunoff, 'La DinAmica del Mercado Laboral

Urbano en Ia Argentina 1976-1981' Desarrollo Economico, vol. 24, no.
94, 1984.
38. B. Warren, Inflation and Wages in Underdeveloped Countries (London,
1977), pp. 109, 138.
39. This is, of course, the title of Peter Gregory's book.
40. For the debunking of the myth of marginality see especially J. Perlman,
The Myth of Marginality (London, 1976); T. Merrick and D. Graham,
Population and Economic Development in Brazil (Baltimore, 1979).
41. PREALC, Empleo y Salarios, Santiago: ILO, 1983, p. 31.
42. Adam Przeworski has stressed this dilemma of labour militancy in vari-
ous writings. See A. Przeworski, Capitalism and Social Democracy
(Cambridge, 1985).
43. World Bank, Poverty in Latin America: the impact of depression; J.
Roddick, The Dance of the Millions (London, 1988).
44. H. Dieguez, 'Social Consequences of the Economic Crisis: Mexico',
unpublished paper, World Bank, n.d.; H. Dieguez, 'Social Conse-
quences of the Economic Crisis: Argentina', unpublished paper, World
Bank, n.d.
45. PREALC, Meeting the Social Debt, (Santiago, 1988), p. 28.
46. M. Pastore Jr, The International Monetary Fund and Latin America
(Boulder, 1987), p. 89.
APPENDIX
The appendix table presents three indices of real wages for industrial workers
taken from three published sources. Since there are indications that the
indices were constructed using somewhat different data and methodologies,
care should be taken in moving from one to another. This can be risky. For
example, according to the index published in the Statistical Abstract of Latin
America real wages in Brazil fell slightly between 1982 and 1983. However,
according to the calculation of PREALC, real wages rose substantially
during these years. Fortunately, mismatches of this kind are infrequent in the
time-series presented. In general, where the three series overlap they show
consistent trends. I have therefore constructed a composite index for the
entire period 1940-86. This composite index should be used with caution,
and provides only a rough guide to wage trends.
I have constructed the composite index in the following manner. For the
first year when two time series overlap I have calculated a simple arithmetical
ratio of the two index numbers and then used this to transform the new index
onto the base of the original. The composite index is, therefore, the Martin
Index from 1940 to 1971, and the other two indices have been recalculated to
correspond to the Martin base.
Sources: Series A: John Martin, 'Labor's Real Wages in Latin America
Since 1940', Statistical Abstract of Latin America, vol. 18, 1977; Series B:
Statistical Abstract of Latin America, vol. 25, table 1413; Series C: PREALC
Newsletter no. 14, August 1987.
....
0
Table A4.1 Indices of real industrial wages, 1940-86 ""'

Argentina Brazil Chile
A B c Composite A B c Composite A B c Composite
Year
1940 100 - - 100 - - - - 100 - - 100
1941 101 - - 101 - - - - 111 - - 111
1942 101 - - 101 - - - - 126 - - 126
1943 104 - - 104 - - - - 110 - - 110
1944 114 - - 114 - - - - 113 - - 113
1945 109 - - 109 100 - - 100 106 - - 106
1946 116 - - 116 109 - - 109 105 - - 105
1947 145 - - 145 92 - - 92 106 - - 106
1948 179 - - 179 96 - - 96 110 - - 110
1949 188 - - 188 119 - - 119 110 - - 110
1950 198 - - 198 122 - - 122 111 - - 111
1951 167 - - 167 119 - - 119 101 - - 101
1952 167 - - 167 117 - - 117 106 - - 106
1953 179 - - 179 101 - - 101 96 - - 96
1954 192 - - 192 125 - - 125 71 - - 71
1955 190 - - 190 138 - - 138 70 - - 70
1956 191 - - 191 142 - - 142 71 - - 71
1957 205 - - 205 144 - - 144 72 - - 72
1958· 214 - - 214 145 - - 145 72 - - 72
1959 170 - - 170 143 - - 143 63 - - 63
1960 177 - - 177 - - - - 63 - - 63
1961 194 - - 194 - - - - 67 - - 67
1962 190 - - 190 143 - - 143 71 - - 71
1963 191 - - 191 168 - - 168 65 - - 65
1964 213 - - 213 166 - - 166 67 - - 67
1965 220 - - 220 160 - - 160 73 - - 73
1966 227 - - 227 192 - - 192 86 - - 86
1967 227 - - 227 194 - - 194 93 - - 93
1968 203 - - 203 204 - - 204 98 - - 98
1969 208 - - 208 210 - - 210 104 - - 104
1970 216 - - 216 210 - - 210 113 - - 113
1971 221 138.3 - 221 223 78.1 - 223 133 189.4 - 133
1972 203 131.5 - 210 284 85.7 - 245 122 171.7 - 121
1973 222 139.7 - 223 - 86.4 - 247 81 113.3 - 80
1974 - 157.7 - 252 - 88.3 - 252 - 102.9 - 72
1975 - 148.6 - 237 - 96.8 - 276 - 98.6 - 69
1976 - 100 - 160 - 100 - 286 - 100 - 70
1977 - 98.5 - 157 - 102.3 - 292 - 112.9 - 79
1978 - 96.7 - 155 - 107.3 - 306 - 120.2 - 84
1979 - 111.1 - 178 - 108.9 - 311 - 130.2 - 91
1980 - 124.2 100 198 - 110.6 100 316 - 141.9 100 100
1981 - 111.0 89.7 178 - 117.2 108.5 343 - 154.8 111.6 112
1982 - 99.2 80.3 159 - 128.7 121.6 384 - 154.2 108.5 109
1983 - 128.3 103.9 206 - 117.6 173.6 549 - 137.8 96.3 96
1984 - 162.8 126.3 250 - 117.5 105.1 332 - 138.2 95.5 96
1985 - - 102.9 204 - - 112.6 356 - - 90.4 90
1986 - - 107.8 213 - - 131.9 417 - - 92.1 92
continued overleaf 0
V\
-
~
-
Table A4.1 Indices of real industrial wages, 1940-86
Colombia Mexico Peru

A B c Composite A B c Composite A B c Composite
Year
1940 100 - - 100 100 - - 100 100 - - 100
1941 105 - - 105 104 - - 104 94 - - 94
1942 102 - - 102 91 - - 91 86 - - 86
1943 92 - - 92 86 - - 86 81 - - 81
1944 83 - - 83 75 - - 75 74 - - 74
1945 82 - - 82 77 - - 77 85 - - 85
1946 91 - - 91 71 - - 71 92 - - 92
1947 109 - - 109 69 - - 69 121 - - 121
1948 129 - - 129 72 - - 72 107 - - 107
1949 140 - - 140 74 - - 74 121 - - 121
1950 153 - - 153 75 - - 75 133 - - 133
1951 145 - - 145 75 - - 75 133 - - 133
1952 143 - - 143 68 - - 68 138 - - 138
1953 138 - - 138 74 - - 74 139 - - 139
1954 138 - - 138 72 - - 72 138 - - 138
1955 138 - - 138 77 - - 77 140 - - 140
1956 143 - - 143 80 - - 80 143 - - 143
1957 166 - - 166 79 - - 79 155 - - 155
1958 164 - - 164 78 - - 78 160 - - 160
1959 163 - - 163 84 - - 84 166 - - 166
1960 207 - - 207 88 - - 88 174 - - 174
1961 220 - - 220 91 - - 91 193 - - 193
1962 246 - - 246 97 - - 97 202 - - 202
1963 259 - - 259 114 - - 114 204 - - 204
1964 251 - - 251 121 - - 121 205 - - 205
1965 269 - - 269 125 - - 125 205 - - 205
1966 255 - - 255 126 - - 126 202 - - 202
1967 260 - - 260 129 - - 129 203 - - 203
1968 271 - - 271 133 - - 133 190 - - 190
1969 269 - - 269 136 - - 136 201 - - 201
1970 295 - - 295 136 - - 136 204 - - 204
1971 309 117.4 - 309 143 83.8 - 143 204 - - 204
1972 294 98.3 - 259 142 84.3 - 144 236 - - 236
1973 275 105.2 - 277 137 84.7 - 145 265 110.1 - 265
1974 - 99.6 - 262 134 87.2 - 149 280 108.4 - 261
1975 - 97.8 - 257 130 92 - 157 - 92.2 - 222
1976 - 100 - 263 - 100 - 171 - 100 - 241
1977 - 94.4 - 248 - 101.6 - 173 - 83.6 - 201
1978 - 105.3 - 277 - 98.9 - 169 - 73 - 176
1979 - 112.2 - 295 - 97.3 - 166 - 68.4 - 165
1980 - 113.0 100 297 - 93.1 100 159 - 76.9 100 185
1981 - 114.4 100.2 298 - 94.2 103 164 - 70.3 94.7 175
1982 - 118.3 104 309 - 94.9 101.5 161 - 71.0 95.9 177
1983 - 124.2 109.8 326 - 70.6 74.5 118 - 66.4 78.4 145
1984 - 133.5 117.4 349 - 51.5 71.9 114 - 57.4 65.2 121
1985 - - 113.4 337 - - 72.1 115 - - 61.3 113
1986 - - 118.9 353 - - 66.1 105 - - 65.5 121
.....
0
-..J
5 Self-Help Housing during
Recession
Alan Gilbert
Latin America's urban population increased rapidly after 1940 during

a period of continuous economic growth. Booming populations were
accommodated by a massive increase in the housing stock, most of it
built through some kind of 'self-help' process. 1 The consequent ex-
pansion of this self-help accommodation as a proportion of the total
urban housing stock has often been denounced; many have claimed
that it demonstrates how housing standards have fallen. In fact, a
case can be made that self-help construction often improved housing
conditions. Home ownership became more common, rental tenure
declined, and generalized overcrowding became less endemic. If
service levels often failed to keep up with the proliferation of self-
help settlement, few cities experienced an overall decline in service
levels through time.
Gradually, the housing literature reacted to these developments by
accepting that self-help construction was 'an architecture that works'.
Despite the obvious problems it involved for the poor, self-help
housing was deemed to be the only real alternative given the struc-
tural distortions within Latin American societies. In terms of policy,
self-help settlement should be assisted rather than hindered; instead
of demolishing such housing, governments should help in its develop-
ment. Sites-and-service schemes should be encouraged to accommo-
date the burgeoning population, existing self-help settlements should
be upgraded. In a less than ideal world, slum upgrading was prefer-
able to slum eradication; self-help ownership preferable to renting in
overcrowded tenements.
This consensus took many years to emerge and there are still
governments reluctant to accept the inevitability of self-help housing.
Nevertheless, it is now conventional wisdom among much of the
architectural and planning community; today there are few advocates
of slum demolition.
Since 1980, however, economic and social conditions in most Latin
American countries have deteriorated. The debt crisis, consequent
inflation, and governmental responses to those twin problems have
109
110 Alan Gilbert
led to a sharp fall in living standards for the poor and the middle class
alike. This prompts the question: how has self-help construction
reacted to conditions of economic recession? Since self-help housing
proliferated during a long period of economic expansion, the current
circumstances prompt a re-evaluation of its role during a period of
economic decline: in short, is self-help housing still 'an architecture
that works'?
This chapter examines that question with special reference to cur-
rent conditions in Mexico and Venezuela. Is self-help housing con-
tinuing to expand? How successfully is it meeting the needs of the
urban population? And what are the principal constraints on its
successful development and consolidation?
Mexico and Venezuela offer an interesting comparison because
both are oil-exporting countries in the throes of very deep recessions.
Both saw the price of their principal export plummet in the 1980s and
both have experienced substantial declines in gross domestic product.
Both countries are also to be numbered among Latin America's
largest debtors, both absolutely and in per capita terms. In reacting to
the debt crisis both governments have acted very responsibly towards
their creditors and, some would argue, rather less responsibly to their
own populations. The declines in living conditions have been very
marked. The experience of recession has been difficult for both
countries because neither has been used to anything but rapid econ-
omic growth. Between 1960 and 1980, Mexico's gross domestic pro-
duct grew annually by 6.3 per cent, Venezuela's by 5.3 per cent. Such
rapid growth allowed successive governments in the two countries to
develop sophisticated systems of patron-client relations. Social con-
trol was maintained in large part by a rewards system, with many of
the rewards being financed by oil. The subsequent decline in oil
revenues and the consequent fall in government income ought to
have had a severe effect on the ability of the state to buy off political
opposition. This difficulty certainly contributed to the problems of
the Mexican PRI during the 1988 elections. For the first time in half a
century the all-dominant party came under severe electoral threat,
albeit from a former member of its own ranks. The incoming presi-
dent, Carlos Salinas, was probably the least popular in living mem-
ory. A similar problem seemed to have been avoided in Venezuela.
The party in power was re-elected easily with the new president
sweeping in on a wave of personal popularity. The honeymoon,
however, proved to be brief and severe riots greeted President Carlos
Andres Perez's attempts to put Venezuela's economic house in order.
Self-Help Housing During Recession 111
A THEORETICAL INTRODUCTION: SELF-HELP

HOUSING UNDER CONDITIONS OF ECONOMIC
EXPANSION AND RECESSION
Most writers broadly agree that self-help and slum housing develop as
a consequence of poverty. Self-help housing has proliferated in Latin
America because of high rates of demographic growth, because the
economy has been incapable of providing sufficient well-paid jobs,
and because of the social inequalities inherent in the development
process. Given inequality, widespread poverty and a housing market
geared to the ability to pay, poor housing conditions have been
inevitable. As Portes and Johns (1986: 382-3) point out: 'Squatter
settlements and related phenomena are . . . the consequence of
poverty-in-employment ... Wages, even those paid to formal sector
workers, are generally out of line with prices in the "normal" housing
market which forces all kinds of people to seek alternative solutions.
Some resolve their shelter problem by doubling up with relatives,
while others endure high rents in dilapidated central-city quarters.
Neither of these alternatives offers, however, a permanent solution
nor a means of reaching the cherished goal of home ownership. The
peripheral settlement does and it is for this reason that wide segments
of the urban population . . . are found among its promoters and
inhabitants'.
More problematic from a theoretical point of view is the dynamic
of slum and self-help housing development during a period of econ-
omic growth. Does self-help housing grow relative to the housing stock
or decline? To this question, there are different answers. Early writ-
ing on housing in Latin America, for example, viewed self-help
housing as some kind of cancer that would eventually be cured by
conventional construction as incomes rose (Juppenlatz, 1970; Lerner,
1967). Whether through better education, which would lead slum-
dwellers out of their 'culture of poverty', the creation of more better-
paid jobs, or through the construction of public housing, slums and
self-help housing would eventually disappear. While the more sim-
plistic versions of this view have been rightly derided, there is still
some substance in this argument. For example, housing conditions in
the more affluent cities of Latin America, such as Buenos Aires and
Sao Paulo, are superior to those in most of the poorer cities, like
Lima or La Paz. On the other hand, it is patently clear that sustained
economic growth over a long period has failed to eradicate self-help
housing.
112 Alan Gilbert
Certain writers from the left have explained the continued pre-
sence of such forms of poverty in terms of the distortions evident in
the process of peripheral capitalist development. Thus Quijano
(1974) explains the existence of the 'marginalized mass' of people in a
city such as Lima in terms of their exclusion from the development
process. Since the monopoly capitalist sector does not require their
labour, they are surplus to the needs of the economy. It is but a short
step from this variation of the 'blocked development' path, to the
argument that self-help housing is required to accommodate this
population. As Harms (1982: 47) argues, self-build housing condi-
tions appear 'In the absence of other solutions, based on the initiative
of the people themselves. They emerge from the people's present
situation of being only partially integrated by wages into the mon-
etarized and "formalized" capitalist production process and from
their previous experiences and memories of subsistence living'. So
long as this marginal mass is not required by the capitalist sector,
self-help housing will persist.
Increasingly, however, many writers on the left have argued that
rather than capitalism at the periphery being blocked the problem is
that the process of development is highly distorted (Booth, 1985).
Indeed, the post-war experience has shown that most peripheral
economies were capable of very rapid growth and that the number of
jobs created by this growth was considerable (Roberts, 1978). The
problem lay in the nature of the exploitative relationship between the
dominant capitalist sector and the rest of society. Rather than econ-
omic growth replacing low-paid jobs with better-paid employment,
the dominant sector took advantage of the low-wage sector. Indeed,
the very survival of the capitalist sector was dependent upon the
cheap labour of the poor (Bromley and Gerry, 1979).
The low-paid sector, therefore, was increasingly seen to be directly
functional to the capitalist form of production as it developed at the
periphery. As Burgess {1982: 70-1) has argued, the emergence of
the 'petty commodity' sector is positively linked to the prosperity of
the capitalist sector: 'Insofar as housing is necessary for the mainten-
ance and expanded reproduction of the labour force, the dominant
capitalist mode of production is satisfied to allow the self-production
of such activities, particularly when the absence of rents and the
association of such housing with various forms of subsistence activi-
ties that extend family budgets will mean less pressure for wage
increases.' Similarly, Portes and Johns {1986: 383) argue that 'if, from
the point of view of workers, unregulated housing is the way to make

ends meet, from the point of view of employers, it is a means to keep
wage levels at a fraction of what otherwise they would have to be'.
The clear implication of this argument is that self-help housing is a
permanent feature of peripheral capitalist development.
While large companies clearly take advantage of cheap labour, the
argument above exaggerates the benefits accruing to the formal sec-
tor (Gilbert, 1987). For example, a labour surplus beyond the num-
bers required to keep down wage rates may be dysfunctional to the
capitalist sector; too many people out of work or underemployed may
encourage revolutionary political activity or the proliferation of crime
(Sandbrook, 1985). The main disadvantage of a cheap labour re-
serve, however, is that it limits the size of the domestic market for
manufactured goods. It is not sufficient for capitalist enterprises to
produce cheaply, they also need an expanding market for their pro-
ducts. Insofar as such enterprises are exporting their production, no
contradiction is posed. But, in Latin America with its tradition of
import substituting industrialization, few companies have been whol-
ly oriented towards export production; they rely on the local market
for sales. Indeed, there is plentiful evidence that purchases by the
low-income sector make up a substantial share of the market for
many products (Wells, 1983).
A further difficulty with the cheap reproduction of labour argu-
ment is that while the capitalist sector clearly uses cheap labour, it
consistently undermines the ability of such labour to reproduce itself.
Such writers Pradilla (1976) argue that capitalism increasingly com-
modifies the housing process. This argument follows a classically
Marxist progressive line (Warren, 1973). Rather than capitalism
being blocked in the periphery (A Ia Quijano or Frank), capitalism is
continuing to expand through penetration of pre-capitalist and semi-
capitalist modes of production. The expansion of the industrialized
building system 'occurs necessarily at the expense of small producers
and "autonomous" systems'. The implication for housing production
and consumption is that the purely self-build form of accommodation
eventually gives way to industrial forms of construction. In short,
housing becomes a commodity, and economic growth hastens the
disappearance of the informal housing sector. The theoretical prob-
lem is that while, on the one hand, self-help housing is required to
reproduce the cheap labour needed to subsidize capitalist expansion,
on the other it constitutes a source of profits for the capitalist con-
114 Alan Gilbert
struction and building-materials industries (Peattie, 1979). The gra-

dual disappearance of self-help housing presumably increases the cost
of labour reproduction.
In practice, the post-war experience in Latin America, at least up
to 1980, shows a combination of both an increasing share of self-help
housing and an improved quality of accommodation. Part of the
answer to the apparent paradox between economic growth and ex-
panding areas of self-help housing is that the quality of that housing
has improved over time. Economic growth under the conditions
ruling in Latin America does not remove the need for self-help
housing; the inequality of the growth process, the lack of well-paid
jobs, the shortage of cheap, serviced land all encourage the continued
development of such housing. At the same time, rising incomes, the
penetration of industrialized building materials, and the improve-
ment of infrastructure and services mean that conditions within poor
settlements in many cities are actually improving. Up to 1980, service
levels were maintained and sometimes improved. Of course, there
were difficulties accommodating the huge expansion in the urban
population; nonetheless the experience in Latin America was not all
that bad.
But what is the likely effect of an economic recession? One re-
sponse is that self-help housing will proliferate if poverty becomes
more widespread and that the quality of the housing stock will
deteriorate. Such a position is implicit in Harms's (1982: 46-8)
observation that self-build housing appears throughout the capitalist
world at moments of world crisis. Such housing appeared in advanced
capitalist countries at the beginning of their transition, during the
crisis of the 1930s, and even since the 1960s when the excessive
dependence on industrialized housing has produced housing too ex-
pensive for the poor. In the Third World, of course, the crisis is
general and during the 1980s has become more persistent. It is
perfectly logical to argue that self-help housing will proliferate under
these circumstances.
A plausible consequence of the current recession, therefore, may
have been to increase the amount of poor quality, self-help construc-
tion. Unable to pay rents because of falling real incomes, tenants may
have occupied physically marginal land on which to build flimsy
accommodation. The authorities, unable to maintain social control
without recourse to 'intolerable' levels of repression, have permitted
such a development. Having allowed the growth of such settlements,
however, cuts in their budgets have precluded improvements to the
services and infrastructure. In addition, the new inhabitants, afflicted

by falling real incomes due to the recession, have been unable to
improve the quality of their housing. The self-help settlements con-
tain increasing numbers of flimsy structures.
However, a second proposition is that the proliferation of flimsy,
self-help housing may not be a feasible option everywhere. The
development of such housing requires land, and in many cities during
the 1980s the cheapest form of land occupation, the organized inva-
sion, has not been permitted. The only alternative for the self-help
builder has been to purchase land through some kind of illegal
subdivision. 2 But, since real incomes have been declining due to the
recession, the cost of that land relative to incomes has probably been
rising. Similarly the real costs of building materials are likely to have
risen. The response of the poor to this situation is not wholly predict-
able; some will have purchased smaller plots; others will have de-
layed purchase until the requisite deposit has been obtained; yet
others will have bought plots but delayed construction until more
savings have been accumulated. As in the previous scenario, condi-
tions in the self-help settlements wiU have deteriorated; unlike it, the
pace of self-help construction will have slowed. Fewer families will
have established their own self-help homes; more will have continued
to live in rental accommodation or to share with kin. Of course, some
of these families will be renting or sharing in existing self-help areas
(Coulomb, 1985; Edwards, 1982; Gilbert, 1983). Many others will be
living in deteriorating middle-class neighbourhoods.
A third response is that all forms of illegal housing are prohibited.
Land invasions are repressed and even the construction of buildings
on unserviced land is discouraged. This was the position in Pinochet's
Chile. Subsidized, fully-serviced, low-cost housing was provided on
the periphery of the cities and self-help housing banned. Subsidies
exist which benefit some poor families, but there are too few schemes
to provide homes for the majority. As a result, many are compelled
to rent or share accommodation. Given the rising demand for accom-
modation to let, rent levels may well rise. Because incomes are
falling, many families cannot pay the rent increases and move into
worse accommodation. For others, survival strategies such as sharing
with kin become more common. In general, levels of overcrowding
increase. The overall result is to reduce the importance of self-help
housing, to increase the proportions of homes with services, and to
increase levels of overcrowding.
Thus there is no single housing response to the recession. Unsatis-
116 Alan Gilbert
factory though it may be from a theoretical perspective, the precise

response will depend on local circumstances. Where land is available
flimsy self-help accommodation may well proliferate; where such
land is scarce the rental population may increase. Whether land is
available for self-help development depends on state policy and on
the nature of the local land market. In places, landlords will increase
the amount of rental accommodation in consolidated self-help settle-
ments, elsewhere smaller lot sizes or a shortage of savings will limit
such a response.
In terms of housing, therefore, the precise effects of the recession
will be highly variable. Ultimately, the effect will be determined by
the local impact of the recession. Industrial cities have suffered in
different ways from administrative centres; port cities in different
ways from agricultural market centres. The effect will also be in-
fluenced by the response of the local state towards land. Important,
too, will be the nature of the national political regime and its policies
towards the recession, towards community participation and towards
housing. In sum, theories of the likely impact of economic growth or
recession on housing can only provide broad lines of thinking about
the question. The final result will be determined locally.
THE NATURE OF THE RECESSION
Between 1980 and 1985, no Latin American economy grew in terms

of per capita income (CEPAL, 1985). If by 1987 the situation had
improved marginally, the decade as a whole appears to have been
one of unmitigated misery (CEPAL, 1987). That misery is reflected
in number of indicators. In attempting to repay at least part of their
external debt, most Latin American governments deflated their
economies. As a result, the manufacturing and construction sectors
suffered badly, which in turn led to sometimes spectacular rises in
levels of urban unemployment. The poor and the young suffered
disproportionately. At its worst, urban unemployment reached levels
at 20 per cent in Chile and Nicaragua. Again, however, the regional
effects were highly variable; throughout the 1980s unemployment
rates remained quite low in Argentina, Brazil, and Mexico.
Inflationary pressures afflicted most countries, with some, such as
Bolivia, Brazil and Mexico, suffering spectacular price rises. In turn,
inflation had a marked impact on the living standards of the poor, and
even of the middle class. In some countries, food prices rose faster
than the general price index, a development which rebounded on the

poor, who spent more of their income on food than other groups. In
many countries, real wages in the formal sector declined and some-
times plummeted; wages among private sector workers in Metropoli-
tan Lima fell by 40 per cent between 1980 and 1985. 3 Elsewhere,
however, real wages improved despite the recession. In Argentina,
Brazil and Colombia, for example, different factors led to real wages
actually rising between 1980 and 1986 (CEPAL 1987: 7). Another
effect of the recession was for governments to cut back on social
expenditure. This occurred both because revenues had fallen, and
because of increasing attempts to repay the foreign and internal debt.
Widespread efforts were made to reduce subsidies and to introduce
more realistic pricing levels for government supplied services. Most
countries suffered from savage cuts in the level of public investment
which had profound effects on the construction industry.
Clearly the precise effects of the recession varied from country to
country and from city to city. The Chilean experience has been very
different from "that of Colombia. Similarly, there are major variations
within countries. For example, the effect of the recession in Mexico
has been very different in Monterrey, with its heavy industry, in
Guadalajara, with its small-scale manufacturing and commercial
tradition (Arias and Roberts, 1985), and in Tijuana, where employ-
ment in the maquiladora plants is increasing rapidly. Because of the
spatial specificity of the process, therefore, the rest of this chapter
concentrates on the experiences of Mexico and Venezuela, and in
particular on their capital cities. While these two petroleum-
exporting economies are hardly typical of Latin American economies
in general, they demonstrate that even two ostensibly similar coun-
tries have gone through very different kinds of recession experience.
The effects on housing are also likely to have differed.
THE RECESSION IN MEXICO AND VENEZUELA
The recession began later in Mexico than in Venezuela and in terms

of the fall in per capita domestic product has been less severe (Table
5.1). In Mexico the recession did not really hit until1982 and seemed
to ease in 1984 and 1985. In Venezuela, it began in 1979 and there
were no signs of improvement until1986. Similarly, unemployment
rates did not rise as dramatically in Mexico as in Venezuela. In 1985,
they were three times higher in Venezuela than in Mexico. On the
....
....
00
Table 5.1 Key indicators of the recession in Mexico and Venezuela
Year 1979
- 1980 1981 1982 1983 1984 1985 1986 1987 1988
Gross domestic product per capita
Mexico1 6.0 5.5 5.1 -3.0 ~.5 1.2 0.2 ~.1 -0.8 -1.7
Venezuela1 -2.5 -5.1 -3.3 -4.0 -8.1 -4.2 -1.4 4.0 0.3 2.3
Urban unemployment
Me:xico2 5.7 4.5 4.2 4.1 6.6 5.7 4.4 4.3 3.9 3.6
Venezuela3 5.8 6.6 6.8 7.8 11.2 14.3 14.3 12.1 9.9 8.3
Consumer prices % change
Me:xico1 20 30 29 99 81 59 64 106 159 71
Venezuela1 22 20 11 7 7 18 6 12 40 31
1. CEPAL Notas sobre Ia economia y el desa"ollo, Nos. 373,409/10, 455/6 and 470/1.
2. Annual averages of quarterly surveys carried out in Mexico City, Guadalajara and Monterrey.
3. All urban areas.
other hand, the rate of inflation has been far higher in Mexico,
reaching a peak of 159 per cent in 1987 before the emergency Pacto
de Concertacion was introduced. The high rate of inflation brought
severe consequences for the living standards of the urban poor and
middle class.
It is estimated that manufacturing wages in Mexico in 1986 were 73
per cent of their 1980 level and that the real minimum wage in Mexico
fell by 44 per cent between 1980 and 1986 (CEPAL, 1987: 18). Since
a substantial proportion of the working population earns the mini-
mum wage, this represents a serious decline in living standards. In
Venezuela, the minimum wage fell by one third between 1980 and
1984 but had recovered to its 1980 value by 1987 (CEPAL, 1987: 18).
Until a package of severe economic cuts was announced in 1989,
the effects of the recession on most poor Venezuelan families was far
less serious than those in Mexico. Several factors account for this
development. First, Venezuela adapted to the recession by consum-
ing an ever-increasing share of national income and saving less. In
1979 and 1980, net savings accounted for 27 per cent of national
income. By 1983, they had fallen to 12 per cent and by 1986 to eight
per cent. Since the proportion of government expenditure remained
more or less constant throughout the same period, the level of private
consumption could be maintained despite the fall in national income.
Second, this strategy could succeed because the late 1970s had been a
period of heavy investment in Venezuela; there was surplus capacity
in the system. Finally, although the recession has been longer-lived
than in Mexico inflation rates, until recently, were quite moderate.
This has meant that real wages have fallen far less dramatically than
in Mexico. In addition, the Venezuelan government has maintained
subsidies on food and services at higher levels than the government of
Mexico.
THE EFFECf ON HOUSING IN MEXICO AND

VENEZUELA
What effect has the recession had on urban housing in Mexico and
Venezuela? The immediate answer is that it has led to severely
reduced private spending in Mexico but much less change in
Venezuela. 4 In addition, differing government policies have pro-
duced very different results in terms of public sector construction.
In terms of public programmes, the Mexican government actually
120 Alan Gilbert
stepped up investment after the recession hit. During the L6pez

Portillo administration {1976-82) 430 000 houses were completed;
under the de la Madrid administration 500 000 units were built be-
tween 1983 and 1986.' In addition, greater emphasis was put on
sites-and-service and squatter upgrading schemes particularly under
the latter administration (SEDUE, 1987). By contrast, Venezuelan
governments cut back on public housing. While the number of homes
constructed in 1981 (44 000 units) was almost double that built in
1977, by 1984 construction was down to 15 000 units. Clearly, the
Mexican and Venezuelan administrations have adopted very different
housing policies.
In the private sector, there are several explanations as to why
families in both countries might have spent less on housing. First, in
both, housing costs have risen less quickly than prices generally. They
have risen much less rapidly than food and clothing costs, which
together with the prices of manufactured goods with a high import
content, have increased significantly. In Venezuela, the effect of
higher food prices is reflected in a major shift in the pattern of
consumption: between 1979 and 1985 the share of food and drink
expenditure as a proportion of total internal consumption rose from
45 per cent to 53 per cent (Banco Central de Venezuela, various
sources).
Housing costs have risen less rapidly than other prices, in part
because there is a smaller import content in housing consumption.
Severe falls in the value of the peso and the bolivar have pushed up
internal prices of most imports to industry and agriculture. By contrast,
there has been much less effect on housing costs. In addition, rises in
the cost of housing services have been partially contained by con-
tinued government subsidies. While both governments have pruned
subsidies severely, housing costs have been affected much less than
the costs of other products.
In Venezuela, reduced government subsidies have not been
reflected in large rises in service charges. In any case, few Venezuelan
service agencies have ever been effective collectors of revenue. In
1986, the water authority (INOS) billed users for only 41 per cent of
the total water it supplied in Caracas (INCE, 1987: 566-7). 6
In Mexico, a more determined effort has been made to reduce the
enormously high level of subsidies. In 1980, government subsidies on
basic products made up 10 per cent of GDP (Cornelius, 1985: 110);
by 1982, these had been cut to 5.4 per cent of GDP and four years
later they had fallen to 3.8 per cent (Reyes Heroles, 1987). Despite
real rises in some ser~ice tariffs, however, prices were still very low.
When prices were raised again in 1986, the Ministry of Finance
claimed that it took only 3.4 hours' earnings at the minimum salary to
pay for a typical month's supply of 50kWh compared to 14.5 hours in
1962 (El Financiero, 31 December 1986, 22).
The second reason why housing costs have probably risen less
rapidly than other household costs is that many families are able to
compensate for falling real incomes by spending less on housing. This
is clearly not the case for new home owners who are paying off a loan,
nor is it possible for tenants whose incomes are rising less rapidly than
their rents. Established home owners, however, can cut housing costs
by delaying repairs and improvements, they can also defer a move to
a more expensive house. Similarly, many tenants can save money by
moving into cheaper accommodation or by staying with kin. Housing
conditions may well be deteriorating, but costs will still have been
reduced.
The final reason why housing costs may have risen less than other
items of expenditure is because rents seem not to have kept up fully
with the rate of inflation. In inflationary times, rents would be ex-
pected to rise in real terms as landlords seek to compensate for their
own rising costs. The evidence from several Mexican cities, however,
is that this is only partly true. In areas of central Mexico City, the
effect of the earthquake has undoubtedly produced extravagant and
illegal rent rises (Proceso, 535, 2 February 1987). In general, though,
rents in Mexico seem to have risen much less steeply than inflation,
particularly during periods of hyperinflation (Gilbert and Varley,
1988). It should also be pointed out, however, that while rents have
risen more slowly than prices, they have stayed in line with rises in
the minimum wage. 7
That rents should not have risen faster is surprising. However,
there are several good reasons for believing these figures. First,
interviews with landlords and tenants in Guadalajara reveal that
landlords are reluctant, or unable, to raise rents dramatically for
sitting tenants (Gilbert and Varley, 1988). Landlords expect to raise
rents when tenants change, but rents certainly do not keep up with
price rises in other circumstances. This would not affect real rent
levels were it not for the fact that average tenancies in Mexican cities
seem to be surprisingly long. In low-income neighbourhoods in
Guadalajara and Puebla, average household tenancies last from four
to eleven years according to settlement. Since tenancies are long,
rents do not rise sufficiently to keep up with prices generally. Second,
122 Alan Gilbert
effective demand for rental accommodation has been limited by

minimum wage levels; it is logical that rents rise more or less in line
with minimum wages, with market forces operating to keep rents
down. Finally, rents in Guadalajara and Puebla as a proportion of
income seem to be quite low by Latin American standards (Malpezzi
and Mayo, 1987). In 1986, householders interviewed in the two cities
were paying 13 per cent of their household income in rent. Even for
those earning less than the minimum wage, rental payments only
amounted to 16 per cent of income. 8
In Venezuela, we lack comparable figures but in any event rental
tenure is much less important in that country than in Mexico. Re-
latively fewer households rent accommodation in Venezuelan cities.
Ownership levels in Caracas in 1981, for example, were 69 per cent
compared to a figure of 53 per cent in Mexico City in 1980. The
difference between ownership levels in the largest provincial cities of
each country is more marked. In Mexico, 52 per cent of homes in
Guadalajara were owner-occupied, 68 per cent of those in Monterrey
and 48 per cent in Puebla (Gilbert and Varley, 1988: 32). By contrast,
the figures in Venezuela were 80 per cent in Maracaibo, 79 per cent in
Valencia and 76 per cent in Maracay (OCEI, 1986).
If these arguments are correct, housing costs for a substantial
proportion of the population remain stable and a greater proportion
of income goes towards the rising cost of food and other essential
items.
THE EFFECTS ON SELF-HELP HOUSING
If the rise in private housing costs has been rather small, what effect
can we expect this to have had on the self-help sector? One way of
examining the likely effect is to consider the impact of the recession
on the inputs necessary for self-help housing. Broadly, these inputs
are land, materials and infrastructure. The interesting question is to
what extent inflation and falling real wages have affected access to
these key inputs? The following section examines what has happened
to each in turn in Caracas and Mexico City.
Land
Land for low-income housing is often acquired through invasion.

Such a method has been common in several Mexican cities and is the
normal practice in most Venezuelan cities (Gilbert and Varley, 1988;

Ray, 1969). Obviously, the value of land is irrelevant to the cost of
acquisition in such a case. Nevertheless, once occupied the land
almost immediately acquires a market value and is sold to incoming
settlers who soon make up a majority of the settlement (Gilbert and
Healey, 1985). As such, the market value of land is important even in
invasion settlements.
In fact, many argue that access to free land is decreasing in Latin
America and indeed in most so-called Third World cities (Angel et
al., 1983). There is also evidence that price trends in the irregular
urban land market are very similar to those in conventionally de-
veloped areas (Mohan and Villamizar, 1982). Thus, a knowledge
of trends in land prices is very important. Unfortunately, despite
their importance, reliable data sets are very difficult to find in most
Mexican and Venezuelan cities.
The limited data available for Caracas suggest that the rate of
increase in house prices slowed during the worst part of the recession.
The real sale price per square metre of housing in Caracas rose by 28
per cent during 1982, remained virtually stable for the next four
years, and then increased by 86 per cent during 1987 (El Universal, 10
April1988). Since in most cities there is a close relationship between
house prices and land prices (Kirwen, 1987), these figures suggest
that land prices remained stable for four years. Given the falls in real
income and the dramatic decline in the construction industry during
those years, this would appear to be a realistic assessment. The rise in
1987 is interpreted locally as being a consequence of the laundering of
drugs money and the repatriation of monies moved out of Venezuela
during the early 1980s in anticipation of forthcoming devaluations of
the bolivar. While there is clearly some truth in these explanations,
the most profound influence on land prices in Caracas continues to
be the severe shortage of land in the face of persistent urban growth.
Given the local topography, it is difficult to find space on which to
accommodate the growing population. Caracas is, as a result, a very
densely populated city; in 1980 it was estimated that it had 150
persons per hectare (El Nacional, 22 January 1980). There has also
been a relatively successful policy to constrain the illegal occupation
of land in certain areas of the city. There is, for example, no illegal
housing development above the cota mil motorway, and the area
designated as a green belt seems broadly to have been maintained
intact. The overall effect, however, seems not to have been beneficial
to the poor. Instead of the recession reducing land values and thereby
124 Alan Gilbert
making access easier, the constraints of topography and policy have

made land within the major valleys of the city less and less accessible.
As a result, the poor seeking to establish a self-help home have either
been occupying steeper slopes in interstitial locations, or have been
moving to flatter but distant and often unserviced plots in the Tuy
valley.
In Mexico City, good information on housing and land values is
also very limited (Ward, 1986; Gilbert and Ward, 1985). Before the
recession, there were signs that land prices were rising slightly faster
than per capita city product; Makin's (1984) calculations of sale prices
of land in six middle-income settlements showed annual price rises of
between 2.6 and 6.5 per cent over the period from 1950 to 1981.
There is no reliable information on what has happened since the
beginning of the recession. Admittedly, land shortages are much less
critical than in Caracas and as a result Mexico City is far less densely
populated. However, low-income settlers in the city (and indeed
throughout urban Mexico) have faced an additional cost burden in
recent years. Ever since 1977, governments have been trying to raise
the revenue from land taxation. As well as revising the cadastral
values, the authorities have widened the tax net. An important
method of increasing the number of households paying the tax has
been to regularize self-help settlements (Ward, 1986). Given the crisis in
the Federal District's budget (Connolly, 1985), application of this policy
has been stepped up. Land taxes have been rising sufficiently since 1986
to cause widespread protest both in Mexico City and in other parts of the
country (Proceso, 16 February 1987: 18-19). These increases in land
taxes have effectively raised the price of self-help land. In so far as the
policy is a result of the recession, it has probably counteracted any
tendency for land prices to fall in real terms.
By contrast, land taxes have not been a problem in Caracas where
their limited collection is notorious. Even in upper income areas,
families may go years without paying. It is only when a family wishes
to sell a house that payment is necessary. Even then, the full charge is
rarely paid, the owner 'negotiating' with the local council over the
amount of debt. Given that cadastral values have failed to keep up
with land prices, the tax is rarely a headache for any family.
Overall the effect of the recession on the cost of land has probably
been neutral in Mexico and slightly favourable in Caracas where the
recession has lasted longer and the effect on the construction industry
has been greater. In both cities land speculation has been slowed by
the recession. However, the problem of acquiring land for self-help

housing remains. If land is purchased in serviced areas, the cost is not
cheap. And, even when land can be invaded or purchased cheaply
through some form of illegal transaction, such is likely to be located a
long way from the city centre and from the major manufacturing
areas. Since traffic congestion is bad in both cities, the journey to
work continues to be both slow and uncomfortable. Transport costs
have also been rising. Many families, therefore, no longer choose to
occupy a peripheral plot because the journey is too long and ex-
pensive to be contemplated.
Cost of materials and labour
The construction industry always suffers during a recession. In

theory, this ought to assist the self-help housing sector in several
ways. First, recession should lower the real costs of building mate-
rials. Second, it should free skilled labour from the formal sector,
reducing the cost of their employment in low-income neighbour-
hoods. Third, partial compensation of the problem of rising unem-
ployment in the self-help settlements is the time this offers former
workers to build their own homes.
The construction industry suffered very badly during the recession
in Venezuela. There was a marked decline in construction between
1980 and 1982 and a major slump from 1983 to 1986. At its lowest
point in 1985, value-added in the construction sector was ap-
proximately two-fifths that generated by the sector in 1979 (Banco
Central de Venezuela, lnforme Economico). By contrast, the effect
of the recession on the Mexican construction sector was less marked.
Nonetheless, production fell by 5 per cent in 1982 and by 18 per cent
in 1983.
A decline in construction should mean cheaper building materials,
at least in the short term when companies will wish to dispose of
existing stocks at a discount. In practice, the evidence on this point is
mixed. In Venezuela wholesale prices for construction materials rose
more slowly than retail prices from 1978 to 1983, but then caught up
and remained at more or less comparable levels for the next three
years. In Mexico, however, the recession seems to have had a propul-
sive effect on building material prices. Certainly, the cost of building
'social-interest housing' rose twice as fast as the general price index
between 1978 and 1985. 9
126 Alan Gilbert
The decline in construction has had a more predictable and pro-

found effect on employment in both countries. In Venezuela, unem-
ployment among construction workers was 30.9 per cent in 1984
compared to 13.4 per cent for the labour force in general. In Mexico,
unemployment in construction has also been severe, although the
claim that 60 per cent of construction workers were unemployed in
1985 is almost certainly exaggerated (Proceso, 5 August 1985: 13).
The implication of these findings is that the most likely benefit to
the self-help sector is that labour must have been more freely avail-
able. In so far as many settlements contain relatively high proportions
of building workers, unemployment should have encouraged self-
help construction. Providing that they had accumulated enough
materials with which to build, unemployment would give them time
to improve their own homes. It would also have allowed other
owner-occupiers with accumulated savings to employ these workers
more cheaply than previously. This, however, seems to have been the
only real advantage gained through the recession.
Services and Infrastructure
During the post-war economic boom, public agencies in many cities

performed remarkably well in providing electricity, water and sewer-
age. While there are certain notorious exceptions, most agencies
maintained levels of service delivery and sometimes improved them.
Of course, the economic recession made further improvements very
difficult. First, many agencies increased capacity with the aid of
external loans. These loans are now attracting much higher interest
rates and there are few public utilities not suffering from major
deficits. Second, general cuts in government budgets have removed
subsidies from many services. This results either in higher charges or
in cuts to services. When figures eventually become available for
service delivery during the 1980s, there will almost certainly be
evidence of a deterioration in the quality and the availability of
services.
In Mexico and Venezuela, government budgets have been sharply
reduced during the recession. Given that both Presidents de Ia Mad-
rid and Lusinchi tried hard to repay the debt, such reductions in
government expenditure have been inevitable. The danger, there-
fore, is that there may have been major cuts in services. Surprisingly,
however, cuts do not appear to have been a major problem so far in
Mexico City. This is largely because infrastructure investments were
already in train when the recession struck and could not easily be
stopped. When a major financial disaster threatened the Federal
District government, the national government stepped in and
absorbed much of its accumulated debt. For the first time, the na-
tional government has been forced to subsidize the richest city in the
country (Connolly, 1985: 4-10). The probable result has been that
service and infrastructure cuts have affected provincial cities more
than Mexico City. In the latter, major expansions in the underground
rail system have continued and during 1986 important investments
were also made in the bus system. Extension to the public water and
drainage systems have also been made (EI Financiero, 31 December
1986: 7).
Similarly in Venezuela, there is little sign that the recession has
severely affected the rate of service extension. The number of elec-
tricity subscribers increased nationally by 18 per cent between 1982
and 1986; the availability of drinking water increased by 13 per cent.
In Caracas, a major improvement has occurred with the opening of
the underground rail system. Despite these advances, however, it is
quite likely that the quality of an already inadequate delivery system
has deteriorated further; pipes may continue to be laid but that does
not guarantee that water always flows through them.
CONCLUSION
The precise impact of the recession on self-help housing in Mexico

and Venezuela is anything but clear. This is surprising in so far as the
economic situations facing both countries are quite similar. On reflec-
tion, it is less surprising since the state in each country has responded
to the economic crisis in different ways. In Mexico, cuts in social
benefits and real wages have been the order of the day; in Venezuela
the introduction of similar policies has been long delayed. What is
valid for Mexico and Venezuela has a broader application for Latin
America. The recession has clearly not affected each country in the
same way. Some countries have suffered from hyperinflation, others
have escaped relatively lightly. Some have experienced high rates of
unemployment; others much lower rates. Some have seen real wage
rates fall severely, elsewhere wages have actually increased. This
differential result is the consequence of different government re-
sponses to the recession. It is also the outcome of different kinds of
political regime. In Argentina and Brazil, democratic governments
128 Alan Gilbert
first attempted to remedy some of the negative effects on living

standards arising from long periods of military rule. In Chile, the
military regime, in power unti11990, did not.
In addition, different housing policies have been adopted by re-
spective national and local administrations. In Mexico, public hous-
ing construction has continued apace; in Venezuela the amount of
construction has been severely cut. In Mexico, land invasions became
less common during the 1980s but the authorities have continued to
permit the illegal sale of ejido land. 10 In Venezuela, invasions have
continued to take place. Elsewhere in Latin America the variations
are still greater. In Chile, irregular, self-help housing was not permit-
ted and land invasions in Santiago were vigorously opposed. By
contrast, policy in Brazil seems to have changed and there was a
phase when land invasions were even encouraged in cities such as Sao
Paulo (Sachs, 1983; Taschner, 1988). As a result of these different
local land policies, recession has produced different local housing
effects. In Chile, the option of self-help ownership virtually dis-
appeared although heavily subsidized low-income housing was avail-
able for some. For the majority, however, the real option has been to
rent or share accommodation. Overall, the effects have been to
increase overcrowding while maintaining levels of service provision.
In Brazil and Peru, by contrast, a continued move into self-help
housing has been possible. In these countries, the overall effect of the
recession is likely to have been to encourage the proliferation of poor
quality accommodation. Affected by falling incomes, the population
will have adequate space but will not be able to improve the quality of
its dwellings. Governments, themselves facing deteriorating budgets,
will be unable to service the newly established self-help areas.
In seeking to address the question of what role the informal,
self-help sector plays in the recession, therefore, we arrive at an
uncertain answer. In places, the informal response to the recession is
to accommodate kin within the existing housing stock. Elsewhere it is
to increase levels of rental tenure as families seek accommodation in
the absence of easy access to their own plot of land. In other places,
land will be available, but the cost of a plot and of the materials with
which to build a house will be rising. There the result will be to
encourage the purchase of smaller plots and to slow the pace of
consolidation. Overall, therefore, the recession will damage housing
standards and it will affect levels of some ownership, housing densi-
ties, plot sizes, service and infrastructure provision, levels of rent and
frequency of eviction. The likely effect of the recession on any of
these variables, however, cannot be predicted across Latin America.
Theoretically, the lesson is clear. We cannot generalize very satis-

factorily about the relationship between self-help housing and econ-
omic change. Just as the informal employment sector embraces a
multitude of ill-assorted activities, so the informal housing sector is
heterogeneous. It includes everything from rooms in rental tene-
ments to consolidated middle-class houses in low-income areas. It
embraces flimsy shanties and houses crammed with young adults
forced to live with their family. Between cities, the relative weight of
each kind of accommodation in the total housing stock will vary
because of locally specific economic, social and political differences.
As a consequence, economic growth or recession affects each city
differently. In some cities, one kind of informal housing will increase;
in others that same form of accommodation may decline. In the final
analysis, it is clear that poverty and inequality produce bad housing.
What we cannot predict is the precise form that such bad housing will
take.
Notes
1. 'Self-help' housing is defined here as that accommodation which is de-
signed and partly built by the occupiers themselves, usually through
'informal' processes and on land initially lacking title deeds and services.
The precise methods of building vary from house to house and will often
use both paid labour and industrialized building materials.
2. Illegal subdivisions are settlements developed without planning permis-
sion and with few or sometimes no services. They differ from land
invasions in so far as the developers have predominantly commercial
motives and sell every plot to the settlers.
3. The changes in economic policy under President Alan Garda, how-
ever, reversed this trend and by 1987 the fall in real wages was down to
20 per cent.
4. This chapter will not go into detail about the Venezuelan situation since
Carlos Andres Perez took power. Both the shortage of data and the
uncertainty of the current situation would make any statements about the
effects on the housing situation far too speculative. What is certain is that
severe cuts in government expenditure, major rises in prices, and cuts in
subsidies will take place. For similar reasons, no discussion of the effects
of the Pacto de Concertacion in Mexico is included.
5. The distinction between private and public housing in Mexico is anything
but clear. The major investment has been in 'social-interest' housing,
much of it financed through the nationalized banks which were compel-
led to invest in housing for lower-income groups (Ward, 1989; Gilbert
and Varley, 1988). While subsidies continue to be available little of this
housing is affordable by the lower-income groups.
6. The head of INOS recently admitted that the agency loses water, both in
130 Alan Gilbert
the poor barrios and in the rest of the country, to unregistered irrigation
(TV interview, April 1988).
7. Until 1981 rent levels stayed more or less in line with the minimum
salary. Since then the tendency has been for the minimum wage to fall
behind rents during the year with some restitution being made towards
the end of the year (Gilbert and Varley, 1988). There has been some
change in this pattern since the introduction of the Pacto de Concertacion
in 1988.
8. Since household incomes excluded certam torms of unearned income
and in all probability also underestimated slightly, this makes the rent/
income ratios still lower.
9. 'Social interest housing' is the normal term used in Mexico for housing
intended for lower income groups. It can be built by either the public or
private sector. Needless to say, the cost of such housing is usually well
beyond the means of the poorest families and currently even beyond
those of the not so poor.
10. Ejidos were the result of the agrarian reform of the 1930s. The reform
expropriated land from the large haciendas and gave them to peasant
communities. Individual members of those communities have usufruct
rights to the land; they are not legally permitted to sell or rent the land to
outsiders.
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6 Growth, Distribution
and Basic Needs in Peru
and Colombia
Rosemary Thorp
This chapter is intended first as a reflection on the difficulty of making

cross-country comparison of welfare and equity. For this it takes as
case studies Peru and Colombia. Secondly, having drawn tentative
conclusions on the respective records of the two countries since the
1960s, and taken the data problems into account, it discusses reasons
for the relatively slight progress registered in basic needs indicators
for both.
The first problem of interpretation is the surfeit of explanatory
variables. The underlying political and economic parameters are very
different. In political terms, populist experiments have at times
provided the basis for redistributionist policies in Peru, notably under
General Juan Velasco (1968-75) and President Alan Garcia (1985-
90); Colombia has been conspicuous for its lack of populist govern-
ments. An obvious question is whether populist experiments that
often end in failure benefit the poor more than incrementalist policies
pursued with greater consistency. The Colombian 'style' has typically
taken the form of 'poverty programmes' personally backed by
the President, 1 most clearly so under the government of President
Virgilio Barco (1986-90). In terms of economic parameters, Co-
lombia's principal export has been produced on small farms in the
majority of cases. The impact of departmental government and local
branches of the national coffee federation has been observed in, for
example, consistently better primary education in the small farmer
coffee departments than in the rest of the country. 2 Birth rates in
Colombia fell earlier than in Peru (or most other Latin American
countries), implying beneficial effects on labour markets and in-
comes. In Peru, only cotton production enjoys characteristics compar-
able with those of coffee in Colombia. Most important Peruvian
export commodities have been produced on a large scale, usually
with a significant foreign presence, and with associated income con-
centration. In Peru no producer pressure group has developed that
133
134 Rosemary Thorp
Table 6.1 Real GOP annual growth rates: Colombia, Peru and the rest
of the world
The world Developing countries

All Latin America
All Colombia Peru
Long run
1965-80 3.9 4.9 4.6 4.7 3.5
1980-89 3.1 3.8 1.6 3.5 0.4
Short run
1960-64 4.2 4.4 4.2 4.0 6.0
1965-69 4.2 4.8 4.4 4.4 2.9
1970-74 3.5 5.1 5.9 5.2 4.8
1975-79 3.6 4.3 4.4 4.5 1.1
1980-84 1.8 1.5 0.1 1.6 --0.8
1985-89 4.4 6.1 3.1 5.4 1.6
Per capita GNP, 1980 dollars
Peru Colombia
1960 747 663
1980 930 1180
1986 1092 1291
1989 896 1379
SOURCE: World Bank, Development Reports; ECLA, Statistical Yearbook
for Latin America and the Caribbean.
possesses a shadow of the coherence or reach of the Colombian

national coffee federation. This strong contrast in the political econ-
omy of the export sectors feeds through into very different state-
private sector relations, and explains the considerably greater coher-
ence and competence of Colombia's short-term economic policy
management. 3 An evaluation of these consequences requires an ex-
amination of the historic record.
THE RECORD
The growth experience of the two countries is set in a wider context in

Table 6.1. Colombia grew faster than Peru, but only at the Latin
American rate - and achieved this mainly by policy consistency.
Peru's rapid growth in boom periods was cancelled out by her vulner-
ability to crisis - most obviously true in the 1980s. Colombia's wise
Growth, Distribution and Basic Needs 135
Table 6.2 Estimates of the incidence of poverty circa 1970
Households below the Households below the

poverty line, per cent destitution line,
per cent
Urban Rural National Urban Rural National
Argentina 5 19 8 1 1 1
Brazil 35 73 49 15 42 25
Colombia 38 54 45 14 23 18
Costa Rica 15 30 24 5 7 6
Chile 12 25 17 3 11 6
Honduras 40 75 65 15 57 45
Mexico 20 49 34 6 18 12
Peru 28 68 50 8 39 25
Uruguay 10 4
Venezuela 20 36 25 6 19 10
Latin America 26 62 40 10 34 19
SouRCE: S. Molina, 'La Pobreza; Descripci6n y Analisis de Polftica para
Superarla', Revista de Ia CEPAL, no. 18, Santiago, de Chile, December
1982.
non-borrowing in the 1970s, and to some degree skilful policy, se-

cured a 1980s record far above that of the continent in general, while
Peru's experience, under cumulative structural pressures and debt,
was disastrous. 4
Economists have three main sets of evaluative tools for the
measurement of change in equity and welfare. The first summizes
equity by the use of statistical measures such as Gini coefficients.
These calculations may be done relatively finely for those years for
which national household surveys exist, and more crudely on an
annual basis using principally wage data. The second evaluates pov-
erty relative to a minimum consumption standard. The third concen-
trates on various more qualitative measure of basic needs indicators.
And a fourth indicator, less commonly used but helpful in conjunc-
tion with others, is to observe the relative trends in food consumption
and income per capita.
Tables 6.2 and 6.3 present the first two types of data for the case
studies, and place them in a Latin American context. It will be
observed that in the late sixties and early seventies both countries
were poorer than the continental average and the distribution of
income was more inequitable. Given the structure of coffee produc-
tion and its apparent beneficial employment effects, it is surprising to
136 Rosemary Thorp
Table 6.3 Income distribution: Gini coefficients
(a) Latin America c. 1965 (b) Peru, Colombia 1970s and 1980s
1971-2 1985-6
Ecuador (1968) 0.38 Peru 0.55 0.49
Argentina (1961) 0.42 Colombia 0.53 0.48
Venezuela (1962) 0.42
Chile (1968) 0.44
Mexico (1963) 0.53
Bolivia (1963) 0.53
Peru (1961) 0.61
Colombia (1964) 0.62
SOURCE: F. Paukert, 'Income distribution at different levels of develop-

ment: a survey of evidence', International Labour Review, August 1973;
Thorp, op. cit., p. 209; J.L. Londono, op cit., p. 7.
find the pattern of distribution in Colombia so unequal. A recent

study by Londono shows how trends in land and labour markets
led to a worsening in distribution from the 1930s to the 1950s for
Colombia. In the 1980s the Gini coefficients registered improvements
for both countries. However, in the case of Peru ephemeral factors
clearly intervened: it is difficult to evaluate long-term trends from the
Peruvian data because the household survey on which they are based
was carried out during Garcia's attempt to reactivate the economy
through short-run re-distributionist policies aimed particularly at the
rural sector. The Colombian improvement was more solidly based, as
illustrated in several surveys undertaken in the 1980s. The Peruvian
situation is more accurately reflected in Webb's longer-run study of
labour incomes, which suggests a worsening of distribution. 5
However, behind any such comparison lie problems of short-term
versus long-term trends, of patchy coverage in the data and of bias in
the surveys. For example, how do household surveys treat non-
money income?
Confronted by such difficulties, economists increasingly prefer to
use indicators of 'basic needs'. A selection of such indicators is given
in Tables 6.4 and 6.5. Much literature now exists on the problem of
measurement and valid proxies for 'quality of life': the overwhelming
consensus is that infant mortality, life expectancy at birth and literacy
are the most reliable welfare indicators. (Of course they cannot be
interpreted in isolation: they are interrelated with other variables.
Literacy, for example, is in part a proxy for skills which enable a
Table 6.4 Welfare indicators 1970-80
Around 1970 Around 1980-82

Relative availability
of calories
Peru 96% (1969-71) 93% (1979-81)
Colombia 92% (1969-71) 108% (1979-81)
Illiteracy rate
Peru 28% (1972) 17% (1981)
Colombia 19% (1973) 15% (1981)
School enrolment rates (ages 6-11)
Peru 79% (1970) 84% (1980)
Colombia 62% (1970) 70% (1980)
Infant mortality per 1000
(0-1 year)
Peru 133 (1965-70) 82 (1980-85)
Colombia 74 (1965-70) 53 (1980-85)
Life expectancy at birth
Peru 52 (1965-70) 59 (1980-85)
Colombia 58 (1965-70) 64 ( 1980-85)
Urban population with sewage
Peru 62% (1969) 55% (1979)
Colombia 72% (1969) 68% (1979)
Population with access to piped water
Peru urban 69% (1969) 79% (1979)
Colombia urban 98% (1969) 86% (1979)
Peru rural 8% (1969) 13% (1979)
Colombia rural 48% (1969) 23% (1979)
SOURCE: WHO, UNESCO, FAO Yearbooks, CEPAL, Statistical Yearbook

for Latin America and the Caribbean.
person to take advantage of other facilities, for example, health

services which in turn raise the quality of life.)
In Table 6.4, we encounter interesting problems of interpretation.
Take education: Colombia's rate of illiteracy was lower than Peru's
around 1970s, while Peru had a higher proportion of children in
school. This is not simply a time-lag problem: Peru's enrolment rates
were consistently higher through the 1950s and 1960s. One obvious
hypothesis is that Peru's schools were less 'effective' - literacy
measures the result - and/or that initial enrolment in Peru was
undermined by high drop-out rates. In fact drop-out rates for both
countries were high, but Colombia's were actually worse. In Co-
138 Rosemary Thorp
Table 6.5 Adult illiteracy rate (aged 15+)
Total Male Female

per cent
Peru 1972
Total 27.5% 16.7% 38.2%
Urban 12.4 5.9 18.9
Rural 51.1 33.9 68.0
Colombia 1973
Total 19.2 18.0 20.2
Urban 11.2 9.0 13.0
Rural 34.7 32.8 36.8
Peru 1981
Total 18.1 9.9 26.1
Urban nla nla nla
Rural nla nla nla
Colombia 1981
Total 14.8 13.6 16.1
Urban 9.0 nla nla
Rural 24.8 nla nla
SOURCE: National Census data.
lombia in recent years, less than 50 per cent of those entering primary
school have completed the final year of primary education, while in
Peru the figure is nearly 60 per cent. 6 The average number of years of
primary education in Colombia in the mid-seventies was 3.1 in urban
and 1.6 in rural areas. 7 Functional literacy is therefore much lower
than (self-assessed) census data8 indicate - and the slightly higher
drop-out rate suggests the gap may have been even larger in Co-
lombia than in Peru.
More insight is provided by Table 6.5, which breaks illiteracy down
according to gender. Peruvian urban adult males were more literate
than their Colombian counterparts in the early 1970s: it is the very
high illiteracy figures for Peruvian women that explain the overall
record. The gap had hardly narrowed by the 1980s. Although fewer
girls than boys were going to school in 1972, the difference was not
great; nor had it been in the previous two decades. 9 The difference
appears to reside at least partly in culture, expectations and self-
concept, partly in the census term, which required a person to define
him/herself as able or unable to read and write. 10
The issue is perhaps more straightforward when we look at infant
mortality and life expectancy at birth. Colombia's record in 1970 was
Table 6.6 Welfare ranking in sample of 125 countries•
'Physical quality of life' GNP per capita

1960 1980 1960 1980
Peru 64 67 53 65
Colombia 51 51 58 59
SOURCE: E. Nissan and R. Caveny, 'Relative welfare improvements of low

income versus high income countries', World Development, May 1988.
• Including rich and poor. The ranking is in terms of distance from an ideal.
The index includes life expectancy at birth, infant mortality and literacy.
better - but not that much better - particularly in regard to life

expectancy. The Colombia figure for infant mortality was still high by
international standards. Looking at changes over time, again it is
impressive that while Colombia has made some gains, so has Peru.
The fall in infant mortality in Peru was an impressive 30 per cent, and
in illiteracy 40 per cent, while Colombia improved less in both cases.
The fall in the Colombian figures for access to piped water and for
sewerage is so great that it suggests a data problem, but again the
balance of this kind of evidence is to emphasize lack of progress.
Table 6.6 makes the same point in a different way, taken from a
'world ranking' of countries according to a physical quality of life
index. 11 Between 1960 and 1980, Peru lost 12 places on GNP per
capita, but only three on the 'quality of life' index. Colombia lost one
place in GNP and held its own in quality of life.
Table 6. 7 relates apparent food consumption to the growth of GOP
per capita. Again it is suggestive: the increase in food consumption in
Colombia is hardly enough to indicate that the increase in real
income was evenly spread through the population. 12
Perhaps the greatest insight, however, comes from disaggregating
data by departments/provinces, though the data at this level are very
unreliable. Table 6.8 gives infant mortality by department/province.
Both countries show acute regional imbalances and the coefficient of
variance is higher for Colombia. In Peru, all provinces improve with
time: in Colombia in the 1970s some departments actually show a
worse rate. 13
It can be seen then that these countries were similar in their
patterns of extreme inequality in the 1960s, and that global measures
of inequality showed Colombia improving thereafter while Peru did
not. This improvement may be explained by a drop in birth rates
140 Rosemary Thorp
Table 6.7 Real GDP and apparent food consumption per capita, annual
averages (indices: 1965--69 = 100)
Peru Colombia
Apparent Apparent
Real food Real food
GDP consumption GDP consumption
1950-54 66.9 92.4 50.0 105.3
1955-59 75.0 84.4 62.6 103.0
1960-64 88.7 87.9 78.7 102.7
1965--69 100.0 100.0 100.0 100.0
1970-74 109.1 102.1 139.1 100.3
1975-79 112.3 98.0 178.6 111.7
1980-84 105.1 97.48 216.1 122.3
124.28
SOURCE: Peru: author's estimates for food consumption; Colombia: A.

Urdinola and M. Carrizosa, 'The Political Economy of Poverty, Equity and
Growth: Colombia'. Mimeo, March 1987. Paper presented at the Conference
on 'The Political Economy of Poverty, Equity and Growth', Fez, Morocco,
April1987.
• Refers to the period 1980-85 (6 years).
combined with a better economic growth rate in the 1980s. However,

the data also show that differences between the countries are less
great when basic needs are explored. Furthermore, both countries
made only limited progress from a rather tow level, particularly in
regard to regional disparities. The reasons for relatively limited pro-
gress are the topic of the next section.
THE 'POLITICAL ECONOMY' OF BASIC NEEDS

EXPENDITURE
'Basic needs' policy comprises all categories of social expenditure. If

basic needs fulfilment appears to be lagging despite progress in in-
come distribution, it suggests a deficient state role in the promotion
of appropriate services to enable people to enjoy not only income but
access to improved quality of life. (Obviously, for people still close to
the poverty line, there is no question of the market alone taking care
of the quality of life.)
Much of the discussion on the 'political economy' of such expenditure
is perhaps rather obvious, and concerns the unlikelihood of redistribu-
Table 6.8a Peru: Infant mortality by provinces

(deaths per 1000 live births)
1968 1979
National Average 142 92
Callao 68 54
Lima 76 56
lea 98 66
Arequipa 119 68
La Libertad 113 73
Tacna 111 80
Moquegua 130 82
Tumbes 107 88
Lambayeque 119 92
Loreto 131 94
Junin 153 95
Madre de Dios 149 75
Cajamarca 155 95
San Martin 126 95
Ancash 146 96
Amazonas 141 96
Ucayali 131 103
Huanuco 170 107
Piura 151 111
Pasco 168 115
Apurimac 199 124
Puno 196 125
Ayacucho 197 128
Cuzco 218 139
Huancavelica 227 142
Coefficient of Variation (%) 27.95 24.60
SOURCE: D.K. Zschock, Health Care in Peru: Resources and Policy,

Boulder, Col., 1988.
tionist and/or expanded social policies where there is no political base.

But to end the discussion here would do less than justice to the huma-
nitarian intentions of many politicians in both countries. It would also
neglect a number of characteristics of the institutional setting and of the
nature of such policies, which operate to limit good intentions. Hence
this chapter concludes with some reflections on the insights that emerge
from a study of the process of policy formulation. None of the foUowing
is intended to deny the overwhelming necessity of 'political will' and
effective public administration.
142 Rosemary Thorp
Table 6.8b Colombia: infant mortality by departments

(deaths per 1000 live births)
1963 1966 1973-78

National Average 88 80 70
Bogota 71 66 48
Atlantico 54 48 57
Valle del Cauca 109 94 58
Risaralda 64
Antioquia 91 81 65
Quindio 71
Caldas 122 111 72
Santander 86 81 73
Narino 114 113 75
Norte de Santander 89 86 77
Bolivar 42 38 78
Boyaca 82 77 79
Huila 104 98 79
Meta 88 94 79
To lima 108 95 80
Cundinamarca 81 75 80
Cesar 81
Cauca 123 105 82
Magdalena 61 55 83
Sucre 87
C6rdoba 25 24 88
Intendencias y Comisarias 60 89 92
La Guajira 114 134
Choc6 111 111 149
Coefficient of Variation (%) 31.55 35.91 26.18
SOURCE: DANE, Boletin Mensual de Estadistica, no. 163, Oct. 1964 and
J. Olinto Rueda, H. de Llinas and V. Vergara, 'Dinamica Demografica y
Proyecciones de Poblaci6n ... ', Revista de Planeacion y Desarrollo, Bogota.
vol. XIV, no. 3, Sept.-Dec. 1982.
The first reflection concerns the domination of short-term consid-

erations, when basic needs policies require a long-time perspective.
In Colombia the dominance of the short term is subtle and deep-
seated: budgetary 'prudence' has been tried and tested and is a
deeply held tenet of faith. In times of fiscal tightness the power of
the Finance Ministry is overwhelming. Administrative talent is con-
centrated there, and thus as a result, presidents find their spending
plans frustrated. Under President Julio Cesar Turbay (1978-82) key
powers in respect of the budget process were transferred from the

Planning Office to the Finance Ministry and the latter has in practice
remained dominant. Given the authority of the finance team and
confronted by short-term crises both Presidents Belisario Betancur
(1982-6) and Barco were frustrated from implementing social pro-
jects to which they had given considerable personal commitment. 14
This was the key explanation for the lack of progress with Barco's
poverty programme. In Peru, there have been administrations well
able to resist 'fiscal discipline'. But the pressure of the short term
works differently. The paramout concern with the short term is a
function of a scarcity of trained personnel combined with the fre-
quency and magnitude of short-term crises. In practice, only the
problem of the day can be addressed. The effect is insidious: to be
'where it counts' in Peru you need to be involved in· short-term policy.
These considerations permeate even the Planning Institute. This has
the clearly perceptible consequence that long-term programmes,
while never discontinued, are left without effective leadership and in
practice stagnate. 15
A second reflection, familiar to any incoming administration, is
'inertia' in the system. At a given moment 70 or 80 per cent of the
investment budget may already be committed to existing projects; in
a time of recession the figure can be over 90 per cent. 16 The costs of
aborting an existing project, in terms of penalty clauses, tied-up funds
and offending vested interests, are usually such as to rule out can-
cellation as an option. Thus the room for manoeuvre of incoming
administrations is marginal.
Fundability is a third constraint upon the formulation of long-term
strategy. Because there is room only for a small number of new
initiatives, not simply in terms of cash but also in terms of manage-
ment capability, there is a marked preference for projects that come
ready prepared with political and financial backing. This gives exter-
nal funding agencies considerable power - in Colombia in conjunc-
tion with powerful regional interests.
This leads to a final reflection: external funding agencies are fre-
quently criticized for preferring the projects that yield tangible pro-
ductive benefits, as opposed to 'social' projects. The former appear
easier to monitor and yield speedier results. Funders look for measur-
able returns for obvious reasons, not because they lack social con-
cern. Tackling poverty is extraordinarily difficult and uncertain. This
sounds obvious, but it is nonetheless important. Far more research
needs to be undertaken at the institutional level. Owing to institu-
144 Rosemary Thorp
tional inertia and incompetence numerous tragic policy failures have

occurred despite both a genuine political will and an openness to
change. For example, it is instructive to see how little Garcia was able
to achieve in rural development despite strong commitment and a
willingness to ignore financial constraints.
CONCLUSION
Where does this analysis leave us? The data are not powerful enough
for a strong conclusion, but they are suggestive. Colombia's income
distribution and poverty situation were closer to Peru's at the start of
our period than might have been expected. By avoiding 'boom and
bust' cycles Colombia made steadier progress. Economic growth and
declining rates of population increase produced some improvements
in distribution in Colombia. But the position in Peru probably
worsened, pace the 1985-6 data. Surprisingly, progress as shown by
the basic needs indicators was less than that demonstrated by the
economic and demographic data. This suggests that neither country
had gone very far in attacking its poverty problem. Unfortunately,
once we examine the political economy of 'the fight against poverty',
it is all too easy to understand why so little progress is observed.
Notes
1. In the L6pez presidency (1974-8) the initiatives were the Integrated
Rural Development Plan and the Food Nutrition Programme. These
continued into the 1980s. Turbay's programme was the National Integra-
tion Programme. With Betancur, Change with Equity, with more em-
phasis on urban housing. With Barco, Struggle Against Absolute Poverty.
2. S. Rodrigo Parra, 'La educaci6n en Ia zona cafetera colombiana', in
E. Reveiz (ed.), La cuestion cafetera (Bogota, 1980).
3. R. Thorp, Economic Management and Economic Development in Peru
and Colombia (London and Pittsburgh, 1991).
4. These experiences are compared in detail in Thorp, op. cit.
5. J.L. Londono, 'Income distribution during structural transformation',
PhD, Harvard University, 1990; R. Webb, 'The Political Economy of
Poverty, Equity and Growth, Peru 1948-1985'. Mimeo, Apr. 1987.
6. Drop-out rates calculated from data in the UNESCO Statistical Digest,
and from DANE, Bolet£n de Estadfstica.
7. Revista de Planeacion y Desarrollo, Bogota, July-Dec. 1981. Both coun-
tries also have a higher figure for children repeating years in primary
education- 15 per cent for Peru in 1980s, 17 per cent for Colombia.
The figure for total public spending on education is rather similar:
2.9 per cent and 2.8 per cent of GOP in 1978 for Colombia and Peru
respectively.
8. Census data are collected on the basis of the oral question 'can you read
and write?' 'Functional' literacy is estimated to require three to four
years of completed primary education. A study for Colombia for 1964
used only two years of primary education as the criterion, and estimated
functional illiteracy as 48.5 per cent, where self-declared illiteracy from
Census data was 27 per cent. (DANE, Bolet{n Mensual de Estadfstica,
no. 249, Apr. 1972).
9. The rate of school enrolment in Peru in 1972 was 82 per cent for boys, 75
per cent for girls, H. Fernandez., Aspectos Sociales y Economicos de Ia
Educacion en el Peru, AMIDEP, Lima, July 1985.
10. The consequences for these figures of linguistic patterns would be worth
explaining. Colombia is almost entirely Spanish-speaking; Peru has a
great diversity of indigenous languages and dialects as well as Spanish.
11. The index combines infant mortality, life expectancy and literacy, arbit-
rarily giving each equal weight, which is not satisfactory but does not
affect the point made here.
12. At low income levels the income elasticity of demand for food is nor-
mally estimated to be of the order of 0.7.
13. We do underline, however, that the data for regions are very weak
indeed.
14. interview, ex-director of INCOMEX, (Instituto Colombiano de Com-
ercio Exterior, Bogota, Aug. 1987).
15. Interviews and personal observation while working in the Planning Insti-
tute in 1987.
16. The figure in the Peruvian National Plan (1985-90) in 75 per cent.
Part
Two
7 Bonos, Beneficios, y Bienestar:
A Study of Wages, Work and
Welfare on Peruvian Sugar
Plantations
Christopher D. Scott
INTRODUCTION
By the 1960s, the largest agro-industrial sugar complexes on the

Peruvian coast had established systems of free health care, primary
education, housing, electricity, drinking water and leisure facilities
for their permanent labour force, as well as providing subsidized
rations of food and clothing. The value of these benefits when added
to a relatively high cash wage placed this group of workers in the top
quartile of the country's income earners (Figueroa, 1973).
This chapter examines why and how this system of welfare provi-
sion came about and analyses its consequences for the sugar industry
and its labour force. A long-run perspective is adopted which traces
the growth of non-monetary components of workers' incomes from
the late nineteenth century, when the industry was heavily dependent
on immigrant labour, up to the transformation of the sugar com-
plexes into producer co-operatives in 1970. It is hoped that this case
study will prove of wider relevance both to the contemporary debate
over the provision of basic needs in developing countries and to an
understanding of how plantation enterprises have evolved in Latin
America.
Welfare provision by employers to workers constitutes an integral
part of the process of wage determination and of the system of social
control within the firm. Therefore, this chapter begins by outlining a
simple framework for analysing the growth of welfare services on
Peruvian sugar plantations. This framework permits the identification
of four different politico-economic environments within which wel-
fare provision occurred. Each tY.pe of environment is distinguished by
a particular set of conditions in the labour market and by specific
features of the industrial relations system. The remainder of the
149
150 Christopher D. Scott
chapter examines in detail the extent and nature of welfare provision

in each of these environments.
WELFARE PROVISION, LABOUR MARKETS AND THE

INDUSTRIAL RELATIONS SYSTEM
Welfare is defined broadly to include the following elements:

Housing
Education: this includes not only universal primary schooling for
workers' children, but also selective financial support towards sec-
ondary and higher education away from the plantation.
Health and Nutrition: this includes the provision of free medical care
(during hospitalization or out-patient treatment) and cooked meals
(for field workers); the sale of subsidized medicines, foodstuffs and
cloth; and access to small plots of land for growing food crops.
Public utilities: these include electricity for domestic purposes, piped
drinking water and refuse disposal, all provided free of charge.
Leisure facilities: these include football pitches, cinemas and social
clubs.
Not all sugar complexes enjoyed the same level of welfare provision
at any one point in time, but by the 1960s most of them supplied ser-
vices under each of the above headings to their permanent workers.
If these in-kind benefits are added to a worker's cash earnings to
give a 'social wage', it is clear that welfare provision is an integral part
of the process of wage determination. However, it is more than that.
Employers provide housing, food, education and health care in order
to coopt and integrate workers into an authority system aimed at
minimizing output forgone through labour disputes. These benefits
serve as devices to legitimate the existing system of social control
which capital creates to prevent, reduce or resolve conflict in the
workplace. Thus, if welfare provision is an 'output' of the process of
wage determination in the labour market, it is also an 'output' of the
process of dispute prevention and resolution in the system of indus-
trial relations.
The dual nature of welfare provision on the plantations is illus-
trated in Figure 7.1. This framework also serves to identify and
distinguish four politico-economic environments within which such
services are supplied by employers and which are roughly chrono-
logical:
Bonos, Beneficios y Bienestar 151
,----~
Industrial relations Employers'

organizations
Conflict prevention
and resolution
Employers
Figure 7.1 Dual nature of welfare provision on Peruvian sugar

plantations
Welfare Provision in a Free Labour Market In this case, workers

sign voluntary contracts of employment, no trade unions exist and
there is no system of organized bargaining. In general, wages are
determined by supply and demand. The government intervenes in
industrial relations only in the case of violent and/or extended labour
disputes when troops may be used against strikers and ad hoc arbitra-
tion may occur. A paternalist system of social control exists in the
workplace, based on limited and highly selective welfare provision
combined with coercion of dissidents. Under these circumstances, the
growers' authority is not shared with either state agencies or workers'
organizations.
Welfare Provision through Central Government Decree In this con-

text, officially recognized trade unions are absent and no formal
procedures of collective bargaining exist. Incipient workers' organ-
izations and worker-based political parties are repressed with varying
degrees of intensity by the state. Direct bilateral channels of com-
munication between employers and workers are weakened as
growers lose much of their control over labour relations to the central
government. This curtails employers' authority in the workplace.
Wages and conditions of work, including welfare provision, are
largely determined by government decree. State agencies begin to
undertake more continuous monitoring and more extensive interven-
tion in industrial relations. The nature of this intervention is often
ambivalent. On some occasions, arbitrary and generous wage in-
creases are decreed in the face of employers' opposition in order to
undercut embryonic workers' organizations and the growth of
worker-based political parties. On other occasions, the government
acts more favourably towards growers.
Welfare Provision under Collective Bargaining In this environment,

effective trade unions become established as a result of changes in the
political situation at the national level. In Peru, the key factor was a
strong showing by the APRA party in congressional elections (in
1945 and in 1956), leading to an accommodation between the incom-
ing civilian president and the aprista leadership which permitted the
formation and official recognition of workers' organizations at firm,
industry and national levels. This led to the emergence of formal
procedures of collective bargaining in the sugar industry which deter-
mined wages and conditions of work for permanent employees.
However, in the casual labour market characterized by conditions of
labour surplus, wage rates were set by minimum wage legislation.
Employers were forced to adjust their systems of social control in the
workplace to accommodate the presence of recognized trade unions.
Various managerial strategies for controlling organized labour
emerged in the sugar industry, of which the system of cooptive
corporatism developed by the Grace company at Cartavio and Para-
monga was the most comprehensive.
Welfare Provision under Self-management Following the agrarian

reform law of 1969, the agro-industrial complexes in the sugar indus-
try were transformed into producer co-operatives. Trade unions had
no formal role nor bargaining rights within the co-operatives and
were not officially recognized. Initially, wages and work conditions
were 'self-determined' by co-operative members. However, after the
sugar price boom of 1974-5 and the abolition of US Sugar Quotas in
1974, the continued rapid rise in labour costs led to increased in-
debtedness among sugar co-operatives which enjoyed a soft budget
constraint. This situation quickly became unsustainable and the
government introduced strict wage controls in the industry, thereby

turning the sugar co-operatives into a peculiar form of parastatal
enterprise. This metamorphosis occurred as a result of the severe
weakening, which in some cases bordered on complete disintegra-
tion, of the pre-reform systems of labour control and the failure of
co-operative institutions to create an alternative structure of auth-
ority viewed by the membership as legitimate.
WELFARE PROVISION IN A FREE LABOUR MARKET
Employer-financed welfare services on Peruvian sugar estates were

originally provided as an integral part of the real wage required to
attract immigrant workers to the plantations which were often socially
isolated communities rife with infectious diseases. The absence of a
locally available labour supply in the coastal valleys where most sugar
was cultivated explains the sugar industry's dependence on imported
workers until late in the nineteenth century.
After the abolition of slavery in 1854, Peruvian growers recruited
indentured Chinese labourers to work on the plantations. Under the
terms of the contract, housing was provided for these workers in the
form of large barracks, each of which might contain up to two
hundred coolies who enjoyed minimal privacy. All labourers received
a free daily food ration in addition to a cash wage. In Cayalti, a
plantation in the northern department of Lambayeque, this amounted
to one pound of beef and one and a half pounds of rice per day
worked by the 1890s (Gonzalez:99).
The Chinese at Cayalti also consumed opium (Gonzalez:103).
Although the drug provided intervals of oblivion for the coolies
amidst appallingly harsh working conditions, it damaged their health,
already seriously at risk from diseases which were rife in coastal Peru
at the time. Bubonic plague, smallpox, measles, influenza, cholera,
malaria, pneumonia, yellow fever, typhoid, typhus and tuberculosis
were all common.
By the late nineteenth century, several plantation owners had
introduced elementary medical facilities and health precautions to
protect their labour supply, which by then included workers recruited
from the Andean highlands, from epidemics. Thus, in Cayalti,
labourers were first vaccinated against smallpox in 1894 and again in
1896 (Gonzalez:105). Despite such measures, the depredations of infec-
tious disease among a population living in overcrowded dwellings
and generally insanitary conditions continued to be substantial.

The closing of the port of Macao to indentured labour in 1874
ended Chinese emigration to Peru. Desperate for alternative sources
of labour, Peruvian sugar growers turned to the highland peasantry
who were gradually induced into temporary employment on the
coastal plantations under a recruitment system known as enganche.
The provision of services (housing, food rations and elementary
health care) formed an integral part of this labour contract which
centred on a loan advanced to a worker and recovered through
deductions from his wages once he started work on the plantation
(Scott, 1976; Albert, 88a-102a).
Indeed, competition in the market for unskilled field labour was as
keen with respect to these non-monetary components of the wage as
it was with respect to the cash element. Growers may have even
preferred to compete for workers on the basis of welfare provision
because they regularly complained that increases in the cash wage led
to a rise in drunkenness and reduced work attendance among the
labour force.
In addition to recruiting workers from the sierra, the growers
replaced Chinese coolies with indentured labourers from Japan. The
first group of appnilximately 800 arrived in 1899 on four-year con-
tracts which stipulated that housing and medical care be provided by
their employers (Albert:103a). However, the Japanese adapted to
the harsh working conditions on the coastal haciendas much less
easily than their Chinese counterparts. Shortly after arrival they
staged violent strikes and as a group they consistently proved more
difficult to control and discipline than locally recruited peons. They
displayed lower levels of productivity than Peruvian workers despite
being paid the same money wage and having access to superior
welfare services (houses, baths, schools). Notwithstanding these
problems, the recruitment of Japanese labourers continued and by
1909 over 6000 of them had arrived in Peru (Albert:104a).
With the outbreak of the First World War food prices began to
rise, owing to the disruption of imports and the switch of land out of
foodcrops into the cultivation of sugarcane and cotton, the prices of
which had risen greatly (Albert:156a). This increased the derived
demand for labour on sugar plantations and nominal wages rose.
However, the movement of real wages is less clear (Albert:161a-2a).
If the Lima food price index is used as a deflator, the real wage of
male field workers fell from 100 in 1913 to 71 in 1916, after which it
recovered briefly before falling again to 60 in 1920 (Albert:173a). Use
of this index is likely to exaggerate the fall in the consumption wage
of sugar workers because growers actively pursued policies to slow
the rise in food prices by increasing employer-financed subsidies on
items sold in the plantation store and by increasing local food supplies
through direct cultivation (Aibert:l89a-90a). Such measures were
probably insufficient to prevent the real wage deteriorating, but the
latter's decline would have been greater in their absence.
Under conditions of labour scarcity, and particularly where immi-
grant workers were recruited, the welfare component of real wages
was important for four reasons. Firstly, in the absence of state provi-
sion of housing, health care and schooling, these services had to be
supplied by employers in order to attract a sufficient stock of workers
to the plantations. The lack of alternative sources of supply for such
services also implied that the degree of substitution between the
monetary and the non-monetary components of the real wage was
very low. That is, plantation workers would be unwilling to accept a
higher money wage to compensate for the absence of any provision
by employers of these services. The relationship between these el-
ements was strictly complementary.
Secondly, once workers had arrived at the plantation the growers
attempted to maximize the proportion of them who were fit to work
at any one time. Fitness to work depended on several factors includ-
ing the physical state of the worker on arrival, which in the case of
indentured Chinese coolies was often poor, while many of the locally
recruited highland peasants suffered from tuberculosis. The insalubri-
ous climate on the coast and the high incidence of disease, coupled
with the increased risk of industrial accidents as mechanical innova-
tions such as steam ploughs and mobile field railways were adopted,
made expenditure on preventive and curative health care a rational
response by employers in the face of labour scarcity.
Thirdly, once a labourer was at work his productivity would be
influenced by his energy intake and general health status. Cutting
cane is highly energy-intensive, so that provision of food rations and
food subsidies by employers can be interpreted as a mechanism for
inducing workers to invest in their own human capital.
Fourthly, the provision of welfare services together with the offer
of bonuses for good attendance were used as incentives to reduce tum-
over among the local labour force. Not only were recruitment costs
high, but the productivity-enhancing effects of an improved diet and el-
ementary health care would be greater the longer the period of time
during which a worker was continuously employed on the plantation.
However, stabilization of the field labour force did not occur until
the 1940s and 1950s. Most of the locally recruited cane cutters and
loaders were peasants who migrated from the highlands during the
period between sowing and harvesting their food crops. These
workers' individual labour supply curves were extremely inelastic
during peak periods of the agricultural cycle in the sierra. In addition,
some of them may have been target income workers, so that increas-
ing wages could have accelerated labour turnover without increasing
aggregate labour supply (Scott, 1976).
WELFARE PROVISION THROUGH CENTRAL

GOVERNMENT DECREE
From the end of the First World War until1945 and again during the
dictatorship of General Odria (1948-56), the extent and nature of
welfare provision on the sugar plantations were significantly affected
by central government decree. In some cases, these measures can be
seen as direct responses to labour unrest or to nation-wide cam-
patgns, as in the case of the demand for the eight-hour day granted in
1918, while in other cases, these decrees were issued in the absence of
any immediate strike pressure by oligarchic governments seeking to
reduce the appeal of radical political parties. 1 It was uncommon for
these interventions to be aimed specifically at the sugar industry.
Rather the industry was affected by a general trend towards increased
state involvement in labour relations.
In assessing the impact of central government decrees on welfare
provision in the sugar industry during this period it is important to
avoid two errors. The first is to assume that because a decree required
employers to supply an item to workers, this item was not previously
provided by employers in the industry. Thus, in 1918, legislation was
passed specifying the industrial establishments which were required
to provide their workers with housing, schools and medical assistance
(IL0:281). This covered sugar plantations where in many cases such
provision already existed. The second error is to assume that decrees
passed in Lima were immediately and comprehensively enforced
hundreds of miles away on the sugar haciendas.
The central feature of the sugar industry during the inter-war
period was the combination of falling world sugar prices and the
growth of organized labour unrest. The post-war boom in sugar
prices broke in mid-1920 and following a short lived recovery in
1923-4, the decline continued until1929 after which prices collapsed.

The impact of sharply decreasing export revenues on growers' profits
was exacerbated by labour militancy linked to the emergence of the
APRA party which was founded in 1924, but did not hold its first
conference in Peru unti11931. After the failure of the aprista uprising
in Trujillo in 1932, the party was forced underground and its mem-
bers persecuted.
During the Benavides administration (1933-9), social reforms were
extended which aroused the growers' opposition. In 1933, workers
who were employed by an enterprise for not less than 260 days in a
year obtained the right to paid holidays which they could take when
they· chose. This increased labour costs and required more careful
planning of the milling schedule, as previously those employees
granted vacations by the management took them during the annual
shut-down of the mill.
Three years later, the plantation workers were included within the
scope of new social security legislation (Seguro Social Obrero) which
provoked the following comment from the administrator of Cayalti
when he reported on a meeting of hacendados:
We also talked about the social security legislation. It will be

enormously difficult to apply and specialist staff will have to be
employed to administer it. Naturally, we all agree that this law will
provoke much discontent, especially among the sierra peons who
work here for a few months and then return to their plots.
Once in the sierra, they may fall ill or even die, and who will care
for them? There will be no one to look after the funeral arrange-
ments that are provided by the scheme. Really, it is a law that
cannot be applied universally in the country, and its scope should
be limited to the artesans and permanent workers on the planta-
tions. (Hacienda Cayalti, 5 Sept 36)2
The difficulty posed by the temporary migrant labourers recruited in

the highlands was that the employer was responsible for deducting
employees' SSO contributions from their wages, which would reduce
these workers' take home pay. However, since the serranos were
unlikely to be in a position to claim the full range of benefits offered
by the scheme (health care, disability pensions and funeral aid) once
they had returned to their home communities, they would feel dis-
criminated against and suspect the hacienda of not paying them their
due wages.
Pari passu with the incorporation of sugar workers into a national

framework of social welfare, there occurred a limited attenuation of
growers' authority in the workplace. The creation of the Regional
Labour Inspectorates in 1931 at the height of APRA's agitational
activity in the sugar industry strengthened further the role of the state
as arbiter in labour disputes. There followed a proposal in 1934 to
establish the post of Lieutenant Governor (Teniente Gobernador) on
the plantations. This was a minor municipal position but the growers
resisted the suggestion strongly:
It is crucial to point out the duality of authority to which this will

give rise. Our own authority is sufficient and we cannot tolerate
anyone else, whoever they may be, telling us what to do. (Hacien-
da Cayalti, 23 June 34)
In 1935, the Ministry of Public Health, Employment and Social

Security was created. For the first time in Peru, a formal procedure
was established for the official recognition and registration of trade
unions. Administrative responsibility for this procedure was lodged
with the Employment Division of the ministry. However, the process
of attaining recognition was lengthy and was designed to discourage
workers from taking initiatives in this area. For example, the law
required that the names of all employees demanding recognition of a
union be entered on police files. Consequently, very few unions were
officially recognized prior to 1945.
Government intervention in wage determination and in labour
relations reached a peak under Odria (1948-56). On the one hand,
the aprista trade unions in the sugar industry were fiercely repressed
after their short-lived period of official recognition under Bustamante
(1945-48). This prohibition of collective bargaining destroyed exist-
ing formal channels of communication between employers and workers,
and led to a loss of control by employers over plant level labour
relations (Burgess and Harbison:77). On the other hand, Odria
imposed wage increases on employers and extended social benefits to
workers. During his period of office, seven nation-wide wage rises were
decreed (Payne:51), and a Sunday wage was introduced in 1950 for all
workers who worked six days in the previous week (Chaplin:86).
Although labour organizations were effectively dismantled under
Odria, not all sugar growers approved of his 'authoritarian populism'.
In the Grace company, 'top management recognized that govern-
ment intervention provides, in the long run, no sound procedure for

dealing with worker dissatisfaction and organized economic protest'
(Burgess and Harbison:77). Therefore, in late 1953, the company
took the initiative 'to get labour relations back into its own hands' by
granting 10-15 per cent wage increases in the basic daily wage to
pre-empt a possible strike. This move was quickly followed by the
other sugar haciendas.
The major consequence of increased state intervention in labour
relations via central government decree was the emergence, growth
and partial integration of two systems of welfare provision and social
control on sugar plantations. On one hand, there existed firm-specific
structures which were created by employers in response to earlier
problems of labour scarcity. Although these structures displayed
certain common features, such as housing, education and health care,
each bore the stamp of a particular owner's management style.
At Tuman, the owners used their influence with the local auth-
orities to establish bilateral relationships with individual employees.
Thus, a letter from the Pardos would be enough to save a worker
from compulsory military service or from prison in the case of a
minor offence (Mejia:7). In exceptional cases, individual members of
the Pardo family would sign commercial guarantees for trusted em-
ployees and loans would be made available to the most loyal workers.
On the other hand, the sugar complexes were incorporated into a
standardized national system of welfare provision which was estab-
lished on the basis of certain distinctions of occupational status, such
as that between blue-collar and white-collar workers (Mesa-Lago:
116--18). The tensions which arose from the interaction of these
two sources of welfare provision were still evident in the 1970s on
some sugar complexes.
WELFARE PROVISION UNDER COLLECTIVE

BARGAINING
Welfare provision on the sugar haciendas first emerged as the result

of formal bargaining between employers and officially recognized
trade unions during the administration of Bustamante (1945-8). He
won the presidency in 1945 with aprista support. In return, the
APRA gained legal recognition as a political party and the freedom
to organize workers. Consequently, the number of unions recognized
annually soared from 28 in 1944, to 42 in 1945 and to 163 in 1946

(Sulmont:316).
Sindicatos were established in several sugar plantations with the
assistance of the Peruvian Confederation of Labour (CTP), created
in 1944, which was affiliated to the APRA. These sugar unions were
grouped into the Federation of Sugar Workers (FTA) which was
formed in 1946.
Labour unrest increased in the sugar industry in 1946--7 as the
newly formed unions grew more confident in pressing their demands
which included wage rises, improved housing and indirect benefits
and stricter adherence by employers to existing labour legislation. 3
This rising wave of militancy caused Bustamante to prohibit strikes
and initiate the persecution of union leaders in 1947. However, it
reached a peak in October 1948 with the abortive armed rising by
apristas against the government which precipitated a military coup by
General Odda. There followed eight years during which unions were
severely repressed and collective bargaining suspended.
The sindicatos re-emerged in 1956 following the victory of Prado in
the presidential elections. He received support from the APRA in
return for guarantees that the party would be legalized and that
labour organizations would be permitted to operate freely. This
period of convivencia under Prado (1956--62) witnessed a rapid
growth and consolidation of trade union power in the sugar industry
under aprista influence. Collective bargaining became established
as the primary method of wage determination for permanent
workers and this remained the case under the Belaunde administra-
tion (1964-8). 4
The consequences of effective unionization in the sugar industry
were immediate and wide ranging. The size of field tasks was reduced
in some plantations. Thus, in Casagrande, the tarea for cane cutters
was reduced by one third between 1956--7 and 1962-3 (Scott,
1979b:251). Wages increased sharply so that between 1956 and 1963
the direct costs of field labour rose more than three fold, while unit
costs of cutting cane by hand increased by a factor of seven between
1954 and 1965 (Scott, 1979b:252-4).
By the mid-1960s, over 40 per cent of the daily cost of a labourer
corresponded to employer-financed welfare services, as shown in
Table 7.1.
This rise in the social wage of permanent workers had two main
effects during the 1960s. Firstly, agricultural operations became in-
creasingly mechanized in order to displace field labour. At Casa-
Table 7.1 Casagrande: Average daily cost of a permanent labourer, 1965
Soles %
Basic wage 33.7 32
Bonuses and overtime 5.5 5
Food ration• 20.0 19
Housing, education and health 23.1 22
Employer's contributionsb 22.4 24
Total 104.7 100
SOURCE: Collin Delavaud, p. 263.
• Includes 1 lb. meat and llh lb. rice per day, midday meal and cost of food
subsidies.
b Includes contribution to social security, Sunday wage, etc.
grande, the number of blue-collar workers was halved between 1957

and 1970, as mechanical cane harvesters and other labour-saving
techniques were introduced (Scott, 1979b:272). The union response
to mechanization was ambivalent. On the one hand, pressure from
those workers directly affected led the union leadership to secure
transfers for some individuals to other jobs within the complex. On
the other hand, the financial incentive scheme for voluntary retire-
ment put forward by the Casagrande management was actively can-
vassed by top union officials who received payments for each worker
they persuaded to resign. Several strikes took the form of insti-
tutionalized ritual, being called for the period when the mill was shut
down for annual maintenance work.
Secondly, where mechanical cane cutting was not introduced,
casual workers recruited indirectly through labour contractors began
to replace permanent workers. At Tuman, contract labour averaged
9 per cent of field employment during the 1950s, but after an un-
successful attempt was made to secure union recognition in 1962,
this proportion rose steadily to reach 54 per cent in 1967 (Scott,
1979b:297).
The advantage to the hacienda was that contract labour was
cheaper than the labour of their permanent employees. These casual
workers did not live in company housing, nor did they receive any
other corporate welfare benefits, except for emergency first aid in
case of accidents at work. In addition, because it was the labour
contractor rather than the hacienda who hired these workers, he was
responsible as the employer for the payment of employees' social
Table 7.2 Contratistas Cafiaveleros: Unit costs of cane cutting at Tuman,

September 1963
Soles %
Piece wage to cutter 4.50 62.6
Sunday wage 0.75 10.4
Field foremen 0.13 1.8
Social security 0.30 4.2
Industrial accident insurance 0.12 1.7
Social welfare 0.10 1.4
Pension contribhtion 0.13 1.8
Stamps 0.05 0.7
Transport 0.38 5.3
Office staff and overheads 0.29 4.0
Holiday and other compensations 0.24 3.3
Profit 0.20 2.8
Total 7.19 100.0
SOURCE: Scott, 1979b: 303.
security and pension contributions. This was a continual bone of

contention between the Tuman management and the labour contrac-
tor throughout the 1960s. The latter accused the former of failing to
keep proper records and of not making the payments for social
welfare and pensions prescribed by law. The contractor replied that if
he met all his legal obligations with respect to deductions and em-
ployer's contributions, he would make a loss at the current price
(S/. 6.31 per ton) paid by the plantation for cut cane (Scott,
1979b:302). His figures are reproduced in Table 7.2.
As a result of these calculations which followed a strike by contract
cutters in August 1963, the hacienda agreed to increase the cane price
received by the contractor to S/. 7.23 per ton cut.
Such a situation seems to have been common among labour con-
tractors supplying the Lambayeque sugar haciendas at this time. They
could only make a profit by evading the required social security
contributions in full. At Cayalti, the two major contractors were
estimated to have made a loss of S/. 0.85 per tarea if they had paid all
the social charges required by law. However, since they omitted to
pay either social security or pension contributions, they earned a
profit of Sf. 1.33 per tarea or Sf. 0.19 per metric ton in 1966. As the
labour contractors were reckoned by Cayalti management to need a
profit of Sf. 0.30 per ton to remain in business, the piece rate paid by
the hacienda to the contractors was increased to Sf. 7.20 with the
latter responsible for the payment of all payroll contributions except
social security (Scott, 1979b:304).
The emergence of strong trade unions in the sugar industry after
1956 forced employers to modify their existing system of managerial
authority and social control in the workplace. In particular, it gave
rise to a novel form of employer-financed welfare provision aimed
specifically at the institutions of organized labour. This phenomenon
was most highly developed at Cartavio. The Grace company's union
policy of co-optive corporatism was based on the twin premises of
accepting its legitimacy as an institution in the work place, while
simultaneously promoting its dependence on management ideologi-
cally, financially and organizationally (Scott, 1979b:230).
The reappearance of the union at Cartavio in 1956 provided certain
advantages for management so long as it articulated the problems of a
labour force of 2500 persons and helped resolve them through 're-
sponsible negotiation'. To this end, the company sought to diffuse a
set of rules of the game - business unionism - among the union
leadership to permit their ideological co-optation. It was hoped that
this would both improve the process of plant bargaining and establish
the Cartavio union as an anti-communist bastion, not only to keep
communist influence out of the complex, but also to strengthen
anti-communist sentiment in the Federation of Sugar Workers. The
APRA party was seen as the main bulwark against the communists
and for this reason the management consistently supported the
APRA cadres within the Cartavio union and in the Federation. The
APRA's belief in the harmonious and collaborative role of labour
and capital was almost entirely congruent with the company's own
view of labour relations, as embodied in the profit-sharing scheme
adopted at Cartavio.
The union ideology was carefully nurtured by sending potential
and actual union leaders to courses at the Union School of the Sugar
Federation, long dominated by the APRA, and to the Institute for
Labour Studies in Lima which was supported by ORIT, the In-
teramerican Regional Labour Organization, an institution in which
Peter Grace, the company's president, was extremely active. In the
early 1960s, the company funded part of the costs of several projects
initiated by the sindicato including a consumers' co-operative, a
co-operative school, the establishment of a union library and the
purchase of four television sets. 5
Such a policy had its opponents among other sugar producers.
Juan Pardo of Tuman had complained that first San Jacinto and
then Laredo had agreed to discount workers' union contributions from
their wages, despite an explicit Committee decision against such a
measure. He argued that 'this new attitude taken by Laredo is ex-
tremely serious and has jeopardized the sense of unity which has
always existed among the producers, and may even threaten the very
existence of the Committee of Sugar Producers' (Negociacitm Tu-
man, 6 April61). Pardo was extremely hostile to the recognition of
trade unions and a proposal to form a sindicato at Tuman was
defeated by a plebiscite in 1962. For their part, the Laredo manage-
ment felt it was much more dangerous 'that producers give donations
or hand over considerable sums of money to the union under the
guise of contributions for social, cultural or cooperative ends' (Nego-
ciacion Tuman, 14 April 61). This statement was clearly aimed at
putting Grace in the dock.
The growth and consolidation of collective bargaining in the sugar
industry between 1956 and 1968 ushered in a more complex environ-
ment of welfare provision. The plant level unions could now exert
pressure for improvements to the national system of social security
via the union federation with its strong political links with the APRA
party, which enjoyed significant representation in Congress, while
fighting to maintain and improve the level of firm-specific non-
monetary benefits through local action.
WELFARE PROVISION UNDER SELF-MANAGEMENT
The transformation of the sugar estates into agrarian producer co-

operatives (CAPs) under the agrarian reform law of 1969 changed the
payment system of permanent workers who formed the bulk of the
membership of the new enterprises. In addition to their cash wage
and indirect benefits in kind, socios received a share of end-year
profits. However, since corporation tax and payment of the agrarian
debt (representing the value of expropriated assets) was levied on
declared profits, members had a strong incentive to take more, if not
most, of their income in the form of higher wages and increased levels
of indirect benefits.
Labour discipline in the CAPs eroded quickly and the authority
system was severely weakened owing to the departure of many mana-
gerial personnel and to a lack of understanding among the members
as to cooperative principles and practice (Scott, 1979a). This led to a
very rapid rise in the costs of welfare provision on the sugar com-
plexes which is shown in Table 7.3. The sugar CAPs were formally
established in 1970 and in the first year of their existence broadly
defined welfare expenditure (at current prices) rose by between 39
per cent and 70 per cent. Cayalti, where such expenditure rose by
only 10 per cent in 1970-1 was a special case, owing to its precarious
financial situation on the eve of the land reform.
There are many problems with these data, which were collected by
a government agency charged with costing the entry into the CAPs of
hired cane cutters. The sugar complexes did not use a uniform
accounting framework, so that the same cost item could occur under
different headings in different enterprises. Furthermore, some
plantations presented more detailed and comprehensive information
on social expenditure than others and the reliability of the figures
varied among the CAPs.
Nevertheless, some conclusions may be drawn from Table 7.3.
Firstly, the cost of food rations and subsidies amounted to between
one third and one half of total social expenditure on all cooperatives,
except at Paramonga where this item was much less significant. The
situation at Paramonga was due to the Grace company's efforts to
reduce the proportion of the real wage paid in kind during the 1960s. 6
Secondly, there is a fairly consistent pattern of expenditure on other
items, although this is not always shared by Paramonga. Thus, in
1970 spending on education ranged from 9-16 per cent of the total,
while expenditure on health varied from 15-18 per cent. Thirdly,
there existed considerable variation in the level of social expenditure
per co-operative member in 1971 which is shown in Table 7.4.
The level of spending in Pucala was only 60 per cent of the level
achieved in San Jacinto. However, the figure for San Jacinto may be
misleading because it includes substantial investment expenditure on
the construction of new houses following the earthquake of 1970
which caused considerable damage in the Nepefia valley.
This cost-push initially took the form of a deepening of social
expenditure, or an increase in welfare spending per co-operative
member. However, a complementary process of widening social ex-
penditure, defined as an increase in the proportion of the labour force
made up of co-operative members, was soon observed. In Tuman,
the number of hired workers fell from 40 per cent of the labour force
in October 1970 to 20 per cent in April 1974, while cooperative
membership grew from 1697 to 2707 over the same period (Scott,
1979b:335).
0\
0\
-
Table 7.3 Social expenditure on six sugar co-operatives, 1970-71
Tuman PocaltJ
Change Change
1970 1971 197~71 1970 1971 197~71
Expenditure Expenditure Expenditure Expenditure
(S/.1000) % (S/.1000) % % (S/.1000) % (S/.1000) % %
Housing 1606 3 7 526 9 +369 n.a. n.a n.a n.a
Education 6128 11 10 417 12 + 70 7 332 16 12 285 17 + 67
Food subsidies and rations 24179 42 27 854 33 + 15 18 381 39 26187 36 + 42
Health care 8 573 15 13 578 16 +58 8 247 18 14 155 20 +72
Public utilities 10 367 18 18119 21 + 75 } 24 +54
Leisure activities 2 843 5 2 953 4 + 4 11172 24 } 17 257
Other 3 203 6 3 989 5 +24 1487 3 2 452 3 + 65
Total 56 899 100 84 436 100 +48 46 619 100 72336 100 +55
Pomalca Cayalti
Housing 19144 23 32 152 27 +68 3 916 7 6 767 12 + 73
Education 7 403 9 7490 7 + 1 5 097 10 5 415 9 + 6
Food rations + subsidies 31961 38 48 994 42 +53 26000 50 27 493 48 + 6
Health care 13 981 16 23 519 20 +68 8 031 15 6 839 12 - 15
Public Utilities 7788 15 8 896 16 + 14
Leisure activities 11604 14l 5 037 4 - 56 0 0 214 0 + 0
Other l 1437 3 1705 3 + 19
Total 84 093 100 117 192 100 + 39 52 269 100 57 329 100 + 10
San Jacinto Paramonerl
Housing 3 719 15 13 501 2 33 +263 5 762 14 15 341 24 +166
Education 2 534 10 3 234 8 +28 5 873 14 8 814 14 + 50
Food rations + subsidies 11 731 48 17 937 43 + 53 6 275 15 6 658 10 + 6
Health care 4 156 17 4 670 11 + 12 10 351 24 11426 18 + 10
Public utilities 1949 8 1 730 4 -11 9 866 23 15 011 23 + 52
Leisure activities n.a. n.a. n.a. n.a. 701 2 1913 3 +173
Other 421 2 526 1 +25 3 373 8 5 489 8 + 63
Total 24 510 100 41 598 100 + 70 42 201 100 64 652 100 + 53
SOURCE: SAF-CAP, 1973.

1. Maintenance costs only. US$1 = S/. 38.70.
2. Includes costs of reconstruction after 1970 earthquake.
3. In Paramonga, the cost of welfare services was shared between the cooperative which controlled the sugar plantation and
mill, and the Sociedad Paramonga Ltda, which controlled the rum factory and paper plant. These figures refer to the costs
borne by the cooperative.
......
~
Table 7.4 Social expenditure per member in six sugar co-operatives, 1971
Soles/Member US$/ Member

Tuman 38 946 1006
Pucala 24 388 630
Pomalca 35 087 907
Cayalti 25 177 650
San Jacinto 40 544 1048
Paramonga 38 030 983
SOURCE: Table 7.3. US$= S/. 38.70 in 1970 and 1971.
This politically motivated entry of additional members into the

co-operatives from the ranks of the contract labourers, and in par-
ticular from among the hired cane-cutters, was imposed from above
by the Velasco government. The financial implications for Tuman of
granting full membership rights to the hired cane-cutters are shown in
Table 7.5. In 1971, an unskilled socio ofthe co-operative earned over
four times as much as a hired cutter, assuming the latter was fully
employed over the year. Approximately 62 per cent of this earnings-
differential corresponded to the imputed value of the socio's food
rations and subsidies, housing, medical and education benefits.
With an increasing share of sugar output sold in the domestic
market at controlled prices, these cost increases threatened the
financial viability of the CAPs which were saved from an early crisis
by the commodity price boom of 1973-4. Following the lapse of the
US Sugar Act in 1974, under which certain developing countries
(including Peru) received a preferential price for sugar exported to
the United States, and a decline in the world sugar price to its lowest
real level since the 1930s, the economic position of the co-operatives
became ever more dire as chronic indebtedness turned into insol-
vency. Labour unrest was endemic and direct state intervention in
co-operative affairs, which had been intermittent since their forma-
tion in 1970, culminated in the imposition of an incomes policy on the
CAPs in 1976 and the declaration of a state of emergency in the sugar
industry in 1977 (Scott, 1979a).
The critical situation in the industry has persisted throughout the
1980s. Three years of drought between 1978 and 1981 adversely
affected production and led to unprecedented imports of sugar. In
1981 and 1983, one quarter of Peruvian sugar consumption was met
from imports (Actualidad Economica, April1985, p. 12). Real pro-
Table 7.5 Direct and indirect earnings of members and non-members of

CAP Tuman, 1971
Member (unskilled field labour) Non-member (cane-cutter)

Monthly Daily
earnings (Sf.) earnings (Sf.)
Monthly wage 3000 Piece rate- Sf. 7.44)

per ton)
Food rations Daily productivity-) 59.52
(4 children) 1277 8 tons )
Holiday pay (1/12) 250 Daily bonus (D.S. 011,
27-10-1967) 1.66
Compensation
payments (1/12) 250 Sunday wage 9.92
Housing 2000 Holiday pay (1/30) 5.93
Hospital and Compensation payments
medical services 600 (1f30) 5.93
Education 150 82.96
Monthly
7527 earnings (Sf.)
Sf. 82.16 x 25 days to
give monthly earnings of 2074
Distributed profits
(Sf. 11,000 + 11
months) 1000
Total 8527 2074
SOURCE: ONDECOOP Report presented at regional seminar on evaluation

of training programmes in the production cooperative (October 1971).
ducer prices fell below unit costs in the export market, where the
nominal price had declined to US $0.09 per kilo by 1985, and in the
domestic market, despite a price increase in April1986 prompted by
the threat of strike action in the industry (ibid., June 1986, p. 17).
The dual nature of welfare provision as part of the process of wage
determination ·and the system of social control in the workplace is
well illustrated by the experience of the sugar co-operatives. Mem-
bers wished to maximize net earnings per head, so with the end-year
residual subject to high taxation, socios attempted to take a larger
share of their real wage in the form of indirect benefits. At the same
time, the widespread legitimacy crisis which had emerged in the
co-operatives by the mid-1970s weakened managerial control over
access by members to health, educational and other welfare services.
CONCLUSION
Sugar plantations have always been more than simply a place of

work. They are also a particular kind of social community. The
growth of a comprehensive system of employer-financed welfare
provision at the micro-level explains why these enterprises have often
been characterized as total institutions within which a wide range of
human needs are met from the cradle to the grave.
However, the existence of a significant non-monetary component
of the real wage has certain interesting economic implications. Firstly,
most types of firm-level welfare provision such as housing, educa-
tion and health are fixed costs. They do not vary over a large range of
output, so marginal costs of production remain unaffected. There-
fore, increased welfare services will only affect optimal output levels
when minimum unit costs are raised above the product price, in
which case an enterprise will close down in the long run. Where
prices exceed unit costs, a rising share of fixed costs in total costs
makes continuity of production increasingly important and, in certain
cases, may make profit maximization virtually synonymous with out-
put maximization.
Secondly, welfare provision, as defined in this chapter, affects
the extent and nature of real wage flexibility. During the First World
War when food prices rose sharply, the sugar growers attempted to
cushion workers against a drastic fall in the consumption wage by
subsidizing food items and cultivating basic staples on the plantation.
That is, they attempted to reduce the downward flexibility of the
consumption wage. This could be taken as evidence for the existence
of an efficiency wage in the industry. However, it is more likely that
growers wished to reduce the probability of labour unrest and result-
ing loss of output which would, and in some parts of the country did,
accompany a collapse in the consumption wage.
Conversely, after 1956, when union pressure led to a sharp rise in
nominal wage rates, growers were unable to reduce the level of
non-monetary benefits to check the rise in the real product wage.
Thus, while the provision of more generous welfare services allowed
growers to reduce downward movements in the consumption wage,
the nature of the politico-economic environment within which sharp
increases in the nominal wage occurred, namely collective bargaining
with strong trade unions, prevented them from cutting back on
welfare services to reduce the rise in the product wage.
Thirdly, welfare provision affects income inequality within the
firm. However, it is not clear whether access to non-monetary bene-
fits narrows - or widens overall - income differentials among the
labour force. On the one hand, certain allocative rules and take-up
rates for particular benefits suggest that inequalities of welfare provi-
sion were less than inequalities of cash earnings. Thus, food rations
and food subsidies were (and still are) allocated according to the
number of children in a worker's household. Furthermore, mana-
gerial and technical staff, who had the highest cash incomes, were the
most likely to pay for private health care and private education off the
plantation and, less commonly, to live in their own houses in nearby
towns.
On the other hand, there is evidence that the provision of welfare
services accentuated, or at least did not diminish, the degree of
inequality associated with the distribution of cash incomes. Casual
workers were denied access to employer-financed non-monetary
benefits and received a lower daily wage than permanent workers
with the same skills. Even where these temporary labourers had the
employee's social security contribution (SSO) deducted from their
wages, few of them possessed a book of paid-up stamps which was a
prerequisite for claiming benefits under the scheme. Among the
permanent workers, the white-collar employees with higher cash
incomes generally obtained the better quality housing on the planta-
tion and also received better quality health care under the national
system of social security.
Overall, it may be concluded that the distribution of non-monetary
benefits was no less unequal and may have been more unequal than
the distribution of cash incomes on the sugar plantations both before
and after the agrarian reform.
Notes
1. The granting of the eight-hour day only affected mill and workshop
employees in the sugar industry because field workers were paid on piece
rates (Blanchard:156).
2. The SSO was not implemented in Cayalti until January 1943, at which
date the level of benefits payable to workers was increased. This caused
the plantation management to complain that the scheme did not provide
the full range of benefits to their workers on the complex (Hacienda
Cayalti, 6 November 43).
3. The main target of worker discontent was the increasing cost of living.
Food prices had risen sharply in Peru and in the international economy
during the Second World War and price controls on basic necessities were
introduced in 1943. This led to shortages, queues, the emergence of a
black market and rapid increases in food subsidies (Portocarrero:128-31).
In the same year, legislation was reintroduced requiring the coastal sugar
estates to sow not less than 10 per cent of their cultivated area with food
crops (or 5 per cent if double cropping was possible). These administrat-
ive controls on the coastal food acreage remained in force throughout the
post-war period although they were modified in 1958 and 1964.
4. Payne has argued that during this period labour relations in Peru should
be described as 'political bargaining' which must be distinguished from
'collective bargaining'. Political bargaining occurs where 'short of dicta-
torial repression, the form of intervention which is most likely to prevent
hostile worker organization activity is the imposition on the employer of
settlements that tend to meet minimum worker demands. That is, the
executive must and does order employers to grant specific concessions to
the workers' (Payne:ll).
In contrast, collective bargaining 'is essentially a system based on
economic coercion. The strike is effective as a concerted withdrawal
of labour . . . Decisions in this system are made independently of the
government, at the firm or industry level' (Payne:12). Collective bargain-
ing is not the general pattern of wage determination under free regimes in
Peru because of the existence of a surplus of unskilled workers. 'The
relative abundance of labour in Peru makes the replacement of strikers a
comparatively easy task. For every worker who goes on strike at a
particular establishment there will be dozens eager to take his place'
(Payne:14).
There are several problems with this concept of 'political bargaining'.
Firstly, the contrast with collective bargaining is overdrawn. Many pro-
cesses of collective bargaining provide for arbitration in cases of per-
sistent and perhaps violent disagreement between employers and workers.
Where such arbitration occurs, and it may not be compulsory, it is usually
undertaken by a state agency which introduces a political element into
conflict resolution.
Furthermore, strikes may be called for many different reasons, and
workers may seek to pursue different objectives within different bargain-
ing contexts. Thus, a strike in one section of a plant over a relatively
minor incident concerning payment of bonuses or treatment by a super-
visor may only last a few hours and be settled directly by management-
union negotiation.
However, in the case of a claim for union recognition, an issue having
important long-term consequences for a particular firm, sympathy strikes
may be called throughout the industry and maximum pressure placed on
employers and the government. Therefore, it is misleading to present
collective as opposed to political bargaining as mutually exclusive pro-
cesses of wage determination, when they may coexist within a single indus-
try as parts, or even stages. of the overall system of industrial relations.
This is well illustrated at Cartavio where in 1961 an agreement was
reached between management and union on wage increases after plant-
level bargaining. However, it was accepted that if the government decreed
larger wage and salary increases than those negotiated independently by

the two parties, then the larger increases would stand. If the officially
decreed increments were lower than those already negotiated, then the
plant-level wage bargains would be honoured (Hacienda Cartavio, Mi-
nutes, 5 May 1961).
Secondly, the emergence of an unskilled labour surplus in the late 1950s
was insufficient in itself to undermine union power in particular industries.
No manager of a sugar complex facing threatened strike action by several
thousand unionized employees would have seriously entertained dismiss-
ing all union members and replacing them with blackleg labour. Such an
action would have precipitated widespread and intense violence against
company staff and property.
5. Between April 1961 and September 1964, the company funded these
union projects to a total value of S/. 210 000 (US$ 7833) (Hacienda
Cartavio, Minutes: 11 April 1961, 18 April 1963, 26 June 1963, 5
September 1964).
6. Thus, on one occasion the management at Cartavio argued that:
The modern trend is to avoid the payment of indirect benefits because

they do not represent a gain for the worker as was the case in the past,
but rather an obstacle to human development because individuals
should be paid a just wage in cash, so as to become fully independent
(Hacienda Cartavio, Minutes, 28 May 63).
References
Actualidad Economica (Lima), various issues.

Albert, W. (1976) An Essay on the Peruvian Sugar Industry, 18~1920
(Norwich).
Blanchard, P. (1982) The Origins of the Peruvian Labor Movement, 1883-
1919 (Pittsburgh).
Burgess, E.W. and F.H. Harbison (1954) Casa Grace in Peru (Washington,
DC).
Chaplin, D. (1967) The Peruvian Industrial Labour Force (Princeton).
Collin Delavaud, (1974) Les Regions C6tieres du nrou Septentrional (Lima).
Figueroa, A. (1973) El Impacto de las Reformas Actuales sobre Ia Distribu-
cion de lngresos en el Peru, Apuntes (Lima), vol. 1, 1.
Gonzalez, M. (1985) Plantation Agriculture and Social Control in Northern
Peru, 1875-1933 (Austin).
Hacienda Cartavio, Minutes of Management-Union Meetings (Aetas) dated
11 April1961, 5 May 1961, 18 April1963, 28 May 1963, 26 June 1963 and
5 September 1964.
Hacienda Cayalti (1934) Administrator of Cayalti to Manager, Aspillaga
Hermanos, Lima, 23 June (Lima, Archivo del Fuero Agrario (AFA)).
Hacienda Cayalti (1936) Administrator of Cayalti to Manager, Aspillaga
Hermanos, Lima, 5 September (Lima).
Hacienda Cayalti (1943) Administrator of Cayalti (R. Neumann) to Man-
ager, Aspillaga Hennanos, Lima, 6 November (Lima).

International Labour Office (1966) Plantation Workers (Geneva).
Mejia, J.M. (1974) La Reforma Agraria y Ia Modificacion de las Relaciones
Sociales en una Hacienda Azucarera: el Caso de Tuman (Lima).
Mesa-Lago, C. (1978) Social Security in Latin America (Pittsburgh).
Negociacion Tuman (1961) Reclamos Obreros-2, Juan Pardo to Enrique
Basombrio, 6 April.
Negociacion Tuman (1961) Reclamos Obreros-2, Gildemeister of Hacienda
Laredo to Enrique Basombrio, 14 April.
Payne, J.L. (19()5) Labor and Politics in Peru (New Haven).
Portocarrero, M.G. (1983) De Bustamante a Odria: El Fracaso del Frente
Democratico Nacional1945-1950 (Lima).
SAF-CAP (1973) Investigacion Cortadores de Cana: lnforme Servicios (Chic-
layo).
Scott, C.D. (1976) Peasants, Proletarianization and the Articulation of
Modes of Production: The Case of Sugar Cane Cutters in Northern
Peru, 1940-69, Journal of Peasant Studies, vol. 3, 3, April.
Scott, C.D. (1979a) The Labour Process, Class Conflict and Politics in the
Peruvian Sugar Industry, Development and Change, 10.
Scott, C.D. (1979b) Machetes, Machines and Agrarian Reform: The Political
Economy of Technical Change in the Peruvian Sugar Industry, 1954-1974.
Monograph in Development Studies, No. 4, University of East Anglia
(Norwich).
Sulmont, D. (1977) El movimento obrero peruano 1890-1979 (Lima).
8 Social Insurance: Ideology
and Policy in the Argentine,
c. 1920--66
Colin M. Lewis
This chapter examines ideological influences and policy considera-

tions· underpinning major shifts in Argentinian welfare provision
from the interwar period until the 1960s. The 1920s and 1930s wit-
nessed a major debate about social policy and social conditions in the
republic which embraced various segments of the political spectrum
and resulted in a number of initiatives. Some of these prefigured later
reforms. The close of the period saw a basic restructuring in the
administration of the social insurance system partly because of the
financial crisis then confronting it but also in part due to the imposi-
tion of a new political agenda following the military golpe of 1966.
The principal focus is upon the social insurance system, or prevision
social to use the Spanish term current for much of the period.
Occasionally, broader aspects of 'welfare', as described at the begin-
ning of the volume, are drawn into the discussion. It will be argued
that the Argentinian experience offers support both for theories that
depict the process of welfare expansion and enhancement as demand
driven - a function of the organizational effectiveness of would-be
beneficiaries - and also those which assert that the process was
consequent upon co-optive strategems applied by authoritarian
regimes. Nevertheless, this was not the whole story and it will also
be demonstrated that fiscal considerations proved to be an enduring
and, perhaps, the overriding constant in the Argentinian case. Given
a relatively weak tax system, successive administrations seized upon
the fiscal opportunities provided by the growing popular appeal of
social insurance in order to improve revenue raising capacity. The
deployment of social security funds, however, changed dramatically
over time. Repeated financial crises were a second- almost patholo-
gical- constant of the insurance system. As will be shown, the origins
of these crises - although often provoking similar solutions - were
quite distinct and emerged from sub-period specific uses to which
social security resources were applied. The use of those resources was
175
176 Colin M. Lewis
in turn almost invariably a function of larger policy considerations.

Increasingly, the fiscal imperative that drove nominal advances in
social welfare provision was geared to macro-economic strategy.
The failure of the scholarly literature to acknowledge the primacy
of a fiscal imperative in Argentinian social insurance policy may be
explained both by the focus on the politics of welfare extension,
outlined above, and by an excessive concern with two basic tensions
in models of social security applied in this and subsequent periods.
The first of these relates to questions of entitlement and function.
Was the system founded on minimalist principles that offered the
insured protection against a loss of income while (temporarily) un-
able to work? Or did the system grant a basic right to a pension on
completion of a predetermined period of service/contribution; that is,
was the scheme established on jubilatorio precepts? The second
tension pertained to financing. Was the social insurance system a
fully-funded, actuarially capitalized arrangement whereby the con-
tributions of each member would be invested in such a way as to yield
an income sufficient to guarantee the payment of benefits or future
pensions equal to a specified percentage of pre-retirement wages or
salaries? Or would the system function on a 'pay-as-you-go' basis
whereby contributions by current subscribers covered payments to
those in receipt of benefits and pensions? These tensions were never
fully resolved.
As is widely recognized, there was a massive increase in social
security expenditure and general welfare provision during the early
years of the first Peronist administrations (1946-55). 1 These measures
facilitated a dramatic- albeit temporary - redistribution of income to
the poorer members of society and also promoted a general improve-
ment in welfare. Although understandable, the excessive focus upon
welfare gains associated with Peronist strategies to improve the social
wage and to extend the social security system obscure the scale and
role of earlier welfare schemes. An undue emphasis upon the co-
optive and the social dimension of Peronist policy also deflects atten-
tion from the fiscal imperative underlying welfare expansion. If Peron
gained much political capital from welfare enhancement at this junc-
ture, the model of social security adopted owed a great deal to
pre-existing schemes. The financial implications of massive increases
in social security coverage were already well established by this stage
and would not be lost upon other administrations of the 1950s and
1960s.
Social Insurance in the Argentine 177
THE 1923 SOCIAL INSURANCE PROJECT
A flurry of measures was submitted to Congress in the early 1920s

and discussed within and outside the chambers. The events of these
years represent a particular conjuncture which illuminate several
interrelated themes in the welfare debate that would resurface later,
namely the financial crisis of the existing system, budgetary pressures
and options for tax reform, social unrest and proto-populist tenden-
cies. Two quite distinct assessments of the 1923 social insurance
scheme present themselves: one depicts the project as a missed
opportunity for an early, large-scale extension of the social insurance
network, the other (partly accounting for that failure), identifies the
project as essentially a fiscal- rather than a welfare- measure.
It is generally acknowledged that the modern system of social
insurance in the Argentine dates from the establishment in 1904 of a
contributory 'capitalized' scheme for employees of the federal
government. 2 All categories of wage-earning and salaried staff were
covered by this arrangement (which provided old age pensions, and
sickness and invalidity benefits), including those on the payroll of
semi-autonomous public entities such as the government clearing
bank - the Banco de Ia Naci6n Argentina - and the state railways.
Previously only very restricted groups of civil servants (judges, senior
officials and the like) had qualified for non-contributory pensions
along with regular army and navy personnel. These benefits were
financed from general taxation. Following the creation of the Caja
Nacional de Pensiones y Jubilaciones Civiles (subsequently Caja de
Estado) by law 4.349 of 20 September 1904, the first major group of
private-sector workers to be covered by a social insurance scheme
was railwaymen. The Caja de Ferroviarrios (sometimes the Caja
Ferroviaria) was instituted by law 10.650 of 24 April1919. Two years
later law 11.110 extended similar arrangements to public utility com-
panies. The Caja Bancaria, established by law 11.232 of 9 October
1923, insured employees in the banking, insurance, savings and finan-
cial sector. This legislation covered state and private institutions. 3
While the formation of the civil servants' pension fund may be viewed
as a co-optive measure, railway workers only gained their privileges
after years of protest and much opposition by the private, foreign-
owned companies. 4 If the federal government pressed enterprises to
implement a pensions schemes in order to restore industrial peace on
the railways and to ensure worker discipline, in the final analysis it
178 Colin M. Lewis
would be difficult to argue that the Caja Ferroviarria was not primar-
ily established as the result of successful pressure from the work force.
Direct action by workers in the private sector thereby secured welfare
benefits already enjoyed by colleagues employed on the state rail-
ways- the latter group now being incorporated within the new caja.
Although the proportion of the economically active population
covered by social insurance legislation was small, by the end of the
1910s two important groups were thus in receipt of a similar range of
benefits notwithstanding marginal variations in terms of eligibility
and more substantial differences regarding contributions pro-
cedures. s While the principal focus of these insurance schemes was
the provision of pensions, a facility much appreciated by contributors
was the supply of credit. 6 Contributors were able to borrow from the
cajas for a variety of purposes at commercial rates of interest on
payment of a modest arrangement fee. Mortgage loans, to finance the
purchase of houses or effect home improvements, proved by far the
most common form of lending by the cajas. Given the acute housing
shortage in Buenos Aires and some up-country towns, it is arguable
that by the late 1920s railwaymen and civil servants came to regard
mortgages as a greater, certainly a more immediate, benefit than old
age pensions.
With these precedents in place, the scene appeared set for a further
extension of the insurance 'safety net'. In official circles, the appeal of
welfare enhancement was hightened by the unrest of the immediate
post-First World War period. 7 Racial and social tensions, often ex-
ploited by opponents of the first Yrigoyen Radical administration,
threatened to destabilize a regime that had already - in the case of
railway workers - learnt that social legislation and direct support for
workers' demands brought electoral gains. Yet the 1923 scheme,
which applied to virtually all groups of uninsured workers, other than
those employed in agriculture, was vehemently opposed by both
capital and labour. 8 The contrast with the attitude of railwaymen to
contributory benefits was stark.
The distinct opposition of secondary and tertiary sector workers to
proposed new national insurance legislation is, at first sight, not easy
to explain given the comparability of new and existing schemes and
the lengthy campaign mounted by rail unions to secure pension
provisions for their members. Under the terms of the bill, separate
Social Provident Funds, cajas, were to be set up for labour employed
in industrial establishments, the publishing and printing trades (in-
cluding journalists), the merchant marine (including coastal and river
shipping) and commerce and the retail trades. 9 Worker contributions

were to be deducted from wages and salaries at source and matched
by employer payments into the cajas. The bill had a rough passage
through Congress in the face of lobbying by employers and a rising
tide of direct action by labour. Confronted by hostility of this order,
the scheme proved impossible to implement. Within eighteen
months, the enabling legislation had been rescinded and desultory
payments into the funds had been returned to contributors. 10
Critics of the project pointed to the impracticability - and expense
- of policing a scheme involving a large number of establishment,
many of which were small and often dependent on family labour.
Proprietors of corner-shop retail businesses and labour-intensive arti-
san workshops resented the intrusiveness of the legislation and railed
against state intervention in the labour market. All employers com-
plained of administrative costs and argued that the scheme would
damage business. Similar criticisms would echo in the 1940s and
1950s when employers voiced doubts about administrative efficiency
and even-handedness and protested against state intederence in
labour management. Private railway companies had acceded to pen-
sion provisions only when permitted to levy a surcharge on passenger
fares and freights to cover employer contributions to the fund. 11
Beset by the problems of the early twenties- first the post-war slump,
later 'dumping' by foreign manufacturers and subsequently tightness
in the labour market - Argentinian industrialists feared that it would
not be possible to pass the burden of employer contributions on to
consumer. 12 In addition, they argued that the measure would further
inflate already high labour costs. There must also have been the
suspicion on the part of some small firms that others would evade
contributions and so gain an unfair competitive advantage.
While larger enterprises undoubtedly shared many of the misgiv-
ings of small firms about the national insurance scheme, the reserva-
tions of big business, like that of labour, appears to have been
provoked as much by the semi-fiscal thrust of the 1923 bill. 13 In this
respect, it is essential to locate the social insurance project within the
context of the 'package of reforms' essayed in the last months of the
Yrigoyen administration and the early years of the second Radical
government headed by Alvear. These reforms included moves to-
wards the consolidation of a government oil monopoly with the
reorganization of YPF, the state oil company, in 1922; the tariff
reform of 1923; the discussion of new forms of taxation, not least
direct taxes; and projects to establish a central bank and to unify the
180 Colin M. Lewis
dual currency system. 14 Notwithstanding the intrinsic merit of each

measure, the collective appeal of these reforms was essentially fiscal
and financial. Adjustments to the tariff were - while possibly protec-
tive - designed to increase revenue. Similarly other tax changes were
aimed at revenue maximization. The restructuring of the state oil
company served a variety of purposes, not least an increased flow of
resources to the exchequer. The proposed revaluation of gold stocks
held by the government at the Conversion Office, Argentinian lega-
tions overseas and at the Banco de Ia Naci6n Argentina were also in
part predicated upon government financial requirements. These
monetary and banking reforms, which involved also the formation of
a central bank, would have given the government much greater
control over credit and further facilitated the absorption by the
money market of short- and long-dated federal government paper.
But perhaps the most sophisticated measure was the extension of
social insurance.
Throughout the twentieth century, successive Argentinian govern-
ments had become accustomed to financing part of current ex-
penditure from short-term borrowing. In this, post-1916 Radical
governments were no different from their conservative predecessors.
However, after 1913 it had become virtually impossible to borrow
overseas and finance ministers had looked increasingly towards the
Buenos Aires capital market - by far the most developed in Latin
America- for short-term accommodation. Yrigoyen presided over a
large real increase in federal government expenditure, in part occa-
sioned by the expansion of employment in the public sector. 15 Both
the rise in federal expenditure and the increased reliance upon short-
term borrowing occasioned adverse criticism. Opponents castigated
the regime for its profligacy. Others, would-be borrowers, claimed
that the government's insatiable demand for credit restricted their
access to funds. Business and financial interests deplored the destabi-
lizing effect of the weight of short-dated government paper in the
market. The growing burden, and structure, of federal debt was
considered to be inflationary and likely to delay a return to currency
convertibility after the war. Heavy government borrowing was also
held responsible for the prevalence of high interest rates. 16 In addi-
tion, a crisis was looming for existing social insurance funds. One
methods of relieving this crisis would be to extend social insurance
cover. drawing in extra contributors to finance disbursements.
The National Insurance Law 11.289 of 22 November 1923 must be
analysed within this fiscal and financial environment. On gaining
office in 1922, Alvear expressed a determination to reduce budget

deficits and to consolidate the floating debt. 17 Broadening the social
insurance net appeared to be a politically expedient method of resolv-
ing many of the government's pressing financial problems and com-
mitments. The Alvear government was anxious about the fiscal base
and the need to address criticisms of financial laxity directed at it.
Within this context, the requirement placed upon the social insurance
cajas to invest at least 50 per cent of their income in long-dated
government bonds takes on a distinctly fiscal complexion. 18
It is plausible to argue that proposals to establish a central bank
and to extend the scope of the social insurance system were, amongst
other things, designed to foster a market for official paper. These
schemes, notably the latter, would guarantee demand for long-dated
government bonds. And an extension of already established net-
works of social provident funds to other groups of workers was
thought to be politically less sensitive than attempting to implement
large-scale direct taxation. Both assumptions proved to be prema-
ture. Debt consolidation had to await the reopening of overseas
money markets later in the decade when the Argentine government
was able to exchange short-term local paper for consolidated dollar
and sterling obligations. The introduction of an income tax and the
creation of a central bank followed in the 1930s by which time the
impact of the interwar depression had muted opposition to these
measures. But, for the purposes of this chapter, of greater import-
ance was a recognition of the potential fiscal role of a massive
increase in social insurance and the prospect of creating a domestic
market for federal funded debt. Perhaps this alone explains the less
than enthusiastic reception of 1923 social legislation by its putative
beneficiaries.
AUTHORITARIANISM AND WELFARE: SOCIAL ISSUES

AND SOCIAL CONDITIONS DURING THE 1930s
The course of events in the Argentine during the 1930s have been
well documented and discussed elsewhere. 19 Know as Ia decada in-
fame, the period 1930--43 was one of political fraud - controlled
elections, party political proscription/abstention and simple ballot-
rigging - and oligarchic rule under the guise of constitutionalism.
Opening with a military coup against the bankrupt Yrigoyen adminis-
tration, the 'infamous decade' closed when the military again
182 Colin M. Lewis
intervened to overturn an increasingly isolated conservative clique.

During these years, the armed forces gradually came to play a more
open and a more direct role in politics. Nationalism and authoritar-
ianism also became more pronounced features of the political dis-
course as social tension mounted and the country's relative economic
performance began to slip. Although the Argentinian economy was,
in fact, remarkably buoyant during the 1930s, the political atmos-
phere became clouded and the basis for a less open, more repressive
system was laid. The decada infame marked the country's descent
into a cycle of alternating military-civilian governments, punctuated
by mounting repression and acute economic instability, that was to
become the hallmark of Argentinian economic and political history
for the rest of the century.
What was the impact of these events upon welfare policy and
approaches to the existing social security system? Looking back from
1930, contemporaries would have tended to observe only modest
growth in the system, yet had the 1923 legislation been fully im-
plemented, the Argentine would have possessed the world's most
comprehensive social insurance system. 20 Nevertheless, by this stage,
social welfare was firmly on the political agenda. Some critics of
existing, piecemeal arrangements identified the defects of the system
in terms of ill-considered actuarial provisions, the raising of labour
costs, and an unnecessary enlargement of the role of the state (impli-
cit in government supervision of social security funds). Others
pointed to the excessive growth of the state sector during the Radical
ascendency and the consequent burden imposed by excessive
bureaucratization upon the productive sectors of the economy. 21
However, and possibly because of the events of the early 1920s, the
Radicals were hardly identified as the party of welfare enhancement.
The civil servants' social insurance fund had been created by a
previous conservative administration and, if the Yrigoyen govern-
ment had presided over the extension of social insurance provision to
organized segments of the labour force, any political capital resulting
from this process had probably been disipated by an anti-labour
stance on other occasions. 22 Whether the tensions manifest during
the immediate post-First World War years were racial or social in
origin, it is beyond question that urban and rural workers involved in
a number of disputes were severely repressed. Moreover, while some
segments of labour could present welfare extension as a function of
direct action, other groups saw little benefit in contributory social
insurance. In short, at this point welfare extension was neither the
project of any one political party nor did it enjoy broad popularity
among sections of society depicted as potential beneficiaries. But by
the 1930s, populist and fiscal opportunism were recognizable features
of the social insurance system. John Fogarty has observed that an
overriding characteristic of the Argentinian approach to welfare at
this stage was a concern about working people, not about the
destitute. 23 The disadvantaged would have benefited from a system of
social security funded from general taxation but could hardly shoul-
der the burden of social insurance contributions.
What themes dominated the debate about 'welfare' during the
1930s? At the outset, it must be recorded that the decade was one of
discussion, or at best minor refinement of existing practice, rather
than of concrete advances. The only major innovation was the intro-
duction of maternity allowance and leave for working mothers,
financed by compulsory deductions from the wages and salaries of
working women, single men, childless married men and employers.
Maternity insurance was the only compulsory levy that applied across
the board - other schemes were sector specific. 24 Maternity benefit
aptly characterizes the political environment within which social pol-
icy was considered. It was one of the few proposals to attract wide-
spread support across the political spectrum and from beneficiaries
and most contributors.
In general, welfare enhancement (principally the extension of
social insurance) was addressed within a Bismarckian, co-optive
framework at this point. And, although its influence should not be
exaggerated, the language of Italian fascism began to permeate the
formulation of Argentinian welfare projects. Social insurance was
considered within the context of labour discipline, and the sanctity of
family life, and was related to parallel projects for family benefits and
a minimum wage - a basic income permitting workers and their
families to live in dignity. Representative of this strand of thinking
were the publications of Jose Arce who argued for social security -
rather than social insurance - which included the right to employ-
ment, housing and health care. Invoking the name of Beveridge,
Arce also advocated state action to ensure the provision of a mini-
mum standard of life compatible with human dignity. Social security
would promote harmony between worker and employer. All classes
would benefit from an inclusive system of welfare that covered every
citizen. And if it was the duty of the state to provide an all-embracing
system of social security, it was the obligation of the citizen to seek
gainful employment. Similar views were expressed by Joaquin
184 Colin M. Lewis
Argonz, sometime governor of Santa Fe during the concordiancia

years. Campaigning for social justice and commenting on the lack of
adequate training for the workforce, Argonz appeared to support a
system that extended benefits to low-paid workers who might be
unable to finance contributions. Like others, Argonz pointed to the
poor physical condition of young men inducted into the armed forces
- and the high rejection rate of conscripts on medical grounds - as
indicative of the incidence of poverty and ill-health. 25 Sentiments
such as these obtained a larger official circulation during the corpor-
atist Uriburu administration, immediately following the 1930 coup,
and occasionally resulted in policy enactments - primarily at provin-
cial level- during the subsequent Justo presidency, notably in C6rdo-
ba and Argonz's own province of Santa Fe.
This language appealed to various conservative organizations,
several of whom dominated national politics during the decade. The
more economistically minded - and nationalists - tended to regard
these family welfare measures as a stimulant to future population
growth and the easing of labour supply. Emphases upon the family
and the sanctity of family life also corresponded with new directions
in Vatican thinking. 26 The higher profile given to social problems and
labour affairs in Congress correlates with the growing political in-
fluence of the Roman Catholic Church in the Argentine. Hitherto,
the advocacy of social measures such a child benefit, maternity al-
lowances and minimum wage legislation had been largely the pre-
serve of the left. Despite the lack of effective legislation during the
1930s, there was broad support for many of these measures- several
of which attracted some of the most radical as well as the more
conservative elements in Argentinian politics. A number of these
projects would achieve substance in the 1940s.
Socialists were not unaware of the authoritarian tendencies implicit
in several of the projects discussed in Congress at this time. But party
political consideration, in addition to long-term sponsorship of cher-
ished welfare measures, facilitated Socialist participation in the de-
bate. With the Radicals proscribed, Socialist Party representation in
Congress increased and so, consequently, did the platform for the
propagandizing of a larger spread of policies. Favouring a revision
and extension of social insurance which suggested a move towards a
system of social security, Socialist deputies and senators- in the press
and in parliament - sponsored schemes which identified the compell-
ing social problems of the moment. It was more than political spite
that occasioned proposals to improve the lot of rural workers in the
north-west where archaic labour conditions and disease prevailed.

Pamphleteers pointed to the need for anti-truck legislation and state
action to combat the near-feudal (this was the language of the propa-
gandists) conditions that characterized work in the sugar industry.
The problem of urban poverty was highlighted by investigations into
the prevalence of tuberculosis and inadequate housing. For Social-
ists, the answer to such adverse conditions lay in factory legislation,
minimum wages, a reduction in the working week, paid holidays and
closer supervision of working conditions. 27 These measures attracted
little support elsewhere at the time but such remedies, and comment
about the adverse conditions which underlay them, would resurface
with. greater force subsequently.
At this point it is thus possible to observe two discrete strands to
the welfare debate: a conservative, corporatist approach articulated
by intellectual apologists for the concordancia and often projected at
official level; a socialist project for utopian, ameliorative action in the
workplace and for a social security regime funded largely from taxa-
tion. Both formed part of an ambiguous, ambitious discourse about
reform which prefigured later programmes that Per6nists were in-
clined to depict as unique ·and original. The Radicals were largely
absent from this debate, particularly in Congress from which they
were excluded by electoral fraud or by abstentionism. Retreating into
an historic ploy of abstention, Radicals were more inclined to de-
nounce the illegality of the 1930 coup than to formulate new econ-
omic and social policies that might command mass popular support.
PERONISM AND THE FORMATION OF

A 'WELFARE STATE'
An assessment of the military coup of 1943 which marked the end of

the infamous decade and demolished the concordancia - the loose
alliance of forces that had controlled politics since the early 1930s- is
beyond the scope of this chapter. Nevertheless, the collapse of the
old order, the impact of the 1943-6 military governments and the
electoral victory of Colonel Juan D. Per6n in 1946 marked a water-
shed in Argentinian politics and economics, not least in the sphere of
welfare. Many factors influenced the construction of what may prop-
erly be described as a 'welfare state'.
Per6n's efforts to forge a popular political base and to co-opt the
labour movement has been well documented. 28 Following the coup,
186 Colin M. Lewis
he was appointed head of the national labour department, a body

which was accorded semi-ministerial status and re-styled the Secre-
tariat of Labour and Social Welfare during his tenure of office. Per6n
was thus well-placed to implement this project. As 'minister' of
labour, he elaborated a strategy of supporting workers engaged in
disputes and spearheaded a campaign to improve the general level of
welfare consumption. These and later measures included an exten-
sion and deepening of social insurance, the establishment of a
network of public hospitals and clinics, the enlargement of state
education at all levels, from universities to kindergartens, projects
targeting the disadvantaged (orphanages, refugees for children and
abandoned wives), low-cost housing, the generation of employment
and cheap food policies. These efforts to upgrade the 'social wage'
were part of a larger process of increased government intervention in
the economy. Variously depicted as nationalist, populist, opportun-
istic and co-optive, Peronist strategy was probably all of these things.
Yet there were other forces at work.
In the Argentine, of all the countries of Latin America, the Be-
veridge Report - blueprint for Britain's welfare state - had the
greatest resonance. 29 Perhaps this is hardly surprising given the ex-
tent of British influence in the River Plate and the closeness with
which events in Europe were followed in Buenos Aires. It may also
not be without significance that Peron fought the 1946 presidential
elections under the banner of the partido laborista, echoing the
British labour party which had campaigned in the 1945 general elec-
tion for the speedy implementation of Beveridgian social welfare
reforms and adoption of Keynesian macro-economic management.
The first Peronist five-year plan, launched in 1946, envisaged the
creation of a comprehensive system of social security embracing all
workers. The appeal of the Beveridge Report in the Argentine owed
much to its popularization by socialist pamphleteers and to their
identification of social problems associated with poverty and
unemployment. 30 Moreover, by the end of the Second World War it
appeared that the country was wealthy enough to sustain a large-scale
expansion in welfare services. In addition, and partly as a result of
war-induced growth, problems such as inadequate housing and
sharpening income disparities were further highlighted.
A renewed crisis of existing mutual funds also compelled a reform
of the social insurance system. 31 The origins of this crisis, which had
been many years in the making, were diverse. In part it arose from
structural defects inherent in the organization of the funds from the
outset. Underfunding was commonplace. (In the case of the civil

servants caja, income derived mainly from employee contributions.
From the outset, no provision had been made for employer contribu-
tions. The government had simply vested the fund with a modest
stock of interest-bearing bonds.) Benefits were over-generous given
the level of contributions; the age of retirement was low and inval-
idity pensions had often been granted without effective vetting.
A gradual drift from the capitalization system to a 'pay-as-you-go'
approach also contained the seeds of a demographic disaster. Initially
the number of public servants (and therefore potential contributors)
had increased but by the 1940s most of the cajas were faced with an
ageing membership. Even when they had been set up, and allowing
for the fact that the number of contributors far exceeded beneficiaries
receiving pensions and allowances, thereby enabling funds to build
up large capital reserves, many contemporary critics maintained that
the cajas were inadequately capitalized and technically 'in deficit'.
Now most of the funds were faced with an aging cohort of contribu-
tor, a growing number of pensioners and only a trickle of new young
members. In some sectors, virtually no new jobs/contributors had
appeared during the 1930s while lay-offs and forced early retirement
provoked an upsurge in claims precisely when income was most in
jeopardy. 32 By the late 1930s and early 1940s, this demographic
timebomb was on the point of exploding. In addition, at precisely the
moment when being called upon to make larger disbursements,
several cajas found that a substantial proportion of assests were
illiquid, tied up in mortgage advances to members. Wartime inflation
had also eroded the value of holdings of government bonds and
triggered demands for pension increases.
This was not a novel situation. Up to and including the 1930s, the
usual solution to a shortfall in the social insurance budget had been to
increase contributions and tighten regulations governing eligibility -
often in the face of fierce opposition. 33 The solutions essayed in 1944
were more ingenious, namely the establishment of additional occupa-
tional social insurance funds and the creation of a new supervisory
body, the lnstituto Nacional de Previsi6n Social. 34 This mechanism
resulted in a sharp increase in the socially insured proportion of the
economically active population and permitted the transfer of funds
from new resource-rich cajas to those in deficit. Although the parlous
financial condition of some older funds appeared to be cured at a
stroke, the structural defects of the system as a whole remained
unaddressed. The prevailing pensionable age set by most Argentinian
188 Colin M. Lewis
cajas was low in comparison with levels prevailing overseas; fund

members were permitted to take retirement at a relatively early age,
having effected a low basic minimum number of annual contribu-
tions, sometimes as low as 20 years; regulations that applied to the
payment of invalidity pensions were lax or inadequately policed;
arrangements governing the transfer of pensions to surviving, non-
contributor dependents of fund members were sometimes over-
generous; contribution levels were in many cases too low given the
liberal nature of benefits, a problem compounded by delinquency on
the part of payees and limits circumscribing investment oppor-
tunities. 35
The pro-welfare stance of the first Peronist administration has "been
depicted as essentially co-optive. 36 A feature of Per6n's pro-labour
programme during the 1943-6 military regime, this strategy un-
doubtedly fostered support for Per6n among labour and contributed
greatly his to electoral victory in the 1946. Arguably, this perspective
undervalues the struggles - and achievements - of some groups
during the 1930s and 1940s to secure comprehensive occupational
social insurance as of right rather than at the discretion of the estate.
Nevertheless, it is clear that subsequent social policy - essentially
measures designed to increase welfare consumption - was tailored to
promote the consolidation of the regime. The Beveridgian language
of the social programme of the first Per6n presidency - the eradica-
tion of poverty and the establishment of the social dignity of the
masses - also marked the confidence of a resource-rich economy in
the aftermath of the Second World War.
The debate about welfare extension was by no means exclusive to
Peronists, nor elements subsequently incorporated within Peronism.
As stated above, ideologues and politicians of the concordancia era
were clearly influenced by the turn of events in Britain and absorbed
the language of Beveridge. But the rhetoric of welfare dovetailed
nicely with other Peronist projects of the moment, namely the much-
vaunted third path that was neither capitalist nor communist, and the
drive to achieve 'economic' sovereignty and regional hegemony. As
the most developed Latin American economy, making a bid for
continental leadership, it may also have appeared incongruous that
by the 1940s a larger proportion of the economically active popula-
tion in less industrialized countries such as Brazil and Chile was
covered by social insurance schemes than was the case in the Argen-
tine. Perhaps the most 'authentic' Peronist statement on social wel-
fare was that issued by the Agrupacion de intelectuales del partido
Table 8.1 Ordinary government revenue and social insurance income
Government revenue Social insurance receipts

(million current pesos)
Totar Gross Net
receipts %b surplus %c
1946 1 976.2
1947 3 249.9
1948 4 094.4 2 256.3 55.1 1 786.9 43.6
1949 5 613.3 3 148.6 56.1 2 461.3 43.9
1950 7 557.8 4 142.9 54.8 3 337.8 44.0
1951 11 012.9 4 895.3 44.5 3 753.4 34.1
1952 12 214.6 6 308.4 51.6 5 077.3 41.2
1953 12 284.7 7 921.8 64.5 6 461.2 52.5
1954 13 687.6 9 644.7 70.5 6 408.3 46.8
1955 15 588.0
SOURCE: Compiled and calculated from Banco Tornquist Business Condi-

tions in Argentina Nos 271 (July, 1951) p. 42, 286 (June, 1955) p. 3, 287
(Sept. 1955) p. 47, 303 (Sept. 1959) p. 150.
a Revenue collected by all federal fiscal agencies
b Gross social insurance receipts as a percentage of total government
ordinary tax revenue
c Net social insurance receipts as a percentage of total ordinary govern-
ment tax income
peronista in 1947. Exploring new methods of finance, the Agrupacion

observed that an effective system of social security would eradicate
economic risk for workers and obviate conflict between capital and
labour. And while it was the duty of the state to protect the citizen
against loss of income due to illness, injury, incapacity or old age, it
was equally incumbent upon the able-bodied to seek gainful employ-
ment and not abuse the liberality of a welfare system created as the
result of the historic compact between state, capital and labour. 37
Perhaps benefiting from earlier Radical failures, Peronist policy pre-
empted worker opposition to social insurance extension by according
wage increases sufficient to cover contribution payments in advance
of the implementation of new social legislation.
Welfare - for a time - served as the cement of the peronista,
populist alliance. Yet within this context, social insurance came to
perform a more prosaic function. As envisaged by Radical adminis-
trations of the 1920s, payments into the cajas soon represented an
important fiscal resource. Indeed, as indicated by Table 8.1, it would
be difficult to underestimate the contributions made by the 'social tax'
190 Colin M. Lewis
to Peronist economic strategy. The table shows that from 1948 to

1954 INPS accumulated large surpluses. During these years the net
receipts of the lnstituto never represented less than 34 per cent of the
income received by the federal government from ordinary sources.
Often INPS net receipts yielded sums equal to 40 per cent or more of
ordinary tax revenue, and in terms of cash ftow, gross social insurance
payments represented an even larger proportion of total government
income, ranging from 51 per cent to 70 per cent.
As required by new social insurance legislation, the greater part of
insurance premium income was invested by the cajas in recently
authorized Social Welfare Bonds. Annual bond purchases by the
cajas increased rapidly from $1813.5 million in 1946 to $6105.6
million in 1955. From their introduction in 1946, Social Welfare
Bonds accounted for by far the greater part of new federal govern-
ment borrowing each year. Already in 1949, INPS bonds represented
some 54.0 per cent of the consolidated internal debt and a similar
proportion of the federal government's total internal debt the follow-
ing year. By 1955 Social Welfare Bonds accounted for 77.4 per cent
of the consolidated debt and 63.3 per cent of the total internal debt
respectively. From 1946 until1952, when an apparently inexhaustible
supply of 'social tax' revenue began to falter, the government virtual-
ly abandoned other financial instruments as a means of public bor-
rowing. Subsequently, there was a modest return to conventional
forms of long- and short-dated debt such as the Credito Argentino
Interno series of bonds and Treasury paper. The ftoating debt, how-
ever, had begun to increase in 1951. 38 Bearing interest at 4 per cent,
Welfare Bonds represented a particularly cheap form of state bor-
rowing, not least as annual rates of inftation headed for 30 per cent.
Clearly, although gradually displaced by inftation taxation, social
insurance contributions constituted the principal fiscal prop of the
regime. How was this income used? The greater part of these funds
was employed to underwrite the statization of the economy. While
Social Welfare Bond income was not employed to finance national-
ization projects, funds provided by the cajas were deployed to
finance public works and to cover the mounting operating deficits of
large state corporations, principally the transport monopolies which
were an essential ingredient of nationalist development strategy.
Beyond this, it may also be argued that social insurance contributions
became an increasingly important element in forced savings at a time
when the state, rather than private savers, became the principal
source of new investment funds in the Argentine.
CEPALISMO, WELFARISM AND POST-PERONIST

DEVELOPMENT STRATEGY
The revolucion libertadora, initially headed by General Eduardo

Lonardi and later by General Pedro E. Aramburu, which overthrew
Per6n in 1955, was dedicated to the eradication of Peronism as a
political force. Successor civilian administrations, several of whom
espoused the developmentalist strategies elaborated by the Economic
Commission for Latin America, were overtly pro-business and, like
their military predecessors, inclined to treat with great suspicion
labour organizations which had emerged since the late 1940s. Usually
anti-Peronist and sometimes anti-labour, most post-1955 administra-
tions nevertheless sought to extend and re-shape, rather than simply
dismantle, the Peronist 'welfare state'. 39 If some generals viewed
restricted welfare as a means of promoting social harmony (only
industrious citizens would qualify) and labour discipline, a technocra-
tic assessment of social insurance rapidly gained ascendancy.
Invariably inclined to emphasise social insurance contributions
rather than payments to beneficiaries, official and semi-official re-
ports of the 1950s and the 1960s stressed the fiscal role of social
security deductions in the development process. These sentiments
were especially pronounced during the desarrollista Radical presi-
dency of Arturo Frondizi (1958-62). Welfare was presented not so
much as a mark of development but as an essential stimulant to
development. By the 1960s it was recognized that throughout the
post-Second World War period employer and employee social secur-
ity contributions had become a major resource. The Frondizi admi-
nistration characterized the ethos of the period, namely that the
social insurance system should promote capital accumulation: the
mechanism was variously depicted as a form of popular savings or
ranked alongside more conventional forms of taxation. 40 This lan-
guage bore the stamp of the Economic Commission for Latin Amer-
ica and reftected an assumption that the Latin American economies
would need to develop internal savings mechanisms to promote de-
velopment in a post-war world in which sources of overseas invest-
ment finance would be extremely limited.
A major element in fiscal accumulation, annual social insurance
premiums soon reached a figure approximately equal to one-third of
the stock of savings deposits held by the banking system. In 1959
contributions represented approximately 10 per cent of gross dom-
estic investment or about 20 per cent of development expenditure. 41
192 Colin M. Lewis
Table 8.2 Social insurance premiums expressed as a percentage of

general federal government income
1945 19.8% 1949 27.0 1953 27.2 1957* 28.8

1946 19.5 1950 26.9 1954 29.5 1957/8 26.6
1947 21.8 1951 24.2 1955 32.2 1958/9 23.4
1948 26.2 1952 24.2 1956 27.5 1959/60 22.2
SOURCE: Republica Argentina, Consejo Federal de Seguridad Social de Ia

Republica Argentina lnforme acerca de Ia factibilidad financiera del plan
argentino de seguridad social (Buenos Aires 1967) p. 111.
• January to October, 1957
But by the early 1960s the savings/investment role of the cajas was
being eroded by the relatively greater growth in benefits payments. 42
Table 8.2 indicates the extent to which, for the greater part of the
period of forced industrialization, employer and employee social
insurance premiums constituted a substantial source of federal gov-
ernment income.
Once again, the table demonstrates that regular social insurance
deductions represented an important element in the central govern-
ment's income flow. The data also show that there was little obvious
difference between pre-1955 Peronist administrations and those that
followed it in terms of the fiscal significance of the 'social' levy. From
the 1940s to the 1960s, irrespective of any other roles attributed to the
system, the cajas performed a major fiscal function. And insurance
fund premiums were invariably treated as 'income' by successive
regimes.
As indicated, throughout the Peronist period funds generated by
INPS bond purchases had been used to cover growing public sector
deficits associated with operating losses sustained by state-owned
transport companies. Later, reflecting a shift in official priorities,
these funds were applied to capital projects. By the early 1960s
caja-generated funds had been ploughed into social overhead
schemes such as electricity generating, fuel production, the steel
industry and transport modernization. 43 Increasingly, during the ten
years or so before the harmonization of social insurance regimes and
administrative reforms implemented in 1967, contributory welfare
arrangements in general, and social insurance schemes in particular,
came to be regarded as instruments of accumulation and wealth
creation rather than as mechanisms for redistribution. After the
mid-1950s there was little mention of welfare and the social wage,
phrases that had predominated in the Peronist discourse. On the
contrary, administrations were even more inclined to plunder the
social insurance funds in order to sustain expenditure on develop-
ment projects of the moment. Perhaps this trait also accounts for
greater official delinquency, the failure of government as employer to
honour its financial obligations to several cajas.
WELFARE AND DEVELOPMENT
A diversity of practical and ideological considerations influenced the

evolution of Argentinian social insurance policy during the period
studied. Pluralism and pragmatism predominated, tempered by clear
party-political objectives. In the decades around the First World
War, Socialist reformers attached a high priority to the provision of
pensions along with other measures designed to regulate working
conditions and establish an institutional base for collective bargaining
and the defence of workers' rights. These were facets of a larger,
gradualist project of economic and political modernization to be
achieved by constitutional means. Socialists envisaged a process of
radical but not revolutionary reform that could be effected through
existing institutional channels. Concerned with problems of poverty,
urban squalor and unjust working practicies, social welfare measures
espoused by the Socialists were principally tailored to the require-
ments of industrious, organized urban labour. It was typical of a party
leadership composed mainly of middle-class intellectuals with a
leavening of labour activists, inclined to draw inspiration from con-
temporary Europe. Radical views on social insurance - which had
been forged by the 1930s and did not change fundamentally there-
after - were shaped by not dissimilar influences. The position of the
Radical party with regard to the coverage of social insurance net-
works was far less universalist than that of the Socialists. Radical
policy initially targeted middle sector groups, addressing middle class
aspirations and fears, and later became more overtly concerned with
financing national development. An agenda that contained few refer-
ence to the eradication of poverty and welfare but included growing
commitments to the expansion of public sector employment, social
insurance and the reform of higher education, the Radical position
was clearly designed to appeal to an expanding, increasingly political-
ly aware, enfranchised middle class and subsequently to the national
194 Colin M. Lewis
industrial bourgeoisie. In practice, however, Radical 'ideology' on

social reform (including social insurance and social policy generally)
was refined by electoral considerations - first in conflicts with Social-
ists and subsequently peronistas - and by the experience of high
office, an opportunity denied the Socialists. For Peronists, social
insurance was one element of a much larger strategy for socio-
political modernization and mobilization. Welfarism involved ex-
tending the scope and coverage of existing social insurance schemes
along with a commitment to full-employment, a 'social wage' and the
enhanced participation of wages in the composition of national in-
come. Raising the social dignity of workers, restructuring the econ-
omy and extending the role of the state were the means to an end
which was the creation of a new Argentinian reality of social justice,
political freedom and economic independence. Despite emphases
upon universality and welfare as a right of citizenship, rather than a
benefit conferred by economic growth, Peronists recognized the co-
optive potential inherent in pre-existing arrangements for the admi-
nistration of social insurance. Developmentalists also advocated a
cautiously distributionist, Keynesian role for welfare, notably social
insurance schemes which were both a manifestation of, and a
mechanism promoting, development. Social harmony was an impor-
tant undercurrent in this, and the peronista, discourse.
By the third quarter of the twentieth century, the language of social
insurance was frequently dominated by references to welfare and
development. Peronists pointed to the significance of the 'social
wage' component of a system of social justice; cepalistas attached
growing importance to the forced savings potential of social insurance
premiums. It may also be asserted with confidence that both peronis-
tas and developmentalists recognized the legitimizing role of welfare
extension. Welfarism was a predominant feature of the political
debate in most western capitalist societies around the middle of the
twentieth century and the Argentine was not immune from this
process. Whether or not a sustained increase in welfare consumption
actually occurred at this time is open to dispute. It is equally arguable
whether social insurance made a large net contribution to capital
accumulation: employer and employee insurance premiums - which
came to equal between one-quarter and one-third of the total wage
bill- may have eroded private savings capacity. Indeed, this perspec-
tive gained force during monetarist experiments of the 1970s. What is
beyond question is the recurrent fiscal dimension of the discussion
about social insurance, as articulated by Radicals, Peronists and
desarrollistas. In the mid-twentieth century several Argentinian gov-

ernments were alarmed by financial crises in the prevailing social
insurance system. Administrative reform in the 1940s and 1960s was
clearly designed to re-establish financial stability by extending the
social insurance net and centralizing welfare administration. Similar
considerations also applied during the 1920s but could not be effected
for reasons indicated above. Repeated 'generational' crises were a
function of the way social insurance was organized and were bound to
resurface as the intake of new contributors, incorporated at each
round of welfare extension to offset declining premium income, aged.
Actuarial deficits had characterized the system from the first and had
featured - along with actual income scarcity - in the 1923 debate.
Yet, if looming actuarial deficits provoked technical reappraisals of
the detail of individual pension and benefit schemes, it was a loss of
fiscal income that ultimately triggered government action. During the
inter-war period the fiscal potential of social insurance had gradually
dawned upon government. By the end of the 1940s, the 'tax' yield
was only too obvious. At this point, social insurance premium income
had become a major factor in the federal budget, irrespective of the
expenditure strategy or ideology of a particular government. Clearly,
as demonstrated by the steady increase in the socially insured propor-
tion of the economically active population, there was much less
resistance to the payment of a 'social' levy upon incomes, especially
when softened by wage increases, than to direct taxation. During the
middle third of the twentieth century, proposals to reform or to
extend the system of social insurance was increasingly driven by fiscal
imperatives.
Notes
1. Centro de Estudios Monetarios Latinoamericanos (hereafter CEMLA),
Aspectos fmacieros del seguro social en America Latina (Mexico, 1963)
pp. 99, 101; J. Feldman, L. Golbert and E. Isuani, 'Maduraci6n y crisis
del sistema previsional argentino' Bolet{n Informativo Techint 240
(1986); C. Mesa-Lago, Social Security in Latin America: pressure groups
stratification and inequity (Pittsburgh, 1978) pp. 163-5; D. James, Re-
sistance and Integration: Peronism and the Argentine Working Class,
/946-76 (Cambridge, 1988) p. 39; D. Rock, Argentina, 1516-1982: from
Spanish colonization to the Falklands War (London, 1986) p. 267.
2. Republica Argentina, Ministerio de Previsi6n Social Recopilacion de
/eyes, decretos, ordenanzas y resoluciones relativos a jubilaciones, retiros,
196 Colin M. Lewis
Direcci6n Nacional de Asistencia Social y Seguro de Maternidad, vol. I,

part I (Buenos Aires, 1952) pp. 171-87; CEMLA, Aspectos op. cit .• pp.
17, 99; D. Antokoletz, Tratado de /egislaci6n del trabajo y previsi6n
social, vol. II (Buenos Aires, 1941) pp. 469-95; R.O. Grego, 'La raz6n
hist6rica de nuestra seguridad social', Derecho del Trabajo: Revista Criti-
ca Mensual de Jurisprudencia: Doctrina y Legislaci6n XL (1980) 1709; E.
Isuani, Los origenes conflictivos de Ia seguridad social Argentina (Buenos
Aires, 1985).
3. Republica Argentina, Ministerio de Bienestar Social, Secretarla de Esta-
do de Ia Seguridad Social, La seguridad social en Ia Argentina (Buenos
Aires, 1975) p. 7; Revista Ana/es de Legis/aci6n Argentina, 1889-1919
(hereafter RALA] pp. 930-1081; RALA 1920-1940, pp. 59, 232, 658;
Mesa-Lago, Social Security, op. cit., pp. 163-70. Sources do not always
agree on dates for the establishment of cajas. The discrepancy may be
accounted for by modifications to initial enabling legislation and delays
between the enactment of legislation and the formal initiation of a fund.
4. A.E. Bunge, Ferrocarriles argentinas: contribucion al estudio del patri-
monio nacional (Buenos Aires 1916) chapters XII, XIV; P.B. Goodwin,
Los ferrocarriles britanicos y Ia UCR, 1916-1930 (Buenos Aires, 1974)
p. 173; R. Thompson, 'Organized labour in Argentina: the railway
unions to 1922' (unpublished Oxford DPhil thesis, 1978) passim.
5. By the early 1920s some 7 per cent of the economically active population
was covered by social insurance schemes. This proportion was around 9
per cent in the early 1940s and some 31 per cent by the end of the decade.
The figure was 55 per cent in 1960 and 68 per cent in 1970. For details of
total numbers of affiliates, etc. see Segio Lischinsky, 'La afiliacion al
sistema previsional, (1944-1955): Iegros y dificultades en su expansion'
(unpublished paper presented at Second Conference of Interdisciplinary
History, Rosario, September, 1989); Mesa-Lago, Social Security, op.
cit., p. 180.
6. For examples of housing schemes sponsored by the Caja de Bancarios,
see Caja Nacional de Jubilaciones Bancarias, Memoria y Balance Gen-
eral: Ejercicio ano 1935 (Buenos Aires, 1936) Appendix (unpaginated). In
the same report it was claimed (p. 65) that the mortgage department
constituted the most important element of the Caja's activities. The
Memoria y Balance General: Ejercicio de 1942 (Buenos Aires, 1943) pp.
55, 63, showed that between 1928 and 1942 the Caja had advanced a total
of 1060 mortgage loans, a figure equal to approximately 10 per cent of
the number of affiliates in 1942. The most prolific agency was the Caja
Ferroviaria which, by 1945, had financed the construction of approx-
imately 55 per cent of all low-cost housing units - casas baratas - built in
the Argentine over the previous 30 years; J. Argonz, Justicia social:
soluciones argentinas (Buenos Aires, 1945) p. 102.
7. The causes of strikes, labour agitation and resultant violent repression
have been variously depicted as arising from the impact of inflationary
pressures (and lag in wages) triggered by the First World War, right-wing
reaction against the apparent pro-worker position adopted by the Yri-
goyen administration, nationalist opposition to unrestricted immigration,
racial - particularly anti-Semitic - antagonisms associated with an ex-
aggerated fear of communist-inspired agitation, etc. See A.E. Bunge,

Los problemas economicas del presente, vol. I (Buenos Aires 1920)
p. 163; Rock, Argentina, op. cit., pp. 201-2. For details of strikes seeM.
Bravo, Capftulos de /egislacion obrera (Buenos Aires, 1927) pp. 11-12.
8. Bank of London and South America (hereafter BOLSA), Monthly Re-
view of Business and Trade Conditions in South America and Portugal,
January 1924 (hereafter Monthly Review . .. ), VI, 62 (1924) p. 35;
March 1924, VI, 64 (1924) p. 91; Apri/1924, VI, 65 (1924) p. 120; May
1924, VI, 66 (1924) p. 148; June 1924, VI, 67 (1924) pp. 179-80; July
1924, VI, 68 (1924) pp. 210, 217; June 1925, VII, 70 (1925) p. 181; July
1925, VII, 80 (1925) p. 213; Apri/1926, VIII, 89 (1926) p. 140; United
Kingdom, Board of Trade (hereafter BOT), Report on the Financial,
Commercial and Economic Conditions of the Argentine Republic, 1924
(London, 1924) p. 49; Report on the Financial, Commercial and Econ-
omic Conditions of the Argentine Republic, 1925(London, 1925) p. 67;
S. de Agostini, Caja Nacional de Jubilaciones y Pensiones Civiles: estudio
financiero - jurfdico de las distintas /eyes nacionales en materia de jubila-
ciones: legislacion comparada, nacional y extrangera: modificaciones de
interes (Buenos Aires, 1932) pp. 14-17; Uni6n Industrial Argentina,
Boledn de Ia Union Industrial Argentina, ado XXXVIII, no. 667 (1924)
p. 37, Boletin . .. XXXVIII, 679 (1925) pp. 35-7; Partido Socialista,
Comite Ejecutivo Seguro Social y Devaneo Jubilatorio (Buenos Aires,
1924) pp. 3-4. Employers and employees launched a joint campaign
against the new social insurance bill, complaining of the administrative
costs of the scheme, problems of collection and, most vehemently, of the
impact upon wages, prices and profits. The principal thrust of the exten-
sive press campaign of the period presented social insurance levies as a
tax on incomes and consumption.
9. J. Ruiz Moreno, Legislacion social argentina: colecciones de /eyes obreras
y de prevision social con sus decretos reglamentarios: resultados practicos
(Buenos Aires, 1925) pp. 278-81.
10. Agostini Caja Nacional, op. cit., p. 17.
11. Direcci6n de Informaciones y Publicaciones Ferroviarias, 'Memoria
sobre Ia crisis de Ia Caja de Jubilaciones y Pensiones Ferroviarias
(Buenos Aires, pamphlet no. 2, June 1942) pp. 2-3.
12. For an account of the problems and complaints of manufacturers see
C.M. Lewis, 'Immigrant entrepreneurs, manufacturing and industrial
policy in the Argentine, 1922-28' Journal of Imperial and Common-
wealth History, XVI, 4 (1987); BOLSA Monthly Review June,1924, VI,
67 (1924) p. 180 June 1925, VII, 79 (1925) p. 181.
13. BOLSA Monthly Review, July 1924, VI, 68 (1924) p. 209.
14. Republica Argentina Presidencia Alvear, 1922-1928: compilacion de
mensajes, /eyes, decretos y regulamentos, vol. I, (Buenos Aires, 1928)
passim; Lewis, 'Immigrant Entrepreneurs' op. cit., XVI, 4 (1987).
15. United States of America, US Military Intelligence Reports (hereafter
USMIR) (Argentina,1918-41) Reel IV/0538, no. 3836, 26 Oct. 1927;
Reel IV/0521, no. 3826, 22 Aug. 1927; Reel IV/0857, no. 3165, 12 June
1923; Reel IV/07081, no. 2968, 10 Feb. 1922; Reel IV/0738, no. 2628,
18 Dec. 1921; BOLSA Monthly Review, Dec. 1928, XI, 121 (1928) p. 5;
198 Colin M. Lewis
Jan. 1929, XI, 122 (192~) p. 41; BOT Report on the Financial, Commer-
cial and Economic Conditions of the Argentine Republic 1923 (London,
1923) p. 6.
16. BOLSA Monthly Review Sept. 1924, VI, 70 (1924) p. 268; Dec. 1924,
VII, 73 (1924) p. 3; BOT Report on the Financial, Commercial and
Economic Conditions of the Argentine Republic 1924 (London, 1924)
p. 9.
17. Presidencia Alvear, op. cit., I, 42-9, 87-8, 111-22; USMIR Reel IV/
0857, no. 3165, 12 Dec. 1923;
18. CEMLA, Aspectos, op. cit., pp. 36, 45-6, 71; Ruiz Moreno Legislacion,
op. cit., especially Article 11, p. 280.
19. See for example M. Murmis and J.C. Portantiero (eds) Estudiossobre los
origenes del peronismo (Buenos Aires, 1971}; M. Falcoff and R.H.
Dolkart Prologue to Peron: Argentina in Depression and War (Berkeley,
1975).
20. Review of the River Plate, 23 Nov. 1923; BOLSA Monthly Review
January 1924, VI, 62 (1924) p. 35; BOT Report on the Financial, Com-
mercial and Economic Conditions of the Argentine Republic, 1924 (Lon-
don, 1924) p. 49; USMIR Reel II no. 3273, 14 Jan. 1924.
21. Caja Nacional de Jubilalciones y Pensiones de Empleados Ferroviarios,
Memoria correspondiente a los alios 1934 y 1935 (Buenos Aires, 1936)
pp. 11-13, 26-7; Municipalidad de Buenos Aires, Caja Municipal de
Jubilaciones, Retiros y Subsidios, Memoria correspondiente al ejercicio
de 1926 (Buenos Aires, 1926) p. 17, ... ejercicio de 1937 (Buenos Aires,
1937) p. 6; I.F. Angel Maberino, Bases economico- financieras de Ia
pasividad: estudios de los fundamentos de Ia pasividad a trav~s del estado
economico de Ia Caja Nacional de Jubilaciones Pensiones Civiles (Buenos
Aires, 1935) pp. 7-28; E.F. Arduino, La Caja Nacional De Pensiones y
Jubilaciones: bajo que bases podrfa funcionar norma/mente sin auxilio del
estado (Buenos Aires, 1917) pp. 26-49; A.L. Palacios, La defensa del
valor humano; legislacion social argentina (Buenos Aires, 1939) pp.
147-58; J. Gonzalez Gale, Jubilaciones y seguro social (Buenos Aires,
1929) p. 5; R. Bogliolo and A. Ghioldi, Algunos conceptos sobre jubila-
ciones: en defensa de Ia Caja Municipal de Jubilaciones, Pensiones y
Retiros (Buenos Aires, 1932) pp. 5-14.
22. Goodwin, Los ferrocarriles, op. cit., passim; D. Rock, Politics in Argen-
tina, 1890-1930: the rise and fall of Radicalism (Cambridge, 1975).
23. J. Fogarty, 'Social experiments in regions of recent settlement: Austra-
lia, Argentina and Canada', in D.C.M. Platt (ed.), Social Welfare,
1850-1950: Australia, Argentina and Canada Compared (London, 1989)
p. 190.
24. D. Antokoletz, Tratado de legislacion del trabajo y prevision social
(Buenos Aires, 1941} vol. II, pp. 429, 454, 468.
25. J. Acre, Seguridad social en Ia Argentina (Buenos Aires, 1945) passim,
especially pp. 15, 17-9, 20, 23; Argonz, Justicia, op. cit., pp. 73-4, 180,
197.
26. For a selection of views see, A.L. Palacios, La natalidad en Ia Argentina
(Buenos Aires, 1939) passim, especially p. 37; La defensa, op. cit., pp.
59-67; Argonz, Justicia, op. cit., pp. 21-123; Antokolez, Tratado, op.
cit., pp. 102-3.
Social Insurance in the Argentina 199
27. E. del Valle lberlucea, Salario m{nimo y trato social de trabajo (Buenos
Aires, 1919) passim; J .A. Ia Cruciani, La tuberculosis en Ia Argentina: lo
que se hace para combatirla: lo que se debe hacer (Buenos Aires, 1933)
passim; Partido Socialista, Comite Ejecutivo, Segurio Social, op. cit.;
Palacios, La defensa, op. cit. pp. 53-99; J. Panettieri, Las primeras /eyes
obreras (Buenos Aires, 1984); V.O. Garcia Costa, Alfredo L. Palacios:
un socialismo argentino y para Ia Argentina (Buenos Aires, 1986)
pp. 94-5; H. Matsushita, Movimento obrero argentino, 1930-1943:
sus proyecciones en los origenes del peronismo (Buenos Aires, 1983)
pp. 102-4.
28. D. James, Resistance, op. cit., passim; C.H. Waismann, Reversal of
Development in Argentina: post-war counter-revolutionary policies and
their structural consequences (Princeton, 1987) pp. 164-206; P. Wald-
mann, El Peronismo, 1943-1955 (Buenos Aires, 1981); G. O'Donnell El
estado burocratico-autoritario (Buenos Aires, 1981).
29. For direct references see, C. Belaunde, Problemas de polltica social
(Buenos Aires, 1958); D. Jarach, Problemas economicos-financieros de
Ia seguridad social (Buenos Aires, 1944); Review of the River Plate,
1 Nov. 1946.
30. Garcia Costa, Palacios, op. cit.; E.J. Corbiere, El Marxismo de Enrique
del Valle lberlucea (Buenos Aires, 1987) p. 17. See especially the writings
of Juan B. Justo, Alfredo L. Palacios, Nicolas Repetto, Antonio de
Tomaso, Augusto Bunge.
31. Republica Argentina, lnstituto Nacional de Previsi6n Social (hereafter
INPS) Pensamiento y Accion de Ia Camara Gremial durante el periodo
1945-46 (Buenos Aires, 1948) p. 23; Direccion de Informaciones y
Publicaciones Ferroviarias, 'Memoria sobre Ia crisis de Ia Caja de Jubila-
ciones y Pensiones Ferroviarias' (Buenos Aires, 1942) passim; J. Gon-
zalez Gale, Prevision social (Buenos Aires, 1946) pp. 29-33, 47.
32. Municipalidad de Ia Ciudad de Buenos Aires, Caja Municipal de Jubila-
ciones, Retirados y Subsidios, Memoria correspondiente al ejercicio de
1931 (Buenos Aires, 1932) p. 5; INPS Publicacion lnformativa:
reflecionada con el movimiento financiero y administrativo de Ia nacion
correspondiente a los anos 1943-1944, 1945 y servicios generales de Ia
misma prestado desde sufundacion (Buenos Aires, 1946) see graph 7 for
changes in distribution of types of 'pensions' paid by the Caja during the
1930s.
33. Angel Maberino, Bases, op. cit. p., 10; Gonzalez Gale, Prevision,
op. cit., pp. 52-3.
34. INPS, Publicacion lnformativa, op. cit.; Waldmann, El peronism,
op. cit., pp. 72-3.
35. Republica Argentina, Consejo Federal de Seguridad Social en Ia Repub-
lica Argentina (hereafter CFSSRA) lnforme acerca de Ia fractabilidad
financiera del plan argentino de seguridad social (Buenos Aires, 1967)
p. 112; Boletin lnformativo Techint, 'La previsi6n social en Ia Argentina',
no. 132 (Jan. 1963) pp. 2-25; C.M. Belaunde, Problemas de polltica
social (Buenos Aires, 1958) pp. 21-2; INPS, Pensamiento y accion de Ia
Camara Gremial durante el perlodo 1945-1946 (Buenos Aires, 1948)
pp. 23-7; S. Lischinsky, 'La afiliaci6n al sistema previsional (1944-1955):
logros y dificultades en su expansi6n' (unpublished conference paper
200 Colin M. Lewis
presented at the Second Conference of Inter-Disciplinary History,

Rosario, 1989) pp. 6-10.
36. James, Resistance, op. cit., pp. 11, 25, 37-H, 57-8; Waldmann, El pero-
nismo, op. cit., pp. 149-57.
37. Agrupaci6n de Intelectuales del Partido Peronista, Doctrina hacia una
vida mejor (Buenos Aires, 1947) pp. 49-51, 96-8.
38. Banco Tornquist, Business Conditions in Argentina, no. 290 (June 1956)
p. 27.
39. Rock, Argentina, op. cit., p. 334; James, Resistance, op. cit., pp. 43-7;
Mesa-Lago, Social Security, op. cit., pp. 165-8, 172.
40. CEMLA, Aspectos, op. cit., pp. 30, 41, 46; CFSSRA, lnforme op. cit.,
p. 8; R. Fernandez, Prevision social y crecimiento economico (Buenos
Aires, 1979) p. 13.
41. CEMLA, Aspectos, op. cit., pp. 30, 41-46.
42. Ibid., pp. 52, 61-2.
43. Ibid., p. 52.
9 Welfare, Oil Workers and the
Labour Movement in
Venezuela*
Steve Ellner
The privileged status historically enjoyed by petroleum workers in

Venezuela is due as much to general welfare benefits provided by the
companies as to superior wages. Welfare provisions have been at the
centre of heated debate in collective bargaining sessions as well as in
the periodical labour conflicts which have erupted in the industry.
Welfare benefits, however, were not the main initial concern of the
oil workers movement in the 1930s and 1940s when labour conflict
centred on union recognition and the demand for decent wages. In
the years following the signing of the first rudimentary collective
bargaining agreement in the industry in 1945 when companies
granted union recognition, the oil workers succeeded in greatly ex-
panding the coverage of contracts to include such diverse worker-
aspirations as job security, housing, clinics, schools, the comisariatos
(company-run stores whose prices were artificially low), and regula-
tion of the practice of contracting work out to contratistas. This latter
issue was important because the contratista system eliminated job
security as well as important fringe benefits, while accepting the
existing wage structure.
The oil workers' movement was organized and initially dominated
by labour leaders belonging to Democratic Action (AD) and the
Communist Party (PCV). The PCVistas, in particular, raised heavily
charged slogans and adhered to maximalist positions on welfare-
related issues. The political control of the oil unions, however, was
modified following the overthrow of dictator Marcos Perez Jimenez
in 1958, which marked the opening of the modern democratic period.
During the guerrilla period of the 1960s, the government encouraged
the oil companies to purge PCVistas and other leftists. 1 As a result,
• The author is grateful for critical comments from Susan Berglund and Richard
Parker, both of the Universidad Central de Venezuela, as well as John D. French of
Florida International University.
201
202 Steve Ellner
the main oil-workers' federation, Fedepetrol, and the much smaller

Fetrahidrocarburos, were almost entirely controlled by the centrist
and centre-leftist AD, the Republican Democratic Union (URD),
and the Social <:;:hristian COPEl and, after its founding in 1967, the
left-leaning Peoples Electoral Movement (MEP). These four parties
as a rule avoided blanket condemnation of company practices regard-
ing layoffs, housing, and the contratista system, arid instead followed
a pragmatic policy of pressing the companies to make concessions in
individual cases as they arose. 2 In general, oil-worker leaders avoided
clearly defined positions on welfare-related issues, even after the
industry was nationalized in 1976. The following study is an examina-
tion of their attitudes and negotiation strategy in this area.
The extent to which the welfare benefits of the oil workers have
spilled over to workers in other industries will also be analysed. Such
a discussion is designed to determine whether the oil workers' move-
ment represents a vanguard or an enclave within the working class. In
recent years much literature has focused on the aristocracy of labour
in developed and underdeveloped countries. 3 Although the full im-
plications of the debate are beyond the scope of this study, the
chapter will be concerned with one aspect of the issue: the diffusion
of gains from privileged to non-privileged sectors of the work force.
JOB SECURITY
The slogan estabilidad absoluta (whereby layoffs are prohibited ex-

cept in cases of worker infractions) has a special appeal in developing
societies where employment opportunities are limited. 4 This demand
was formulated by the oil workers movement in Venezuela in the
early 1940s and staunchly resisted by the companies. Their argument
was that estabilidad absoluta was inoperative in an industry where the
phase-out of exploratory activities required a substantial reduction in
the workforce. The unions, however, included an estabilidad absoluta
clause in the proposed contracts which they drew up for collective
bargaining purposes in 1946, 1948 and 1960 and on all three occasions
an industry-wide walkout nearly resulted.
The companies averted a showdown in 1948 by agreeing to double
one of the two main severance payments (known as antiguedad). The
concession, which was amplified in subsequent contracts, was de-
signed to achieve estabilidad relativa whereby onerous employer
severance obligations discourage layoffs.' A related arrangement was
Welfare and the Labour Movement in Venezuela 203
known as estabilidad numerica. This concept was first introduced in

the 1963 contract in which the company was required to replace 98
per cent of all discharged workers, a percentage that was increased to
99 and 100 in the two subsequent collective bargaining agreements.
The leftists generally belittled these concessions and insisted that
only estabilidad absoluta would prevent a mass cutback in the work-
force. Not only did estabilidad numerica allow management to fire
union militants as long as they were replaced, but left the door open
for companies to reduce the number of employees by offering work-
ers incentives to resign. Indeed, the leftists frequently maintained
that there was no substitute for estabilidad absoluta, which was of
greater importance than wage increases. 6 In 1946 and 1948 important
Communist oil worker leaders refused to sign labour contracts in
protest at the failure to achieve estabilidad absoluta and in 1960 the
left wing of AD split off from the party partly for the same reason. 7 In
1963, Fetrahidrocarburos (which was at the time pro-leftist) pre-
sented a contract in the collective bargaining sessions that included an
estabilidad absoluta clause, but had to back down in light of differ-
ences with Fedepetrol, led by AD and COPEI. 8
AD and COPE! labour leaders were originally less committed to
estabilidad absoluta and soon abandoned the demand altogether.
One Copeyano member of the National Committee of Fedepetrol
reported that he had supported estabilidad absoluta as a reaction to
the mass layoffs during the Perez Jimenez dictatorship (194~58) 'in
order to show the companies that they could not dismiss workers
whenever they felt like it'; in the 1960s, however, that system was no
longer feasible due to the cutbacks in exploratory activities. 9 Another
top Fedepetrol leader who belonged to AD stated in 1963: 'In a
capitalist regime, estabilidad absoluta is practically impossible to
achieve and to do so would take a struggle as terrible and powerful as
that of the eight-hour day in Chicago. ' 10
Even though non-leftists accepted the abstract right of manage-
ment to discharge workers, they followed a policy of attempting to
block individual layoffs. On several occasions in the 1960s,
Fedepetrol with the backing of the Ministry of Labour succeeded in
getting the companies to agree to a moratorium on layoffs. 11 In
addition, the unions insisted on the right to discuss with management
each layoff as it occurred and in some cases actually questioned 'the
right of management to discharge workers unilaterally. ' 12 One parti-
cularly thorny issue was the practice of transferring workers to other
areas. On the one hand, the unions insisted that discharged workers
204 Steve Ellner
be given the opportunity to relocate. On the other, they maintained

that a worker who preferred to resign rather than accept transfer be
considered 'unjustly' laid off and thus eligible for severance pay .13
The unions also demanded that transferred workers should not have
to take a cut in salary and that the company be obliged to 'justify to
the union [the reason for] the transfer in order to avoid that it be used
by management for the purpose of pressuring the worker to resign' .14
Fedepetrol put up hardened resistance to layoffs for two reasons.
In the first place, labour leaders felt that many workers were dis-
missed for personal reasons or, as the Copeyano president of a
Fedepetrollocal stated, because 'some executive tries to be promoted
[by reducing expenses] in order to score points and impress his
superiors'. 15 In the second place, AD and COPEI labour leaders
hoped that union wrangling over individual layoffs as well as an
increase in severance payment obligations would discourage manage-
ment from discharging workers when the termination of their em-
ployment was less than one hundred per cent justifiable from an
economic or technological viewpoint.
In spite of these multiple obstacles to layoffs in the industry, the
labour force declined sharply in the course of the 1960s. 16 Manage-
ment was able to get round estabilidad numerica by offering workers
bonuses to transfer from the company payroll to that of a 'contratista.
Labour leaders of all ideological persuasions considered the practice
a violation of the spirit of estabilidad numerica, and denounced it as a
mockery ('una burla'). 17 AD and COPEI leaders succeeded in stiffen-
ing the terms of estabilidad numerica but felt that they lacked suf-
ficient clout to force the companies to refrain from reducing the work
force. Their weakness was due to the existence of an international
'buyers market' for oil, and the companies' lack of commitment to
Venezuela due to the proximity of the date on which their conces-
sions were to expire. 18
The law governing the nationalization of the petroleum industry in
1976 provided for estabilidad absoluta. Labour contracts since 1976
have also granted estabilidad numerica in which the reduction of the
work force is strictly regulated. Furthermore, the oil industry has
agreed to refrain from offering workers bonuses in return for their
resignation, a practice which so embittered labour relations in the
years prior to nationalization. 19 These gains, like the other important
ones which organized labour has achieved in Venezuela since 1958,
were handed down by the government at a time when workers were
not engaged in militant struggle. 20
Business representatives feared that estabilidad absoluta in the oil

industry would produce a ripple effect. In one report they noted: 'If
the oil industry is unable to resist estabilidad absoluta in spite of its
strength in Venezuela, there will be no other industry ... that can
support the pressure, and as a result the workers' aspirations to
achieve estabilidad absoluta will end up being more than just an
unachievable whim' .21 Actually this fear proved to be unfounded as
by 1989 the oil workers remained the only sector of the Venezuelan
working class to be protected by estabilidad absoluta.
HOUSING
The oil companies in Venezuela were originally forced to build

houses and provide workers basic services due to the backwardness
and isolation of the rural areas where nearly all of the nation's
petroleum was located. The Labour Law of 1936 affirmed this respon-
sibility and shortly thereafter the government forced the companies
to upgrade facilities. 22 The unions also exerted considerable pressure,
beginning with the famous oil workers' strike of 193623 and subse-
quently in the collective bargaining negotiations beginning in 1945. A
significant breakthrough came in the contract of 1960 which stipu-
lated that each worker was entitled to ten square metres of construc-
tion for each family member, a size which the unions subsequently
tried to increase to fifteen. 24
Beginning in the 1950s, the petroleum companies attempted to
reduce their responsibilities in the area of services by promoting the
'integration' of oil-worker camps into the surrounding municipalities.
Under this arrangement, the oil communities gave up their special
legal status and came under the jurisdiction of the local city govern-
ments. Fences surrounding the camps and the company guards who
restricted entrance to them were removed. At the same time the
companies sold the houses to their oil-worker tenants at inordinately
low prices, while the schools, clinics and utilities and the services of
transportation and refuse collection became the concern of the muni-
cipalities and the corresponding ministries. Of particular importance
was the elimination of the comisariatos, where food prices were
frozen at post-Second World War levels.
The companies were mainly motivated by the desire to simplify
their operations in Venezuela as a result of the proximity of 1983
when all concessions were to revert to the nation. 'Reversion' of the
206 Steve Ellner
oil concessions was being defined broadly to mean government

takeover of all company property in Venezuela, including housing.
Under integration not only did the companies receive payment for
their houses, in spite of the fact that as 'concessionaries' they did not
own the land, but they were relieved of the ongoing obligation of
providing multiple services in the camps which represented a major
company expense. 25
In arguing for integration, the companies pointed out that the
'special' legal status of the oil-worker camps demonstrated that they
were originally conceived of as provisional. They also maintained
that with the growth of adjacent cities and improvement in trans-
portation and communication the camps were no longer isolated from
the rest of the region and thus lost their raison d' etre. Furthermore,
not only were the communities monotonous because the houses were
identical, but the workers' liberties were restricted. In selling the idea
of integration to the nation, the companies benefited from the
nationalistic resentment against the camps which were viewed as
constituting a 'nation within the nation'. This sentiment had been
fully articulated by the communist anthropologist and former oil-
worker leader Rodolfo Quintero who, in his Antropologla del
petr6leo, defined the oil camps as 'an industrial plantation, a socio-
economic system implanted in national society as the result of mod-
ern colonialism' .26 While rejecting Quintero's hostility towards the
oil companies, the proponents of integration seconded his assertion
that the camps were based on an 'obsolete paternalism'. 27
Creole (the largest oil company in Venezuela and a subsidiary of
Standard Oil of New Jersey) took the initiative in demonstrating the
feasibility of integration by constructing two pilot communities
known as 'comunidades abiertas' in the townships of Judibana in
Falc6n and Tamare in Zulia in the 1950s. Creole sold a certain
percentage of the houses to non-oil workers and received outside
financing to build shopping centres and other facilities. 28 In the early
1960s the companies submitted their plans for the integration of
oil-worker camps to the Ministry of Labour and the Fedepetrol
national leadership and received endorsement from both.
Nevertheless, the proposal provoked heated debate in worker
assemblies throughout the nation. The opportunity to acquire a
home, and the compensation which amounted to over a year's salary
for those employees who did not reside in the camps, influenced a
large number of workers to support integration fervently. Many
union leaders, however, particularly those of the URD-controlled
Fetrahidrocarburos and MEP criticized integration on the basis that it

eliminated important worker-gains (especially the comisariatos)
which had been won through hard struggle. They calculated the
annual value of the obligations which the companies wanted to relin-
quish and argued that in the long run most workers ended up losing
out. While older workers who were ready to retire profited from the
arrangement, younger ones and especially those who had yet to be
incorporated into the work force would be deprived indefinitely of
important benefits. On this basis, some leaders accused the partisans
of integration of 'selling out' the younger generation. Both oil work-
ers and municipal authorities, who were also apprehensive at the
plan, expressed concern that the government lacked the resources to
perform adequately the tasks formerly carried out by the industry. 29
Geographical cleavages were more important in accounting for
worker-response to integration than ideological ones. In most camps
located in urban areas the workers ratified the proposal, unlike those
of rural zones. Not only was real estate in the countryside of mini-
mum value, but public services there were highly deficient and
privately run grocery stores, which were to take the place of the
comisariato, were inferior to their counterparts in the cities. In the
latter half of the 1960s almost all the camps near urban centres were
integrated, while the workers in more remote areas, who represented
less than half the work force, refused to accept the arrangement. In
one exception to the rule, integration in the eastern city of Anaco was
rejected because most of the area where the camp was located was
leased from private interests, and thus the workers would not have
acquired property titles to the land where their houses were situated.
In the 1970s Fedepetrol reversed its position on integration. This
turnabout was reflected in the elimination in the 1970 collective
bargaining agreement of a provision in Clause 117 of the previous
contract in which both union and management committed themselves
to integration. 30 Two occurrences explain the change in policy. In the
1970s, for the first time· in Venezuela's recent history, the nation
faced a serious problem of inflation. 31 As a result, the workers were
more determined than in the past to prevent dismantlement of the
comisariatos. In addition, a member of the pro-leftist MEP was
named president of Fedepetrol at its 1969 convention and hardened
the federation's position on certain matters.
The issue of integration continued to be a source of contention
following nationalization of the petroleum industry in 1976. PDVSA,
the state-run oil company, was determined to integrate the remaining
208 Steve Ellner
camps where over 6000 workers and their families resided. It labelled
the camps a 'negative inheritance' (mala herencia) from the period of
foreign company control of the industry. An additional problem
stemmed from the services which PDVSA continued to lend the
communities that were already integrated, including recreation, road
maintenance, and in some cases refuse collection. PDVSA (like the
state housing authority INA VI) was determined to rid itself of all
community obligations. 32 The residents in the former camps, a
majority of whom were no longer oil workers, pressured their respect-
ive city councils to oppose this move, or to insist that PDVSA provide
subsidies to improve services as a precondition for one-hundred per
cent integration. 33
In recent years Fedepetrol leaders of all political affiliations have
recognized that acceptance of integration in the 1960s was an error.
In their eagerness to become home-owners, oil workers and their
leaders underestimated the long-term effects of inflation and the
deficiency of public services. In the course of time it became evident
that the oil workers who resided in the camps lived better than their
counterparts elsewhere. 34 Nevertheless, Fedepetrol, which by the
late 1970s reverted to AD control, was resigned to the eventual
integration of the remaining camps. This attitude was expressed by
Aristides Bermudez, an AD member of Fedepetrol's National Com-
mittee who aspired to become its president:
It seemed back then [in the 1960s] that integration was a good
business ... But today it appears to us preferable to retain the
comisariato. Why? Because what cost 10 bolivares then now costs
five or six times more. The comisariatos are now considered much
more important than even the houses themselves. Nevertheless,
with integration the comisariatos will tend to disappear. 35
THE COMISARIATOS
The comivariatos were created in 1943 in order to provide workers

and their families with basic food products that were in short supply
during the Second World War. The collective bargaining agreement
of 1946 obliged the companies to maintain the comisariatos intact.
Subsequent contracts amplified their obligations to include: the
establishment of new comisariatos in camps with over 250 workers, a
figure which was reduced to 200 in 1963 and 140 in 1970; the sale of a
specified number of products, eventually set at 72; the establishment

of a commission with union representation to oversee the comisa-
riatos. By the 1960s company negotiators complained in internal docu-
ments that they dared not raise the issue of inflation in discussions
concerning the prices in the comisariatos for fear that the unions
would respond by insisting on a cost-of-living 'escalator' clause. 36
Beginning in the early 1960s, the companies called for the conver-
sion of the comisariatos into union-run stores which would sell pro-
ducts at a modest discount, and offered to furnish land and money to
get the operation off the ground. Since then, the proposal has been a
standing company offer. The left, in keeping with its opposition to
integration, sharply criticized the plan. Most Fedepetrolleaders, on
the other hand, refrained from rejecting it and at least one union
local took the initiative in requesting company contributions for the
project. 37
Since nationalization in 1976, a majority of the top labour leaders
have been swayed by PDVSA's determination to eliminate the comi-
sariatos. The inclusion of a clause in the 1986 contract creating a
commission to study the feasibility of union-run stores was a tacit
recognition on the part of Fedepetrol that the days of the comisa-
riatos were numbered. The commission has considered proposals to
set up worker co-operatives to replace the comisariatos, and to en-
courage the participation of the Workers Confederation of Vene-
zuela (CTV) and private capital in the enterprise, as well as PDVSA
contributions which would be phased out over an extended period of
time. 38 The participation of PDVSA is designed to allay workers'
fears, which have been expressed throughout the debate over integra-
tion, of being suddenly 'abandoned' by the companies. 39
The 1986 contract, for the first time since 1948, passed price
increases on to comisariato customers. Those trade unionists who
opposed provision claimed that price hikes along with deterioration
in service would lead to the 'slow death' of the comisariatos. They
pointed out that most labour representatives had ceased to press for
improvement in the quality and quantity of comisariato products in
collective bargaining negotiations, and that the stores were plagued
by chronic shortages. 40
Fedepetrol leaders belonging to MEP and COPEI opposed the
plan to increase prices, and even raised the possibility of going on
strike. 41 AD and the URD-dominated Fetrahidrocarburos supported
the measure claiming that it was preferable to the complete abolition
of the comisariato system, which was what PDVSA was advocating.
210 Steve Ellner
Even though the president of Fedepetrol was an AD member, MEP

and COPEI had recently gained a majority of four seats on the
seven-man executive committee of the federation. AD, however,
claimed that it had the right to decide by virtue of its plurality in
Fedepetrol and the support it was receiving from Fetrahidrocarburos.
MEP and COPEI oil-worker leaders felt differently and even called
for a referendum to settle the matter. COPEI labour leaders even-
tually signed the contract as a result of pressure from party heads,
who warned that a strike in the industry which represented the
lifeline of the nation's economy was ill-advised. 42
One reason why the oil-worker leaders failed to take a firm stand in
the 1986 contract negotiations is that less than one-third of PDVSA's
workforce has the right to use the comisariatos. 43 The majority of
workers live in integrated areas, and would thus stand to benefit from
the conversion of the comisariatos to union-run stores which would
serve all workers in the industry. In addition, since as long ago as the
1960s labour leaders generally lacked a firm commitment to safe-
guard the comisariato system. As was the case with their position on
other welfare-related issues, most union leaders followed a pragmatic
course of trying to achieve piecemeal improvements. Slogans in
favour of such underlying objectives as estabilidad absoluta, elimina-
tion of the contratista system, and maintenance of the comisariatos
were generally eschewed.
THE CONTRA TISTA SYSTEM
Oil company reliance on contractors to perform certain tasks was

considered necessary in an industry where much activity, especially in
the area of exploration, was non-continuous: it was impractical for
the companies to master technology and hire workers for transitory
operations. By the 1940s, however, union leaders began to complain
that even though the Venezuelan oil industry was no longer in its
exploratory phase, the number of contracted workers was on the
increase. 44 1t became evident that the companies contracted out work
in order to evade payment of certain fringe benefits which had been
incorporated into labour contracts beginning in 1945.
The collective bargaining agreement of 1945 obliged the companies
to attempt to exert influence on contractors to comply with the terms
of the industry-wide contract which covered all oil workers, not just
those who were on the oil company payrolls. This provision was
considerably strengthened in subsequent labour contracts. Neverthe-

less, equality between contracted and regular workers was never
achieved in practice. Because of his status as a temporary employee,
the contracted worker generally did not receive housing, nor did he
belong to the companies, credit-savings plan (caja de ahorro). 45
Furthermore, contracted workers were not eligible for the same
severance payments that regular workers obtained when they were
laid off for 'unjustified' reasons. 46 Contractors exposed their workers
to greater risks on the job, as was reflected in their poor safety
records. They also frequently failed to live up to their contractual and
legal obligations to the workers, but because of the smallness of their
operations, they were not subjected to as much union pressure as
were the oil companies.
Since the 1940s, the number of contracted workers has steadily
increased in spite of the fact that in the years prior to nationalization
exploratory activity practically came to a halt. During the repressive
Perez Jimenez dictatorship in the 1950s, management took advantage
of their upper hand with respect to labour by assigning numerous
activities that were not directly related to production to contractors.
With the re-establishment of democracy in 1958, oil-worker leaders
pledged themselves to reverse this trend. Nevertheless, in spite of
Fedepetrol's resistance in different localities, the companies suc-
ceeded in turning over diverse facets of the industry to contractors.
The companies maintained that they could not offer indefinite em-
ployment in such areas as transportation service and clinics since
these operations were contracted out for specific periods. 47
Contrary to the expectations of many union militants who assumed
that nationalization would provide oil workers with increased be-
nefits, the number of contracted personnel continued to increase
after 1976. The technification of the petroleum industry provided
opportunities for engineers and other specialized personnel who pre-
ferred to work for their own firms. In addition, nationalization
fostered a clientelistic nexus between the governing party and con-
tractors, in the process fortifying the contratista system.
Oil company representatives defended the practice of contracting
out work as a 'management prerogative' (the same argument was
used to oppose estabilidad on the basis that it violated management's
exclusive right to discharge workers). 48 The companies resisted press-
ure to recruit among workers who had been employed by contractors
over an extended period of time. Company spokesmen argued that
such a hiring practice would undermine the position of contractors,
212 Steve Ellner
who would resent the loss of their best qualified employees.

The left harshly depicted the contractors as unnecessary middle-
men who overworked their employees and failed to meet their legal
obligations. Occasionally the leftists called for elimination of all
contractor firms without distinguishing between the varied types of
operations that they performed. Non-leftist union leaders, on the
other hand, recognized that the contratista problem was complex.
Indeed their attitude toward contracted workers was characterized by
a degree of ambivalence, as was reflected in the following statement
by a top Fedepetrol leader:
The petroleum industry is very attractive due to the high wages.

There are groups of workers who do not want to look for absolute-
ly any [other] employment. They are content working [in the oil
industry] even though it is just one week per month. They are
satisfied with this because it gives them enough to eat ... We feel
that they should look for work elsewhere where they will enjoy
greater estabilidad. 49
Another non-leftist labour leader argued that the unions could not
exert too much pressure on the companies to assume for themselves
functions previously delegated to the contractors. Should the com-
panies be forced to hire permanent employees they would choose
younger workers lacking in experience in preference to older ones
who had been employed by contractors over a lengthy period but
were generally less disciplined and educated. 50
Undoubtedly the attitude of labour leaders is shaped by the role
that they themselves play in the contratista system. Ever since the
1970 labour contract, contractors have been obliged to hire a certain
percentage of workers (originally set at 60 per cent and later in-
creased to 80) from lists submitted by the unions. This practice
(known as 'administering the contract') has been sharply criticized by
political parties which are trying to gain a foothold in the oil workers
movement, on the grounds that it is conducive to corruption. Under
the arrangement, union officials allegedly receive bribes from
prospective workers and give preference in hiring to members of their
own party. In addition, contractors collude with labour leaders by
inflating employment lists in order to influence union elections.
Administration of the contract is defended by both oil-workers' fed-
erations on the basis that it is less humiliating for workers to queue in
union hiring halls than to do so on company grounds. Regardless of
its pros and cons, the practice provides union officials with a vested
interest in maintaining the contratista system. Thus, even though
Fedepetrol leaders generally protest that contracted workers are
'second class citizens' in the industry (particularly because they do
not enjoy estabilidad,S 1 the union refrains from putting forward a
blanket condemnation of the system and instead attempts to achieve
piecemeal improvements in remunerations and working conditions.
CONCLUSION
The struggle of the Venezuelan oil workers up to 1960 was closely

watched by counterparts in other sectors of the working class who
were ready to copy their example. At first the main goal of the
oil-workers' movement was union recognition. The achievement of
this objective in 1945 was followed by a massive proliferation and
legalization of unions in other industries. In addition, the oil-workers'
strikes of 1936 and 1950, which were undoubtedly the two most
important labour conflicts in Venezuelan history, captured the undi-
vided attention of workers throughout the nation. Similarly, the
collective bargaining negotiations in 1946, 1948 and 1960 became a
focus of interest of the entire labour movement which called for the
signing of a just contract. 52
In the 1960s, welfare-related issues in the areas of housing, educa-
tion, health facilities, job security and the comisariato became the
major concern of the oil-workers' movement. During these years the
unions were unsuccessful in pressing the companies to retain pri-
vileges which were considered historical 'conquests' of the labour
movement. Rather than maintain a hardened position, Fedepetrol
compromised on the defence of the comisariato, the elimination of
the contratista system for certain types of work, and the reduction in
the workforce. The federation followed a pragmatic, flexible policy of
working out solutions to individual problems as they arose and in
some cases reached gentlemen's agreements behind closed doors with
company representatives.
In whittling away traditional worker-privileges, the oil industry was
able to rely on popular aspirations and arguments which appealed to
nationalistic sentiment. Thus the general resentment against the oil-
worker camps for representing a 'nation within the nation' redounded
in favour of the companies in their drive to promote integration.
Furthermore, the desire to become a homeowner induced many
214 Steve Ellner
workers to put aside long-term interests and fervently support the

plans for integration. At the same time, the industry attempted to
interest the unions in running their own stores which were to substi-
tute for the comisariatos. Finally, after 1976 PDVSA neutralized
discontent by reminding workers that the oil industry belonged to the
nation and thus could not be forcibly challenged in the same way as
when it was run by multinational corporations. 53 These considera-
tions undermined the position of those labour leaders who favoured a
militant course and an unwavering defence of certain key union
objectives.
With the exception of companies engaged in iron-ore mining, the
oil industry was unique in providing such services and benefits as
comisariatos, housing, health facilities, schools and transportation.
The caja de ahorro plan was another fringe benefit which was not
easily transferable to other members of the working class whose low
salaries did not allow them to put aside part of their income for
savings. 54 Still other company concessions were extended to the rest
of the working class only after a considerable lapse of time. Thus, for
instance, the oil workers were first granted double severance pay as a
means to achieve estabilidad relativa in their 1948 contract and only in
1974 was the concept incorporated in the Ley Contra Despidos Injus-
tificados which applied to all workers. In addition, oil workers
achieved the 40-hour work week in 1963 as did the iron workers, but
twenty-five years later no other group of blue-collar workers (obre-
ros) was so privileged. 55 In short, oil-worker gains did not spur other
sectors of the working class into action.
The oil workers represented for a period of time an enclave within
the working class with certain characteristics which have been iden-
tified with the aristocracy of labour. In the first place, their wages and
fringe benefits were far superior to those of the rest of the labour
force. In the second place, the types of privileges that they enjoyed
were not easily transferable to other sectors. Thus the oil workers
were not in a position to serve as a vanguard or pacesetter for the
labour movement as a whole. 56 In the third place, in contrast to
earlier years, the oil-workers' movement failed to employ militant
tactics which might have extended to or influenced the rest of organ-
ized labour, and instead followed a pragmatic strategy based partly
on particularistic bargaining. Oil-worker leaders avoided provocative
language and unyielding positions because most of them viewed the
major issues - integration of the oil-worker camps, the contratista
system and estabilidad absoluta - as complex while their own atti-

tudes were characterized by ambivalence.
The period in which Venezuelan oil workers most resembled an
aristocracy of labour was far from protracted. In the initial years of
the industry, the oil-worker camps were rudimentary and the advan-
tages of residing there were offset by the hardships and sacrifices of
living in isolated regions. By the 1950s, however, most large camps
were situated in or near cities. Thus the workers enjoyed the best of
both possible worlds: the services provided by the companies and the
urban location. Their privileged status became especially evident in
the 1960s when, as part of the integration process, workers received
their own homes, or else a substantial bonus in lieu of a house. This
benefit was considered a virtual godsend; few workers anywhere
throughout history have been so fortunate. Since the 1960s, however,
the majority of workers have lived outside the camps and thus do not
enjoy the special services provided by the companies.
Recent changes in the composition of the labour force, uneven
distribution of benefits, and a decline in real income due to contrac-
tions in the international market belie generalizations regarding oil
workers as a privileged sector. Thus, for instance, employees who
still live in the oil camps enjoy a higher standard of living than their
counterparts in other regions. An even more important source of
differentiation is the contratista system which in the course of time has
employed an ever greater number ofworkers. In addition, techno-
logical innovations have increased the demand for professional work-
ers who are not covered by collective bargaining agreements and thus
do not enjoy estabilidad absoluta. 51 These better-paid workers were
heavily hit by cutbacks in the workforce as a result of the decline in
oil prices after 1980. In fact, the plunge in prices in 1986, which had
no precedent in the history of the industry in Venezuela, 58 was
reflected in the deterioration of the standard of living of all oil
workers. In short, myriad developments in the oil industry over the
last two decades point to the structural complexity of the labour force
and demonstrate that any broad all-encompassing statement regard-
ing the petroleum workers' ongoing status as an aristocracy of labour
is misleading.
216 Steve Ellner
Notes
1. Arturo Tremont (ex-PCV labour leader), interview, Caracas, 3 Sept.
1984.
2. Of the above-mentioned parties MEP was the most consistent in defend-
ing the comisariatos and some of the other welfare-related benefits
discussed in this chapter. Nevertheless, MEP, after its early years of
existence, pursued a policy (known as 'tactical flexibility') of forming
alliances with other parties to its right in trade union elections, which
allowed it to retain the presidency of Fedepetrol for most of the 1970s.
See Ellner, Venezuela's Movimiento al Socialismo: From Guerrilla De-
feat to Innovative Politics (Durham, NC, 1988), p. 154.
3. For a bibliographical discussion of the aristocracy of labour in developing
societies see the concluding chapter of John Humphrey, Capitalist Con-
trol and Workers' Struggle in the Brazilian Auto Industry (Princeton,
1982); Ian Roxborough, Unions and Politics in Mexico: The Case of the
Automobile Industry (Cambridge, 1984) pp. 1-9, 72-4. For a discussion
of the aristocracy of labour in Venezuela, with specific reference to the
oil workers, see America Martin, Marcuse y Venezuela: se aburguesa Ia
clase obrera en Venezuela? (n.p.: Cuadernos Rocinante, 1969). See also
Andreas Boeckh, 'Organized Labor and Government under Conditions
of Economic Scarcity' (Ph. D. dissertation, University of Florida, 1972),
p. 310.
4. Selig Perlman, a pioneer labour historian, emphasized 'job conscious-
ness' as the major worker-concern in the United States and elsewhere.
Perlman viewed labour unions as an outgrowth of the medieval guild and
concluded that job security was a more important worker-objective than
wage increases. See his A Theory of the Labor Movement (New York,
1928), pp. 5--10.
5. Ellner, Los partidos pollticos y su lucha por el control del movimiento
sindical en Venezuela, 1936-1948 (Caracas, 1980), pp. 125--36.
6. Que Pasa en Venezuela, 3 Oct. 1965, p. 9. Unlike the leftists, AD labour
leaders viewed the achievement of estabilidad numerica in the 1963 oil
workers' contract as a major victory. See 'Orientaci6n polftica y sindical
de Acci6n Democratica', Caracas, 1964 (typewritten manuscript, Ar-
chive of Taller Movimiento Obrero Latinoamericano [MOLA], Central
University, Caracas). ·
7. Domingo Alberto Rangel, one of the main founding leaders of the
Movement of the Revolutionary Left (MIR), served as an adviser to
Fedepetrol and sharply criticized the exclusion of the estabilidad absoluta
clause in the 1960 contract, shortly prior to splitting off from AD. For
a detailed discussion of estabilidad absoluta in the oil industry by a fu.
ture presidential candidate of MIR, see Martin, Marcuse y Venezuela,
pp. 124-38.
8. Clarfn, 5 Dec. 1962, p. 3.
9. Sulpicio Ventura Quero (member of the National Committee of
Fedepetrol), interview, Caracas, 10 Dec. 1986.
10. Interview No. 336, Interviewee No. 287, 15 Oct. 1963, Centro de Desa-
rrollo (Cendes), project 'Confticto y Consenso' (I received permission to

read these in-depth interviews under the proviso that the names of the
interviewees would not be revealed).
11. E. Scott, 'Contrato Colectivo- Aiio 1976' in 'Experiencias obtenidas en
Ia Administraci6n del Contrato Colectivo Perlodo 1970-1973' (PDVSA
archive, Caracas) p. 7; La Republica, 18 Jan. 1962, p. 2.
12. Scott, 'Contrato Colectivo', p. 6.
13. 'Amilisis de Ia aplicaci6n y administraci6n del contrato colectivo del
13-2-1960', May 1962 (PDVSA archive, Caracas) pp. 5-6.
14. Contratacion colectiva petrolera venezolana, 1946-1973 (Caracas, n.d.),
p. 97 [Discussion notes].
15. Victor Farrera (president of Fedepetrol union of Puerto La Cruz), inter-
view, Puerto La Cruz, 9 Oct. 1986.
16. The workforce declined from 44 103 in 1956 to 29 448 in 1966 and to
23 328 in 1972. See Franklin Tugwell, The Politics of Oil in Venezuela
(Stanford, 1975), p. 78.
17. Jorge Rodriguez (ex-president of Fetrahidrocarburos in Puerto La
Cruz), interview, Puerto La Cruz, 9 June 1988.
18. Ventura, interview, Caracas, 10 Dec. 1986.
19. Fedepetrol, Contrato colectivo, 1983-1986 ftrmado con: 'La industria
petrolera nacionalizada' (n.c.), p. 56.
20. The most important gains were granted in the first year of the govern-
ment of Carlos Andres Perez (1974-79) and were made possible by the
sharp increase in government income as a result of OPEC-oil price rises.
The Perez administration formulated these programmes without pre-
viously consulting labour leaders. See Ellner, 'Venezuela' in Latin Amer-
ican Labor Organizations, edited by Gerald Michael Greenfield and
Sheldon L. Maram (New York, 1987), pp. 732-3.
21. 'Estabilidad en el trabajo en Ia industria petrolera', Caracas, 2 June 1976
(PDVSA Archive, Caracas), p. 16.
22. Andres de Chene D., La transformacion de comunidades petroleras
(n.p., n.d.), p. 67.
23. Paul Nehru Tennassee, Venezuela: Los obreros petroleras y Ia lucha por
Ia democracia (Caracas, 1979), p. 227.
24. The original draft of the Labor Law of 1936 stipulated ten square metres,
but was reduced to four in congress, a modification which was harshly
criticized by the law's co-author Rafael Caldera. See Richard Parker,
'Consideraciones en torno a Ia Ley del Trabajo del aiio 1936' in Estudios
Laborales: Ensayos sobre Derecho del Trabajo y disciplinas aftnes vol. II
(Caracas, 1986), p. 216.
25. Contratacion colectiva petro/era, p. 368.
26. Rodolfo Quintero, Antropologfa del petroleo (Mexico, 1972), p. 87. The
chapter 'Campamentos y Ciudades Petroleras' (pp. 80-102) deals speci-
fically with Venezuela.
27. Chene, La transformacion de comunidades, p. 97; Cosme Trias (head of
Department of Industrial Relations of Meneven), interview, Caracas,
9 Feb. 1986.
28. For a lengthy discussion of the 'open communities' see Rafael Valery,
218 Steve Ellner
Las comunidades petroleras (n.p.: Cuadernos Lagoven, 1980), pp. 24-56.

29. Jose Rafael Molino (president of Fedepetrol union, Puerto La Cruz),
interview, 23 May 1984, Puerto La Cruz.
30. Contratacion colectiva petrolera, p. 370.
31. In the course of the 1983-6 contract, the 18 comisariatos in existence at
the time were subsidized in the order of 1.7 billion bolivares. This outlay
represented over a month's salary per year for most of the active and
retired workers who had access to the stores.
32. Banco Obrero, 'Informe de las actividades realizadas por el Banco
Obrero desde marzo 1969 basta diciembre 1970', Caracas, Mimeograph,
p. 111-4.
33. Emiro Natera (Department of Municipal Affairs, Corpoven), interview,
Puerto La Cruz, 19 June 1988. The residents of the former oil camps
pressured the city councils through their juntas de vecinos, which formal-
ly link individual communities with municipal government.
34. Carlos Ortega (National Committee of Fedepetrol), interview, Caracas,
27 Jan. 1987.
35. Aristides Bermudez (Secretary of Labor Relations of Nacional Commit-
tee of Fedepetrol), interview, Caracas, 17 Feb. 1987.
36. E. Scott, 'Contrato colectivo' (discussion of Clause 33, PDVSA Archive).
37. 'Analisis de Ia aplicaci6n y administraci6n del contrato colectivo del
13-2-1960 (Confidencial)', May 1962, p. 12 (PDVSA Archive).
38. Bermudez, interview, Caracas, 17 Feb. 1987.
39. Chene, La transformacion de las comunidades, p. 91.
40. Victor Farrera, interview, Puerto La Cruz, 9 Oct. 1986.
41. El Nacional, 24 Sept. 1986, p. D-2.
42. Farrera, interview, Puerto La Cruz, 9 Oct. 1986.
43. Of the approximately 30 000 workers who have the right to use the
comisariato, 18 000 are employed by PDVSA, 15 000 work for contrac-
tors in areas were there are camps, and 10 000 are retired oil workers.
44. Hector Lucena, E/ movimiento obrero petrolero: proceso de formacion y
desarrollo (Caracas, 1982), pp. 417-25.
45. Workers with over two years of steady employment are eligible for loans
to finance the down-payment of a house, a provision which naturally
excludes contracted workers.
46. The regular worker who was discharged for reasons beyond his control
generally received a much larger severance payment than did the con-
tracted worker when his contract expired. Furthermore, severance pay
was calculated on the basis of the worker's salary shortly prior to being
laid off, a system which worked to the disadvantage of the contracted
worker, who was employed for limited periods of time.
47. Jesus Rafael Marquez (secretary general of Fedepetrol union in Anaco,
1960s), interview, Puerto La Cruz, 15 June 1988.
48. 'Analisis de la aplicaci6n y administraci6n del contrato colectivo del
13-2-1960 (Confidencial)', May 1962 (PDVSA Archive, Caracas).
49. Ventura, interview, Caracas, 10 Dec. 1986.
50. Farrera, interview, Puerto La Cruz, 31 May 1988.
51. Carlos Ortega, interview, Caracas, 27 Jan. 1987.
52. Eloy Torres, (speech at Third CfV Congress in Nov. 1959] Jdeologia y
sindicalismo (Caracas, 1970), p. 73; El Nacional, 14 Nov. 1959, p. 44.
53. Laura Randall, The Political Economy of Venezuelan Oil (New York,
1987), p. 96.
54. Under the caja de ahorro plan, PDVSA employees save up to 12.5 per cent
of their basic salary which the company matches by placing 65 per cent of
that amount in the same fund. Both the company and worker 'contribu-
tions' are far superior to those of savings plans in other industries.
55. Asesores de Relaciones Industriales Asociados (ARIA), Resumen de
contratos colectivos en Venezuela (Caracas, n.d.), pp. 273-84.
56. Humphrey discusses the vanguard role played by workers in privileged
sectors of the working class in Capitalist Control and Workers'
Struggle . ..
57. The percentage of university graduates who worked for PDVSA in-
creased from 10 per cent at the time of nationalization in 1976 to 23 per
cent by 1988. By the latter date only 16 000 of the 45 000 PDVSA
employees were considered blue-collar workers lacking in a highly spe-
cialized skill. Another 16 000 were professional and management em-
ployees who were considered upper-level personnel (belonging to the
'nomina mayor') and who were excluded from the contract. See El
Nacional, 25 Aug. 1988, p. D-7.
58. Charles Bergquist points out that the relative stability of the oil industry
(which contrasted with the cyclical behaviour of major exports of other
third-world nations) influenced the Venezuelan oil workers movement
during its formative years. See Bergquist, Labor in Latin America:
Comparative Essays on Chile, Argentina, Venezuela, and Colombia
(Stanford, 1986), pp. 28-38, 206.
10 Utopia in Uruguay
Redefined: Social Welfare
Policy After 1940*
Henry Finch
Uruguay has long been acknowledged to have a remarkable history

of reformist legislation in the area of social and labour policy. The
foundation of that achievement was laid during the first three decades
of the twentieth century, in which the influence of Jose BatHe y
Ord6iiez was dominant; and although advances were also made in
Argentina, Chile and Brazil in the specific area of social security
before 1930, the phenomenon of batllismo had parallels but no
equivalents elsewhere in Latin America. After 1940 there was a new
surge of interest in the area of social welfare, following the post-
depression years of consolidation and repression of labour. Although
social security legislation was not neglected in this new phase, the
task in fact amounted to little more than rounding out a system whose
main lines were already well established.
It was in labour policy that the principal and most significant
innovation now took place. In 1941 an Investigating Commission of
the House of Representatives on the living conditions, labour and
wages of the working class published its report. 1 Its findings, and the
growth of manufacturing industry in the same period, led directly to
the creation of wages councils (Consejos de Salarios) in 1943. The
early 1940s were years in which the relationship of labour and capital
in Uruguay underwent a redefinition, laying the basis of the ideology
of neo-batllismo which was to dominate until the onset of political
crisis in the second half of the 1960s. If the economic, social and
• The author expresses his thanks to the Nuffield Foundation for financial support of
the research on which this chapter is based. Versions of it have been delivered to the
symposium on Welfare Equity and Development at the 46th International Congress of
Americanists, Amsterdam, and to seminars in the Secci6n Historia, Facultad de
Humanidades, Universidad de Ia Republica, Montevideo; Department of Economic
History, University of Stockholm; and Department of History, University of Manches-
ter. I am grateful for many helpful comments, especially from Raul Jacob, Michael
Tadman, and Raquel Nogueira.
221
222 Henry Finch
political condition of the country was still privileged compared with

the rest of the region, and the sense of national self-satisfaction even
greater, the utopia of the years after 1940 nonetheless rested on new
foundations. The task of this chapter is to investigate the nature and
novelty (but not the functioning) of the neo-batllista social welfare
policy in general, and of the wages councils in particular. It is pre-
faced by some brief general observations on batllista welfare policy in
the preceding period. 2
WELFARE POLICY 1900-40
Uruguay's turbulent first decades after Independence gave no sign of

what was to ftower in the twentieth century as 'Latin America's first
welfare state'. The structural conditions which made possible this
remarkable transition are too complex to be analysed here, but may
be crudely stated in the form of three propositions. Firstly, the
favourable ratio of land to population endowed Uruguayans with
high per capita levels of exports and income. Secondly, the landown-
ing class failed to dominate the political system and exercise control
over the resources of the state. Thirdly, the livestock export sector
experienced only limited technological modernization, with the result
that its rate of growth of output was slow, and its labour requirement
was very restricted. These features of the transition have remained
substantially true throughout this century. As a result, although the
basis of Uruguay's prosperity lay in the interior, political power has
normally been concentrated in Montevideo, and the urban sector has
offered greatest scope for growth. Income redistribution has there-
fore been a long-run condition of Uruguay's economic and social
development.
Within the range of 'reformist' policies implemented during the
first three decades of the twentieth century, labour and social security
legislation had a central place. The principal measures are well
known and may be briefly summarized. In labour legislation, the
eight-hour day (1915) was complemented by a weekly day of rest
(1920); the obligation of employers to guard against accidents (1914)
was succeeded by compensation for accidents at work (1920); and
minimum wages for rural workers were established (through not
enforced) in 1923. Social security provision mainly comprised the old
age pension for indigents (1919); reorganization of the public em-
ployees' retirement pension fund (1904); and the creation of pension
Utopia in Uruguay Redefined 223
funds for public utility employees (1919), bank employees (1925),

and employees in industry and commerce (1928). Teachers and the
military were already covered by their own pension funds.
The social context within which these reforms were enacted was
developing rapidly at the turn of the century. The role of immigrants,
whose numerical importance in Uruguay has often been exaggerated,
was nonetheless crucial to the character of the process. Largely
excluded from the traditional routes to higher economic and social
status, via access to land, the professions, or the bureaucracy, immi-
grants were very strongly represented within the independent middle-
class and unskilled working-class sectors. The affinity they felt to the
Colorado and Blanco political parties, reinstated in power in 1887 at
the end of the decade of militarismo, cannot have been great. To the
extent that they committed themselves to, their new country, they
were after all (or wished to become) Uruguayans, not orientales, as
traditional political discourse described inhabitants of the country. 3
The practice of politics as a full-time profession entailed that immig-
rants, even the small enterprising minority, could have had little
direct representation. For the politically alert working class the
growth of trade unionism and class-based political groupings offered
the best prospect of self-defence.
The role of Batlle was to exercise a radicalism which would expand
and strengthen the political system while preserving its traditional
structure in the face of the class-based challenge. Though it may seem
absurd to regard Batlle himself as a conservative figure, the model
society he proposed incorporated many inherited elements and was
to be defined not only in terms of egalitarianism, conciliation and
participation, but also by the absence of class conflict. The working
class found a political champion whose commitment to the workers'
cause (obrerismo) owed nothing to their condition as a class, but was
rooted instead in the perceived justice of their case and in the
political necessity of resolving Ia cuestion obrera. The left as a politi-
cal force was absorbed and disarmed by a policy of support for its
struggle combined with a demonstration that the batllista Colorado
party was more effective in securing working-class objectives.
Extensions of the public sector in the economy, labour legislation,
and a refusal to commit the forces of the state to the suppression of
working-class agitation, obviously called into question the rela-
tionship of batllismo to urban capital. 4 It was at best ambiguous, and
was viewed by employers with great suspicion. The extent to which
batllismo may have been acceptable depends on differentiating
224 Henry Finch
between domestic and foreign capital, and emphasizing the batllista

commitment to protection of the domestic market. Incursions of the
state into the economy and the regulation of labour either on balance
promoted the long-run interests of national employers, or affected
foreign capital more severely. Protection, on the other hand, clearly
enhanced the interests of the new industrial class, so much so that
socialists and syndicalists opposed the raising of import duties on the
grounds that tariffs and higher cost domestic products reduced the
level of real wages.s
Employment creation which resulted from protection of the
domestic market may have been relevant to another aspect of social
welfare policy, which concerns the relative generosity (in terms of age
and period of service) of social security provision, as well as the
impact of the eight-hour law. Put crudely, both tended to reduce
the aggregate supply of labour to the economy, a perverse result in
the context of Uruguay's low overall man-land ratio but compre-
hensible when viewed in the context of the limited employment
opportunities of the urban as well as rural economy. There is no
evidence that considerations of labour supply as such entered the
calculations of the batllistas in promoting their welfare policy; but it
should be borne in mind that the rival attractions of Argentina not
only served to maintain a rough equilibrium in the urban labour
market of Uruguay, but also gave rise to a low ratio of net to gross
immigration in Montevideo. 6 If the model country was to be achieved,
more immigrants were required; conditions for the working class had
therefore to be made more attractive, and that implied public provi-
sion to supplement the private wage.
From the end of Batlle's second administration in 1915 until the
early 1940s, the pace of social reform slowed. This reflected primarily
a reaction by the conservative classes, as well as by less progressive
elements within the Colorado party. Some further legislation was
enacted (including, remarkably, a completely unenforceable mini-
mum wage for rural workers in 1923), but there were fewer initiat-
ives. New occupational pension funds were established, but by the
early 1930s there was a generalized crisis within the social security
system. Inadequate reserves, difficulties in securing. income, high
administrative costs, generous eligibility rules, and lax controls on
granting benefits, all contributed in greater or lesser measure to the
problems even of funds only recently established.
In 1933 the collegiate constitution of 1919 under which the batllista
Colorados were dominant was overthrown by Gabriel Terra. Reform
of the pension funds was instituted; even the finance minister of the
deposed government was subsequently obliged to concede that the
situation of the funds was 'one of the most important problems left
unresolved by the former regime'.' The reforms (which in seeking to
re-establish financial equilibrium in the funds had only short-lived
success) reflected the complex and ambiguous nature of the Terra
years. But for labour the 1930s represented the low point in its
fortunes. Though the corporatist tone of the new constitution did not
in fact result in legislation to give effect to the new conception of
state-labour relations, the impact of the Depression and of political
change was nonetheless severe. 'The State sought to control trade union
activity and regulate the right to strike, took restrictive measure on the
use of that right, and intervened in relations between labour and
capital ... In 1933 the redistributive and vindicatory philosophy
which had accompanied the advance of social legislation in the first
three decades of the twentieth century was interrupted. ' 8
WELFARE POLICY AFTER 1940: THE WAGES COUNCILS
In elections in 1938, from which batllista Colorados and independent

Nationalists (Blancos) were excluded, Terra's brother-in-law General
Alfredo Baldomir succeeded him as president. The alliance of terrista
Colorados and herrerista Nationalists re"'ained intact, but was now
progressively undermined by the waning influence of the herreristas
and the rapidly developing international situation. 9 By 1940 constitu-
tional reform was already under discussion; in 1941 the herreristas
lost their ministerial appointments; in February 1942 Baldomir dis-
solved the legislature; a new constitution, president and legislature
(in which all party factions were represented) were voted later in the
year, and Juan Jose Amezaga formed a government in March 1943.
Thus the golpe of 1933 was answered by another in 1942 which
restored representative government. It also opened the way to the
resumption of bat/lista domination in government. From 1943 the
influence of the bat/listas was clearly growing within the political
system, as it had been outside it since the beginning of the decade. In
1947 Luis Batlle - nephew of BatHe y Ord6iiez - acceded to the
presidency, and in 1950 a second collegiate constitution was
approved. The rhetoric of neo-bat/lismo invoked the legacy of the
original but was to prove substantially different from it.
The economic background to the period was dominated by the
226 Henry Finch
resumption of industrial growth in the late 1930s following the shock

of depression. The growth process decelerated markedly during the
Second World War, but revived again in the post-war decade, at the
conclusion of which import-substituting industrialization (lSI) had
virtually run its course. By 1945, industrial employment probably
totalled almost 100 000, compared with 60 000 a decade earlier, and
over the same interval the contribution of manufacturing to GDP
rose from 15 per cent to 19 per cent. 10 The recovery of the livestock
export sector, by contrast, was limited; although price trends were
generally favourable after 1931, by the end of the decade they had
done no more than compensate for the falling volume of exports. The
effect of war and post-war international demand was further to
strengthen prices, which, combined with relatively stable production,
endowed the country with unprecedented export earnings in the late
1940s and early 1950s. 11 Protection for manufacturing activities,
which had been relatively high compared with other Latin American
countries in pre-depression years, was increased as a result of the
emergency measures adopted at the beginning of the 1930s, and was
maintained in place as intervention in the foreign exchange market
and trade controls were confirmed as primary weapons in the econ-
omic strategy of successive governments. Even under Terra, therefore,
the urban economy could not be sacrificed to the interests of the
landed sector: the political weight of Montevideo demanded atten-
tion. On the other hand it was urban capital, not urban labour, which
found government receptive to its pleas. The repressive nature of the
state in the 1930s. and the continuing divisions within the working-
class movement, left labour with little defence in this period. Real
wages fell over the course of the decade. 12
Such was the context in which the Communist Deputy Eugenio
Gomez called for a commission of the House of Representatives to
investigate the living and working conditions of industrial labour, in
November 1938. Given the isolation and small minority status of the
left-wing parties within the legislature it was not obvious that his call
would be approved, still less that the resulting report should prove so
significant as a foundation document for the reform of labour policy.
The Investigating Commission on living conditions, laoour and wages
of the working class visited forty-four establishments during 1939-40,
collecting information on wage levels, physical conditions, mode of
payment, etc., and also (curiously but significantly) on the raw ma-
terial used within each industry. Its report was the work of six
legislators: two each from the terrista Colorado and Blanco (Nacion-
al) parties, Jose Pedro Cardoso (Socialist Party), and Tomas Brena
(Uni6n Civica) who had main responsibility for drafting it. The
general conclusion, bluntly expressed, provided the basis from which
subsequent legislation proceeded: 'it would be possible to improve
the level and conditions of life of the working class without affecting
the vitality of industry'. 13
The specific findings were grouped under five headings. Those on
housing and the work environment proposed generally predictable
reforms. A third, on industrial protection, observed the lack of
co-ordination in manufacturing activity, particularly in the use of
national raw materials, and argued the need for more systematic
policy on protection which would take into account the social advan-
tages of resulting industrial activity, including those to the working
class. 14 On wages, the Commission found that they were in general
inadequate and insufficient for a family to raise children; wages for
skilled workers were very variable and often less than for unskilled
workers; women workers were paid much less than their male coun-
terparts; and wages for both men and women in some industries were
so low that they did not cover the most basic personal expenditures.
Finally, 'there is an evident imbalance between capital and labour.
The latter has no protection against wage reductions, dismissal, or
the lack of a decent work environment'. 15 Of the twenty-two recom-
mendations, the most significant concerned wage determination and
the defence of labour. They included the establishment of a legal
framework for trade unions (sindicacion con personeria jurldica) and
of tribunals of conciliation and arbitration; minimum wages councils
for individual industries; family allowances; a regime for participa-
tion in profits through share distributions; and the prohibition of
sweated labour.
The findings and recommendations of the report were unanimous
in all except the objections of Cardoso to the legal framework for
trade unions and conciliation tribunals. Like G6mez, who had not
been a member of the Commission but had nonetheless participated
in its work, Cardoso feared state unions and compulsory arbitration;
but Cardoso also took the view that unions needed to retain their
freedom not only from the state but also from political parties,
including those of the left. However, the majority view, expressed in
the debate on the report by Salgado (Blanco), a leading member of
the Commission, gave evidence of the clear intent to embrace the
working-class movement within the party system, and to deny the
reality of class conflict. The Commission proposed 'a moderate policy
228 Henry Finch
initiative, a policy to enable the harmonisation of the interests of

capital with those of labour . . . moderate because it takes into
account the situation of the worker as well as that of the business-
man . . . The employer and the worker, far from composing antag-
onistic forces, should be necessary complements in industry and
commerce . . . The reality is that social problems cannot be solved
except through the great forces of opinion constituted by the tradi-
tional parties' . 16
Although Baldomir's golpe of 1942 delayed the passage of the
wages councils law until November 1943, there was no fundamental
disagreement with the conclusion that wages were unacceptably low
and that government should intervene. On the general principles of
the measure, Emilio Frugoni (Socialist), who had unsuccessfully
proposed a minimum wage in 1912, observed that 'the problem of the
minimum wage and its solution through the Councils appeals to many
political parties, and at this moment there is no party in the country
opposed to their creation' . 17 This was no exaggeration; even the
conservative Colorado La Manana, for example, observed that the
case for wages councils was not open to challenge, if only because it
offered a device for avoiding working-class agitation. 18 Certainly
there was no representation in the legislative debate for the belief
that wage determination was best left to market forces, or to bilateral
negotiation between the two sides of industry. It was the universal
view that action was required not merely to instal the wages councils,
but through them to ensure that wages would be increased. The
proposal which was eventually successful - opposed by only a single
vote - came from the executive, and was limited to the institution of
the councils and family allowances. Attempts by the batllista Colora-
dos (now restored to the legislature) to include in the law a basic
minimum wage, and to set wage levels for rural and domestic
workers, were abandoned in the interests of prompt approval of the
main measure. The law established a regime for tripartite councils for
each industry, having three members designated by the government
and two each by employers and labour, which should determine
minimum wage levels 'sufficient to satisfy the physical, intellectual
and moral needs of the worker'. 19 A petition on behalf of labour to
establish a council for an individual industry required the support of
one-third of the workforce, or of labour organizations having legal
status or being otherwise recognized by government. 20
The unanimity of purpose and restricted range of issues considered
were characteristic of the debate outside the legislature as well as
within it. A stylized explanation of such widespread agreement can
be built up on the basis of the economic project which became
dominant at this time: the implementation of lSI was based on an
alliance of urban capital and urban labour; higher money wages
increased the level of aggregate demand and thus the size of the
market; protection against competing imports, which validated this
increase in production costs, implied a redistribution of income away
from the traditional export sector and allowed the level of profitabil-
ity of urban capital to be maintained or enhanced. 21 How coherently
such a view was held by contemporaries, if at all, is hard to say,
though Salgado, who maintained that all sectors would be better off
as a result of the Commission's recommendations, did make the
connection between higher wages and 'a regime of scientific industrial
protection'. 22 But although it is clear (especially with hindsight) that
higher wages and protectionist policy went together in the long term,
in the short term a government imposition aimed specifically at
raising wage costs must surely have alarmed the private sector. Yet
opposition was not expressed to the principle of wages councils in
some form, or even of higher wages. The three peak employers'
associations with interests in the urban sector (Camara de Industrias,
Camara de Comercio, and Camara Mercantil de Productos del Pais)
jointly proposed the introduction of a minimum wage which would
vary according to sector and location of employment, and age, gen-
der and skill of employee. 23 This conciliatory approach to the mini-
mum wage issue was replaced by outright opposition when a single
national minimum wage was (unsuccessfully) proposed in the legis-
lature in 1943. There were reservations about the tripartite structure
of the wages councils in which equal representation for labour with
capital was expected to lead to confrontation, and a system of neutral
commissions was preferred; but opposition on this issue was not
pressed. 24
Why did employers acquiesce in proposals which were intended to
raise wage levels, and which would reduce their control of the wage
bargaining process? If the notion of an 'urban alliance' is somewhat
simplistic, there were other more immediate reasons for the interven-
tion of the state in the process of wage determination. First, wages
councils represented an attempt to extend the formal labour market,
and were therefore an attack on the 'unfair competition' to organized
commerce and industry represented by street sellers and domestic
workers. Complaints were frequently heard from the distributive trades
of the activities of door-to-door salesmen (vendedores ambulantes), and
230 Henry Finch
Raul Jacob cites evidence of the threat to the footwear and furniture
industries posed by informal sector activity in the 1930s. 25 Second,
the experience of wartime inflation did result in depressed real wage
levels and contributed to the belief that an exceptional solution was
merited. Third, it was felt that the country had fallen behind in the
social reform stakes in which for so long it had regarded itself as a
pioneer; reference was made to achievement in other countries, to
the Beveridge Report, and to obligations entered into under interna-
tional agreements. 26 Fourth, evidence had recently been published
suggesting a sharp decline in the birthrate. There were gloomy prog-
nostications of the two-child family, of the demographic disaster of
zero population growth, and the primary cause of this was believed to
be wage levels inadequate to support a family .27 Fifth, different
aspects of the measure found support in terms of the orientations of
the various political groups. For the left, wages councils would in-
crease the level of organization of the working class; for the batllista
Colorados, they were a portent of further concessions to its tradition-
al support in the urban working class; for terristas and herreristas, a
legal form for trade unions and conciliation and arbitration tribunals
had been anticipated but not achieved in the 1934 constitution.
Indeed the corporatist stamp of that regime, as well as the new
populism, were combined in President Amezaga's inaugural message
to the General Assembly on 1 March 1943: 'the labour contract
cannot continue as a contract in which the will of one of the parties
predominates . . . Industry, labour and the national economy repre-
sent allied, shared interests. The state must organize its economic
policy taking into account this harmony of interests . . .'. 28
Such novel sensitivity to the condition of the labouring classes
cannot of course be separated from what constitutes a sixth reason for
state intervention, and one which undoubtedly grew in importance in
the early 1940s: the evident and increasing capacity of organized
labour to seek improvements by and for itself. During the 1930s the
trade union movement had been divided among three confedera-
tions: the anarchist Federaci6n Obrera Regional Uruguaya {FORU,
1905), the anarcho-syndicalist Uni6n Sindical Uruguaya (USU,
1923), and the Marxist Confederaci6n General del Trabajo del Uru-
guay (CGTU, 1929). By the late 1930s moves to establish a single
central indicated a limited revival of resistance to the Terra regime,
and as employment in manufacturing industry rose so too did the
level of organization. In 1942 a railwaymen's union was re-formed,
following its dismantlement in the wake of the 1908 strike, and the
following year a federation of five transport unions, the Comite

Unificador de los Gremios de Transporte, was established. 29 More
significant was a new attempt at unity in the movement as a whole,
with the formation in 1942 of the Uni6n General de Trabajadores
(UGT) (though its domination by the Communist Party, and its
clumsy treatment of a strike offrigor£fico workers in 1943, persuaded
a number of unions to remains autonomous, and a nucleus of them
was to form in 1951 the non-Communist Confederaci6n Sindical del
Uruguay). In addition to the growing self-confidence of the union
movement, the German attack on the Soviet Union increased the
degree of unity of the left. A strike of tramway workers in 1943 added
to the sense of heightened militancy, which led La Manana to reflect
on what was without doubt the most fundamental reason for labour
legislation at this time: 'If the Wages Councils start work in the
shortest time possible, it may perhaps be possible to avoid the out-
break of workers' movements which we are already catching clear
glimpses of'. 30
The institution of wages councils had complex results on the charac-
ter of the trade union movement and its relationship with the
political system. To the foundation of the more unified and comba-
tive movement of the early 1940s was now added the need to take
advantage of the new legislation. That required, as the secretary of
the UGT immediately pointed out, the preparation of wage claims;
the preparation of candidates to represent labour on the councils;
new trade unions in industries where labour was previously unorgan-
ized; and the consolidation of the movement as a whole. 31 The irony
of wages councils was therefore that although they were intended to
establish state control over the process of wage determination and so
prevent the emergence of an independent trade union movement, in
practice they led directly to a great increase in the number, mem-
bership and organization of unions. On the other hand, the political
orientations of the early small unions were now discarded by the
unions of mass membership, whose functional objectives were in-
creasingly to be defined in economic terms. Union hierarchies were
dominated by the Communist Party in the UGT and, after achieve-
ment of a single union confederation, in the Convenci6n Nacional de
Trabajadores (CNT, 1964); but in spite of its loyalty to the trade
union movement, the working class continued to define itself politi-
cally in terms of the traditional parties.
Because of the stimulus they provided to the expansion of the
trade unions, the achievement of wages councils has generally been
232 Henry Finch
regarded by the labour movement as a victory and a stepping-stone

to greater strength. 32 That view has been disputed by the independent
left, however. In the editorial columns of Marcha Carlos Quijano
consistently argued that unions are made strong by the function of
collective bargaining, and that the councils had diverted their ener-
gies into a short-term economism: 'the law of Wages Councils was
born in a climate of hostility and prejudice against trade unions ...
collective bargaining strengthens the spirit of solidarity of workers, it
makes them trust only in the strength of their union and not in the
providential sympathy of official third parties'. 33 Francisco de Ferrari
was even more scathing: 'It was contradictory and illogical that after a
long and bitter struggle against the capitalist economy and against the
State, the proletariat should decide to leave to the public authority
the task of determining its living conditions, and decide to do so just
at the moment when it had reached the conclusion of its struggle,
united and powerfully organized'. 34 Ferrari found no essential change
in the structure of the state which could justify regarding it as a loyal
ally of labour rather than the political organization of the bourgeoisie.
Although the institution of wages councils was the outstanding
initiative of this period, it should be seen in the context of greatly
extended labour and social legislation in the 1940s and early 1950s
(and an expansion of the state sector of the economy resulting pri-
marily from the acquisition of former British-owned public utilities).
Even before the final approval of the councils, in September 1943 the
Representatives were considering a batllista proposal to establish a
national register and legal framework for trade unions. Labour legis-
lation which was enacted included a modification to the regime on
compensation for industrial injury (1941), compensation on dismissal
(1944), labour exchanges (1947), and regulation of rural labour
(1946). Unemployment benefit was granted to frigorlfico and wool
warehouse workers in 1944-5. Within the sphere of social security,
and with the exception of family allowances, the task was essentially
to extend to other workers the principles already established for
major occupational groups, rather than to propose significant innova-
tions. The principal occupations to be incorporated in the system of
retirement pensions for the first time were domestic workers in 1942
and rural workers the following year. In 1954 university graduates
working in the professions were covered. The system was effectively
completed when in 1954 all workers engaged in licit paid activities
who were not otherwise eligible for retirement benefit were absorbed.
The pattern by which social security cover was widened was thus
gradual and discriminatory. Marcha observed how social benefits
initially conceded to one group, whose pension fund was best able to
bear the additional burden, were subsequently extended to all
irrespective of the financial capacity of the funds. 35
CONCLUSION
The regimes of Baldomir and Amezaga between 1938 and 1946 must
be seen as a transition phase between the socially and politically
repressive era of Gabriel Terra and the neo-batllista period domi-
nated by Luis Batlle. During this lapse of time the batllista wing of the
Colorado party resumed formal political activity and grew in
strength, and the institutions defining the relationship of the state to
the working class were installed. The structural context continued to
be one of income redistribution from rural to urban sector, but urban
industrial capital was now a direct beneficiary during a period in
which the external sector was at first constrained by exceptional
wartime conditions, and later passively rewarded by high world
prices. The urban labour force emerged from this transition stronger
and better organized. Growing demand for labour, and more comba-
tive trade unions, gave the union movement a leverage which allowed
the formation of mass-membership unions under left-wing lead-
ership, but at the cost of emphasizing short-term economic objectives
which were to be achieved under the tutelage of the state.
The inspiration for the social and labour legislation of the 1940s
and 1950s had diverse origins, only one of which was enhanced union
power. It is impossible therefore to accept the judgement of Rodri-
guez that 'If up to 1933 a kind of welfare state made some concessions
to workers in the public sector- sometimes with, sometimes without
direct trade union pressure ... From 1940 onwards there is not a
single economic or social benefit received by public or private sector
workers which does not have its origin in direct trade union demands
acceded to in agreement, award or law'. 36 It was in fact during this
period that while organized labour was consolidating and extending
its improved standard of living, the weakest, non-organized labour
groups in both rural and urban sectors were also absorbed into the
social security system. The success of the trade union movement in
exploiting its new level of integration is undeniable, but the expanded
234 Henry Finch
legislation which defined that integration after 1940 has to be traced

to the changing requirements of the regime which represented a state
itself in transition.
What was the relationship of the neo-batllismo of the 1940s and
1950s to the dominant ideology of the pre-1930 period? Both versions
of batllismo sought to contain working-class pressures in an over-
whelmingly urban context, within a political framework dominated
by multi-class parties, which had over the long term perceived the
necessity to mediate and conciliate if they were to survive. Batllismo
did so during a period of slow but steady export-led economic
growth, when trade unions had ideologically radical but numerically
weak memberships, and when the integration of the working class
was achieved by the granting of the male franchise, legitimation of
the unions, and the granting of working-class demands through the
political process. Batllismo recognized the aspirations of workers but
not the separateness of their class, and made concessions in a manner
which was more paternalist than populist. Neo-batllismo expressed
the requirements of the state during a period of industrial growth and
fortuitous export prosperity, and survived into the late 1950s when
both of these favourable conditions had been lost. The process of
integrating the working class, now organized and active, employed
elements of corporatism and populism. Unions were called on to
represent the interests of their members within councils in which
appointees of the state would ensure justice and fair play between
labour and capital. Exploitation of workers might still occur, but this
would be at the hands of individual employers and not systematically
as a result of class conflict. The network of laws and institutions
defining the integration of the working class denoted an alliance, not
a division: 'this law (of wages councils] cannot be taken as an ex-
pression of and cause for conflict between worker (obrero) and
capitalist; it must be taken as a law in favour of the worker (traba-
jador) seeking necessary cooperation with capital'. 37
The defence of the collective interest of labour under neo-batllismo
through corporatist legislation was later supplemented as a device for
controlling the unionized workforce by the vertical penetration of
clientelist relations between the political parties and the individual.
The novelty of this did not lie in the practice. It had its roots in the
urban-based redistributive policies of the first batllismo, as well as in
the urbanized form of co-participation developed between the two
parties under the 1917 constitution and amplified by the pacto del
chinchuUn in 1931. What was new was the scale of patron-dient
relations, especially during the extended period of economic stagna-

tion after the mid-1950s. The raw material was provided by the
expansion and administrative chaos of the social security system, and
the enhanced party patronage built into the 1950 constitution. The
characteristic expressions of the corruption which overtook neo-
batllismo in the 1950s were the inflation of the bureaucracy, the
multiplication of social security privileges, and the particularistic and
discriminatory role of the parties in supervising the distribution of the
resources of the state to their clienteles.
Notes
1. The report was published in Diario de Sesiones de Ia Camara de Repre-
sentantes (DSCR),vol. 442, pp. 21-32 (17 March 1941).
2. Earlier attempts to establish a minimum wage and/or wages councils are
briefly reviewed in Jose Maria Labrada and Milka Ivankovik, 'Los Con-
sejos de Salarios en una Alternativa de Desarrollo', Hoy es Historia, 12
(October-November 1985) pp. 42-5. There are general surveys of the
evolution and operation of the social security system in Uruguay in
Arturo C. Porzecanski, 'The Case of Uruguay', in Carmelo Mesa-Lago,
Social Security in Latin America: Pressure Groups, Stratification, and
Inequality (Pittsburgh, 1978) pp. 7~112; and J.E. Kneit, La Prevision
Social en el Uruguay (Montevideo, 1961).
3. Bamin and Nahum observe that older inhabitants continued to describe
themselves as orientales not only to evoke their provincial, criollo identi-
ty, but also to differentiate themselves from the immigrant population.
Batlle habitually spoke to and of 'Uruguayans': Herrera preferred 'orien-
tales'. Jose Pedro Barran and Benjamin Nahum, Batlle, Los Estancieros
y Ellmperio Britdnico, vol. VI: Crisis y Radicalizacion 19/3-1916 (Mon-
tevideo, 1985), p. 236.
4. On the attitude of industry and commerce to batllismo see Jose Pedro
Barran, Batlle, vol. V: La Reaccion lmperial-Conservadora 1911-1913
(1984), pp. 27-40.
5. Barran and Nahum, Batlle, vol. IV: Las Primeras Reformas (1983),
p. 51; M.H.J. Finch, A Political Economy of Uruguay since 1870 (Lon-
don, 1981), p. 12.
6. Finch, Political Economy, p. 24-5. During 1905-14 the ratio of new
immigrants to total population was ten times greater in Argentina than in
Uruguay: Ana M. Rothman, 'Evolution of Fertility in Argentina and
Uruguay', 'International Population Conference, London, /969, vol. I
(International Union for the Scientific Study of the Population Liege,
1971), p. 716.
7. Eduardo Acevedo Alvarez, La Economfa y las Finanzas Publicus Des-
pues del 3/ de Marzo (Montevideo: 1937), p. 286.
8. Raul Jacob, El Uruguay de Terra, 1931-1938 (Montevideo, 1984), pp.
109-10.
236 Henry Finch
9. These divisions in the Blanco and Colorado parties are not easy to locate
in ideological terms, since it was access to (or exclusion from) power
which fundamentally determined their attitudes to the 1933 regime.
However, in attacking the 1919 constitution and the dominance of the
progressive batllista Colorados, and in basing his regime on an alliance
with Herrera's reactionary Blanco faction, Terra found general support
among the conservative classes.
10. Julio Millot, Carlos Silva, Lindor Silva, El Desarrollo Industrial del
Uruguay de Ia Crisis de 1929 a Ia Postguerra (Montevideo, 1973) Table 8,
9, 23.
11. Finch, Political Economy, Table 5.3.
12. Millot, et at., Desarrollo Industrial, Table 14.
13. DSCR, vol. 442, p. 31 (17 March 1941).
14. The observation regarding the lack of a policy on the use of national raw
materials by manufacturing industry is ironic, since it was precisely this
objective which had led Batlle y Ord6iiez to create the Instituto de
Quimica Industrial and Instituto de Geologia y Perforaciones, in 1912.
For an account of their work see Henry Finch, 'Technology Policy and
the State in Uruguay, 1900-1935', in Rory Miller and Henry Finch,
Technology Transfer and Economic Development in Latin America 1850-
1930 (University of Liverpool, Institute of Latin American Studies,
Working Paper 7, 1982) pp. 37-66.
15. DSCR, vol. 442, p. 32 (17 March 1941).
16. Ibid., pp. 42-4 (18 March 1941).
17. Ibid., vol. 449, p. 171 (15 October 1941).
18. La Manana, 26 March 1943. The generally favourable view of wages
councils taken by all shades of press opinion is displayed in the press
cuttings in Carpeta no. 1890 (1941-44, Consejos de Salarios) in the
archive of the Camara Nacional de Comercio.
19. Law 10 449, 12 November 1943, art. 1. The text of the law, and official
material relating to the awards of wages councils, is in Ministerio de
Industrias y Trabajo, Digesto de Ia Actuacion de los Consejos de Salarios
entre los Alios 1943-1952 (Montevideo: 1952).
20. Law 10 449, art. 5.
21. Such an explanation for the introduction of wages councils has been
frequently put forward: see for example Ana Frega, M6nica Maronna,
Yvette Troch6n, 'Los Consejos de Salarios Como Experiencia de Con-
certaci6n', Cuadernos de CLAEH, 33, year 10, no. 1 (1985), and (same
authors) Baldomir y Ia Restauracion Democratica (1938-1946) (Monte-
video, 1987), pp. 86-7; Millot, et at., Desarrollo Industrial, pp. 119-20;
Finch, Political Economy, p. 176-7.
22. DSCR, vol. 442, p. 42 (18 March 1941).
23. The proposal, dated 7 November 1941, is in Informe Anual de Ia Camara
Nacional de Comercio, 1941, pp. 74-6.
24. Informe Anual de Ia Camara Nacional de Comercio, 1943, pp. 18-19.
25. Raul Jacob, 'Crisis y mercado de trabajo: una aproximaci6n a Ia prob-
lematica de los aiios veinte y treinta', Centro Interdisciplinario de Estu-
dios sobre el Desarrollo, Uruguay (CIEDUR), Serie Investigaciones no.
16, 1984 esp. pp. 82-6.
26. See for example DSCR, vol. 442, p. 50 (18 March 1941); vol. 449, p. 164
(15 October 1941); vol. 454, p. 179 (23 June 1943); and La Manana 15-17
January 1943.
27. DSCR vol. 442, pp. 45-6 (18 March 1941); vol. 450, p. 221 (18 November
1941). During 1935-44 the rate of natural increase of the population fell
to 1.13 per cent, compared with 1.76 per cent (1915-24) and 1.55 per
cent (1925-34): Rothman, 'Evolution', p. 716. For a valuable discussion
of wages councils and social benefits as an expression of the socialization
of the means of reproduction of the labour force, see Jorge Luis Lan-
zaro, Sindicatos y Sistema Polftico: Relaciones Corporativas en el Uru-
guay, 1940-1985 (Montevideo, 1986) pp. 32, 54.
28. The address was reported in La Manana, 2 March 1943. A more concrete
expression of Amezaga's corporatist design was his proposal to institute
the Consejo de Economfa Nacional which had been envisaged in the
1934 constitution. Its twenty-one members were to be nominated by the
executive (seven), the state banks (three), the rural interest groups
(three), and one each by the Camara de lndustrias, Camara de Com-
ercio, the banks, the Central Uruguay Railway, the trade unions, the
Colegio de Abogados, the Ateneo, and the Facultad de Ciencias Econ-
6micas of the University: La Manana, 28 April and 26 May 1943.
29. Marcha, 204, 8 October 1943.
30. La Manana, 26 March 1943.
31. Enrique Rodriguez, Justicia, 19 November 1943.
32. See, for example, Lucia Sala de Touron and Jorge E. Landinelli, '50
Aiios del Movimiento Obrero Uruguayo'. in Pablo Gonzalez Casanova
(co-ordinator), Historia del Movimiento Obrero en Amlrica Latma, vol.
IV (Mexico, D.F., 1984) pp. 267-8; Hector Rodriguez, Nuestros Sindica-
tos (1865-1965), 2nd edn (Montevideo, 1966), pp. 42-3.
33. Marcha, 685, 28 August 1953. Quijano did not deviate from this view
even after the formation of the CNT. He also held upward pressure on
money wages resulting from the awards of wages councils to be a major
factor in the inflationary process of the early 1950s: Marcha, 613, 7
March 1952. Subsequently Marcha canvassed and published the opinions
of labour, capital and leading political figures on the operation of the
councils: 820-4, 6 July- 3 August 1956.
34. Francisco de Ferrari, El Sa/ario Minimo y el Regimen de los Consejos de
Salarios e11 el Uruguay (Montevideo, 1955), p. 100.
35. Marcha, 939, 28 November 1958. As an illustration of the piecemeal
nature of social security provision, during 1943 pension provision for or
rate of contribution of the following occupational groups was under
discussion in the House of Representatives: drivers employed by the
state; teachers of the deaf-mute, blind, and abnormal; porters; domestic
workers; rural workers; bakers and butchers; employers; private school-
teachers; newspaper sellers; washerwomen and ironers; hairdressers;
workers in ANCAP handling toxic materials; petrol tanker drivers; and
tramworkers. DSCR, 453-6 (1943).
36. Rodrfguez, Nuestros Sindicatos, pp. 84-5.
37. Speech of Luis Batlle, 29 June 1952, reproduced in Luis Batlle, Pensa-
miento y Accion, vol. I (Montevideo, 1965), p. 310.
11 Education and Training in
Colombia, 1940s to 1960s
Aline Helg
In 1940 Colombian education offered a varied picture. Although

enrolment had increased at all levels compared to 1920, access to
education hardly kept pace with demographic growth. 1 A major
improvement was registered in the literacy rate, which rose from 32
per cent of the population over fifteen years of age in 1918 to 56 per
cent in 1938. But in 1940 as in 1920, only one-third of children of
school age attended primary school, and the majority of these for
only the first two grades. Only 6 per cent entered secondary schools
(colegios) and very few (perhaps 1 per cent) received vocational
schooling. Under 3000 students were enrolled in the universities. 2 In
practice, only the sons and daughters of the upper and middle classes
studied beyond the second or third grade. Vocational training was
very limited: industrial schools pursued moral rather than technical
goals, and agricultural training was almost nonexistent. In the rural
areas, very little schooling was available. Disparities between the
countryside and the cities were exacerbated by regional economic
imbalances, because the financing of primary education was mainly
the responsibility of departmental government. The highest rates of
literacy and of school provision were found in the most prosperous
and urbanized departments, namely Cundinamarca, Antioquia,
Valle, and Atlantico.
Before 1940, the role of the state in education had been limited by
such factors as scarce funding, ·the absence of trained personnel, and
traditions of decentralization. Educational reforms consisted heavily
of legislation that could not be enforced (compulsory elementary
education in 1927, minimum salaries for public primary school-
teachers in 1934) or that fell into abeyance when budgetary retrench-
ment occurred. Some new secondary schools were established, and
the National University was founded in 1935. However, the radius of
impact of the Ministry of Education hardly went beyond the region
around Bogota, as was highlighted by the ambitious national educa-
tion programme designed during the Revolucion en Marcha ('revolu-
tion on the march') of the Liberal president Alfonso L6pez Pumarejo
239
240 Aline Helg
(1934-8). Education continued to rely heavily on private initiative,

especially from the Catholic church. Catholic religious orders which
had been recalled to Colombia by the government in the late
nineteenth century, ran most of the secondary schools and most of
the limited number of schools that provided training in the arts and
crafts. From the early twentieth century, a non-confessional private
sector of primary and secondary schools slowly took shape. 3 The
relative roles of the central state, the departments, the Catholic
church, and the lay private sector in education had been a matter of
continuous debate since independence. It is difficult to see clear-cut
divisions between the dominant parties, the Liberals and the Con-
servatives, from the 1920s.
Budgetary constraints imposed by wartime conditions meant that,
with population growth, it was difficult in the early 1940s to retain the
proportion of children attending schools at the levels of the late
1930s. After the Second World War the education system was subject
to new demands associated with a renewal of growth, rural-urban
migration and population expansion. Elements of the ruling elite had
been warned of their own precarious position by the bogotazo of
9 April 1948. the urban riot foUowing the assassination of the radical
Liberal leader Jorge Eliecer Gaitan, which represented for the urban
poor a loss of hopes of a progress towards equity. The crowd hurled
its long-restrained anger at official buildings including the education
ministry and at symbols of privilege that included Catholic schools. 4
The sacking of the city centre and the rural violencia that ensued
convinced sections of the ruling elite that without controlled social
change- including an expansion of educational access and provision-
elite survival would be imperilled. Meanwhile, expansion of the
manufacturing sector and of tertiary activities gave rise to a demand
for more workers with elementary instruction. And, at the same
time, foreign missions gave an impetus to the restructuring of educa-
tion and to incipient educational planning. The IBRD recommended
educational changes as part of its five-year development programme
published in 1950; and UNESCO inftuenced policy formulation and
implementation, especially literacy and teacher-training pro-
grammes. Subsequently loans and donations, prompted in part by the
Alliance for Progress, poured into Colombia from the international
agencies and US foundations. (Between 1960 and 1967 these were
worth US$ 48 050 000.) Although foreign educational missions re-
commended elementary education as the overall policy priority, 58
Education and Training in Colombia 241
per cent of foreign loans and donations went into higher education. 5
The bipartisan constitution of 1958 established that education was
to receive at least 10 per cent of the national budget. Indeed, public
education was to be a high priority: rural schools were to be targeted,
along with the primary and tertiary sectors, and vocational training.
Spending on education exceeded 10 per cent of the national budget
for the first time in 1962. National funds assigned to primary educa-
tion increased steadily between 1960 and 1968, and its share of the
total education budget rose from 19 per cent to 39 per cent. This
increase was made principally at the expense of secondary education,
still largely the preserve of the Catholic church, while funds assigned
to higher education were stable, representing in 1968 as in 1960,
about 33 per cent of the total budget. 6
Extension of the provision of public education was preceded and
accompanied by the development of the private sector, which catered
for the children of the elite and the middle class. Between 1950 and
1957, enrolment in private primary schools increased by a factor of
4.3 (as compared to 1.7 in the public sector) and in private secondary
colegios by 2. 7. Subsequently, in the 1960s, the universities registered
the biggest increase in private enrolment. 7 Private institutions were
far from being uniform. Some were Catholic colegios of the religious
orders, others were Catholic colegios operated by the dioceses. There
were a few Protestant secondary schools, and others that had no
religious orientation. There were bilingual schools, some of which
were grant-supported by foreign governments. Educational standards
in the private sector varied considerably. Some schools employed
mainly qualified teachers, had an intensive curriculum, made con-
siderable demands on pupils and experimented with new methods of
active teaching. Others were short-lived business ventures without
official recognition where immediate profit mattered more than the
achievements of the pupils. Many schools ran courses from kinder-
garten to the bachillerato (secondary-school leaving qualification),
while others taught only a few grades. 8
Stratified and fragmented, the private education sector matched
Colombia's social structure. There was a range of private schools,
both confessional and non-confessional, each of which served a par-
ticular social group. There were private schools that provided educa-
tion for all age-groups and those with a more limited age range. Some
charged high fees and others modest ones; some pioneered ex-
perimental teaching methods, others used more formal ones. 9
242 Aline Helg
PRIMARY, SECONDARY AND HIGHER EDUCATION
Renewed efforts to generalize public primary education occurred

after the Second World War. By 1957 3049 new schools (mainly
rural) had opened. Between 1945 and 1957, the number of trained
and untrained teachers almost doubled to reach 26 823, and the
number of children attending public school increased from 758 156 in
1950 to 1168 368 in 1957. 10
Such progress, however, was not made without lowering the qual-
ity of education. As in earlier decades, many new schools functioned
in private houses rented by the municipio. The selection of teachers
during the Violencia was often made by political, not professional,
criteria. Many trained Liberal teachers lost their jobs, and unqual-
ified but loyal Conservatives, sometimes with only two grades of
primary schooling, hastily replaced them. In addition, although funds
for primary education expanded, their share of national and depart-
mental budgets remained stable, and there was no improvement in
the system of funding. Inadequate funding, together with inflation,
caused the real wages of teachers to fall relative to the salaries of the
middle class and the wages of skilled workers. Consequently, pro-
fessionals tended to move from the public to the private sector or out
of teaching altogether; teaching jobs were attractive mainly to
women without formal qualifications. 11 Furthermore, there was little
curricular development during this period. In the 1950s, primary
schooling consisted mainly of the three Rs, plus a fourth - religion,
taught by rote-technique and memorization. The content of rural
primary education was not specifically designed to meet the needs of
agriculture; and the rural curriculum was a mere condensation of the
urban. In order to stem the ftow of rural emigrants, however, the
rural curriculum had one additional feature; it was so designed as to
prevent pupils who had completed one or two grades from continuing
their studies in an urban school. 12
From the 1960s, public policy in primary education showed more
commitment to social equity. The approach to the problem of rural-
urban migration changed: it was now believed that the best way to
retain the rural population in the countryside was to improve ser-
vices. New legislation in 1963 harmonized the urban and rural cur-
ricula and imposed a five-year programme on all primary schools.
The Emergency Plan of 1967 outlined concrete ways of implementing
the 1963 law and of making possible the schooling of the 700 000
children still denied access. The Emergency Plan reduced the number
of years of schooling and established a two-shift system (one shift in

the morning, the other in the afternoon), which allowed the schools
to double their intake. For the countryside, the Emergency Plan
created the unitary (one-teacher) five-year school, and removed the
Church's prohibition on coeducation in schools with fewer than thirty
pupils. 13 And, significantly, from 1961 the system of financing educa-
tion was overhauled. The national government assumed a greater
responsibility for the primary education budget, particularly teachers'
salaries. A new central institution, the Colombian Institute of School
Construction (ICCE) was founded, which helped departments and
municipios to build new classrooms.
Consequently, between 1957 and 1968, 6921 new schools were
opened and 35 517 teachers appointed. In 1968, 2 213 405 children
attended public schools, and 77 per cent of the school-age population
had at least one year of schooling. 14 Differences between rural and
urban areas were not, however, eradicated: in the rural areas, 40 per
cent of school-age children still did not attend school, as opposed to
22 per cent in the urban. Only 6 per cent of the rural schools provided
the five-year curriculum. Nevertheless, some steady progress was
observed, even given that the population was growing at an average
rate of 3.4 per cent per annum between 1957 and 1968. 15
The quality of teaching also improved. The government organized
on-the-job training and raised teachers' salaries slightly. By 1967, less
than 7 per cent of primary-school teachers had received only a
primary education themselves; and 44 per cent had a formal qualifica-
tion from a teacher-training establishment, as compared to 29 per
cent in 1953. These improvements, however, would not have taken
place without the pressures of the Colombian Federation of Teachers
(FECODE), which, created in 1958, organized congresses and strikes
to improve salaries, working conditions and training. Since in 1967
79 per cent of the 52 793 Colombian teachers in the public sector
were women, FECODE represented an outstanding case of unioniza-
tion and politicization in a mostly female profession. 16
Public secondary education expanded later. The Conservative
governments (1946-53) had decided to entrust secondary education
principally to the private sector, especially the Church, and had
abandoned in 1946 the Liberal programme of bringing private col-
egios under national supervision. As a result, the proportion of
secondary-school enrolments in the public sector dropped from 50
per cent in 1945 to 35 in 1957P Although the stated reasons for this
decline included the low prestige of the national colegios and the high
244 Aline Helg
priority given to expanding primary education, policy was based too

in an unstated fear among many politicians that almost free second-
ary education would divert the young poor from manual labour.
In the 1940s and the 1950s, the bachillerato was at the centre of a
long debate on curriculum reform. Broadly speaking, there were two
positions, neither of which was directly connected with party affilia-
tion. While the 'traditionalists' wanted to maintain a six-year pro-
gramme with a European, classical framework, the 'modernists',
influenced by the example of US secondary education, looked to a
four-year programme of bachillerato, after which students would
either go to a technical school or take a two-year pre-university
course. The 'traditionalists' wanted to preserve the prestige of the
bachillerato, while the 'modernists', following the recommendations
of foreign missions, wanted to broaden access to the bachillerato and
to direct some bachilleres towards new technical training courses. 18
At the end of the 1960s, nevertheless, the six-year bachillerato still
prevailed. The many attempts to shorten it met fierce opposition
from upper- and middle-class parents and from the organized confes-
sional and non-confessional private sectors. Since a shorter curricu-
lum would have been compulsory in both public and private colegios,
the social value of the title of bachiller would have been devalued.
The commitment of the government to open opportunities for social
mobility through education was diminished by its concern not to
alienate powerful interests. This explains the government's decision
to resume the expansion of the public sector in secondary education
in 1960. The bachillerato became more accessible to poor children in
public institutions. In the 1960s, over 1200 new public colegios
opened, and enrolments in the public secondary schools rose from
37 963 in 1957 to 177 554 in 1968. The proportion of children enrolled
in public secondary schools organized along classical lines rose from
35 per cent in 1957 to 44 per cent in 1968. 19 As in primary education,
this increase was made possible partly by such measures as the
double-shift schools.
In the 1960s, however, the bachillerato was no longer the only
academic requirement for gaining access to universities. By the end
of the decade, almost all public and private universities had selective
admissions tests. The ability to attend a good colegio became, in
effect, a necessary precondition of university entry. Meanwhile, be-
tween 1946 and 1970 the total number of students registered in the
universities rose from little over 7000 to 79 000. In the same period,
the number of approved universities increased from 14 to 34; and by
1970 several departments had their own regional institution. 20 Higher

education received particular attention thanks to foreign loans, ex-
change, and advice. The universities of Antioquia and Valle, for
example, had buildings like those on a US campus; and US assistance
played a part in the introduction of new subjects, like sociology,
electronics, and public administration.
Several public universities had prestige, and the major National
University in Bogota still had the highest national standard. How-
ever, private institutions such as the Catholic Universidad Javeriana
in Bogota or Pontificia Bolivariana in Medellin, and the secular
Universidad de Los Andes in Bogota met the demand of a growing
number of students from upper- and upper middle-class families for
up-to-date courses and a stable environment for studying. These
universities provided training better suited to the new job opportuni-
ties for engineers, economists and businessmen opened up by con-
tinuous economic growth. 21
The increasing politicization of public institutions, especially the
National University, played a major part in the growth of demand
for private higher education. In the 1960s, students organized the
National Federation of University Students (FUN), which, beginning
with a reformist programme, evolved in a socialist and anti-US direc-
tion. The FUN argued that if the blocked National Front coalition of
Liberals and Conservatives could not bring about desired social
change, revolution would, as in Cuba, achieve it. Guerrillas appeared
in the university movement; and in 1965 student demonstrations
throughout the country precipitated the declaration of a state of siege
and violent clashes with the army in which students died. Because
public universities were considered revolutionary centres and were
frequently shut for long periods, prosperous parents often regarded
private university education as more cost-effective. Their children
completed their courses more rapidly in the private sector, and were
better equipped for the job market. 22
VOCATIONAL TRAINING
In 1940 the most neglected sector of education was vocational train-

ing. Establishing courses in vocational training was a difficult task,
since it meant both creating an attractive alternative to the bachi/lerato
in a milieu that despised manual work and making a heavy investment
in new buildings and equipment. Thus only teacher- and commercial
246 Aline Helg
training had developed alongside the bachillerato before 1940.

From the early twentieth century to the late 1930s, teacher-training
schools had had a six-year curriculum with the same content as the
colegios, except for introductory education courses in the last two
years. Throughout Colombia, the schools had been popular with girls
because they represented their only route to public secondary educa-
tion, and with boys because they provided more grants than the
colegios. Thus, many girls and boys dropped out of the schools to
work as semi-qualified teachers or to transfer to the bachillerato; and
the few students completing the teacher-training course seldom
served as teachers. In practice, the teacher-training school functioned
as a channel of social mobility for the middle class, especially in small
towns.
To limit this abuse, the Ministry of Education in 1938 implemented
a successful five-year programme specifically oriented towards
teacher-training. After 1945, however, it gradually reinstated the
six-year curriculum, which prevailed until the 1960s. Dropout rates
remained high, but, now because teachers were losing status,
teacher-training became a vehicle for lower-class mobility, allowing
poor girls especially to avoid factory work. Public and private
teacher-training increased considerably. Enrolment in teacher-
training institutions rose from 4990 in 1943 (73 per cent women) to
59 515 in 1968 (80 per cent women). Meanwhile, teacher-training
enrolments as a percentage of total secondary-level enrolments rose
from 6.5 to 9 per cent. 23
Commercial training was, from the 1930s, a popular alternative to
the bachillerato. It drew 11 003 pupils in 1940 (17 per cent of total
secondary-education enrolments) and 69 233 in 1968 (12 per cent),
generally girls from the lower and lower-middle classes. 24 Yet com-
mercial schools were overwhelmingly in private hands, and often
expensive. But they addressed a social need. They gave a short, two-
to four-year training in preparation for non-manual, clerical jobs,
such as secretary, bookkeeper, receptionist-telephonist, or shop
assistant. An investment in this training yielded gains for modest-
income families. To run a commercial school could also be good
business, and many small entrepreneurs took advantage of it and
provided a low-quality education. For the government, private com-
mercial education was useful because it filled a gap without making
demands on the public budget. State intervention in commercial
schools started to be effective only in the 1960s, with the beginning of
inspection and the imposition of minimum curricular requirements.
In 1940, industrial and agricultural schools attracted only a few

pupils. There was no tradition of apprenticeship in the European
sense. Most industrial schools, run by Catholic orders with charitable
aims, taught mechanics, metalwork, carpentry, shoe making, tailor-
ing, and printing to boys; sewing, millinery, and embroidery to girls;
and much religion to both. Boys usually received training on old
equipment from teachers who rarely had any contact with the indus-
trial sector. Training for girls enabled them to earn pin-money, but did
not prepare the many who were to be heads of families for the world
of work. Agricultural education did not exist before 1940, except for
one institute of the Catholic Society of Don Bosco in Ibague (Tolima)
and two small schools founded by the Federation of Coffee Growers
in the department of Caldas. zs The lack of agricultural training, in a
country that depended largely on coffee exports, appeared bizarre.
The first attempts at agricultural training encountered many prob-
lems. The goals of training were diverse and somewhat contradictory:
to halt rural emigration; to terminate the Violencia; to increase levels
of output and productivity by introducing modern technology to
small- and medium-scale peasant producers; to diversify agricultural
production; and to train specialized rural technicians and public
service employees. These goals, difficult in themselves to achieve,
were frustrated too because no serious agrarian reform modified
Colombia's inequitable patterns of land distribution. In the 1960s an
additional goal of agricultural training was to impede guerrilla re-
cruitment.
In 1941 the Ministry of Education hastily started a programme of
agricultural training, which included courses in the theory and prac-
tice of agriculture within the general curriculum. Twenty-four schools
opened in those municipios that accepted the responsibility for pro-
viding buildings and land, regardless of its suitability for agriculture.
In 1942 a Puerto Rican mission helped to found an agricultural
teacher-training school in Buga (Valle). At the same time, farm-
home schools were designed for peasant girls. Although the Violencia
was responsible for a high turnover of pupils, their number rose
steadily. Whereas there were twenty schools with 779 pupils in 1945,
by 1968 there were 81 with 7930 pupils, most of them in the public
sector. 26 The curriculum generally consisted of a pre-vocational year
to equalize the level of knowledge of the students, followed by two
years of complementary studies and agricultural or domestic science.
The main positive feature of the agricultural schools was that
they provided some training for rural youth, but their impact on
248 Aline Helg
agriculture was very limited. They had no assistance from the Minis-
try of Agriculture and won no sympathy from the powerful landown-
ers' associations. The boys often clashed with their parents over new
techniques; and on graduating, many boys who could not find land to
work moved to clerical jobs. 27
The Federation of Coffee Growers' programme of 'agricultural
concentrations' was more successful. Launched in the late 1940s in
the coffee-producing departments of Antioquia and Caldas, the con-
tent of the programme did not differ much from the official curricu-
lum, except in its emphasis on co-operativism. Its success was
brought about by three factors. First, the programme was run by the
efficient Federation of Coffee Growers, with which peasants were
affiliated, and not by the government, which they often considered
with scepticism. Administration by the Federation guaranteed reg-
ular financing of the programme and a steady supply of materials,
seeds and animals, as well as the integration of the programme with
local communities. Secondly, the affiliation of the peasants to the
Federation assured, through practices of participation and control,
the families' commitment to the programme and the dedication of the
teachers. to their task. Thirdly, the western coffee region consisted
mainly of middle-size farms, and coffee production provided a sur-
plus that could be invested in technical improvements and new
crops. 28
The reform of industrial training raised another series of questions.
How should the prestige of manual work be enhanced? How ·could
low-cost training be developed that kept abreast with technological
change in the industrial sector? What kind of relationship should be
established between training schemes and manufacturing? From 1938
to 1957, the government created a national network of industrial
schools that had no direct connection with the manufacturing sector.
At first, there were three categories of institutions: two-year craft
schools preparing skilled workers; three- to four-year industrial
schools that awarded a diploma of perito; and five-year technical
institutes leading to the title of experto. The technical institutes
introduced some new specializations, such as electricity, motor
mechanics, and draughtsmanship. The diplomas of perito and experto
were supposed to challenge the primacy of the bachillerato, and
grants were introduced to draw students. Subsequently, the Ministry
of Education eliminated the craft schools' category. It reorganized
the industrial schools around a four- to six-year programme and the
technical institutes around a five- to seven-year programme. Five
years of training led to the diploma of experto, seven years to the

bachillerato tecnico: the term itself was proof that the bachillerato
could not be ousted. 29
Nevertheless, industrial training drew an increasing number of
students: from 3339 in 1940 to 10 616 in 1958. 30 Yet, as in other
sub-sectors of education, only a few completed their training. Many
unmotivated grant-holders dropped out to enter a colegio. Others,
who could not accustom themselves to the heavy forty-hour-week
schedule of industrial schools that combined morning general educa-
tion with afternoon practicals, abandoned courses after a few
months. Moreover, students were discouraged because a long train-
ing, compared to that in the commercial schools and the bachillerato,
led only to the low status of an industrial worker. Furthermore,
current trends in industrial education did not correspond to entre-
preneurial requirements. In 1948, the National Association of
Manufacturers (ANDI) stated that the main weakness in training for
industry was among middle and upper management and specialized
technicians; skilled workers could easily be trained on the job. 31 In
addition, industrial schools had high unit costs per pupil and lacked
the resources to modernize their machinery continuously. As a solu-
tion, many foreign missions and, in 1954, the Catholic Union of
Colombian Workers (UTC) recommended the organization of a sys-
tem of apprenticeship, partially financed by the manufacturing
sector.
In 1957, with the advice of the ILO, the National Apprenticeship
Service (SENA) was founded. Built on the model of the Brazilian
SENAI, it was a semiautonomous agency of the Ministry of Labour.
The SENA board of directors had representatives from the ministries
of labour and education; the employers (ANDI, the National Federa-
tion of Merchants [FENALCO]), and one joint representative from
the Colombian Agricultural Society [SAC] and the Federation of
Cattlemen [FED EGAN]; the trade unions; the Catholic church. And
the ILO provided advice. A compulsory payroll tax on employers
ensured the financing of SENA. In the 1960s, SENA had basically
two programmes. One three-year apprenticeship programme trained
teenagers who had completed primary education for employment in
industry. The other consisted of proficiency courses in specific skills
for adult workers and employees. In 1966, 41 000 adults enrolled,
and only 6000 apprentices. 32
SENA's advantage over the industrial schools came from its
close relationship with the manufacturing sector. SENA conducted
250 Aline Helg
national and regional surveys to find out where and in which branches
of industry more labour was needed. On the basis of this information,
SENA fixed the number of apprentices or adults in training. In these
circumstances, SENA-trained apprentices were almost certain to be
hired.
Not surprisingly, SENA rapidly gained respectability among em-
ployers and working families. At the end of the 1960s, however,
SENA's aim of meeting entrepreneurs' needs - about two thousand
apprentices per annum - clashed with an increasing demand from
lower and lower middle-class families for short training courses.
There was also the problem that SENA's aim of meeting entre-
preneurial demand amplified regional differences, since SENA
activity was concentrated in the more developed departments of
Antioquia, Cundinamarca, and Valle. The thrust of SENA activity
was upon industry and services, because the needs of these sectors
were precise and attainable, rather than on agriculture. where the
dominant interest groups SAC and FEDEGAN resisted the spread of
training among their workers, and appropriate training was difficult
to design because the labour force was mostly illiterate.
WOMEN AND EDUCATION
As society modernized, a large proportion of women entered the

labour market, despite the opposition of traditional sectors of the
Conservative and the Liberal parties, and the Catholic church. More
and more women worked, either as heads of families or as earners of
secondary incomes. At the same time, the expansion of public ser-
vices meant a demand for more teachers and clerical workers, and
more opportunities in new specialist occupations, such as social work,
nursing and laboratory assistance, where women predominated.
As a result, educational differences between men and women
decreased. As the literacy rate rose from 52 per cent in 1938 to 69 per
cent in 1964, levels of literacy among women came almost to equal
those of men. The rate of primary education enrolment of girls
became the same as that of boys for the first time in 1965. And by
1965, more girls than boys completed the five-year primary cycle. The
proportion of girls among secondary-school pupils rose from 44 per
cent in 1940 to 49 per cent in 1968. Almost excluded from the
universities until the 1930s, in 1968 women represented 26 per cent of
university graduates. 33
In 1940, girls still had few opportunities in secondary education and

almost none in higher education, in part because co-education was
denounced by the Catholic church as immoral. The Liberal govern-
ment, however, took the first steps to enlarge opportunities by estab-
lishing a bachillerato femenino that included domestic science in the
curriculum. Separate higher education institutions were founded for
women, beginning with the private Women's Section of the Catholic
Javeriana University in 1941 and the public Colegios Mayores de Ia
Cultura de las Mujeres in 1945. Training was organized for careers
regarded as appropriate for women, such as nursing, social work, and
the decorative arts.
During the military regime of General Gustavo Rojas Pinilla
(1953-7) women gained the vote. Opportunities multiplied rapidly,
particularly for middle- and upper-class women, some of whom en-
tered medicine, engineering, university teaching and architecture. 34
In the 1960s, higher education became increasingly co-educational,
although primary and secondary education remained mostly single-
sex. Women's vocational training at the secondary level expanded,
but diversified little. Girls continued to constitute over 80 per cent of
the students in teacher-training and commercial schools. Women's
industrial schools still taught mostly sewing, and almost all of the
apprenticeships of SENA were allocated to men. But the few new
fields that opened up for women - nursing, rural domestic science,
and decorative arts- rapidly gained recognition. 35
EDUCATIONAL REFORM FOR SOCIAL CHANGE?
Colombia's governments developed education and training consider-

ably. At the end of the 1960s, was access to education more equitably
distributed among Colombians than before?
A class analysis indicates that the popular classes enjoyed greater
access to the educational system by the 1960s. In 1967, for example,
7 per cent of National University students were from the lower or
lower-middle classes, a figure that would have been unthinkable a
decade earlier. 36 By the end of the 1960s, however, arrangements
within the educational sector had become even more hierarchical and
class-specific, with the sharp separation of public and private provi-
sion. Whereas in the 1920s, the completion of public primary educa-
tion was enough to get a job as teacher, clerk, bank employee, or civil
servant, by the 1960s more and more years of study were necessary to
252 Aline Helg
enter these areas of employment. A growing proportion of Co-

lombians, with little access to employment in the cities and the
countryside, was relegated to the sidelines of society, forming a new
underclass. This trend prompted a redefinition of SENA's priorities;
instead of training with a view to raising the quality of labour, its
priority was now the organization of special programmes to help the
poor to survive. 37
Far from modifying regional disparities, educational expansion was
concentrated in or around the three major cities, Bogota, Medellin
and Cali, which in 1968 contained most of Colombia's co/egios and
universities, and most of the industrial and commercial programmes
of SENA. By contrast the departments of Choc6, Magdalena, Sucre,
and Cesar had virtually no facilities for vocational or higher educa-
tion. A brain drain was accelerated as the best educated of the
poorest regions moved to major cities in search of better opportuni-
ties. Some equalizing of educational provision between rural and
urban areas occurred; but educational opportunities in the country-
side remained extremely limited.
The coalition arrangements designed in 1958 to re-stabilize Co-
lombian .politics enabled entrenched groups to defend their privi-
leges against radical legislation. Hence it was not till 1971 that an
education minister, Luis Carlos Galan Sarmiento, attempted to con-
front the educational needs of the 1960s; and then his reform project
was overwhelmingly rejected by Congress, which would have no
truck with a proposal that all private and public educational inten-
tions be required to take 10 per cent of their pupils from lower-class
grant-holders. 38
The overall picture in education was mixed. The performance of
the sector between the 1940s and the 1960s had important positive
features. It contributed to Colombia's unbroken growth record, and
created a better-educated population. Perhaps too it also shaped the
positive views of personal investment in education that were widely
held in the 1980s. Yet the very character of educational change had
negative consequences too. Its inherent inequalities and unevennes-
ses contributed to frustrations. Stratification within the education
sector reinforced social divisions, restricted communication between
social classes, eroded patterns of social control without promoting
new patterns of participation, and played a part in creating a climate
where violence became endemic in the 1970s and 1980s.
Notes
1. This chapter deals with public and private formal education, from the
primary to the higher level, and refers to the national scale. It does not
include, for example, adult programmes, informal education, or military
training.
2. DANE, 50 anos de estadfsticas educativas (BogotA, 1985), p. 101; lv6n
Lebot, Elementos para Ia historia de Ia educacion en Colombia en el siglo
XX (Bogota, 1978), pp. 169, 177, 183.
3. Frank Safford, The Ideal of the Practical. Colombia's Struggle to Form a
Technical Elite (Austin, 1976), pp. 185-236; Aline Helg, Civiliser le
peuple et former les elites. L'education en Colombie, 1918-1957 (Paris,
1984), pp. 16-163.
4. Christopher Abel, Politica, iglesia y partidos en Colombia: 1886-1953
(Bogota, 1987), pp. 152-5, 246-7; Herbert Braun, The Assassination of
Gaitan, Public Life and Urban Violence in Colombia (Madison, Wis.,
1985), especially pp. 155-72.
5. See, for example, International Bank for Reconstruction and Develop-
ment (IBRD) (Lauchlin Currie, dir.), The Basis for a Development
Program for Colombia: Report of a Mission (Washington, DC 1950);
Colombia, Ministerio de Educaci6n Nacional (MEN), lnforme del
proyecto para el primer plan quinquenal. 4 vols (Bogota, 1958); Misi6n
Economia y Humanismo (Louis J. Lebret, OP, dir.), Estudio sobre las
condiciones del desarrollo de Colombia, (Bogota, 1958). Richard R.
Renner, Education for a New Colombia, (Washington, DC, 1971), pp.
18~2.
6. Misi6n Economia, Estudio, p. 318.
7. DANE, 50 anos, p. 101; Lebot, Elementos, pp. 177, 182.
8. Misi6n Economfa, Estudio, p. 318.
9. Renner, Education, p. 52. According to the studies of the National
Direction of Statistics, as early as the 1940s a majority of Bogota middle-
class families sent their children to private primary schools (Contralorfa
General de Ia Republica. Direcci6n nacional de estadfstica, Las con-
diciones economico-sociales y el costo de Ia vida de Ia clase obrera en Ia
ciudad de Barranquilla [Bogota, 1948], pp. 14, 29, 3~0).
10. Lebot, Elementos, pp. 177-8, 180.
11. Colombia, MEN, lnforme, p. II: 20; Misi6n Economia, Estudio, p. 305.
12. Decree no. 3468 of 1950, in Colombia. MEN, Educacion colombiana.
Disposiciones organicas y reglamentarias de Ia educacion nacional de
1903 a 1958 (Bogota, 1959), pp. 521-4; Orlando Fats Borda, Peasant
Society in the Colombian Andes: A Sociological Study of Saucio (Gaines-
ville, 1955), pp. 42, 164-6; Myriam Stella Ferro C., Mi vida (historia de Ia
vida de una maestro rural colombiana) (Bogota, 1978), p. 19; Gerardo
and Alicia Reichei-Dolmatoff, The People of Aritama. The Cultural
Personality of a Colombian Mestizo Village (Chicago, 1961), p. 127; Nina
Giraldo de Espinosa, teacher. Interview with author, El Guamo (Antio-
quia), 15 September 1981. Eduvigis G6mez Gallo, teacher. Interview
with author, Medellin, 21 July 1981.
254 Aline Helg
13. Renner, Education, pp. 52--66.

14. Lebot, Elementos, pp. 177-8; Rodrigo Parra Sandoval, Dependency and
Education in Colombian Underdevelopment (Land Tenure Centre, Paper
No. 54, Madison, 1973), p. 14.
15. Parra, Dependency, p. 33; Gabriel Poveda Ramos, Polfticas economicas,
desarrollo industrial y tecnologia en Colombia, 1925-1975 (Bogota,
1976), p. 129; Renner, Education, p. 53.
16. Laureano Coral Quintero, Historia del movimiento sindical del magiste-
rio (Bogota, 1971), p. 42: Mision Economia, Estudio, p. 304.
17. Lebot, Elementos, p. 183. In 1945, 17 871 students enrolled in the public
sector, and 17 936 in the private sector; in 1957, 37 363 enrolled in the
public sector and 69 664 in the private sector.
18. Daniel Henao Henao, Veintiuno planes de bachillerato, Revista Jave-
riana 45, no. 221 (February 1956) pp. 156-9; El Siglo, 22 January 1950, 1
and 15 March 1951; El Tiempo, 15 January 1949, 13 November 1950, 17
and 19 March 1951, 17 May 1953, 28 and 30 January 1955, 8, 25 and 27
February 1955, 26 March 1955; Alfonso Uribe Misas, La libertad de
ensenanza en Colombia (Medellin, 1962), pp. 142-5.
19. Lebot, Elementos, pp. 183, 185.
20. Renner, Education, pp. 99-100.
21. Gonzalo Catano, 'Escolaridad y movilidad social en Colombia', in
DANE, El sistema escolar colombiano (Bogota, 1978), pp. 182-9; Jaime
Rodriguez F., SDB, Educacion catolica, 1970); Robert C. Williamson,
El estudiante colombiano y sus actitudes. Un ana/isis psicosocial de Ia
Universidad Nacional. Monografias Sociologicas, no. 13 (Bogota, 1962).
22. Iv6n Lebot, Educacion e ideologfa en Colombia (Bogota, 1979), pp.
75-105.
23. DANE, 50 alios, pp. 59--60; Lebot, Elementos, pp. 182-3.
24. Lebot, Elementos, pp. 177-8, 180.
25. Helg, Civiliser, pp. 75-83, 152-5, 216-24.
26. Lebot, Elementos, pp. 183, 185.
27. Colombia, MEN, Memoria de 1942-1943. 2 vols (Bogota, 1943), pp. 1:
27-8, 237-47; MEN, Panorama de Ia educacion vocacional en Colombia
(Bogota, 1948), pp. 65--68; Misi6n Economia, Estudio, pp. 312-13;
Norberto Solano Lozano, director of vocation training, 1947-51. Inter-
view with author, Bogota, 5 August 1981.
28. Guzman, La Violencia, p. 1: 299; Francisco Yepes Avila, 'Concentra-
ciones rurales agricolas. Proyecto educativo de Ia Federaci6n Nacional
de Cafeteros', Revista Cafetera 19, no. 146 (April 1970): 73-93.
29. Colombia. MEN Memoria de 1948-1949 (Bogota, 1949), p. 92; Misi6n
Economia, Estudio, p. 314; Cesar Arboleda, industrial teacher. Inter-
view with author, Bogota, 29 September 1981; Father Francisco
Staedele, SDB, industrial teacher. Interview with author, Medellfn, 12
September 1981; Antonio Vera, industrial teacher. Interview with au-
thor, Medellfn, 14 September 1981.
30. Lebot, Elementos, p. 183.
31. Asociaci6n Nacional de Industriales (ANDI) Revista de Ia Asociacion
Nacional de Industriales, 1, no. 1 (15 March 1948), pp. 5, 7.
32. International Labour Office, Formacion profesional in Colombia. In-
forme destinado al gobierno de Colombia preparado por Ia Organizacion

lnternacional del Trabajo, institucion participante a Ia que el Programa de
Ia Naciones Unidas para el Desarrollo confio Ia realizacion del proyecto
(Geneva, 1970) pp. 73-80; Lebot, Educacion, pp. 66-70; Renner,
Education, p. 95; SENA, lnforme sobre necesidades de mano de obra
(Bogota, 1959).
33. Catano, Escolaridad, p. 22; Lebot, Elementos, p. 182; Hernando Ochoa
Nunez, 'La mujer en el sistema educativo', in Magdalena Le6n de Leal,
ed., La mujer y el desarrollo en Colombia (Bogota, 1977) pp. 86-7. 96.
34. Lucy Cohen, Las colombianas ante Ia renovacion universitaria (Bogota,
1971) pp. 43-9.
35. Helg, Civiliser, pp. 224-8; Ochoa, 'La mujer', pp. 91-5.
36. Parra, Dependency, p. 36.
37. Maria Angelica Ducci, The Vocational Training Process in the Develop-
ment of Latin America. An Interpretative Study. CINTERFOR Studies
and Monographs, no. 47 (Montevideo: ILO, 1980), pp. 87-8.
38. A. Eugene Havens and William L. Flinn, 'Structural blocks to higher
educational attainment', in Havens and Flinn, Internal Colonialism, pp.
165-85; Parra, Dependency, pp. 41-69.
12 Puerto Rico: A Model of
Welfare Capitalism?
c. 1945-70
Christopher Abel
Between the 1930s and 1950s colonial governments in the Caribbean

embarked on policies of welfare amelioration within a capitalist
framework in order to counter a political radicalism and nationalism
awakened by the inadequate official responses to the crises of the
World Depression and the Second World War. In the British colonies
welfare innovation was used to make imperial rule palatable; and in
the French welfare provision was used as a sweetener to reconcile
local populations to the status of departement within metropolitan
France. But it was in Puerto Rico that welfare capitalism was most
thoroughgoing, its consequences most enduring and its character
most controversial.
The reformist Puerto Rican leadership of the PPD (Partido Popu-
lar Democnitico) used its bargaining dexterity to entrench itself in
power in the island from 1944 to 1968. PPD leaders persuaded
Washington that a substantial investment of resources and a renego-
tiation of the external relationships of the 'unincorporated territory'
would yield both political advantages - a stable Puerto Rico secure
for international naval and airforce bases- and ideological dividends:
an image of altruism that compared favourably with that of British
and French imperialism, and that stood the test, after 1959, of com-
parison with Cuban revolutionary performance. The United States
could afford a 'colonial experiment' in Puerto Rico. It was a small,
manageable island with a skilled political elite who strove energeti-
cally to generate consensus in exchange for the succession of one
form of subordinate status by another. Perhaps the welfare achieve-
ment that accompanied the dual transition from an 'unincorporated
territory' to a 'Commonwealth' (or Estado Libre Asociado) and from
a largely agribusiness economy to one in which manufacturing for
mainland markets predominated was, indeed, impressive. Welfare
gains were significant both by any Caribbean standard, and by com-
parison with Hong Kong, the pioneer of manufacturing displacement
257
258 Christopher Abel
among West European colonies. The theme of this chapter is the

character of welfare capitalism in Puerto Rico between its beginnings
in the mid-1940s and the early 1970s, when the weaknesses of the
Commonwealth model were fully manifest and its welfare dimension
was under threat. Just as, in 1967, Puerto Rico was classified by the
World Bank as a rich nation, the deficiencies of the prevailing model
were becoming inescapable. 1
The study of the post-war period should be seen against the back-
ground of the World Depression of the 1930s. Despite the crisis,
Puerto Rico was probably the most prosperous Caribbean island of
the decade. However, US sugar-cane companies dominated the econ-
omy. Their obdurate resistance to modest attempts to import aspects
of New Deal reformism to Puerto Rico engendered multi-class
opposition. Imaginative reform proposals contained in the Chard6n
report {1934) included cheap hurricane relief for small-scale coffee
producers and the introduction of tariffs on selected US imports in
order to protect infant industries. But these and other proposals were
shelved when the large companies flexed their muscles in Washington
and Puerto Rico in order to nullify the central recommendation of the
report: the expropriation of cane lands from companies flouting the
500-acre law by a new non-profit-making public corporation that
would redistribute land to subsistence homesteaders or administer it
itself. 2 Agribusiness militancy gave rise to an upsurge of radical
nationalism among professionals and trade unionists, angry that the
sugar-cane companies could still make profits by forcing wages down
to a mere survival level while other US business ceased to be profitable. 3
Welfare conditions were investigated in the 1930s and early 1940s
with some thoroughness. The adverse consequences of monocrop
dependency were repeatedly underscored by studies of particular
localities. These drew attention to problems of high food prices, the
pervasiveness of disease (malaria and intestinal parasites), inad-
equate access to health care, seasonality of employment, the preva-
lence of the four-day week, and poor housing. The concentration of
land and capital in sugar-cane was held responsible for an over-
reliance on imported dry foodstuffs, especially polished rice, which
were associated with insufficient vitamin intakes. 4
THE POLITICAL AND ECONOMIC CONTEXT
Welfare policy evolved in a context of political and economic ambi-

guity. Political ambiguity was observed in the status that Puerto Rico
Puerto Rico: A Model of Welfare Capitalism? 259
acquired under US supervision and the second-class citizenship that

accompanied it. Economic ambiguity was visible in the uncertainty
surrounding the extent to which Puerto Rican decision-makers (busi-
ness and political) influenced the pace and direction of industri-
alization and economic change. These discrepancies shaped an
environment in which social policy was shot though with imprecision.
Ambiguities of political status made for a lack of synchronization
between insular and federal initiative and a shuttling of responsibility
between insular and federal agencies when policies faltered. Insular
resources could finance only modest programmes; hence these
tended to be merely complementary to those undertaken by federal
agencies. But funding by federal agencies was discontinuous. Federal
aid arrived unexpected -like a windfall gain; it was employed ener-
getically; and was withdrawn for reasons seldom directly connected to
Puerto Rico. There was no guarantee that a federal programme
would be completed. Since the insular authorities had negligible
control over the size and disbursement of federal funds, stagnation
of welfare initiative usually occurred where federal funding was ab-
ruptly terminated.
Economic ambiguities were equally important. Welfare initiative
was undertaken on the assumption that the process of industrializa-
tion would be self-sustaining, that its positive consequences for the
Puerto Rican economy would be general throughout the island, and
that they would be sufficient to ensure self-sustaining welfare gains.
The reality was otherwise. The process of industrialization, never
self-sustaining, was always dependent on the performance of the US
economy; the benefits of growth were heavily concentrated in the
urban zones, especially San Juan and contiguous areas; and an ab-
sence of self-sustaining growth precluded the evolution of self-
sustaining welfare expansion.
These problems were masked by the PPD government which was
precociously attuned to the benefits derived from costly public rela-
tions exercises. According to official propaganda, an expansion of
political rights for Puerto Rico was accompanied by an expansion of
social rights. These, together with the economic changes wrought by
the 'industrialization by invitation' programme, made the island the
showcase for democracy of the region. 5 Yet political rights were
circumscribed. The 1954 constitution denied Puerto Ricans indis-
pensable features of sovereignty - control of foreign, foreign econ-
omic and defence policy; the right to an independent currency and
the right to vote for the US president and congress, which enlisted
them in federal armed forces. 6 Nevertheless, the official view that the
autonomous status enshrined in the 1954 Constitution maximized the

advantages of both independence and integration with the United
States while minimizing the disadvantages enjoyed considerable pub-
lic acceptance in the 1950s and early 1960s. This was reflected in the
electoral success of the PPD, which between 1944 and 1964 never
drew under 58.00 per cent of total votes cast in elections (in which
turnout never fell below 73.99 per cent.f Second-class citizenship
was persuasively projected by the PPD - controlled communications
media as the best deal possible for Puerto Rico at a time when
decolonization was gradually rising to the top of the regional political
agenda.
A transition from colonial to autonomous status whose main fea-
ture was a pragmatic trade-off between status, growth, welfare and
citizenship had several consequences. It had the effect of reassuring
US liberals of their country's essential altruism and lack of imperial
ambition. Secondly, it smothered some of the debates surrounding
the Cold War: the exemption of Puerto Rico from contributions to
federal taxes that funded US military bases in the island meant that
insular budgetary debates were focused on other matters. Thirdly,
the transition to Commonwealth status forestalled the evolution of
effective independence movements, and prevented the formation of a
Puerto Rican military force capable of declaring independence. In-
stead, the PPD fostered the notion that autonomy might be perfected
or 'culminated' without offence to Washington or to powerful
interests. Meanwhile, an articulate governing elite emerged which
managed the relationship with the United States and which, with the
multinational manufacturers, was its chief beneficiary. And the ruling
elite recruited to the PPD a following from which small property-
owners, secondary beneficiaries of the 'Commonwealth' experiment,
came to form an intermediate leadership. 8 Opportunities for debate
about Puerto Rico's status reassured international observers about
the viability of her democracy; yet debate was subtly managed so that
politics - welfare politics included - were usually presented in the
island as a technical, not an ideological matter. Once the Common-
wealth Constitution was enacted, issues involving policy implementa-
tion were freely discussed by the ruling PPD; but essential questions
about citizenship were sidestepped where possible. The conundrum
of what constitute social and political rights in a framework where
patriotism is ill-defined (and, indeed, where the slogan 'To be patri-
otic is to emigrate' was coined) was hardly addressed.
Welfare policy performed one other significant function. It was an
instrument for making personalized rule palatable and for smoothing

the transition from personal rule in the early 1940s to a more collegi-
ate form of government by the mid-1960s. The last Governor
appointed by a US president, Rexford Guy Tugwell, brought the
language and practice of intervention (in, for example, food distribu-
tion and telecommunications) during the Second World War. Start-
ing from the assumption that the effective administration of relief and
reconstruction in the 1930s had been impeded by the unwillingness of
US administrators to leave scope for initiative to Puerto Ricans,
Tugwell begin to build a permanent civil service manned by island
professionals enjoying career structures based on merit. Explicitly
committed to comprehensive planning, Tugwell embraced the insti-
tutionalized pursuit of public interest, and questioned the value
of freedom without social welfare. 9 Tugwell's successor Governor
Luis Muiioz Marin, was equally committed to notions of economic
and social planning. According to a close colleague, a reading of
Beveridge's Full Employment in a Free Society persuaded Muiioz of
the urgency of an economic development programme. 10 The overall
consequence of policy pursued by Tugwell and Muiioz was that an
incipient technocratic apparatus that delivered welfare benefits to
large parts of the electorate reinforced the legitimacy of a govern-
ment that was already conferred by election results.
The self-congratulatory language of official documentation gives
the impression that the twin policies of social welfare and indus-
trialization constituted a carefully planned and calibrated strategy. 11
The island government tempted cheap venture capital, brought in
branch plants of blue-chip US firms, reduced their risks, widened
profit margins, and recruited labour. Furthermore, the island govern-
ment gave clients thorough guidance on statutory regulation, located
appropriate industrial sites, and even provided buildings and equip-
ment. The availability of generous funds for vocational training under
the GI Bill of Rights was also fortuitous. 12
Already by the late 1950s cautionary observations about the Puerto
Rican model were made that had an immediate significance for
welfare performance. Werner Baer, who was sufficiently optimistic to
forecast self-generating growth, warned of over-optimistic official
predictions. These were founded in an assumption of a falling re-
liance on US savings, rising mainly from a growth in domestic person-
al savings, that would result from high incomes accompanied by a
higher propensity to save and an increasing availability of savings
institutions. 13 Meanwhile, the failure to integrate industry with island
agriculture was remarked upon as early as 1951: only a few industrial

inputs like coconut fibres and bamboo were locally produced. Crisis
in the model of the 1950s loomed, as productivity increases, while
large, were insufficient to offset wage rises; and employment shrank
relative to both capital and output. 14
These problems were not solved. They were smothered by a partial
restructuring: by diversification away from a limited range of modest
industries like textiles and leather goods into new areas of manufac-
turing. Unforeseen success in the electrical machinery industry en-
couraged the Planning Board to identify more advanced industries,
like the pharmaceuticals, metal products, machine tools and preci-
sion instruments, oil refining and petrochemicals industries that
might be lured to Puerto Rico. And government evolved 'fishbaiting'
feasibility studies ranging over such areas as patents and royalties,
viability and minimum plant size, and comparative costs and profits
relative to the mainland which were included in new incentive
packages. 15 The adjustment from the first to the second version of the
'industrialization by invitation' model was achieved smoothly, and
assured continued material improvement, observed in Table 12.1.
Expansion of welfare provision continued until the second version
of the industrialization model was thrown into crisis in the early
1970s. The transition from the first to the second version had been
relatively smooth owing to the congenial international climate. The
harsher realities that prevailed from about 1973 - dollar and oil
crises, softness in tourism, contraction in the USA - exposed the
fragility of the Puerto Rican model. While the manufacturing of
labour-intensive industries shifted to other Caribbean locations,
much capital was repatriated to the mainland. 16 Export industrializa-
tion, once the panacea, was now, according to pessimistic prognoses,
a doomed strategy. It would inescapably fail to solve Puerto Rican
problems of mounting unemployment; and the only alternative
course was to develop agricultural potential to its limits, while under-
taking a new drive to promote linkages between agriculture and
manufacturing/processing. 17
Earlier, pro-PPD authors had argued that independence posed a
threat to welfare, as to the physical and economic sec.urity of Puerto
Rico. 18 As it became clear that Puerto Rican industrialization had run
its full course of options, 19 the closeness of welfare capitalism to
collapse was exposed; and the argument grew in strength that the
welfare gains of the 'Commonwealth' solution were no more than
temporary palliatives. Far from assuring self-sustaining welfare gains,
Table 12.1 Measures of economic success in Puerto Rico,

by decade, 1940-80
Measure 1940 1950 1960 1970 1980

Life expectancy (years) 46 61 67 72 74
Literacy of population
over 10 yrs (%) 68.5 75.3 83.0 89.3 91.3
Teachers (1000) 6.3 8.7 13.2 21.8 30.6
Registered motor
vehicles (1000) 27 61 180 614 1,035
Maintained roads
(1000 km.) 2.4 3.6 4.7 5.9 6.4
Gasoline sales
(1000 gals.) 167 408 681
Telephones (1000) 17 35 83 319 693
Construction permits
(1000) 6.1 9.4 12.5 6.3
Cement sales
(1000 94-lb. bags) 15.7 33.4 29.5
Sugar production
(1000 short tons) 1.0 1.3 1.0 0.5 0.2
Tourist visitors
registered (1000) 58 207 735 823
Passengers to Puerto Rico
(1000 arrivals) 137 643 2,033 2,742
Electricity consumed
(1000 kWh) 423 1,667 6,495 11,121
Electricity authority
customers (1000) 176 409 691 978
Water authority
customers (1000) 117 257 530 832
Persons per physician 1,130 758 534
Hospital beds (1000) 11.5 12.2 11.9 12.1
SOURCE: Richard Weisskoff, Factories and Foodstamps: The Puerto Rican

Model of Development (London, 1985) pp. 52-3.
fomento strategies had failed to create the economic structure neces-

sary to provide sufficient employment or to generate sustained
welfare. 20 These were conditions in which the alternatives to auton-
omy gained momentum. The statehooders, who had won the 1968
elections as consensus began to break, were established as a viable
alternative governing party. The independentistas recovered some
selfconfidence and impetus. Now the fourth largest customer of the
United States on a per capita basis and fifth worldwide, 21 Puerto Rico
became an object of concern for Washington decision-makers. Sud-

denly the island was the object of the federal foodstamps programme.
Imposed like a 'hurricane relief expedition', the foodstamps pro-
gramme represented welfare capitalism entering a new, unpredict-
able, uncalculated and unexportable phase. Only one feature of that
new phase could be confidently predicted: that, despite success in
developing speciality export food crops, a proposal in 1981 that part
of the $1 billion food subsidy should be directed to a programme of
agrarian rehabilitation and food self-sufficiency was not acted upon. 22
EDUCATION AND TRAINING
Welfare problems are clearly observed in education and training. The

education achievements of the post-war decades were considerable;
but the limits to them were also pronounced, and became increas-
ingly manifest by the late 1960s. The experience in vocational training
was also impressive, especially by Caribbean criteria; yet, throughout
the period, nagging doubts persisted about the aims and content of
vocational training. These came clearly into focus as the 'Common-
wealth' model went into crisis. The exponents of the 'Common-
wealth' experiment assumed a heterodox liberal view; that public
education was an essential tool in economic development, while it
was also vital both in releasing creative individual social and indi-
vidual potential and in fostering democratic participation. 23 School
and university teachers were increasingly embroiled in political de-
bate, because they were expected to promote the values associated
with a full citizenship which was denied to them and their pupils.
Trapped in the ambiguities of the post-war decades, educators were
simultaneously beneficiaries of the welfare and growth achievements
associated with autonomy, and losers in the trade-off between wel-
fare, growth and status.
The achievements of Puerto Rican education were considerable.
One enthusiast in 1949 described Puerto Rico as having already done
more for education in half a century than the United States in a
century and a half. 24 The 1940 education budget (US$6.4 million)
multiplied tenfold by 1958. Whereas 43 per cent of those entering
school finished the sixth grade in 1940--7, a figure of 67 per cent was
reached in 1958. School enrolment was one useful indicator. Percent-
age enrolment in the 5-24 age group rose from: 28.6 in 1930 to 33.4
in 1940, to 40.7 in 1950, to 55.4 in 1960. 25 And universal primary
education was achieved in 1960. Eric Williams, later Prime Minister

of Trinidad and Tobago, confirmed in 1946 that, because secondary
education was free in Puerto Rico, the ratio of secondary to primary
school children compared favourably with that of the British West
Indies: 1:4 in Puerto Rico; 1:32 in the British West Indies.
The island education budget also looked impressive. Williams
pointed out that the entire British West Indies with a population
almost one-half larger than that of Puerto Rico spent less then
one-half of what Puerto Rico spent on public education. 26
The limits to Puerto Rican educational achievement were sig-
nificant. In mid-century leading educationalists calculated that the
provision of an adequate service would require annual capital ex-
penditure of US$100 millions when the total annual budget for public
education was US$60 millions. The primary and secondary school
system had patterns of educational centralization rooted in Spanish
colonial traditions. This had the merit of assuring that funds flowed to
the poorest municipalities. 27 But it had disadvantages too. Under the
'Commonwealth' experience, criticisms persisted that had already
been voiced under US colonial management. The school system was
handicapped by a uniformity of management practice, teaching
methods and curriculum content that suffocated initiative by teachers
and parents. Excessive centralization was argued to have aborted
local leadership and responsibility. And the island's department of
education was accused of evolving curricula that were more clearly
formulated in theory than in practice. Efficient in generating re-
sources, some parts of the school system did little more than promote
prescriptive rote-learning and mould a disciplined workforce. 28
Schoolteachers lacked confidence in the appropriateness of a curricu-
lum on which they were not consulted, and did not fully understand
their social role. 29 Teachers of disadvantaged children, in particular,
were not sufficiently familiar with problems like child-rearing and
socialization practices, child health, and patterns of daily life among
the urban and rural poor. An alienated teaching force could do little
to assist the alienated child. 30
The limits to Puerto Rican educational achievement were equally
evident in the University of Puerto Rico. The defects of the Univer-
sity were exposed in 1960, when it was threatened with losing its
certification from the Middle States Association because of weak-
nesses in specific areas, especially its teacher-training programme.Jl
In 1958 Richard Morse authored a bruising indictment of the Uni-
versity. For Morse it was an alien graft whose limitations were not
remedied by other Puerto Rican centres of tertiary education. Blast-

ing at a 'negligible amount of creative thinking and research', Morse
recommended that higher standards of teaching and scholarship
should be demanded by faculties, that university teachers should
enjoy more overseas experience, that exchanges of ideas among
Puerto Rican campuses should be encouraged, and that contacts with
Latin America, especially Brazil, should be enlarged. The University
needed to evolve its own priorities, instead of giving prominence to
routine, utilitarian areas, like home economics, business administra-
tion and pedagogy; and it should abandon the attempt to create the
appearance of an omnicompetent university that covered all fields.
The university shaped a climate where students were open-minded,
but deferential to authority and reverential to tradition. They lacked
bold commitment, an unflagging intellectual curiosity and a sense of
the pursuit of learning as an adventure. 32
As the industrialization programme got up steam, the defects of
industrial training became apparent. Deficiencies of equipment and
of preparation of teachers of vocational training were compounded
by other problems, notably an absence of instruments for evaluating
the progress of training programmes and difficulties in meeting the
high recurrent costs of maintaining equipment. 33 New programmes
were launched; but by the late 1960s these same programmes were
under fire. Employers complained that school training programmes
failed to keep pace with technological change, because teachers were
unfamiliar with industrial technology and shortages of specialists in
mathematics and sciences were not tackled. Meanwhile, adult vo-
cational training programmes were not keeping abreast of the in-
creasing number of workers with obsolete or lagging skills, and were
failing to meet widespread shortages of skilled, technical and man-
agerial manpower that persisted despite a high unemployment rate. 34
Uncertainty about the direction taken by the economy was accompa-
nied in the mid-1960s by doubts over the purposes of training and
retraining schemes. 35 Were federal programmes for vocational train-
ing in carpentry, plumbing and electricity appropriate to Puerto
Rican needs? And were limited resources for retraining being
wasted? Rapid shifts in the composition of the workforce and the
pattern of income creation accompanied by job destruction puzzled
government (and the family), which responded by promoting work-
sharing.36
HOUSING
Housing policy well exemplified the problems of heavy dependence

on federal funding. The insular government had no housing or slum
clearance programme in the mid-1930s and only initiated a housing
policy and established housing priorities when opportunities
beckoned under the US Housing Act of 1937. Early health and
nutrition studies indicated the urgency of change in the housing
sector, and some modest changes were introduced in projects be-
tween 1939 and 1943 that were 90 per cent federally funded. 37
Post-war industrialization and urbanization programmes created
new housing needs. The competence of both federal and insular
authorities was much in question. There were problems of policy
formulation, co-ordination and execution. Federal housing pro-
grammes of the years 1951-7 were so rigidly formulated and ad-
ministered in such an authoritarian manner that adaptation to local
conditions was barely possible, and no consensus could be reached
between federal and island officials. Furthermore, federal activities
were fragmented. No way was found to combine federal aids to
private housing, public housing, and slum clearance and prevention,
in the proportions best suited to the needs of each locality. The
proponents of urban renewal programmes failed to recognize the
importance of giving precedence to housing clearance schemes in
slum areas without immediate development potential, like squatter
settlements in mangrove swamps. Instead, rigid criteria of project
feasibility meant the bypassing of slum areas that were a health
hazard needing immediate elimination, in favour of those making
'good projects' and with potential for sale.
Appropriate policies were unlikely to evolve when appropriate
questions were not asked. Was public, private or co-operative hous-
ing preferable? And in what combinations? Were mass-production
techniques desirable and feasible? Should housing initiative precede
or follow the establishment of factories? Since housing is an import-
ant competitor for scarce resources, should these first go to improv-
ing levels of education and training and to modernizing public
administration, and only later be assigned to the construction indus-
try? Where should new housing developments be located? It might be
cheapest to develop housing on farm land; but what were the costs in
farming production; and did the cost of providing basic services -
roads, transport, watersupply, etc. -outweigh the economies achieved
on the housing side? 38
Policy was formulated on assumptions that proved erroneous. Two

examples will suffice. Federal and island housing officials started from
the premise that the family benefiting from public housing would, as
its income grew, move to the private owner-occupancy sector. This
proved impossible for many families, which, in spite of higher in-
comes, remained dependent on public housing, owing to the adverse
consequences of rising construction and land costs. 39 The lack of
mobility of public housing users in the 1950s meant that the lowest
income groups were compelled to improvize new dwellings. A new
generation of slums was built; and the number of slum dwellings in
San Juan grew at a record rate of 2000 (2 per cent) per annum in the
1950s. They generated additional social costs reflected in the incid-
ence of disease (typhoid, gastroenteritis, etc.) and crime.
A second mistaken assumption was that federal practices could be
applied in Puerto Rico without making adjustments for local condi-
tions. Thus federal officials confined the range of housing projects to
multi-family, multi-storey apartment buildings which were unsuitable
for squatter families. The federal authorities required standards that
went beyond the resources of Puerto Rican families, and rejected
Puerto Rican proposals for low-cost housing that could be made
available to slum families without additional subsidies. A determina-
tion to be seen to be getting results prevailed among federal officials
excited by post-war planning. To be credible in Washington they had
to be seen in Puerto Rico to have worked up a good momentum of
construction because in Puerto Rico the federal programme had got
off to an earlier start than was the case in much of the United States.
For reasons of bureaucratic politics, large projects were preferred to
small; and a realistic appraisal of the limits of the Puerto Rican
economy or even of the implications for housing of a mild climate was
not made. 40
Trenchant criticism was made, as early as 1950, of the general
pattern of federal contributions to social and economic programmes
in Puerto Rico: that they were haphazard and sometimes mis-
directed, and that they were rarely planned or executed specifically in
terms of the island's needs. But these warnings went unheeded by the
federal housing agencies. 41 Meanwhile, PPD politicians were too
timid to demand a special programme better adapted to local cir-
cumstances for fear of jeopardizing the 'unique' relationship of
Puerto Rico with the United States. Without political, fiscal and
administrative independence the Housing Administration of Puerto
Rico could not perform effectively the functions of co-ordination
required of it. 42
Throughout the early and mid-1950s, federal housing officials

failed to make precise definitions of the aims of urban renewal or to
establish adequate instruments for evaluating their achievements.
Meanwhile, the poorer and less self-confident Puerto Rican housing
authorities were confused. Reflecting the reservations of some social
policy-makers within the island administration about the social
consequences of economic decision-making, the Puerto Rican hous-
ing authorities tried to stem internal migration by diverting funds to
small towns and villages. The impact of these moves was not signi-
ficant. The funding of island initiative was very restricted; and the
quality of island housing personnel was impaired, because the federal
agencies seduced some of the better professional, managerial and
clerical staff with better salaries. 43
If the appropriate measurement of progress in housing is the num-
ber of families relocated from slums, then progress in Puerto Rico
was limited. The complete programme in Puerto Rico (both federal
and island) hardly kept up with new slum growth in the early and
mid-1950s. Then towards the end of the decade the island govern-
ment was confronted by a dual crisis. First, major reductions in
federal aid took place just as the public housing and slum clearance
initiatives were about to outpace slum growth. Secondly, island re-
sources did not meet immediate needs. Diverted in the early 1950s
from locally designed attempts to handle problems in local terms to
an imported programme that promised much and accomplished little,
island resources were not equal to the new tasks demanded of them.
They were insufficient to complete projects, inherited from aban-
doned federal programmes, that were inadequately funded and
staffed. 44
The weakness of housing programmes was fully manifest in 1968.
A wave of urban land invasions - well organized and planned, and
timed shrewdly before and after elections - took place. Many of the
invaders were rural-urban migrants, low-income agregados from
urban centres, dissatisfied with permanent residence in supposedly
temporary housing, and angry at the failure of the PPD to honour
election pledges since 1940 of private home ownership for all. 45
WELFARE AND THE RURAL SECTOR
Policy failure was most pronounced in the rural sector. The sugar-
cane ascendancy was destroyed in the post-war period, without any
coherent programme of agricultural diversification being undertaken.

Three interacting variables affecting the rural sector had profound
consequences for welfare. One was a continuous neglect of en-
couragement to production of domestic foodstuffs. A second, comp-
lementary, variable was a failure to promote linkages between
industry and agriculture and between the food marketing sector and
agriculture. Thirdly, food marketing policy favoured the integration
of food distribution systems with the United States.
An overwhelming urban-industrial bias to policy in the post-war
decades reflected the prevalent view that a misplaced emphasis had
been put upon agrarian restructuring in the 1930s and early 1940s. 46
The agrarian reform of the Tugwell administration had conspicuously
failed: by 1946 the Land Authority had redistributed only 2. 9 per cent
of the island's land area despite a heavily publicized programme to
establish large scale Proportional Profit farms. Thereafter the rural
sector was neglected; the island government did little to stimulate
food self-sufficiency; civil service expertise was concentrated in man-
aging external relationships and urban change; and the assumption
that Puerto Rican agriculture could be neither productive nor com-
petitive became an unassailable orthodoxy. Thus remedial pro-
grammes in agriculture were barely contemplated, in spite of the
progressive undercutting of peasant production and marketing by
US-owned food corporations and supermarket chains. Significantly,
the promotion of intra-island linkages with agriculture was never a
feature of incentive packages to the new industries. 47 As a propensity
for metropolitan investment to be concentrated in the export sector
was compounded by the seduction of domestic funds to profitable
export activities, so some expansion of agroexport activities (winter
fruit and vegetables) occurred; but few new job opportunities were
created, and food prices remained higher than on the mainland.
Inaction disguised a vacuum of policy competence in the rural
sector. No impetus to rehabilitation of the countryside was generated
by civil servants for whom the framework of new opportunities was
urban. Neither the island nor the federal government exerted press-
ure for radical agrarian change. Little impetus came from rural
workers, small farmers and sharecroppers, who showed no enthusi-
asm for modest ephemeral projects for co-operative extension ser-
vices. An indifferent government that did not seek their views did not
win their confidence. Indeed in the countryside, an apathy towards
group action prevailed which could be explained ultimately by the
numerous individual opportunities that migration availed. Govern-
Table 12.2 Occupational structure of Puerto Rico, 1930-70
1930 1940 1950 1960 1970

Total population 1 543 913 1 869 250 2 210 703 2 349 544 2 712 033
Total employed 503 805 512 214 560 271 551 688 634 961
Agriculture 52.00% 44.00% 38.00% 24.00% 7.41%
Communications 3.40 4.00 5.54 7.11 7.11
Personal services 9.75 10.00 7.71 6.51 2.97
Manufacturing 19.56 19.70 16.51 17.00 20.63
Commerce 7.30 10.50 12.17 14.82 16.01
Professional services 2.44 3.20 5.80 10.29 11.85
Public administration 1.39 2.50 8.03 11.23 17.79
Construction 2.53 3.10 4.82 8.59 12.10
SouRCE: Frank Bonilla and Ricardo Campos, 'Industrialization and

Migration. Some Effects on the Puerto Rican Working Class', Latin
American Perspectives, issue 10, summer 1976, III, no. 3, p. 80.
ment agronomists in the mid-1950s rejected a view that credit short-

ages posed a major impediment to agrarian rehabilitation. They
argued, to the contrary, that the credit already made available by
numerous federal, island and private agencies was ineffectively used.
For the most part it was allocated to producing annual crops, not to
raising the efficiency of farm operations. And the impact of any
increase in rural credit would be virtually nullified by an inefficient
system of production, processing and marketing.
These arguments provided a rationale for withholding sustained
encouragement from pineapple producers, for failing to provide
adequate funding for cotton growers, for neglecting productivity-
raising measures in coffee. 48 Even thorough investigation of alterna-
tives to sugar-cane was overlooked. The dereliction of agricultural
policy was accompanied by the progressive abandonment of the
countryside by migrant workers, a process hastened by government
advertising which stressed the merits of non-seasonal factory
employment. 49 The message was clear: welfare was to be found in the
city. Table 12.2 indicates a continuous decline in the proportion of
the economically active population employed in agriculture while
showing too a sharp increase in the proportion involved in public
administration, professional services and the construction sector.
Whereas welfare provision for the countryside barely went beyond
palliatives, in the city it eased public acceptance of the 'Common-
wealth· experiment and reduced social conflict. Traditions of urban
craft radicalism rooted in the last decades of the nineteenth century

had been complemented by socialist and anarchist militancy among
sugar-cane workers which, in spite of ideological divisions, job in-
security and repression, gathered strength in the 1930s. 50 But the
mass migration of rural dwellers to the urban factory and service
sectors and the displacement of artisan production by factory reallo-
cated the labour force to enterprises that were smaller than the old
plantations, and changed radically the nature of relationships be-
tween the employers, workers and government. Whereas a con-
spicuously underfunded business welfarism in the 1930s had no
success in muffling rural worker protest, state welfarism in the 1950s
created the framework for the definitive displacement of socialist and
anarchist traditions of worker militancy by a US style of business
unionism whose central feature was transaction at the urban work-
place within the assumptions of a capitalist status quo.
Welfare pressures hastened the demise of the sugar-cane ascend-
ancy. Already on the defensive in the Second World War, the big
four companies alleged that profits for growers were modest or at
zero level while land and labour were lost to food staple schemes.
They went on to complain at rising production costs, (fertilizer,
machinery, etc.), and resented quota practices that favoured Cuba,
Florida, Louisiana and Hawaii in US markets. 51 After the war the
companies lamented low prices and a downward trend in labour
productivity, and resented the new burdens imposed by welfare
legislation: wage and social security legislation in 1948-9, followed by
a statutory increase in the minimum wage-rate for mill workers and
the introduction of old-age insurance in 1950. Unskilled cane workers
escaped from cycles of seasonal unemployment to better opportuni-
ties in the city; and skilled cane workers migrated in growing numbers
to the United States in 1952-3. 52
The attitudes of government decision-makers were shaped by the
experience of volatile sugar-cane prices and the record of belligerent
non-co-operation of the large four companies. Island government
resisted the blandishments of the Association of Sugar Producers of
Puerto Rico. Arguments that a sugar-based prosperity had raised
welfare levels and financed relatively high levels of per capita con-
sumption of manufactured goods fell on deaf ears. 53 Government was
inclined to respond by stressing the problem of production in excess
of the US quota and local requirements.
Between 1951-2 and 197~1 sugar-cane production declined as an
employer of farm, mill and refinery workers, and also in terms of
farm value, numbers of farms and acreage of land harvested. 54 Man-

agement failed to respond to the challenge of reorganization; an
uncompetitive rate of recovery of cane meant that production costs
were high and wages low. Deteriorating market conditions in the
United States then consummated the process of marginalization of
sugar-cane production in the early 1970s. 55 No direct assault upon the
sugar-cane sector had occurred; but the economy was restructured so
that the power of the sugar-cane corporations was significantly dimin-
ished. And welfare policy played a central role in that restructuring.
An economic model promoting linkages with the mainland without
intra-island linkages had profound consequences for the food dis-
tribution and marketing sector. The traditional small store was not
destroyed. But, as higher consumption levels were made possible by
enhanced incomes and broader product-choice, the share of small
stores in sales fell. Customers increasingly opted for supermarket
chains which offered the advantages of refrigeration facilities and
more product-variety at lower prices. At the same time marketing
traditions were eroded because women entered the labour market in
larger numbers, and because there was decline in domestic service.
Webs of face-to-face relationships associated with frequent purchases
at local stores close to the home were displaced by impersonal
relationships at the branches of supermarket chains which, though
distant from the home, were accessible by car.
After a brief period (1946-51) of public ownership of some large
retail food-stores, the island government adopted the policy of en-
couraging large private supermarket chains as the leaders in food
wholesaling and retailing - a practice which encountered only a brief
political resistance outside San Juan in the early 1950s. The advan-
tages of this policy were seen in family food budgets. The concentra-
tion of a large proportion of food distribution in the hands of two
large supermarket chains- Pueblo (which by 1965 sold more than its
two largest competitors together) and Grand Union - helped to
reduce food costs, so that, as incomes grew, the food budget as a
proportion of the total personal budget fell (from 38.6 per cent in
1947 to 21.5 per cent in 1970). 56 Vertical integration in the mid-1960s
from food producers and processors assured quicker deliveries and
stable prices; and by 1966 containerization of almost all food imports
cut shipping losses and hastened the loading and unloading of imports
from the United States. The disadvantages of this system were clear
early on. Public policy and the private sector neglected to develop
backward vertical linkages of the supply system for local products. In
the early years Pueblo preferred to recruit mainland employees.

Integration with the US economy was fostered; integration within the
Puerto Rico abandoned. 57 Policy was again made palatable by im-
proved incomes and formal welfare provision.
CRISIS -THE PUERTO RICAN MODEL CHALLENGED
A climate of self-congratulation impeded self-criticism even in the

mid-1960s. Early warnings about the policy competence of the island
administration had not been acted upon, 58 so that efficient govern-
ment action was impeded by agencies with overlapping terms of
reference and spheres of authority. At the same time, senior civil
servants became increasingly divorced from islaqd realities. Enjoying
liberal sympathies in Washington cultivated by Tugwell and Munoz,
they acquired a habit of judging each issue principally by the response
of their liberal mainland allies, and, in some cases, were recruited
into senior positions in programmes of inter-American development.
Still in 1966 the gleaming optimism of the official literature was
mirrored by scholarly studies that enthusiastically endorsed a tra-
ditional society moving inexorably towards a fully fledged representa-
tive democracy. 59 Yet, decision-making in Puerto Rico became
increasingly routine-bound; and concern grew that Puerto Rico was
receiving less assistance from federal aid programmes than she was
entitled to, because Puerto Rican technocrats were less familiar with
the corridors of power in Washington than they claimed to be.
Optimism broke around 1968 when the PPD lost elections for the
first time. The defeat was depicted positively by the PPD as evidence
of the consolidation of a democratic order, but their opponents -
both statehooders and independentistas- argued, more convincingly,
that voters were protesting at the bankruptcy of the 'Commonwealth'
solution. Disenchantment with the PPD performance was not con-
fined to the island. The Puerto Rican model, once confidently adver-
tised and warmly admired, was now treated with caution and distance
in Washington. Among the ideologues of market-forces orthodoxy
the statism of the model was anathema, in spite of. its cumulative
benefits to private investors and lenders, and crisis in the model was
attributed to its inherent flaws.
Confronted by endemic crisis in the 1970s the Puerto Rican govern-
ment desperately sought out new options. A revival of nationalism
fuelled by an upsurge of labour militancy was confidently predicted
by independentistas. Statehood proved an impossible course because

US Congress would not accept it. And a crisis of high unemployment
loomed, in which locally financed welfare provision was threatened
because self-generating growth failed to occur. Without economic
independence, the island government had no flexibility in tariff and
exchange rate policy. Without political independence, the govern-
ment lacked the boldness to launch a debate that scrutinized the
consequences of improvization and calculated imprecision over thirty
years. Instead, Puerto Rican leaders courted Washington. They had
two bargaining counters when extracting concessions: one was the
threat of radical nationalism; the other, the strategic value of the
island, now enhanced by a petrochemicals superport that guaranteed
US supplies if war broke out in the Middle East.
Puerto Ricans were automatic recipients of pensions and social
security benefits because they had paid their contributions. They
were not automatically entitled to federal food and unemployment
benefits, because these had not been mandated by the constitutional
relationship. The sudden introduction of a massive foodstamps pro-
gramme amounted to a substantial modification of the US-Puerto
Rican relationship. In an earlier phase full citizenship had been
traded for growth and welfare; now more welfare was provided while
growth was not delivered. A new formula was hastily cobbled
together by which a dual dependence combining private investment
flows with federal transfer payments was applied. 60 Far from consti-
tuting a revised exportable model, these new arrangements were
widely regarded in the United States as a wasteful departure from the
conventional wisdom, even if their chief beneficiaries included US
food corporations and their allies among supermarket chains.
The foodstamps programme did, however, have the main effect
intended in the short term. It dampened any nationalist revival, and
contained labour militancy, which was focused more on the theme of
competition with mainland urban labour than on issues of indepen-
dence and labour fraternity. 61 The new arrangements were not seduc-
tive. Puerto Rico experienced negative growth in 1974 and 1978, and
foodstamps and non-money payments perpetuated low wages and did
nothing to alleviate underlying problems like mass unemployment.
The few new opportunities that arose within the US orbit merely
caused new gloom. A brain-drain began when in the late 1970s and
1980s large mainland corporations and federal agencies, which by
statute had now to fill minority quotas, came to the island to hire
engineering and business-school graduates. 62
PERSPECfiVES
The social costs of the 'Commonwealth' experiment were clearly

extensive. Yet the costs of destroying the informal sector have not
been appraised. The costs of stifling trade union growth are not clear.
No thorough assessment of environmental and pollution costs has
been made; nor the costs of what Gordon K. Lewis in the early 1960s
called 'automobilization' in a city appropriate to the mass use of the
bicycle. 63 High crime rates and growing drug abuse have been widely
commented upon, but not thoroughly examined. Critiques of the
island education system were often more sterile than the system
criticized. Critics - from the right and the left- retreated into uncon-
vincing rhetoric that lamented the utilitarian functions assigned to
public education and attributed a lofty emphasis to the 'humanizing'
role of education, without examining the character of social change
or considering funding issues.
The Puerto Rican and Cuban models lost their allure simultaneously.
The first oil crisis of 1973 exposed conclusively the shallowness of
the Puerto Rican model. To dismantle the model would be to dis-
mantle the welfare system; and to dismantle the welfare system
would have thrown into doubt the legitimacy of the political system
and would have jeopardized the future of military bases. In conse-
quence, the model was not dismantled. The language of transforma-
tion masked the reality of tinkering. No alternative path that combined
political stability with welfare benefits was found. Those who had
questioned the wisdom of the Puerto Rican model from its inception
found their doubts confirmed. Although the post-war record in such
areas as education, housing, income growth and food consumption
was impressive, the character, quality and appropriateness of the
changes that had occurred were less certain. Exponents of a modified
status quo began to worry that as conventional practices of warfare
came to be displaced by intercontinental ballistic missiles the military
value of Puerto Rico might be diminished, thus reducing Washing-
ton's willingness to sustain the revised version of the 'colonial experi-
ment'. The undisguised failure to resolve these contradictions assured
that in the late 1970s and 1980s reference to the Puerto Rican model
in other parts of the Caribbean indicated no more than a broader
despair about stagnation and decline in the region.
Notes
1. Gordon K. Lewis, Puerto Rico: freedom and power in the Caribbean
(New York, 1963); Raymond Carr, Puerto Rico. A Colonial Experiment.
(New York, 1984), esp. pp. 206--8; James L. Dietz, Economic History of
Puerto Rico: Institutional Change and Capitalist Development in Puerto
Rico (Princeton, 1987).
2. Chardon Report, 1934 (mimeo, San Juan, 1934), esp. pp. 3, 17, 68, 367.
3. Sidney Mintz, Worker in the Cane - a Puerto Rican Life History (New
Haven, 1960), p. 256; Angel Quintero Rivera, 'Puerto Rico, c. 1870-
1940' in L.M. Bethell (ed.), Cambridge History of Latin America, vol. V
(Cambridge 1986), pp. 265-86; A. Quintero (ed.) Workers Struggle in
Puerto Rico: A Documentary History (New York, 1976); Thomas G.
Matthews, Puerto Rican Politics and the New Deal (Gainesville, 1960).
4. Brookings Institution, Porto Rico and its Problems (Washington, DC,
1930), pp. 33-4; Govt of Puerto Rico, Minimum Wages Board, Division
of Research and Statistics, The Sugar Cane Industry in Puerto Rico (Sept.
I942) (San Juan, 1943). Mintz was later to report that in Barrio Jamaica
two barracks from the era of slavery were still inhabited. Mintz, op. cit.,
p. 15.
5. An example of showcase literature was William C. Baggs, Puerto Rico.
Showcase of Development. A Special Feature Reprinted from the I962
Britannica Book of the Year (pamphlet, 1962), and of earlier publicity
material, Man and Woman Power for Industrial Production - Puerto
Rico, USA will help you establish a factory (1951).
6. Analysis of welfare expenditure compared to non-welfare is frustrated by
the absence of defence and foreign policy spending from island budgets.
It is unclear whether welfare spending was offset by rent transfers for the
use of US bases.
7. Fernando Bayr6n Toro, Elecciones y partidos poUticos de Puerto Rico
(1809-1976) (Mayaguez, 1977), passim.
8. Angel G. Quintero Rivera, 'The Development of Social Classes and
Political Conflicts in Puerto Rico', in Adalberto L6pez and James Petras
(eds) Puerto Rico and Puerto Ricans (New York, 1974), pp. 145-213.
9. Rexford Guy Tugwell, Puerto Rican State Papers (San Juan, 1945 re-
print, New York 1975); The Place of Planning Society (Puerto Rico
Planning Board, Technical Paper no. 7, n.d.)
10. Fernando Pic6, Diez arios de planificacion en Puerto Rico (San Juan,
1952), p. 112.
11. Optimistic self-projection is illustrated by Teodoro Moscoso, 'Industrial
Development in Puerto Rico', paper, San Juan, Nov. 1958. The exuber-
ant optimism of a close collaborator is exemplified by Stuart Chase,
'Here is a chance for [an allegedly ideology-free] 'San Juan School of
political economy' to go down in history with the Manchester School'.
Chase, National Planning Association Pamphlet, no. 5, p. 36 Operation
Bootstrap in Puerto Rico. Report of Progress 1951 (September 1951).
12. Mary Proudfoot, Britain and the United States in the Caribbean (London,
1955). pp. 223-5.
13. Werner Baer, 'An Evaluation of a Successful Development Programme',

Quarterly Journal of Economics, LXXIII, Nov. 1959, pp. 645-71. Also
David Cheurning, Stimulating Greater Local Investment in Manufactur-
ing Enterprises in Puerto Rico (Small business Management Report,
prepared ... for the small business administration) (Washington, DC,
1960), esp. p. 38; Lloyd G. Reynolds and Peter Gregory, Wages, Pro-
ductivity and Industrialization in Puerto Rico (Homewood, Ill., 1963),
pp. 95-6; Chase, op. cit.
14. Hy Sang Lee, 'The Entrepreneurial Activities of the Government in the
Economic Development of Puerto Rico', unpublished PhD thesis, Uni-
versity of Wisconsin, 1965; Richard V. Smith, 'Characteristics and lo-
cational problems of Puerto Rican Industrialization' (unpublished PhD
thesis, Northwestern University, 1957)
15. Government Development Bank, A Special Report on San Juan, Capital
of Puerto Rico, July 1964, Office of Economic Research, Economic
Development Administration, Commonwealth of Puerto Rico.
16. Elias R. Gutierrez, Factor Proportions, Technology Transmission and
Unemployment in Puerto Rico (pamphlet, Hato Rey, 1976).
17. Robert J. Tata, Structural Changes in Puerto Rico's Economy, 1947-76
(Ohio University Center for International Studies Latin American Pro-
gram, Athens, Ohio, 1980).
18. Frank Bonilla and Ricardo Campos, 'Industrialization and Migration,
Some effects on the Puerto Rican Working Class', Latin American Per-
spectives, issue 10, Summer 1976, vol. III, no. 3. p. 74.
19. Henry Wells, The Modernization of Puerto Rico: A Political Study of
Changing Values and Institutions (Cambridge, Mass., 1969), p. 282.
20. Dietz., op. cit., p. 236.
21. Gordon Lewis, Notes on the Puerto Rican Revolution (New York, 1974).
22. Richard Weisskoff, Factories and Foodstamps. The Puerto Rico Model of
Development (Baltimore, 1985), esp. p. 146.
23. Jaime Benitez, Education and Democracy in Puerto Rico (Office of
Puerto Rico, Washington, DC, ?1950).
24. Juan Jose Ospina, A History of Education in Puerto Rico (Rio Piedras,
1949), pp. 419-64.
25. Alvin Mayne (ed.) Proceedings of the Seminar on the Contribution of
Physical Planning to Social and Economic Development in a Regional
Framework, May 21-27, 1960. San Juan, Puerto Rico (San Juan, 1961),
esp. p. 23.
26. Eric Williams, 'Education in the Dependent Territories in America',
Journal of Negro Education, XV, no. 3, Summer 1946.
27. Benitez, op. cit.
28. Roame Torres Gonzalez, 'Democracy and Personal Autonomy in the
Puerto Rican School system: a Socio-Historical Survey and Critique of
Educational Development', unpublished Ed. D. thesis, University of
Massachusetts, chs. 4 and 5.
29. Angel G. Quintero Alfaro, Educacion y cambio social en Puerto Rico.
Una epoca crftica (Barcelona, 1972), esp. p. 175.
30. Gladys Davila de Fuentes, 'Problems in Teaching Disadvantaged Chil-
dren in Puerto Rico: Recommendations for an Undergraduate Elemen-
tary School Teacher Program' (unpublished Ed.D. Thesis, Columbia

University, 1968).
31. Frank le Veness, 'The Commonwealth of Puerto Rico: Democracy
Thrives in the Caribbean' (unpublished PhD thesis, StJohn's University,
1968) p. 290.
32. Richard M. Morse, 'The Higher Learning of Puerto Rico', Journal of
Higher Education, Xl, no. 2, April 1958, pp. 83-96.
33. J.S. Wright and L.S. Hawkins, Reports on Survey in Progress in Vo-
cational Education in Puerto Rico 1931-1947, with recommendations for
its further development (typescript, San Juan, 1947}, esp. p. 16.
34. Centro de investigaciones sociales, Universidad de Puerto Rico, Puerto
Rico's Present & Prospective Technical, Skilled and Clerical Manpower
and Training Needs (Hato Rey, 1972), esp. p. 285.
35. Conchita Torres de Romero, El desemp/eo en Puerto Rico y sus princi-
pales cambios estructurales 1950 a 1964 (Rio Piedras, 1966).
36. Committee on Human Rights, Commonwealth of Puerto Rico, Un-
employment, Family Income and the Level of Living: Puerto Rico (n.p.,
1959), esp. p. 5.
37. Alvin Mayne (ed.), Proceedings of the Seminar on the Contribution of
Physical Planning to Social and Economic Development in a Regional
Framework, May 23-25 1960 (San Juan, 1961), pp. 121-52.
38. Ibid.
39. Theodore Caplow eta/., The Urban Ambience. A Study of San Juan,
Puerto Rico (London, 1964).
40. Weisskoff, chapters 6-8.
41. Harvey S. Perloff, Puerto Rico (Chicago, 1950; reprint, New York,
1975), p. 121.
42. Weisskoff, chapters 6-8.
43. Fuat M. Andie and Arthur J. Mann, 'Secular Tendencies in the In-
equality of Earnings in Puerto Rico', Separata, no. 3, Unidad de investi-
gationes econ6micas (Rio Piedras, n.d., post-1969).
44. Weisskoff, op. cit., esp. p. 103.
45. Proyecto de planificacion, Universidad de Puerto Rico, Las invasiones de
terrenos en Puerto Rico: una alternativa a Ia politica publica existente (rev.
version, Rio Piedras, typescript, 1972).
46. William N. Stead, Fomento: The economic development of Puerto Rico
(Washington, DC, 1958), p. 66.
47. James L. Dietz, Economic History of Puerto Rico: Institutional Change
and Capitalist Development in Puerto Rico (Princeton, 1987), pp. 86-7;
Jorge Heine and J. Garcia Passalacqua, The Puerto Rican Question
(Foreign Policy Association pamphlet, Washington, DC 1981); Richard
Weisskoff, Factories and Food Stamps. The Puerto Rican Model of
Development (Baltimore, 1985), pp. 136, 146.
48. Clarence F. Jones and Rafael Pic6, eds, Symposium on the Geography of
Puerto Rico (Rio Piedras, 1955), pp. 97-128, 151, 389-99.
49. Andre Archer, 'Internal Migration and Traditional Agriculture: the case
of Puerto Rico' (Unpublished PhD, thesis, City University of New York,
1976), esp. p. 94.
50. Angel Quintero Rivera, 'Puerto Rico c. 1870-1940' in Leslie M. Bethell
(ed.), Cambridge History of Latin America, vol. V (Cambridge, 1986),

pp. 265-86; Miles Galvin, The Organized Labour Movement in Puerto
Rico (London, 1979) passim.
51. US Congress, Committee on Insular Affairs, 1st Session on condition of
Puerto Rican Sugar Industry. March 1945 (Washington, DC, 1945), esp.
pp. 14, 77, 87.
52. Association of Sugar Producers of Puerto Rico, Annual Reports 1947,
1950, 1951, 1953.
53. Association of Sugar Producers of Puerto Rico, esp. Annual Report,
1951' pp. 5-8.
54. US Dept of Labor, Employment Standards Administration, Wages and
Hours Division, The Sugar-Cane Farming Industry and The Sugar Manu-
facturing Industry in Puerto Rico Apri/1972 (Washington, DC, 1972).
55. Estado Libre Asociado de Puerto Rico, Autoridad de tierras de Puerto
Rico . . . Conversion de nuestra agricultura de caiia de azucar al ma-
quinismo (San Juan, 1963), p. 13; Revista de agricultura de Puerto Rico,
XVIII, no. 2, Dec. 1961; Archer, op. cit., p. 258.
56. Jacques M. May and Donna L. McLellan, The Ecology of Malnutrition in
the Caribbean (New York, 1973), pp. 24~.
57. John Reed Walsh, 'Food Retailing in Economic Development: Puerto
Rico, 195{}-1965' (unpublished PhD thesis, Michigan State University,
1967), esp. p. 72; Harold Riley et al., Food Marketing in the Economic
Development of Puerto Rico (East Lansing, Mich., 1971), esp. pp. 269-
75; Irena Lydia Lange 'Marketing Institutions in the Economic Develop-
ment of Puerto Rico, 195{}-1964', (unpublished PhD thesis, University of
Illinois, 1968).
58. Proudfoot, op. cit., p. 126.
59. For example, Dorothy Dulles Bourne and James B. Bourne, Thirty
Years of Change in Puerto Rico- A Case Study of Ten Selected Rural
Areas (London, 1966), esp. p. 312.
60. Jose Cabranes, 'Puerto Rico: out of the colonial closet', Foreign Policy,
Winter 1981, pp. 66--9.
61. Miles Galvin, 'The Puerto Rican Movement: the US Connection' in
Jorge Heine (ed.) Time for Decision - The United States and Puerto Rico
(Lanham, Md, 1983), pp. 55-91.
62. Jorge Heine and Juan M. Garcia Passalacqua, The Puerto Rican Ques-
tion (pamphlet, Washington, DC, 1983), p. 28.
63. Lewis, Freedom and Power, p. 63.
13 Social Equity, Agrarian
Transition and Development
in Cuba, 1945-90*
Jean Stubbs
Post-1959 Cuban revolutionary strategies sought to extend welfare

arrangements established in the 1940s to previously marginalized
groups. After a quarter of a century of revolutionary government, the
year 1986 highlighted a significant retreat from this expansion of
welfare provision. It came as a jolt when the government had to
question the wisdom of its decision three years earlier to extend
retirement pensions to co-operative peasant farmers. In 1983 these
had become the first peasant farmers to be recipients of government
welfare benefits on a par with state-salaried agricultural and indus-
trial workers. Acute problems in the funding of welfare enhancement
were a component of a broader crisis, both domestic and inter-
national, in Cuba's socialist development model.
The retreat in the case of retirement pensions for co-operative
peasant farmers was illustrative of two facets of the growing domestic
crisis: the demand for pensions exceeded bureaucratic expectations
and rapidly exhausted available funds; and the early retirement of
large numbers of farmers resulted in declining agricultural yields. By
the close of 1986, more than 35 000 co-operative farmers had taken
retirement. The state had laid out over 58 million pesos under
farmers' pensions schemes, but received only 25 million pesos in
contributions through the co-operatives to which the peasants be-
longed. The substantial deficit, plus the drop in agricultural yields,
compelled an uncomfortable government to appeal to farmers not to
retire. For the government, the problems connected with the pension
schemes were political as well as financial. New structures provided
• This is one of several articles on questions of rural transition in Cuba based on

research conducted by the author in conjunction with Mavis AlvArez, agricultural
economist of the National Association of Small Farmers. Field research was facilitated
by a 1982 postdoctoral award from the Committee on Latin American Studies of the
Social Science Research Council and the American Council of Learned Societies, and
a 1988 Nuffield Foundation Small Grant.
281
282 Jean Stubbs
local fora for people to give greater voice to their own concerns and
to express their demand for a greater input into policy-making. Thus,
harsh state criticism of the co-operative ventures over pensions and
other issues met with equally sharp criticism from the co-operative
farmers of state-co-operative relations, of the poor economic per-
formance of state-run farms, and of profiteering by small farmers.
This chapter focuses on some of the development options and
constraints confronted by Cuba in pursuing radical agrarian changes
within the context of a drive to greater social equity in the country-
side. The issue of peasant pensions is significant because it informs
the well-trodden development debate of social equity and welfare
versus efficiency and the role of the state in the Cuban agrarian
transition. New economic strategies to promote efficiency resulted in
social inequalities that ran contrary to revolutionary ideology.
THE SOCIALIST DEVELOPMENT STATE
By the 1940s, Cuba had one of the most extensive welfare systems
and most progressive legislation in the hemisphere (Seers 1964; Dlaz-
Briquets 1983). But their implementation and effectiveness were
restricted by major problems, such as the largely stagnant, sugar-
based economy tied to a fluctuating but contracting US market; the
endemic under- and unemployment, seasonal, cyclical and structural;
and political neglect, especially of the rural poor, to whom the benefits
of development were denied.
The rationale of the Cuban revolution rapidly came to hinge on the
need for greater state planning and control over national wealth
through land reform and nationalization, for a more self-sustaining
economy that could hold its own in the world and generate the
finance for redistributive large-scale development programmes and
massive welfare spending (Brundenius 1984; White 1983; Zimbalist
1988, 1989). Welfare socialism specifically targeted the least advan-
taged areas and groups on humanitarian and economic grounds. State
spending on education, health, housing and other services was seen
as a necessary and desirable investment in human reso~rces. Returns
on investment were envisaged not only in terms of an educated,
healthy and happy population, but one that could in turn sustain
future development. There was a balance to be struck between equity
and efficiency.
Social Equity and Development in Cuba 283
Early socialist development models, to which Cuba largely sub-

scribed, saw industrialization and modernization as the road to
self-sufficiency by generating accumulation, achieved by heavy cen-
tralized planning (White 1983). In the Cuban case, the breakdown of
its integration into the US economy was salvaged only through a
development model that was heavily contingent on favourable ex-
change with the Soviet Union and other Eastern European socialist
countries. Thinking based on the more recent Nicaraguan experience
extrapolated the argument that Third World socialist states should be
viewed as 'peripheral' socialist economies (Fitzgerald 1985). Such
economies could hardly aspire to self-sufficiency and had to seek
accumulation through export agriculture for foreign exchange, both
of which were barely susceptible to state planning and controls.
This tied in with new notions of the disaggregation or 'roll-back' of
the state, in both capitalist and socialist context. Contrary to the
earlier orthodoxy that the state needed to regulate in order to pro-
mote fast development and for the social good, new concerns were
with the poor quality of regulation, the incapacity of many states to
regulate and the weight on poor economies of cumbersome bureauc-
racies and new elites acting in their own interests. At worst, regula-
tory states have been authoritarian and corrupt; at best, they have
often been wasteful and undynamic. Elements such as these have
been evidenced in the new thinking in the Third World and the
Eastern European bloc, whether in the form of veering away from
socialism or attempting to introduce reforms within the socialist
model.
So far in Cuba, these new strands of thinking have made only
relative headway. Domestically, in the 1960s, state ownership, pro-
duction, trading and other controls were the order of the day. Only
from the late 1970s to the mid-1980s were pricing and market
mechanisms reluctantly allowed to operate in the small private far-
mer and minimal informal urban sectors. By contrast. in 1986, state
action was again depicted as a necessary and desirable paradigm
to further inter- and intra-national equity (Mesa-Lago 1990; Roca
1988). However, the rapidity of events since then, both external and
internal, would seem to be throwing this into question as Cuba
currently faces one of its most critical moments since the 1959
revolution.
284 Jean Stubbs
THE POLICY CONTEXT
The theoretical underpinnings of Cuba's transition to socialist agri-

culture, seen as the springboard to wider development, have been the
nationalization of land, the diversion of productive forces to large-
scale scientific farming, the socialization of production with a rural
proletariat optimally working the means of production, the replace-
ment of planning for market forces, and a both efficient and equitable
allocation of resources, growth of output and accumulation (Acosta
1972, 1973; Benjamin 1984; MacEwan 1979; Martin 1987; Pollitt
1985; Perez-L6pez 1987; Rodriguez 1987; Rojas et al 1983).
Few of the post-Second World War wave of small 'peripheral'
Third World countries embarked on socialist transformation found it
possible or necessary to nationalize land. It was more common for the
state to intervene in the regulation of property relations through
agrarian reform and to take an active role in pricing and marketing
arrangements (Deere 1986). Cuba was among the few exceptions
where collective forms of agriculture predominated over private, and
is possibly the only country in which there has been an explicit
preference for state farms, even after the mid-1970s re-evaluation of
agricultural production cooperatives as a transitional form (PCC
1975). The reasons for this lie in Cuba's classic agro-exporting eco-
nomy of land-extensive sugar and cattle farming, in its substantial
agricultural proletariat, and in the expropriation of US property.
Given the perceived economies of scale in the pattern of landhold-
ings, there was little question of subdivision.
Three domestic reasons were cited for operating large estates as
state farms rather than production co-operatives. Firstly, it was
thought that heterogeneous production conditions and productivity
of estates would lead to severe inequality between rich and poor
co-operatives. Secondly, it was felt that co-operatives run by perma-
nent workers would not address the problem posed by seasonal
unemployment of temporary workers and would exacerbate income
inequalities among the work force. Thirdly, given growing tensions
between state and private producers in agriculture, there was a desire
to avoid any strengthening of the private sector. External reasons for
preserving large landholdings included an ideological commitment to
the Soviet model and generous USSR prices which made sugar (and
the large farms producing it) a very attractive mechanism for financ-
ing development in other fields (Pollitt 1981).
A negative consequence of this policy was that Cuba became
enmeshed in a new economic dependence on cash-crop exports, to

the detriment of domestic-consumption produce. Economies of scale
were barely achieved in sugar (Pollitt 1983) and never in tobacco, for
decades a major export (Stubbs 1985, 1987). Under-utilization of the
private sector (Lehmann 1981) and low productivity and profitability
in the state sector prevailed. At the same time, labour costs were
inflated due to general wage increases (including the social wage) and
better living standards. The social gains provided by an overly ben-
efactor state acted as a disincentive to labour motivation and hence
to economic performance, which in turn undermined state funding
for social welfare (Stubbs 1989).
These reasons amongst others explain experimentation in the mid-
to late 1970s with greater self-sufficiency and self-reliance for state
farms and newly formed agricultural production co-operatives set up
under the economic management and planning system (SDPE). The
co-operatives were conceived on an autonomous, voluntary, highly
participatory basis, which many felt augured well for equity and
democratization within the process of rural decision-making. It was
also envisaged that the co-operatives would spearhead more locally
self-sustaining development and welfare initiatives. It was hoped,
too, that co-operative communities would break the social and econ-
omic isolation of poorer peasant households (Ghai 1988; Kay 1987;
Gomez 1983; Meurs 1990; Peek 1984; Stubbs and Alvarez 1987;
Trinchet 1984).
The new SDPE set out to harmonize national planning priorities
with greater decentralization of decision-making, local initiative and
agricultural self-sufficiency in the state sector. It was hoped that state
farms, which had previously suffered from over-centralization, would
take organizational cues from new productive co-operatives. A cer-
tain convergence could be noted between state farms and co-operatives:
state farms, like co-operatives, were encouraged to function as auto-
nomous self-managed enterprises that utilized a percentage of end-of-
year performance for reinvestment in local economic and welfare
projects. Also, like co-operatives, state farms were encouraged to
satisfy their own food requirements while remaining efficient cash-
crop producers.
In 1979, free marketing arrangements were permitted in an
attempt to boost private sector production and distribution. By 1985,
however, an inspection of 600 co-operatives concluded that free
trading was rapidly fomenting rural social differentiation, and more
particularly the emergence of a 'new rich' peasantry, to the detriment
286 Jean Stubbs
of co-operative growth and performance. Ageing farmers were using

co-operatives as stepping stones to obtammg new state pensions.
There was also a growing exodus from the mountain areas, especially
Oriente, one of the poorest regions of peasant agriculture.
GETIING THE BALANCE RIGHT
What initially paved the way for large-scale change was undoubtedly
a sweeping land reform. In the market economy of pre-revolutionary
Cuba, much small farming had been disrupted by large-scale foreign
and local capital investment. This was particularly true of sugar
plantation agriculture and land-extensive cattle-ranching. Capital in-
vestment had not resulted in uniform agricultural modernization. On
the contrary, it had often served to strengthen archaic forms of
production. The 1946 agricultural census showed that small-scale,
labour-intensive, tenant and subtenant farming and sharecropping
operated alongside modern farm units employing wage labour. The
1943 and 1953 population censuses, which quoted up to 60 per cent of
the 'economically active population' in agriculture as wage labour,
were grounds for interpreting the strength of rural proletarianization
in pre-revolutionary Cuba (Martinez-Alier 1970). However, there
would seem to have been a considerable semi-peasantry/semi-
proletariat which farmed small plots of land according to intricate
systems of land tenure and rent-in-kind, forfeiting anything from a
quarter to one-half of the crop (Nelson 1950; Pollitt 1979, 1980). This
sub-sector was highly dependent on unpaid family labour and subsist-
ence production, and was forced, at different times of the year, to sell
its labour (Stubbs 1987).
Patterns of letting, sub-letting, sharecropping and squatting of
land are crucial to any understanding of labour and poverty in pre-
revolutionary Cuba. Depending on property relationships, peasants
were vulnerable to landowners, creditors, buyers, middlemen and
speculators. Most significantly, the wealth derived from the concen-
tration of land ownership contrasted with the poverty of peasants,
labourers and their families. This made land tenure the most import-
ant factor in the nascent revolution's programme for improving rural
life. A ceiling of 400 hectares on private land ownership, stipulated in
the First Agrarian Reform Law of 1959, led to the state appropriation
of vast foreign- and domestic-owned properties, and made possible
land distribution to poorer tenants and sharecroppers. The Second
Agrarian Reform Law of 1963 established a new ceiling of 67 hec-

tares, which cut the ground from under the feet of a hostile domestic
middle agrarian bourgeoisie.
Whatever the continuities and discontinuities in farming and
labour patterns, agriculture continued to be the keystone of am-
bitious state development plans. In the early 1960s, there was a costly
attempt to break with sugar dependency and diversify rural output.
The failure of this policy led to a changed in 1963. Sugar was once
again viewed as the springboard for longer-term diversification of
agriculture and industry, which would result in import substitution
and self-sufficiency. The success of the policy depended on securing
favourable bilateral and multilateral trading agreements with the
socialist bloc. With a renewed emphasis on sugar, the transition to
socialist forms of agrarian organization accelerated, and state farms
came to be seen as the model for socialist agriculture. And yet, even
in sugar, Cuba's most modernized crop, semi-proletarianization and
limited technology served to hold back the successful development of
state farms. Modern agro-industrial sugar complexes did not emerge
till the 1980s but, owing to the economic and social costs of mod-
ernization, many are still unprofitable.
The state farm model was also applied to other sectors, dairy and
poultry farming, rice, tubers, citrus fruits, bananas, tomatoes, pep-
pers, etc. These farms needed large numbers of voluntary, as well as
paid labourers. In the 1960s rush for development, state farms played
a critical role in projects to revitalize agriculture and industry; and
their accumulation would be assigned to the provision of health,
education and other welfare services. In the 1970s, state farms work-
ed closely with schools in the countryside, which undertook study-
work programmes to boost agricultural production. New agricultural
research stations and agricultural institutes were opened, which
emphasized the development of new crop strains and breeding
stocks, soil improvement, irrigation, fertilizer and pesticides. These
facilities were made available to both the state and the private sector
by agricultural stations. In the case of the private sector, the National
Association of Small Farmers (ANAP) and the Ministry of Agricul-
ture (MINAG) were the channels through which resources and tech-
nical personnel were provided.
The application of technical know-how was facilitated by generally
improved educational standards in rural areas. Following from the
literacy campaign of the early 1960s were continuous adult education
programmes, some under the auspices of the Ministry of Education
288 Jean Stubbs
(MINED), others run by mass organizations like ANAP or the

Federation of Cuban Women (FMC), through the FMC-ANAP brig-
ades. A 1980s adult education drive was to encourage all state
agricultural workers (like their industrial counterparts) and ANAP
members to complete ninth grade. In addition to MINAG extension
services, ANAP has its own team of agronomists and local para-
professionals involved in promoting a grass-roots technical activist
movement. Extension agents encourage farmers and farm workers to
come forward with innovation and to be on the phytosanitary alert.
With the major blights of sugar cane rust, tobacco blue mould and
coffee smut in the early 1980s, preventive crop control became es-
pecially important in both the state and private sectors.
From the 1960s onwards, state pricing, credits and inputs were
granted on advantageous terms to peasant farmers. A strategy of
infrastructural rural development programmes, including health,
education and housing, was undertaken. In all this, ANAP, set up in
1961, played a central role. Highly integrated into the new revol-
utionary political apparatus, ANAP has as its express aim the defence
of the revolution and its agrarian policies. It was seen as a logical
continuation of revolutionary peasant organizations set up in the
1940s and 1950s to defend poor tenant farmers and sharecroppers
against the national sugar, cattle, tobacco and coffee associations.
ANAP worked with the main direct beneficiaries of Cuba's first
agrarian reform through land entitlement, credit and other schemes.
In the early 1960s, it played a confrontational role in struggle be-
tween tenant farmers and sharecroppers and the remnants of the
agrarian bourgeoisie; and ANAP was instrumental in the implemen-
tation of the second agrarian reform.
The paradox was that, by the late 1960s, through ANAP's action,
these former sharecroppers and small farmers became the only pri-
vate producers in virtually the only existing private sector in an
otherwise extremely state-dominated economy. By the late 1960s, the
state owned or rented 80 per cent of all agricultural land; by 1989 this
had risen to 85 per cent. In the late 1960s, there were 400 000
agricultural labourers on state farms, compared with 250 000 ANAP
members. In the late 1980s, the balance was further tilted towards the
state sector, with some 600 000 state farmworkers and 180 000
peasant farmers.
ANAP experienced particular strains in attempting to marry such
incongruous and unequal partners as the state and the peasantry.
Yet, the peasant sector had a vital, larger significance because it

accounted for an important proportion of agricultural produce des-
tined for the local market, especially perishable vegetables. Given
the intrinsic strengths of the peasant movement and the importance
of peasant agriculture for domestic food supplies, the 'marriage' has
been critical to the revolutionary history of Cuba and its rural de-
velopment. The relationship between the peasantry and the state has
undergone several strategic definitions. The first came after the 1971
ANAP Congress, with a revitalization of the peasant sector in the
wake of the crisis associated with the 1970s ten-million-ton sugar
campaign, which, as indicated above, precipitated a sharp fall in
domestic food production. Following this, there was a reformulation
of the role of peasant agriculture in the national economy, especially
regarding the production of arable and pastoral commodities des-
tined for domestic consumption. Concurrently the peasantry was also
assigned a role in the export economy, notably tobacco.
A second strategic modification came with the 1977 ANAP Con-
gress, which endorsed a major agrarian policy-switch towards a
voluntary, autonomous co-operative movement within the small
peasant sector. This was to encourage smallholding peasants already
grouped in either Credit and Service Cooperatives (CCSs) or Peasant
Associations (ACs) to pool their land and other means of production
so as to form Agricultural Production Cooperatives ( CP As). This
rural development strategy attempted to boost production by break-
ing away from traditions of small-plot, labour-intensive, low-technology
base for improved socio-economic conditions, with a blend of state
support and self-help. A third turning-point came in 1986, with the
close of the short-lived free farmers' market and tighter supervision
of private and state sectors following the Second National Meeting of
Co-operative Farmers. This quickly spread beyond the confines of
agriculture to become the sweeping national programme of econ-
omic, social and political 'rectification'.
The year 1990 opened with a fourth turning-point, when the govern-
ment declared a 'special period' in which food self-sufficiency was
to be crucial. Export crop (especially sugar cane) lands were to be
turned over to produce for domestic consumption, with a return to
the plough. For a country that had taken an increasingly technified,
agriculturally based, export-led development model, this was perhaps
the most dramatic shift of all. It came as a two-pronged response to
stepped-up US hostility and the rapidity of events in Eastern Europe
290 Jean Stubbs
breaking down established trading patterns. If carried through, the

'special period' could have significant ramifications for agricultural
policy and agrarian relations, not least smallholder agriculture.
PITFALLS OF CO-OPERATIVE FARMING
Early co-operatives in the 1960s were given little state support, partly
on the assumption that they would wither away as peasants were
lured to the wider socio-economic benefits available on state farms.
There was indeed a withering away - of the co-operative and indi-
vidual private sector - but to the point of jeopardizing domestic
production. The return to peasant co-operativization in the mid-
1970s was accompanied by a strong package of incentives, including
priority access to construction materials for housing, along with bet-
ter health, education and recreation facilities.
Five years after its introduction, the co-operative programme
seemed to be a success, with increasing production and profitability in
agriculture, and improved social wellbeing for peasants. However, by
the mid-1980s, the apparent success was offset by disturbing new
trends, three of which will be discussed here. First, a political conflict,
which evolved between successful CP As and sluggish state agricul-
tural enterprises administered at regional level, was detrimental to
the co-operatives. Second, individual farmers and intermediaries en-
riching themselves through the free farmers' market challenged the
rules of the game established by the state. Third, as a result of these
conflicts and challenges and also of internal mismanagement, more
and more CP As were encountering difficulties of an economic,
financial and socio-political nature. Co-operatives reported cut-backs
in production, losses, curtailment of social programmes, and signi-
ficant drops in membership.
With the abrupt policy reversal of May 1986, private market deal-
ings were stopped. Later, further controls on state, co-operative and
individual farming ventures were imposed. These included the out-
lawing of both the alienation of state farmland for private plots, and
of private tenant and sharecropping arrangements that had come
about. This clampdown extended to those CPAs that had become
financially solvent thanks to lucrative but unauthorized non-agri-
cultural activities. The raison d' etre of the co-operative movement
was to boost agricultural production for city as well as local rural
consumption, not to foster non-agricultural initiatives. At the same
time, careful strategies were elaborated to help strengthen the co-

operative movement in fulfilling its original intent. These included
(1) the establishment of new state bodies within MINAG and the
Ministry of Sugar (MINAZ) which were to work with the co-
operative and individual peasant sector, (2) a restructuring of ANAP
to function as a political rather than an economic body, more as a
trade union than a management agency, and (3) local government
agricultural co-operation councils to monitor ANAP and the new
ministerial bodies.
EQUITY AT STAKE
One major defence of co-operatives at the landmark 1986 meeting

was that the co-operative movement had grown in an ad hoc way,
because it had received little guidance. Policymakers had not thought
through, in agrarian class-terms, the character and consequences
of co-operative/state and co-operative/individual farmer relations.
(Peres 1987, 1989) This failure might have accounted for the disturb-
ing trends discussed above. The Main Report to the 1977 ANAP
Congress highlighted technical and social questions which needed to
be tackled directly. Technical questions included soil, production,
investment, management, labour force and other matters essential to
CPA good functioning. Social issues included the tendency of co-
operative members to adopt a laxer approach to CPA work than
when farming their own plots, and to take earlier retirement. While
some CPAs satisfied social and economic objectives, and met the
food, housing and welfare needs of their members, others did not.
A 1987 private sector census on land tenure and use confirmed that
'non-peasants' held a smallish land area (less than one-sixth, some
1800 hectares out of a total of 11 800), but comprised a larger
proportion of the total number of individual 'landholders' (over
one-third, i.e., 55 000 of a total of 155 000). 'Non-peasants' included
state workers and employees who held some land and 'landholders'
without title; many of these were outside the rubric of ANAP and
experienced few or no controls. There were also those who did not
farm land themselves but lived off the proceeds of the wage-labour of
others, or rented land in either money or kind, and were becoming
the 'new rich peasantry'. These were 'the declared enemies with
whom there can be no truck', for whom the land had again become 'a
source of capital accumulation through the exploitation of others'
292 Jean Stubbs
labour for personal enrichment' (ANAP 1987). Then there were

those whose land was left idle or in part abandoned, even when it was
needed for cultivation.
ANAP joined its voice to the wider, highly political and moralistic
message of 'rectification', exhorting the peasantry to respond to
newly provided benefits by working harder on collectives for the
social good, and not for egotistic gain. In this, women co-operative
farmers came forward in what has been a traditionally male organiza-
tion, calling for caring, collective, egalitarian solutions to problems
and challenging the revival of petty egotisms (Stubbs forthcoming).
Peasant construction brigades redeployed members of the more suc-
cessful CPAs to the remote coffee co-operatives largely in Oriente.
The state responded to labour redeployment by cancelling CPA
debts, increasing the prices for CPA producers, providing further
labour and evolving new development policies for the mountain
co-operatives. These co-operatives benefited from village-level mini-
dams and small solar energy plants which provided low-cost water
and electricity. It was also no coincidence that Cuba's mid-1980s
family doctor programme began in the mountain region. A new wave
of state investment in the restructured CPAs indicated a welcome
flexibility and pragmatism that belied the moral and political rhetoric.
No evidence exists as yet of a similar pragmatism in approaching the
problem of the state monopoly on marketing and distribution, though
by 1988 there were enough farmers complaining about delays in state
collection and distribution of produce, implementation of quality
control, and pricing (ANAP magazine 1988, 1989).
The post-1986 effort to consolidate the agricultural co-operatives
has so far only been tentative. Designed as an instrument to upgrade
the least developed part of the peasantry, it has created relative
enrichment in unforeseen quarters and cast inefficient state farms in a
poor light. Contrary to official ideology and aims, there were indi-
vidual peasant producers performing better than co-operatives; and
co-operatives better than state farms. There would seem little incen-
tive for remaining smallholders to pool their lands on straight econ-
omic grounds, since their overall productivity and profit margins
continue to surpass those of the co-operatives (Deere and Meurs 1990).
The determining factor in this respect may well be less internal
than external. When the co-operative movement started out, Cuba
was riding the crest of favourable overseas trading, with both West
and East. The tide radically turned in the West in the early 1980s,
with price collapses for Cuba's major exports and rising interest rates
causing Cuba to default on its foreign debt payments. The buffer was
trade with the Eastern bloc until its own mid-1980s economic restruc-
turing dramatically highlighted the drawbacks of the 'new depen-
dency'. As Cuba finds itself having to administer its own 'structural
adjustment' and prepare for more autochtonous, cost-effective, less
technified, basic-needs approaches in its 'special period', new press-
ures will be on the rural household; social welfare and equity will
again be at stake. However, the end-product of three decades of
national policies designed to upgrade the rural areas has been to put
the greatest strains on the cities, not the countryside, not least in food
supplies. In an overall panorama that is far from optimistic, the
'special period' emphasis on food self-sufficiency, if handled well,
could render the domestic table less bare.
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14 Social Security in Haiti:
Informal Initiative in a
Welfare-less State*
Mats Lundahl
The need for a social security system can in different ways be derived
from the failure of some individuals to command enough commodi-
ties (including services) to meet the standard of living conventionally
defined as the 'acceptable' or 'satisfactory' minimum. Such a failure
may occur for different reasons. Using the concepts of Amartya Sen, 1
two parameters will be of fundamental importance in deciding
whether an individual will fall short of the minimum acceptable
standard; his endowment, that is his original ownership bundle (com-
modities and labour), and his exchange entitlement, i.e. the alterna-
tive commodity bundles that he can acquire, given his endowment,
through trade or through production.
Thus, his endowment may not suffice to yield an acceptable com-
modity bundle for any exchange entitlement mapping (the function
specifying the set of alternative commodity bundles that an individual
can command for each endowment). This shortfall may be chronic
('poverty') or prevail only during certain time periods, for example
due to loss of production capacity as a result of illness. Alternatively,
the exchange entitlement mapping may be such, chronically or
periodically, as to make it impossible to assemble a sufficient com-
modity bundle - for various reasons. Thus, the individual may fail to
find employment; he may be unable to sell assets at a sufficiently high
price, or to produce enough with the resources to which he has
access; or the price fetched by his products may be too low. 2 Finally,
the definition of a minimum acceptable standard may change over
time, as a result of changes in society, but also because 'necessary'
expenditures are not evenly distributed in time but may increase
drastically and unexpectedly, as in the case of severe illness or death.
• This research has been funded by a SAREC grant. Thanks are due to Ari Kokko for
comments.
297
298 Mats Lundahl
In modern welfare states, these situations are handled via more or

less elaborate, formalized social security systems covering both wel-
fare and social insurance aspects. Through the social security system,
a decent standard of living, social security and wellbeing should be
ensured for all citizens. 3 Intervention into the market is made in
order to guarantee a minimum income regardless of the market value
of the individual and a reduction of personal insecurity by the provi-
sion of health care, unemployment benefit and services for the care of
the aged. The object of such intervention is to ensure that care and
support are available for everybody regardless of their social or
economic standing, and to reduce the degree of welfare inequality in
society. 4
Social security systems vary considerably in scope and emphasis
between countries. In Sweden, the
total system of cash benefits consists of ( 1) benefits to families and

children (in addition to all general family allowance and parental
benefits), (2) study assistance, (3) pay and other benefits to nation-
al servicemen, (4) housing allowances, (5) benefits in case of sick-
ness and disability, (6) benefits in case of unemployment (including
training allowance and relocation assistance), (7) benefits to re-
tired persons and to adult survivors and (8) means tested social
assistance. s
Sweden represents a case where very much has been left in public
hands. This is, however, not the only possibility. Social security
systems in developed countries differ with respect to the extent that
they are managed directly by the state or left to private initiative,
respectively. In falling order of ambition, the state may decide to (1)
run a comprehensive social security system itself, (2) facilitate the
emergence of private insurance schemes and (3) promote general
stability in the economy so as to reduce the need for social in-
surance.6 There has been much heated discussion concerning which
of these three policies is optimal. In less developed economies, the
situation usually differs very much from the one prevailing in indus-
trial economies in three respects: (1) the need for sQcial security is
greater, (2) the resources at the disposal of the government are
smaller, and (3) the ambitions of the state are lower. The greater
need for social insurance is to a large extent a function of widespread
poverty, low per capita incomes and unequal income distribution.
Social Security in Haiti 299
THE SPECIAL PROBLEM OF HAITI
Haiti poses special problems in the context of social insurance. It

shares with other less developed countries the strong needs, the
plight of poverty and the general lack of resources which can be
employed for social purposes. 7 Haiti is not only far from being a
welfare state; it is also a far cry from even trying. The Haitian state
has in fact constituted the complete antithesis of the welfare state in
virtually every respect.
During the course of the nineteenth century, a predatory state
ruled by 'kleptocrats' developed in Haiti. 8 After the country obtained
its independence from France, the once wealthy plantation system
declined. Politics degenerated into a struggle for the spoils which
could be obtained through presidential office; and the Haitian state
became essentially predatory, satisfying the demand for unearned
incomes of the members of the power elite. The American occupa-
tion of Haiti (1915-34) destroyed some of the old structures, notably
the official army and regionally based bands of mercenaries, but did
not mean that predation ceased. Instead, a new army developed into
the ultimate powerholder that decided who would hold the presidency
and for how long. In 1957, the decisive role of the army came to an
end. Franc;ois Duvalier ('Papa Doc') destroyed all the existing power
structures and built new ones, centred on his own person. 9 These
structures were inherited by his son Jean-Claude ('Baby Doc') in
1971. Through them, the country could be plundered in a much more
efficient fashion than before. All conceivable sources were used:
taxation, tapping foreign investment and development aid, payment
for sugar-cane cutters going to the Dominican Republic, 'voluntary'
donations, bond issues, compulsory payments of various kinds, out-
right blackmail, lotteries, fees, pensions, takeovers of desirable ac-
tivities, switches of budget items, non-budgeted (unaccountable) tax
revenue via the Regie du Tabac 10 and, when the pressure to fiscalize
the latter started to mount, rent extraction via public enterprises and
private monopoly concessions. 11
All these activities were undertaken in order to redistribute a given
GOP rather than to increase its size. They fall into what Jagdish
Bhagwati has termed directly unproductive, profit-seeking (DUP)
activities. 12 Government resources have been spent on transferring
incomes to those in power, instead of providing those goods and
services that the citizens demand. This, in turn, bears directly on the
300 Mats Lundahl
ability to provide social insurance and undertake programmes that

alleviate the plight of the poor, since the resources spent on DUP
activities cannot be used for other purposes. The production possi-
bility surface of the economy shifts 'inwards'. In addition, the exist-
ence of a predatory state leads to what Bhagwati calls a 'stifling
effect' 13 in the sense that neither public nor private investment to
expand the production possibility frontier 'outwards' will be forth-
coming, the former because money is not allocated for productive
purposes and the latter because the potential investors face the risk
that somebody else will move in and reap the profits. 14
The predatory character of the state means that in many instances a
net transfer has taken place from the citizens to the government.
'Apre bon dieu se leta' -after God comes the almighty state- and the
state has interfered negatively with the lives of the individuals, for
example by levying taxes and by confiscating property without pro-
viding any services in return. This has been the case not least for
those who have the lowest standard of living in Haiti: the peasants. 15
The citizens fear the state. David Nicholls tells the following instruc-
tive story:
An acquaintance of mine once returned to his home on the out-

skirts of Port-au-Prince, after a day in the countryside, and could
not find his servant. He called and eventually from behind the
bushes at the end of the garden the man appeared. On being asked
what he had been doing, the man replied "l'etat te vini e m'cache"
(literally: the state arrived and I hid). An Army officer had arrived
at the house and the man's first thought was that this meant
trouble. 16
It comes as no surprise then, that investments in public water facili-

ties in the years 1980-85 hardly sufficed to make up for the deprecia-
tion over the period and to provide services at a constant level, that
government outlays on public education amounted to a mere 15 per
cent of GDP in the early 1980s- about half as much as the average in
sub-Saharan Africa, that around 90 per cent of the current budget of
the ministries of education and public health was spent on wages and
salaries, or that, even though government employees were entitled to
a pension at the age of 55 and after 25 years of service, it depended on
the discretion of the minister in question whether any actual pay-
ments would take place: 17
There are no specific provisions for retirement and pensions. Every

official who reaches an age at which he or she wishes to retire must
personally petition the minister; and the minister, if he supports
the petition, must negotiate an appropriate pension in each indi-
vidual case with the minister of finance . . .
In the absence of a scheme for widow's pensions, salaries some-

times continue to be paid after an employee's death. Whereas this
provides some form of social security, there are other cases where
salaries are being aid to former public-sector officials who have not
been near their offices for years or who have left the country. 18
The state has played a negative role in the eyes of the population. A
Haitian proverb contends that 'Vole de leta, se pa vole'- stealing from
the state does not amount to stealing: whatever the state owns, it has
stolen itself. Accordingly, the Haitians have developed a number of
response mechanisms. 19 These began with marronage (escape) from
slavery and forced plantation labour; and have taken the form of
trade union activism in the 1940s and 1950s, and exile under the two
Duvaliers. 20 All these responses have either been of a 'negative' kind,
aiming at minimizing the contact with government authorities or, the
political situation permitting, designed as active protests against the
way Haiti has been governed. In addition, however, the absence of
positive government action in the social field has forced the Haitians
to develop a series of informal devices that allow them some kind of
protection against unforeseen events or some mitigation of the un-
desirable consequences of such events. 21 The people must overcome
a record of negligible public investment, sorely deficient public ser-
vices and extremely underdeveloped administration and public man-
agement capabilities. 22
This, the Haitians have attempted to do in a multitude of ways. It
should be said at once that devices designed to cope with risk consti-
tute an integral part of daily life in Haiti. Thus, the peasants do not
plant just a single crop on each field but mix slow-growing and
fast-growing crops, tree crops and crops on or in the ground, drought
resistant and not so drought resistant crops, etc. to make as certain as
possible that a total harvest failure does not occur. 23 Driven by a
similar logic, the urban dwellers attempt to hold more than one job,
often all of them 'full time', simultaneously, in order to keep some
income, should they lose one of them. 24 At the family level, an
302 Mats Lundahl
attempt is made to have as many income earners as possible. 25

Another device employed to obtain some measure of security is that
of establishing pratik relations. Such relations are established be-
tween buyers and sellers in a market. Typically, a peasant woman
marketing food crops will have a favoured buyer in the market-place,
somebody who may pay a little extra and buy even if the market is
glutted. Conversely, the buyer can be assured that whenever produce
is scarce, she will be guaranteed delivery of whatever the seller has to
offer. 26
The list can be made long. 27 To reduce dependence on the market
and hence also the risk of price falls and income reductions, there has
been an increasing tendency to grow food crops that can be consumed
directly by the household. 28 Assets are kept in relatively liquid form
(e.g. animals) to allow sales in the case of immediate need. Credit
lines which can be used in the case of an emergency are opened with
lenders in the informal credit markets. Products are sold while still in
the ground and loans are repaid in kind instead of in cash so that the
risk of a price fall is shifted to the buyer.
Instead of detailing the above mechanisms, we shall concentrate on
four types of specific welfare and insurance institutions: lakous, ritual
kinship, patron-cliente relations and sangues. Finally, we shall analyse
how over time the traditional mechanisms tend to be supplanted by
new ones, notably by emigration.
THE LAKOU
The cornerstone of the traditional, informal, insurance system in

Haiti is the lakou, 29 the extended family with a common residence
headed by an elderly male. Lakous came into existence during the
nineteenth century as the younger generations built their houses in
the immediate neighbourhood of the older, on land that had been
granted by the latter.
The classic lakous served in different ways as institutions of social
cohesion and insurance. In the first place, they made certain that
production was maximized, by allowing more land to be cultivated
than in a system building on the nuclear family. During the
nineteenth century, when land was still abundant and labour was
scarce, the lakou system saw to it that labour utilization was high.
The males of the younger generation who were given land as pre-
inheritance grants by their fathers were under the obligation to
cultivate not only their own plots but the land of the older generation
as well. This cultivation was undertaken with the aid of coumbites30 -
collective, or rather, co-operative labour teams that worked each
individual's field in rotation. This form of work organization, with the
teams moving down the fields working in a steady rhythm, ensured
economies of scale that went beyond what would have been possible
if only the labour provided by the nuclear family had been used. 31
Secondly, within a lakou there was an obligation to share food
between the nuclear families, whenever cooking took place and
enough was available. Thirdly, the lakou members had to assist each
other in cases of illness or when something went wrong. Finally, the
existence of a large, socially coherent, kin group living near each
other made it possible to obtain loans at a lower cost (frequently zero
interest) than if outsiders had to be relied upon.
The rural/akou has been reported to have disappeared by a num-
ber of researchers. 32 Around the turn of the century, lakous could be
as large as 25 to 40 hectares - they constituted veritable villages -
whereas already in the 1940s it proved difficult, at least in some areas,
to find units as big as eight or ten houses. Today, what is referred to
as a 'lakou' in the countryside is often nothing but a few huts grouped
together, lacking the tight-knit social cohesion associated with the
classic units. The main reason behind the decline of the lakou is the
increased difficulty of obtaining land. The growth of the population
has been accompanied by a decrease in the average size of landhold-
ings, since in principle all children have equal rights of inheritance.
This, in turn, makes it difficult to construct dwellings close to each
other in the 'old' fashion. Thus, gradually the classic lakou has tended
to disappear - and with that its role as an insurance mechanism. 33
However, the disappearance of the traditional system has to some
extent overshadowed the fact that the extended family still plays an
important role. Michel Laguerre and Uti Locher have both warned
against obsession with the lakou as such instead of focusing on its
adaptation over time. 34 As Haitian society has changed, so have its
institutions, including that of the lakou, or more precisely, the ex-
tended family traditionally grouped in a /akou. According to Laguerre
and Locher, the adaptation of the lakou has taken place both in rural
areas and, with the increased rural-urban migration during the past
few decades, in the non-traditional urban environment.
No systematic evidence has been gathered on a large scale in rural
areas. But Laguerre has checked an extended family of some thirty
households comprising some 150 individuals, who did not maintain
304 Mats Lundahl
the traditional lakou settlement pattern, residing mainly in the

Plateau Central, and who had some members in Port-au-Prince, the
United States and Canada. 35 The history of this family was one of
close contacts and mutual aid in several areas: for example, rent
payments, housing relatives, cooking for relatives, payment for
schooling at different levels, help in agriculture, distribution of some
of the harvest to relatives, payment of passages to New York or
Canada and remittances of money from abroad. Not least the latter
aspects constituted important aspects of the survival strategy:
Every month Ticouloute [the head of the extended family] receives

some money from his children, who also send money to their
cousins, aunts, and other relatives. The children's strategy is to
help with the passage to New York for relatives, so that less will
have to be sent (for subsistence rather than opportunity) to Haiti.
Migration to New York is now the major point at which the
Ticouloute extended family is manifesting its solidarity. 36
Naturally, a great deal more by way of case studies is needed before

safe generalizations can be made. For one thing, the family studied
by Laguerre was relatively successful economically;37 it is not an
'average' or 'typical' case. An important question is whether eco-
nomic success was due to the functioning of the extended family or
whether the former was a precondition for maintaining the latter
once the geographically concentrated lakou had ceased to function.
Nevertheless, the idea of adaptation receives further support in the
urban studies. The doctoral dissertations of Laguerre and Locher
both report the existence of lakou-like structures in popular neigh-
bourhoods in Port-au-Prince that by and large fulfil the same in-
surance functions as the classic extended family. 38 In the urban setting,
the lakou members do not have to live within a common compound.
Nevertheless, they interact very closely, and frequently, in the case of
migrants, they have the same background in terms of geographical
origin. 39 Laguerre describes three different types of urban lakou
which, even though they did not function in an identical manner,
clearly retained the co-operative features of the classic structure. In
one, food was shared and nobody paid any rent to those in the lakou
that owned the plots. In the second, the members had got together
and paid the ticket to New York for one of its members, with the
expectation that this person would later be able to finance chain
migration from the lakou. Those who won on the numbers lottery
would share their gains with their lakou-mate losers. The members
relied upon each other - ultimately on the matriarch heading the
lakou - for loans in times of need. In the third, a voodoo brother-
hood, all the members were tied to each other through ritual kinship
and were all the proteges of the houngan (voodoo priest) who headed
the lakou. There was communal work and various kinds of help on a
day-to-day basis: loans for payment of school fees and medical ex-
penses, regular borrowing of kitchen utensils and chairs, and some-
times of food as well.
Locher's results corroborate those of Laguerre. 40 Locher found
lakou-like structures in the sense of an extended family that was
operating in spite of the lack of a common residence both in a
neighbourhood on the urban-rural border and in a slum district. The
urban settings always involved more than a single extended family;
and they differed furthermore from the rural ones in that seldom did
any activities involving all members of the lakou take place. The main
advantage of the urban lakous instead was that they functioned as
networks facilitating the survival of their members. For example,
migrants moving into Port-au-Prince usually moved into households
in clusters of migrants who had the same origin. Thereby, urban
contacts could be obtained more easily, while at the same time
contact with the area of origin was maintained:
Every link connecting an individual to his or her close kinfolk is

potentially a preferred migration route. It is preferred because it
promises the "buffer" effect and the assistance in adaptation with-
out which migration would indeed be . . . [a] hazardous ven-
ture . . . The important thing for most migrants is to have at least
one good contact at the point of destination, but several contacts
are better than one, and family contacts are better than mere
acquaintances. But migration networks harbour resources beyond
those of immediate use in urban adaptation. A foreign link, for
instance, may mean remittances, and extensive urban links may
mean access to jobs in the modern sector non-existent in rural
areas. 41
The networks created via the urban lakous are multi-purpose ones in
that they serve as mechanisms facilitating the mobilization of re-
sources of many kinds needed by the members.
306 Mats Lundahl
RITUAL KINSHIP AND PATR6N-CLIENTE RELATIONS
In Haiti, there are five types of ritual kinship that carry some effective
responsibility that may be interpreted in terms of insurance and
increasing welfare. 42 Via the bapteme andoye, a simple folk baptism
performed by a bush priest or other layman, which takes place before
the Christian baptism, the child obtains a godfather and a godmother,
usually chosen among young friends or neighbours who are not
economically well-off and whose main obligations are babysitting and
rendering some services to the parents during early childhood.
The godparents of the folk baptism have only limited obligations.
The Christian baptism, on the other hand, is far more important from
the insurance point of view, for then the child is endowed with
godparents who are better off than the parents or at least of the same
standing. The choice by and large is based on economic calculations:
Those godparents are chosen in anticipation of the child's future.

In case of need, they will pay his schooling, board, and room and
they may have him stay with them. They may help pay the ex-
penses of his marriage or of a trip to New York. The links go
beyond mere affection; they meet the child's economic needsY
The three other types of ritual kinship - the godparents obtained at

the wedding (when a formal wedding in fact ·takes place)44 and the
voodoo godparents obtained at the voodoo baptism which serves to
initiate the child to voodoo, or when an adult voodooist marries a
voodoo loa (spirit) to advance in the voodoo hierarchy- all contri-
bute with guidance and protection, but to a far lesser extent than the
godparents obtained via the Christian baptism.
Ritual kinship is manipulated explicitly as a means of obtaining
economic security. 'When you choose your godparents you must do
so with a view to extending the family', writes Remy Bastien,45 and
Laguerre describes the operation principles in some more detail:
With each new baby, Ticouloute played a transaction game to

make the most advantageous choice possible, for godparents are
expected to help their godchild in every way. The godparents, for
their part, expect their godchildren to take care of them in old age
if they have no children of their own. Moreover, if these god-
parents are politicians or vendors, they expect the parents and
the godchildren to help during electoral campaigns or to trade

with them.
Thus, Ticouloute, desiring good educations for his children,
managed to draw on people in the upper and middle classes of his
village for godparents to his children. This allowed him to have
contacts, through these godparents, with other people in key posi-
tions in Port-au-Prince. When a child had to go to Port-au-Prince
to finish high school, Ticouloute would get a letter from his compe
(the child's godfather) ... or mayor of the village, and bring this
letter to the principal of the lycee. This was enough for his sons to
be admitted. Correspondingly, during elections, Ticouloute would
do his best to make his extended family vote for his compe. Such
are the reciprocal prices of godparenthood transactions. 46
Another common traditional insurance method that builds on per-

sonal ties is the patron-cliente relationship with somebody of superior
economic and social standing who can be called upon to help in
difficult situations:
In such a relation the patron offers economic aid and protection

against legal and illegal exactions of authority. The client in turn
pays back in intangible assets. He may support the patron with his
vote [. . .] He may keep his patron informed of the plots and
machinations of others. He will praise his patron, thus helping to
raise his status in the community. 47
In Haiti, patron-cliente relations exist at many socio-economic

levels. 48 Frequently, those who are patrones in one setting are
clientes in others. In the urban slum studied by Locher, such relations
ranked high on the list of survival algorithms:
Patronism - "lopsided friendships" - is the principal adaptive

strategy used by the people of Portail Leogane in the struggle of
their daily lives. Virtually none of these people have sound occupa-
tional careers, steady incomes, safe leases on their living quarters
and material resources which could provide security in critical
situations of any kind. Therefore they spend much time and energy
on the planning and maintenance of patron-client ties. The nature
of these ties - the direction of their lopsidedness - is moderately
affected by economic and social status. Otherwise, patronism is
308 Mats Lundahl
unaffected by the major demographic and social determinants. As

the essential vulnerability of the urban lower class remains un-
changed, so does the need to counteract it and the strategy adopted
for this purpose. 49
SANGUES
An institution which can be used, for example when it comes to

mobilizing outlays that are larger than ordinary, is the sangue5° - the
Haitian variety of rotating credit association. 51 A rotating credit
association may be defined as 'an association formed upon a core of
participants who agree to make regular contributions to a fund, which
is given, in whole or part, to each contributor in rotation ... ' 52 Such
associations represent an adaptation to conditions of poverty in many
countries - conditions that force people out of the more elaborate
and institutionalized banking framework reserved for, and making
demands that can only be met by, people with a higher socio-
economic standing.
In Haiti, sangues are constituted whenever there is a need for them
and people have enough money to put in regularly. Each sangue has a
president, usually the person who took the initiative to form it. The
number of members tends to be low, a handful as a rule and ten at the
most. These members bring in money at regular intervals, usually
once a week, and the whole capital is then distributed to each of the
members in turn. 53 The sangue can be dissolved at any time the
members wish, but it often continues in operation for long periods.
Sangues exist in both rural areas and urban districts, and Haitian
emigrants have brought them to New York and Miami as well. They
are flexible instruments that can be used for a wide variety of pur-
poses, like payments of rent and school fees, medical expenses and
burials, or for mounting small businesses. Sangues are even used to
pool resources to finance migration to the United States for the first
member of what becomes a chain of migrants who remit money back
home to make it possible for others to join them abroad. 54
The sangues have a number of advantages from the insurance point
of view. 55 Thus, they increase the savings of their members. The
obligation to put money into the sangue at regular intervals makes it
difficult to spend carelessly. In fact, the sangue, once it has been
started, acquires characteristics of a forced savings scheme, since in
contrast to most bank savings schemes, the contributions to the
common fund must be met. This, in turn, creates another advantage:

'When one is participating in a sangue, it is easier to find people
willing to lend you some money since they know you have a source of
revenues . . . ' 56
Also, in an urbanizing world, the sangue may be more easily
adapted to the new environment than the lakou because it does not
require that the participants be kin. Membership can be based on one
or more of many criteria: 'sex, age, kinship, locality, occupation,
status, religion, education, political affiliation and/or a condition of
shared poverty'. 57 In an urban society, economic activities tend to be
increasingly separated from non-economic ones. Thus. in the cities.
the sangues constitute an imperfect substitute for the extended fam-
ily, in particular when, for some reason, one has to live outside the
lakou network. 58
OLD AND NEW MECHANISMS
The extended family continues to exist in Haiti. It has made the

transition from the nineteenth-century lakou to twentieth-century
urban life. However, it is difficult to know how efficient it is when it
comes to serving as a social cushion or buffer in the modern setting.
The fact that the institution has managed to adapt does not guarantee
that the adaptation has been a successful one in the sense that social
insurance is as good as it used to be in the traditional lakou. Geo-
graphical dispersion of necessity increases the social distance between
human beings as well, even though the ties of kinship remain.
Secondly, in rural areas it was the land that provided the ultimate
security. Over time, however, the average size of landholdings has
declined rapidly, as a result of population growth and erosion. To
take but one example, Bastien has shown how in the Marbial valley,
in four generations (from 1840 to 1940) the land area per heir (per
capita) in a lakou decreased from 16 hectares to 0.32, 59 a tremendous
difference from the point of view of production possibilities. It is of
course the output available that ultimately decides the ability of an
agriculture-based society to redistribute resources in case of need. At
the same time, the demand for social insurance is higher, since
peasant incomes are closer to subsistence level than during the past
century. 60
The combination of increased poverty and less efficient social
insurance has led to migration, both to the cities and out of the
310 Mats Lundahl
country. In 1980 an estimated 680 000 Haitians were already living

abroad. 61 In 1988 there were an estimated 550 00062 in the United
States alone, an increase of 100 000 in comparison with 1980. The
emigrants send money back home - exactly how much is not known
with any degree of accuracy. 63 However, there should be no doubt
that emigration has become one of the most important, perhaps even
the most important social insurance mechanism in contemporary
Haiti. Thus, Laguerre reports how the ghetto households
endeavour to have one of their members move outside the country.

The emigration of a member allows the head of the household to
rely on him for subsistence. The preparation for the migration
brings stress to the entire family to pay the passage. Once a man
migrates, the entire family may look to him for future support.
Indeed, their future may depend on remittances from the emi-
grant. He communicates with them by mail and remits a monthly
cheque. Lakoumates too, who have a former household member in
New York hope that their future will be insured or improved. 64
The entire family is involved in gathering the money that allows the
young man to emigrate. Frequently, the money has to come from
sales of assets or from borrowing at high rates of interest. Friends
who may be able to lend money or who could help when it comes
to obtaining the necessary papers are called upon. Religious cer-
emonies, both Christian and voodoo, are performed to ensure the
success of the venture, and to inculcate in the emigrant's mind that
future remittances must be sent that will allow others to follow him. 65
As the importance of migration increases, in particular as more
families have relatives living abroad, the importance of the tra-
ditional insurance mechanisms diminishes. Having somebody earning
dollars in New York, sending them to Haiti where their purchasing
power is high is a more efficient survival algorithm than falling back
on what the traditional devices alone may bring. 66 Thus, in the
future, the latter may gradually be reduced to mere intermediary
steps in the process of arriving at an efficient cover, by transferring as
many family members as possible abroad.
The employment of the traditional lakou for social security pur-
poses was based on making the most efficient use of the relatively
abundant production factor during the nineteenth century: land.
Today, land has become scarce. The insurance mechanisms have
changed accordingly. The modern lakou structure does not build on
land, but on labour- today's relatively abundant factor. Emigration

to capital-rich countries like the United States is the best way to raise
labour productivity and incomes, and hence the ability to contribute
to the welfare of those left in Haiti.
Notes
1. Sen (1981), especially chapter 5 and appendix A.
2. It could also be the case that too much of his produce is taxed away.
3. Korpi, Olsson and Stenberg (1982).
4. Ibid.: Andersen (1966) chapter 1.
5. Edebalk and Elmer (1983), p. 63.
6. SOderstrom (1983) pp. 1-2.
7. For the situation in rural areas, see e.g. Lundahl (1979). For the urban
situation, cf. Laguerre (1976), Locher (1978), and Fass (1978), (1980).
8. Lundahl (1979); (1985) chapters 6-8; forthcoming.
9. Lundahl (1984).
10. Ibid.
11. Private communication from Leslie Delatour, 3 May 1988. For the
principles involved, see Ekelund and Tollison (1984), and Tullock
(1984).
12. Bhagwati (1982).
13. Bhagwati (1978) chapter 8; (1988) pp. 98-101.
14. Lundahl (1985) p. 209.
15. Cf. Lundahl (1979) chapters 7-10, for details.
16. Nicholls (1984) p. 256.
17. Banque Mondiale (1987) pp. 9, 15, 99-100, 110-11.
18. Garcia-Zamor (1986) pp. 75, 76.
19. Lundahl (1988a), (1988b).
20. Cf. Hirschman (1970).
21. Some of these have been dealth with in Lundahl (1983b).
22. Fass (1980) p. 8.
23. See e.g. Moral (1961) pp. 201ft., and Lundahl (1979) pp. 77-8.
24. Locher (1978) pp. 67, 181; Garcia-Zamor (1986) p. 76.
25. Fass (1978) p. 161.
26. Mintz (1961); Lundahl (1979) pp. 166-8.
27. Lundahl (1979), p. 600.
28. Boudet and Lundahl (1988). On average, the production of export crops
is decreasing.
29. From French: Ia cour- yard.
30. From Spanish: convidar- invite.
31. Cf. Lundahl (1983b).
32. Bastien (1951), (1961); Moral (1961) pp. 169-72; Schaedel (1962) pp.
25ff.; Dominguez (1976).
33. At the same time, the coumbite has undergone changes as well. At least
up to the 1940s, a coumbite was not simply a way of getting work done,
312 Mats Lundahl
but simultaneously a festive occasion where people gathered to eat, drink

and gossip. Today, with the lower per capita income in rural areas, the
latter component has by and large disappeared and only the 'productive'
part remains. (Cf. Lundahl (1979) pp. 110-18.)
34. Laguerre (1976), (1978a); Locher (1977), (1978).
35. Laguerre (1978a).
36. Ibid., p. 422.
37. Ibid., p. 408.
38. Laguerre (1976), Locher (1978).
39. Laguerre (1976), p. 138, reports how in the Port-au-Prince districts he
studies, members of lakous with a dispersed settlement pattern 'consider
themselves jointly linked to the same Voodoo spirit protector [exactly
like in the traditionallakou] and participate every year in the ceremonial
meal offered to this spirit protector and their common ancestors'.
40. Locher (1978).
41. Ibid., p. 267.
42. Bastien (1961); Laguerre (1976) pp. 177-80; (1978a) pp. 434-5.
43. Laguerre (1978a), p. 435.
44. Most Haitians practise common law marriage only.
45. Bastien (1961) p. 491; cf. also (1961) p. 57.
46. Laguerre (1978a) pp. 208-10.
47. Wolf (1966) p. 87.
48. Locher (1978) pp. 208-10.
49. Ibid., p. 212. Bastien (1961) p. 490; on the other hand, reports that ritual
kinship is losing its importance in Haiti - faster in the cities than in the
rural areas.
50. Also known as so/de, comb/e or associe.
51. See Valles (1967) pp. 124-8, and Laguerre (1976) pp. 129-35 and (1978b)
for descriptions.
52. Ardener (1964) p. 201.
53. This description refers to a survey. Sangues also have important advan-
tages in comparison with regular banks, for example in that they can be
organized everywhere and in that they are not formal institutions requir-
ing paperwork. Most important, however, is that all members have an
unconditional right to money when his turn comes. In a bank, the
creditworthiness of most sangue participants would be zero (Lundahl
(1983b) p. 229).
54. Ibid., p. 14.
55. Bonnett (1981) provides a survey.
56. Quoted by Laguerre (1976) p. 134.
57. Laguerre (1976) p. 130.
58. Cf. Geertz (1962), and Levin (1975).
59. Bastien (1951) p. 140.
60. Lundahl (1979) chapter 5, analyses how population growth and erosion
tend to interact in a cumulative downward process, lowering rural per
capita income over time.
61. Allman (1982) p. 11.
62. De Wind and Kinley (1988) p. 10.
63. Segal (1975), note, p. 214, states that in 1970 16.5 million dollars were
remitted, Anglade (1977) p. 96 gives a figure of 36-60 million per year in

the mid-1970s and Laraque (1979) states that no less than 80 million
reached Haiti in 1977. However, at least the latter two figures may be
exaggerations (Locher (1978) p. 192).
64. Laguerre (1976) p. 180.
65. Ibid., pp. 18Q-l.
66. Lipton (1968). Segal (1975), note p. 214, states that each Haitian who
holds a paid job in the United States supports five family members in
Haiti, directly or indirectly, and a 1976-7 survey among Haitians in New
York showed that 43 per cent of those interviewed were responsible for
two or more persons back home (Nicholls 1985) p. 193.
References
Allman, J. (1982) 'Haitian Migration: 30 Years Assessed', Migration Today,

vol. 10, pp. 7-12.
Anglade, G. (1977) Mon pays d'Hafti (Port-au-Prince).
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Ardener, S. (1964) 'The Comparative Study of Rotating Credit Associa-
tions', Journal of the Royal Anthropological Institute, vol. 94, pp. 201-29.
Banque Mondiale (1987) Hai1i: Examen des depenses pub/iques (Washing-
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15 Market Modernization Policy
in Bogota: Welfare
Consequences for Low-
Income Market-Sellers*
Caroline O.N. Moser
INTRODUCTION
The lack of consensus as to the underlying causes of poverty in Latin

American cities has been reflected in the different conceptual
approaches to Third World economic development. Social policy to
alleviate poverty, therefore, has not been formulated in a vacuum,
but has been determined within specific political and ideo-
logical frameworks reflecting different class interests. Similarly, pro-
fessionals involved in policy implementation have not been simply
technocrats providing technical responses to identified problems, but
have relied on value assumptions to justify their particular actions
and responses to ameliorate poverty. This chapter is concerned with
the interrelationship between social policy formulation and economic
development paradigms. An anthropological case study of new
marketing policy in Bogota, Colombia, provides the empirical basis
for examining the implications of market 'modernization' policy on
the welfare of low-income market-sellers.
In 1969-70 the Empresa Distrital de Servicios Publicos (EDIS), as
owners and administrators of the Bogota municipal market system,
attempted to introduce new marketing regulations, intended to im-
prove the market administration and increase the scale of market
operations. Three aspects of this process are analysed here in terms
of the models of economic development which predominated in Latin
America during that period: firstly, the regulations themselves,
secondly, the methods employed to test their applicability in one of
• This chapter is an abridged version of chapter 7 of my unpublished PhD thesis

entitled 'Differentiation and Mobility in a Bogota Retail Market', University of Sus·
sex, 1975.
317
318 Caroline O.N. Moser
the city's retail markets and, thirdly, the reaction of the retail sellers
to the regulations. The purpose is to highlight the differing percep-
tions of policy-makers in EDIS, the social workers sent to implement
the changes, and the sellers themselves as to the constraints on the
expansion of small scale enterprises. The case study seeks to illustrate
how policy formulated within one particular development paradigm,
that of 'modernization', while theoretically designed to assist the
market-sellers to expand economically, because of its particular
underlying assumptions, would, even if unintentionally, have de-
stroyed their means of livelihood.
By the 1960s rapid 'modernization' in many Latin American cities
meant that a considerable proportion of the low-income population
had a limited ability to meet their economic wants and social needs,
with the concept of 'marginality' providing a useful means to describe
particular problems of poverty in the urbanization process: migrants
'swarming' into the city were socially marginal; the fact that they
were seen to live predominantly in squatter settlements on the
periphery of cities meant they were spatially marginal; their failure to
find secure wage sector jobs meant they were economically marginal,
and their inability to vote in formal political elections meant they
were politically marginal. As a descriptive category, the term mar-
ginality was used to explain the social attributes which characterized
certain segments of the population. The problem of poverty was seen
as one of adaptation to the system, identified in terms of the innate
capacity of the individual migrant, who, with increased participation
within the urban structure and increased assimilation of urban norms,
would shift towards integration and into stable wage labour (see
Perlman 1976; Moser 1977, 1978, 1980; Roberts, 1978).
One of the most important constraints identified was that of the
'culture of poverty', the problem, articulated most succinctly by
Oscar Lewis, that the poor have a separate subculture. While this
enabled them to survive in a difficult environment, the fact that it
had an autonomous dynamic of its own meant that it had self-
perpetuating mechanisms for its transmission. Thus, as Lewis argued,
once it came into existence it tended to perpetuate itself from one
generation to the next, acting to reinforce disadvantages from one
generation to the next. Lewis's concept of the 'culture of poverty'
work appealed to policy makers working within a 'modernization'
approach because it identified the poor as responsible for their own
poverty, with the only possibility of changing this coming from out-
side, for instance in the form of psychological assistance from social
Market Modernization Policy in Bogota 319
workers (Lewis 1961, 68). By the early 1970s it had gained certain
respectability among policy makers not only in Latin America but
also in USA and UK. The case study of marketing modernization
policy in Bogota, Colombia examines the extent to which conceptual
approaches to poverty such as 'marginality' and the 'culture of poverty'
influenced the formulation and implementation of this social policy.
EDIS AND THEIR POLICY OF MARKET REFORM
At the outset it is necessary to describe briefly the Bogota market

system and the events surrounding the attempt by EDISto embark
on a drastic reform policy. Within the urban centres of Latin Amer-
ican cities market systems with complex structures exist and flourish
comprising various categories of individual market-places, wholesale
and retail, daily and periodic. EDIS, which controls the Bogota
market system, is a public corporation responsible for such works as
slaughterhouses, garbage collection, cemeteries, street-cleaning and
public markets. In 1970, the market system consisted of the wholesale
market complex, called the Plaza Espana (including up to 700
wholesalers and thousands of bulk-breakers and retailers), 14 daily
retail markets, and 22 periodic markets. The daily retail markets
consisted of two general types: firstly, the newly constructed modern
enclosed market, large in size with well-ordered cement puestos
(stalls) situated in new residential barrios; and, secondly, the older
smaller market, often all or partly exposed, with disorderly arrange-
ment of homemade wooden puestos, and located in older barrios,
often in the 'inner city'.
One such market-place within the Bogota market system, which I
call the Plaza San Juan, performed a dual function as a small daily
retail outlet mainly for fresh foodstuffs and a means of employment
for certain sectors of the urban population. Built in 1935, by 1970 it
was one of the oldest and poorest markets in the city, divided into
two parts - a dark and cold interior with 25 puestos, and behind it an
uncovered area with 65 puestos. In 1970 a total of about 100 people
worked in the Plaza daily- puesto owners, cargueros (load carriers),
family and non-family assistants. The 90 puestos comprised small
numbers selling goods such as meat, fish, non-perishable grains,
clothing, and cooked foods, with the largest category composed of
the 60 puestos selling fresh produce, fruit, vegetables and staples,
which formed a distinct group situated in the external market. The
market was situated in a long-established but rapidly changing neigh-

bourhood located about 15 blocks from the commercial city centre on
the lower slope of the Montserrate mountain. This had been a pre-
dominantly low-class area with multi-occupied dwellings rented by
the room, reflected in the buying patterns of customers, the vast
majority of whom bought on a daily basis. Bogota's rapid growth had
made the area increasingly attractive to professionals with an increase
in the construction of owner-occupied houses and apartment blocks.
EDIS had long recognized the need to modernize the older mar-
kets through the introduction of a written code of rules and regula-
tions. The markets, especially those situated in the poorer barrios of
the city, were generally considered an eyesore and disgrace in the
rapidly modernizing capital. The Plaza San Juan, for instance, had a
long-standing reputation as unpleasant and unhygienic for shopping
in, and the sellers as violent and constantly drunk because of their
low 'class' and 'lack of aspirations'. Although the majority of sellers
had been working in the market between five and 10 years EDIS
considered it to be populated by a constantly shifting riff-raff element
of thieves and highly dangerous in terms of personal safety. With the
construction of the Bogota Hilton Hotel on the main road less than
five minutes from the market, the existence of such a 'slum of a
market' had become a particular embarrassment.
Over the years there had been several plans for clearing up markets
but it was not until 1970 that Dr Enrique Camargo, the Director of
EDIS, signed a contract with a newly formed Corporation of Supply
(Corporacion de Abastos) to design and implement comprehensive
new regulations for all the retail plazas of Bogota. Complicated
political motives underlined the reform plan. EDIS was controlled
by the mayor of Bogota, who was elected every four years simul-
taneously with the president of Colombia. In the April1970 presiden-
tial elections, which were won by Misael Pastrana Borrero, there
were numerous pledges to 'clean up' and 'modernize' the capital city.
When the changeover of political personnel occurred in August of
that year the new mayor was under considerable pressure to imple-
ment these pledges, especially since the majority of the urban low-
income population had voted for ex-dictator Gustavo. Rojas Pinilla,
with a resultant fear of unrest. Because of its political implications,
however, the market reorganization plan was seen by many observers
as a grandiose publicity stunt rather than a cohesive practical plan
with real potential for implementation.
The plan was designed in various stages. Firstly, a new set of
regulations known as the 'Internal Regulations of the Market Places

of Bogota' ('Reglamento lnterno de Plazas de Mercado de Bogota')
was drawn up by the Corporation of Supply. These were then tested
in individual markets with the intention of making modifications to
cope with specific demands of particular markets. Meetings were
held to inform sellers of the proposed new regulations and, where
possible, for the social workers to collect very general census in-
formation. It was estimated that it would take three months to hear
complaints and criticisms at the grass-roots level. The whole reform
project was designed to be completed in three years by which time all
the retail markets would be completely reorganized, with in many
cases the buildings partially or totally reconstructed and the new
'Internal Regulations' implemented.
Problems, however, arose on two fronts. Firstly, in many of the
markets attempts to discuss the reforms with sellers met with hostility
and suspicion. Sellers refused to attend meetings convened by Admin-
istrators or rent collectors and were unwilling to co-operate in giving
census information to the social workers. In some cases this hostility
took the form of violence, with social workers stoned out of the
markets. Simultaneously, an internal crisis developed within EDIS
when Dr Camargo was accused of mismanagement and resigned. The
new director, Dr Pu yo Vasco, on taking office queried, and then
broke, the contract signed between Camargo and the Corporation of
Supply on the grounds that it gave the Corporation complete control
over the markets. After this EDIS resumed charge of the running of
the markets, reorganizing its Technical Department to assume the
work of the Corporation. Although detailed plans were drawn up for
the reform of the markets and the 'Internal Regulations' were re-
tained with very slight modifications, large-scale reforms could not be
implemented because of EDIS's limited budget, with only the plan-
ning phase completed. After the 'crisis' the market returned to nor-
mal and continued to function much as before 1970. The above
description of events is intended to provide a background to the
examination of the regulations themselves.
THE INTERNAL REGULATIONS OF THE MARKET

PLACES OF BOGOTA
The market reform document, 'The Internal Regulations of the Mar-

ket Places of Bogota', drawn up by the Corporaci6n de Abastos, had
a twofold purpose: firstly, to raise the level of economic activity in the

city's markets, and, secondly, to improve the standard and reputation
of the markets themselves. It was expected to achieve both measures
through the introduction of a uniform set of regulations imposing
standardized, controlled rules on the sellers, as well as the cons-
truction of an orderly system of concrete market-stalls.
Different regulations were intended to rectify the problems ident-
ified as causing the low level of economic activity in the market.
Analysis of these regulations provides an insight into the perceptions
of policy-makers as to the function of retail markets in the city, the
constraints on enterprise expansion, and consequently the underlying
assumptions as to the causes of the poverty of small-scale market-
sellers. The conclusions reached by policy-makers did not necessarily
coincide with those of the sellers themselves. In appraising the pro-
posed regulations in terms of the realities of market-stall operations
it is possible to show not only the differing perceptions of the prob-
lems by the different actors involved, but also to infer from this the
assumptions used to justify the new measures, many of which were
articulated by market administrators and social workers. It is import-
ant, however, to emphasize that ultimately this is an outsider's
appraisal, with the following analysis at no point assuming a priori
that the policy-makers or sellers consciously interpreted regulations
in a similar manner.
The Sellers in the Plaza San Juan
The regulations are appraised specifically in terms of their effect on

sellers in the Plaza San Juan. Although this was one of the poorest
markets in the city it was not unique, with many of its problems
common to the majority of the markets EDIS intended to reform.
The appraisal involves examination of the effects on the different
categories of sellers, identified by scale of market-stall operation, sex
of seller and marital status. In order to do so it is necessary to
mention very briefly some of the most important characteristics of
both the sellers and their market stall operators (Moser 1975).
As in most of the retail markets in Bogota, the sellers were not
peasant producers selling their own produce but 'professional sellers',
middlemen who depended on marketing for their living (Mintz 1964).
They were not itinerant traders buying rurally to sell in the city, but
entirely involved in the urban market system, buying wholesale in
order to retail in the local market. They did not operate their puestos
with a random selection of produce but made rational decisions in the

choice of what they sold, within the limitations imposed by personal
and wider constraints. Each particular fruit, vegetable or staple had
specific selling characteristics with different demand and supply fac-
tors and related risks and profit margins. In 1970, I identified five
distinct categories of puesto operations and ranked puesto size from
largest to smallest (only of relative value and not related to any size
structure outside the Plaza San Juan). A significant correlation
emerged between the size of puesto and type of produce sold. Dis-
tinct patterns were identified in the relationship between these two
factors which together determined the economic basis of the enter-
prise. The evidence showed that the larger the operation, the greater
the tendency to sell fruit, or fruit and staples, with their greater
capital requirements and higher risks but larger profit margins.
Conversely, the smaller the seller, the greater the tendency to sell
only vegetables with their low capital requirements and risks but also
lower profit margins. In between the two were the medium-scale
sellers who tended towards combinations of staples (potatoes, yuca
(sweet manioc), or pldtano (plantain]) and vegetables or fruit and
vegetables. The sellers were not homogeneous but formed a con-
tinuum from very small pedlars of vegetables to the large-scale opera-
tions with a wide assortment of fruit and staples.
It was clear that the sellers utilized the market for different ends
depending on the scale of operation. Large-scale sellers operated
puestos geared to the maximization of profit and expansion and were
upwardly mobile, with the possibility of breaking out of the market.
Small-scale sellers, who were caught in the vicious circle of small
amounts of capital, uneconomic wholesale buying, and very low pro-
fit margins, existed below the level at which expansion was possible
and operated to maintain the status quo and not become insolvent.
Sellers of different-scale puesto operations not only tended to retail
different products but showed differences in their social character-
istics. Depending on the age and sex of the individual seller at the
time of entry into the market, so depended the constraints under
which he or she was forced to operate and their goals in undertaking
this type of work. From extensive data general characteristics can be
summarized. Old men unable to continue as rural agricultural labour-
ers or urban manual labourers were attracted to marketing at the end
of their working lives. With heavy family financial commitments they
set up with limited accumulated capital and little hope of expanding
their enterprises. Most were small-scale sellers, as were old women,
many of whom were widowed or deserted and also without capital.

However, the majority of women sellers entered when young, often
because they were the sole supporters of a number of dependants.
Many started their working lives in domestic service, but had been
forced out by the time their second child arrived. Family commit-
ments limited the likelihood of accumulating sufficient capital to
increase the size of their enterprise, so they tended to be medium- or
small-scale sellers. Younger men entered the market with a different
intention reflected in their larger scale of operation and shorter
length of stay. With high unemployment and low wages they chose
marketing as the best career option, generally after trying out other
jobs. On entry into the market many were able to use family contacts
and borrow credit. They saw it as 'settling down' but with smaller family
commitments and the possibility of accumulating capital; they also
saw it as a 'stepping stone' into more lucrative areas of marketing.
The Detailed Regulations
The new regulations were long and complicated with some 55

Articles. In the following appraisal, only the most important regula-
tions are described.
(a) Monthly Payment of Rent (Preamble and Article 24)

This regulation stated that sellers were required to pay the puesto-
rent monthly into a commercial bank specified by EDIS, within the
first ten calendar days of each month. This contrasted with the
existing system under which only the graneros (large grain-sellers)
paid in such a manner, with the vast majority of the sellers paying on
a daily basis to the rent collector in the market. The likely effect
would have been to reduce almost all these sellers to the status of
'temporary' as against 'permanent' users in the market, with a subse-
quent lack of security of tenure.
Examination of the wholesale buying and retail selling behaviour
of the different-sized market operators showed that for a variety of
reasons small-scale sellers were able to function on sca~:cely more than
a day-to-day basis, while the larger-scale sellers tended to conceive
of their businesses in terms of a weekly turnover. By instituting a
system of monthly rather than daily rental payments EDIS intended
to reduce the importance of the rent collector. It was assumed that
the sellers were capable of long-term budgeting or, if they were not,
this was a 'cultural' trait which could be overcome by education.
Empirical evidence in the market suggested that very few sellers

would have been able to cope with the new system and that the
majority would have been thrown out for rent arrears, not so much
because of apathy but more because of the economic realities under
which they operated.
(b) Allocation of Puestos for Fixed Produce (Articles 2a, 19)

This regulation stated that puestos would be adjudicated to sell a
particular produce after which no 'user of permanent or temporary
puestos will be allowed to market different products from those for
which the puesto was adjudicated' since for a more orderly arrange-
ment of the structure of the market 'each market place will be
organized into zones or sectors designed for the sale of similar
articles'. EDIS appeared equivocal in not defining explicitly what was
meant by 'a particular produce'. If the definition was a broad categ-
ory such as meat, grains, staples and 'llchigo' (general provisions),
then the sellers would have been largely unaffected by this Article.
However, if the definition were more specific and sellers were forced
to make a decision between selling fruit, vegetables or staples, then
this would certainly have given a more orderly appearance to the
market but at the same time would have destroyed completely the
existing system of selling goods in combination, undertaken to spread
risks.
In fact, large-scale sellers built up a complicated method of selling
fruit and staple combinations as the optimal choice for maximization
of profit, while smaller-scale sellers were dependent on product di-
versification according to seasonal wholesale fluctuations and their
individual state of solvency. Strict categorization would have dis-
allowed this as well as excluding the types of changes made over a
longer time-span. to increase, or cope with the decrease in the size of
a puesto. By organizing the market into sectors designed for the sale
of similar produce EDIS would also further have reduced the pro-
fit margins of the large-scale sellers who had built up a reputation
for a particular produce and then diversified to sell more to their
middle-class customers more interested in quality than in small price
differentials.
(c) Price Fixing and the Limits of Profits (Articles 28(6),

30(w), lc, 28(14)
The new regulations required that sellers 'must guard rigorously the
commercial morality in every sense', stating that 'every seller is
especially obliged to show on signs and in situations easily visible to

the public the prices of articles of primary necessity which are sold,
the prices being determined by the authorities of the branch' and
equally that it was strictly prohibited to 'sell articles of primary
necessity at prices higher than those authorized by the branch auth-
orities . . . '. Infringement of these regulations would lead to either a
fine or being ejected from the market. The logic behind these regula-
tions was that sellers overcharged their clients and that fear of being
cheated made large numbers of potential customers prefer the super-
markets with their fixed prices. This measure which was seen as very
necessary if the markets were to compete with supermarkets would
have destroyed the fundamental premise of bargaining on which this
scale of selling was based.
in reality, sellers operated under a flexible price system where a
seller's skill was determined by the ability to judge the exact profit
margin that could be expected from a particular customer. Price-
fixing was highly complex and varied from one type of produce to
another. While staples were more rigidly fixed in terms of the
wholesale price, fruit and vegetable prices were more variable.
EDIS's identification of the problem as the sellers' fear of middle-
class clients was not supported by empirical evidence. Clients with a
reputation for driving the hardest bargain were almost all middle-
class senoras. 'You have to have the patience of a saint to sell,' said
one seller after an affluent middle-aged lady had made her open up
five avocados to look at their quality and then bought nothing. Prices
were frequently fixed on the basis of 'one price for the rich, one price
for the poor', a commonly held feeling that the rich could afford to
pay more than the poor. However, other factors also influenced
pricing, such as the state of solvency of the seller, whether a fixed
client relationship existed with the buyer, and the time of day. Prices
dropped considerably in the afternoon when sellers were desperate
for the odd peso if their sales have been particularly bad earlier in the
day, and here it was the poorer working-class clients who benefited as
they scoured the market for final reductions. 'It's the old women who
make you lose in the market' said a large-scale seller, Jose, summing
up the problem of resisting making late-afternoon bargain offers.
Flexibility of prices was essential if more than one scale of puesto
operator was to co-exist in the market. Wholesale prices were related
to the size of bulk bought, with split-bulk more expensive and with a
consequent effect on retail prices. The most important other factor
utilized by sellers to justify higher prices than those of surrounding
puesto-owners was quality. Skill and frequently years of experience
had taught sellers to judge the quality of what they bought wholesale.
All these factors, in total, produced a highly complicated pricing
system within a particular market which the new regulations would
completely destroy. In addition, it would be impossible to impose a
fair system, regardless of wholesale buying patterns, since it could not
take into account deterioration and would, therefore, work success-
fully only if all the sellers bought wholesale on the same day of the
week/month.
While the regulations described so far related to methods of selling
and were designed to change the type of puestos operated and the
procedures involved in retail selling, the second important aspect of
the regulations concerned the rules governing the sellers themselves,
many of which would have had important repercussions on recruit-
ment patterns into this type of retail marketing.
(d) The Puesto Holder: Regulations Governing Tenancy

Methods of Application (Preamble, Articles 9, 10, 13) In 1970 a
relatively simple procedure for entry into the market existed. Sellers
who desired to work there either applied directly to the Adminis-
trator for a puesto or made an informal arrangement with a seller
already in the market, then informi'ng the Administrator of the
changeover in occupancy. In both cases the seller's particulars,
plus cedula (ID card) were then forwarded for ratification to EDIS's
main office. Numerous irregularities existed in the market, sellers
handed over puestos to others for varying lengths of time, or reg-
istered them in the names of spouses or relatives if their papers were
not in order. so that the Administrator never had an accurate list of
the sellers working in the market at one particular moment.
The new regulations were designed to establish control over the
movement of workers in and out of the market. At the same time, it
was highly bureaucratic and complicated and for a variety of reasons
it was unlikely that many of the sellers would have been able to
comply with it. Firstly. sellers would have far more paperwork to
complete prior to entering into market work. Under the new regu-
lations they were obliged to submit a written application to the
administration of the plaza; once assigned a puesto, they were re-
quired to sign a 'contract of administrative use' on presentation of
numerous documents. These included a certificate showing the seller
had not been thrown out of a market for bad conduct, nor was the
owner of any other puesto; his/her Paz y Salvo certificate (to show
taxes paid), cedula (ID Card), Health Card, and receipt of payment
of matriculation. In addition, 'the expenses made by the contract up
until its total legislation must be paid by the awardee'. Thus the
whole procedure was complicated, drawn out and expensive. It was
likely that semi-literate sellers would find the measures difficult to
accomplish, not having the necessary documents. Paz y Salvo certi-
ficates were only held by workers paying taxes; and none of the
sellers when I was in the market was in this position, nor would they
all pass the examination for a Health Card.
Therefore, regardless of the costs of entering market work very few
of the sellers in the market at the time could hope to continue as
permanent puesto owners under the new system. As a result they
would Jose the relatively secure position they occupied and be forced
into the position of temporary puesto owners, the second type of
puesto categorization in the new regulations. The difference between
the two was marked, 'those people recognized as users of permanent
puestos will be people with legal rights ... they those puestos will be
temporary which have been provisionally given in places in the mar-
ket entailed for such purposes. and paid for the right by a daily
ambulant ticket ... (the) duration will be as the Administrator of
the respective plaza deems convenient or necessary. who can order
the cancellation of the vacancy at any moment'.
Personnel Assisting in Puesto Operations (Preamble, Article 16,

30) In order to establish far greater control over the movement of
workers a number of EDIS's regulations were designed to limit and
regulate the large numbers of helpers and assistants attached to
puestos. The right to operate a puesto 'is given to people exclusively
as individuals ... the users of this public service are expressly prohi-
bited from ceding it to a third person. the right to enjoy the 'puesto'
or local which EDIS has granted' (Preamble). This regulation was
designed to restrict sellers from handing over puestos without ED IS's
authorization but. at the same time, would prevent the casual temporary
arrangements which were made in the market at times of crisis.
'With the death of a user the Contract of Administrative use is
terminated ipso facto and although the functionary in charge of
reassigning this "must give preference" to the surviving spouse or
members of the family dependent for their subsistence on the puesto,
nevertheless this is not automatic and the new awardee must comply
with all the requirements enumerated.' In the Plaza San Juan there
were a number of cases of widows taking over puestos, as well as

daughters gradually assuming control from their mothers. Again, it is
unlikely that all would have been able to comply with the stringent
requirements necessary.
Regulations governing assistants stated that 'Each user will attend
his business personally but ... will be able to accredit a dependant to
the administrator of the respective plaza'. The accepted dependant
would have to fulfil the same requirements as the seller and in
addition have a market ID Card and only he could assist the seller in
his puesto. 'Allowing other people not authorized by the respective
administration to sell in the puesto or local' is strictly prohibited. In
some cases this would simply mean the registration of a family
member or non-family helper who regularly assisted in the puesto and
therefore in no way changed the situation. Other sellers, the majority
of whom were smaller-scale, consistently operated their puestos
single-handed and would be unaffected by this regulation. There
were, however, a number of sellers who depended on the fluctuating
assistance of family or friends particularly at periods of peak sales
who would have been affected and, as one might expect, they were
mainly larger-scale sellers who included staples among the produce
they sold. In these cases sales would have been seriously affected if
only one officially recognized assistant as allowed.
Children in the Market (Article 29) In the regulations EDIS stated

that 'The sojourn of young children or babies is strictly prohibited in
the markets'. EDIS felt that the presence of large numbers of young
children 'lowered the tone' of the market and wished to define clearly
that it was solely a centre for work operations. Indeed, complaints
were often made by the sellers themselves, especially the men, of
children running around the market, out of parental control.
Although most of the women preferred not to bring children under
six months into the market for health reasons, there were a large
number of medium and small-scale women sellers who could not
operate in the market if they were prohibited from bringing their
children. Thus, if implemented, this one clause would have had the
most fundamental effect on female recruitment patterns into this type
of retail marketing. In fact, the Plaza San Juan attracted younger
women specifically because marketing was one of the very few means
of earning a livelihood during childrearing years.
The work histories of individual sellers showed that women fre-
quently moved into retail marketing once the birth of their second
child precluded them from doing domestic work. Although this regu-
lation was obviously more crucial for women who headed house-
holds no mother would be able to operate in the market unless profit
margins were large enough to employ someone else to look after the
children, or there was an older daughter who could be left in charge.
In crisis situations, children frequently came with their mothers and
the crucial factor here was the distance between the place of resi-
dence and the market. Those sellers who lived in the Barrio San Juan
locked their children up at home and returned for a few moments in
the middle of the day to check, while those who came from further
away had to bring their children with them. A variety of complex
arrangements existed. Some women brought their children with them
every day, in order to look after them while selling but, equally, so
that the children could assist in running the puestos. Other sellers bad
children who appeared intermittently after they had finished the
morning at the barrio school. They would come to the market after it
ended, and help with sales while waiting for their mothers to pack up
and return home to make lunch. Other arrangements entailed feed-
ing of children in the market itself. In all cases these women sellers
could not have operated if children were prohibited from the market.
Hours of Tenure: Market Timetables (Article 3, 7, 28) Finally, brief

mention must be made of seemingly insignificant timetable technicali-
ties which would once again have a large effect on recruitment
patterns. 'The market places will normally function from seven in the
morning until five in the afternoon'. 'The stallholders must present
themselves and occupy their puestos at 6.30 am and must remain
in them until the hour of closure of the market'. 'Every seller is es-
pecially obliged to remain in the front of their puestos or locals during
the hours prescribed for the functioning of the same (infringement
would cause a fine or expiration of contract)'. ED IS's intention in
lengthening the hours of opening and making the movement of sellers
less flexible was to provide a reliable and more extensive service to
the public. But this would have a number of important repercussions.
Firstly, it would have excluded from the market those sellers who
lived considerable distances from Bogota who travelled from 4 am
onwards to arrive by 8.30 am. Secondly, it would have seriously
restricted the wholesale buying time and curtailed the bargaining
procedure, especially for the smaller-scale sellers who bought split-
bulk and waited for the intermediaries to bring down the prices.
Thirdly, the fact that sellers would have to remain at their puestos
until the market closed at 5 pm would have affected the large num-
bers of sellers who had chosen to work in retail marketing specifically
because of its flexible work-hours. These included not only the
women sellers who needed part-time work so as to be able to run
their homes and look after the children; but also the sellers who
worked part-time to have a second means of livelihood in the
afternoon.
Finally, it is questionable whether the very long opening hours in
the new regulations actually would have led to increased sales. With-
in barrios such as San Juan the demand for long afternoon openings
did not exist, with the bulk of selling occurring between 11 am and 1
pm and the sellers who remained later than this were either those
small scale puesto owners who relied on the additional peso or two
from afternoon sales or those, with little else to do, who chose to sit
around as a means of passing the time of day.
The Etfects of Implementation of 'Internal Regulations'
The 'Internal Regulations of the Market Places of Bogota' would

without doubt have made some improvements to the Plaza San Juan.
A number of other articles, not mentioned, such as the provision for
the establishment of a sellers' association (Article 44) and the pro-
hibition on drinking and fighting in the market (Article 30) would
have benefited the sellers. But implementation of the regulations
would have had fundamental repercussions in terms of recruitment
patterns into this type of marketing activity and, consequently, have
destroyed the existing socio-economic group of workers at present in
the market. A three-month period was allowed for sellers 'to adjust
themselves' to the new regulations (Article 53) but, as has been
shown, the vast majority of the sellers would have been unable to
continue in the market. Those sellers surviving would have been
forced into the position of temporary users, paying a daily puesto
rent, without security of tenure.
EDIS were justified in introducing the new reforms in terms of the
market's function as a centre of retailing. Markets such as the Plaza
San Juan were economically inefficient, in terms of the use of space
and middle-class customer potential. One of the fundamental prob-
lems in the market was lack of capital reserves, and an injection of
more capital (implicit in the requirements laid down for selling proce-
dure) would have resulted in increased efficiency (for instance,
buying in larger bulk at the wholesale level) and consequently lower
prices at the retail level. Equally, improved conditions and larger-

scale operators would in all likelihood have attracted more, wealthier
customers into the market. The question of standardization of prices
was, however, more complex, since price-fixing could produce cartels
with their own inefficiencies, while restrictions on the present system
of product flexibility could result in limitations to the system of free
market enterprise and consequently lead to a rise in prices. The
fundamental difference would have been in the type of worker re-
cruited into retail marketing since greater capital reserves would have
been essential to function under the new regulations. The markets
would therefore have needed to attract sellers with more capital.
Were EDIS, however, justified in introducing the new regulations
on social grounds, for the sellers then in the market would with few
exceptions have been unable to continue functioning? This relates to
the second function of the market, as a means of livelihood for urban
workers unable to enter the formal wage sector. The market re-
cruited a specific category of the low-income population, the largely
uneducated migrant with numerous dependents and a previous his-
tory of rural marketing. The fact that this type of person dominated
the market was seen by EDIS as the crux of the problem. The
underlying rationale for their reform in fact showed a marked simi-
larity to that of Lewis's rationale in his 'culture of poverty'. EDIS
argued that it was the behavioural traits of sellers living in a 'culture
of poverty', their unruliness, violence, drunkenness, lack of cleanli-
ness and generally unpleasant appearance, together with their
apathetic indifference and lack of ambition, which ultimately was
responsible for the low tone and very bad reputation of the market.
Factors such as the lack of education, housing and job opportunities
were acknowledged root causes, but EDIS, nevertheless, saw the
fundamental problem as 'cultural' and 'behavioural' rather than
economic in origin. Radical reform policy was legitimized by means
of post-hoc rationalization, projecting onto the sellers a set of
assumptions which were not necessarily valid.
While modernization theory provided the conceptual rationale for
the identification of the cause of the problem, with the small-scale
sellers seen to remain small because of 'cultural' constraints, in fact
detailed examination of puesto operations shows that sellers operated
in rational economic terms but with different goals, dependent on the
size of their puesto operations and the constraints under which they
existed. But, whatever the scale of enterprise, sellers needed skill and
acumen to survive in urban marketing. EDIS regulations show a
remarkable lack of knowledge or understanding of the intricactes and

complexities involved in this level of marketing activity in that they
would have disallowed many of the practices fundamental to the
function of small-scale marketing by considering them unnecessary
irregularities.
What, therefore, were the social costs? With no social security
at this level of employment the direct transfer payments would have
been nil. It is impossible to calculate the indirect transfer payments in
terms of, for instance, increased crime. Therefore, the continuing
existence of small-scale markets such as San Juan performed a posi-
tive function in providing a means of existence, however economi-
cally marginal, for a number of workers who without outside injec-
tions of capital were unable to expand. Therefore, while EDIS's
concern was to modernize and raise the efficiency of markets such as
these, it is unlikely that the growth generated would have 'trickled
down' to the expelled sellers who like many before them would more
likely have joined the large numbers of illegal petty-traders and
prostitutes in the city.
TESTING OUT THE REGULATIONS: THE WORK

OF THE SOCIAL WORKERS AND THE RESPONSE
OF THE SELLERS
Having examined the new regulations and concluded that EDIS's

conception of the function of such reforms was inconsistent with the
effects they would have had on the sellers in the Plaza San Juan, it is
necessary to turn to the sellers themselves, and to examine how far
their perception of the problems confronting this level of petty-
retailing activity coincided with that of EDIS, and consequently how
they reacted to the reform policy. This analysis derives from the
events which occurred in the Plaza San Juan as EDIS sought to
inform the sellers of their intentions during September-November
1970. During this period five meetings were held with the sellers to
inform them of the new regulations, the Administrator was removed
from the market and a new one replaced him, and social workers
attempted to collect census information. The sellers' response is
examined in terms of the methods of communication, the 'propa-
ganda techniques', employed by EDISto introduce the reform policy
to the sellers since this was crucial.
EDIS first used the rent collector, Don Roberto, as an intermediary
between themselves, the local market administration and the sellers.

This was designed to reduce the inevitable hostility and tension which
was expected when the new reforms were announced. Because of the
power attached to the position of rent collector, sellers were basically
sympathetic to him, and so, when he called a first meeting, the tone
was neither violent or hostile. Although the sellers reacted to the
reforms with anger this was never directed personally at Don Rober-
to. Though businesslike in manner, he was also sympathetic in tone
and spoke to the sellers as equals, making them feel that he was
performing an unpleasant task which was part of his job, but which he
personally disliked. 'This is a set of new regulations, which it is now
my intention to read out to you', he said.
Although EDIS expressed their determination to conduct detailed
research projects within individual markets prior to implementation,
utilizing social workers to see how far the regulations were generally
applicable, the very complexity of the central document itself leads
one to question how much of a dialogue was actually envisaged with
the market-sellers themselves. The earlier part of this paper de-
scribed the complicated nature of the document with its 55 Articles,
its sophisticated legal language and high-flown philosophical state-
ments on such matters as the limits of profit. This made it very
difficult for a lay person to comprehend, particularly given the low
level of literacy in the market, (57 per cent of women and 40 per cent
of men were illiterate). In addition, the lack of availability of the
document in the market made the likelihood of any of the sellers
reading it in its entirety very unlikely. Therefore, Don Roberto chose
the most sensible method of communicating the 'Internal Regula-
tions' to the sellers - reading it out aloud to them as a group. But in
the given time he could only read the first few pages. Therefore, no
comprehensive measures were taken to adequately communicate the
proposals. For instance, neither EDIS nor the Corporation of Supply
ever produced a simplified document outlining the proposals, for use
in the retail markets.
Bearing in mind the 'propaganda techniques' employed by EDIS,
what then was the reaction of the sellers? When the meeting was
announced, the general consensus of opinion was that this would only
be called to inform them of measures to their disadvantage and,
therefore, the initial response was suspicion, and an overall preoccu-
pation that rent increases would be announced. Nevertheless, the
majority of sellers were curious enough to attend and the turn-out for
the first of the five meetings was high. The sellers, who at this stage
were largely ignorant of what the reforms actually entailed, reacted

with straightforward hostility, instinctively suspicious of any attempt
to upset the status quo. The meeting with Don Roberto only acted to
confirm their opinion that as Camila, one of the sellers, said, 'This
government never does anything for the people (pueblo), it only
cares about those rich people [esta gente rica] who live in Chico (the
most affluent suburb of Bogota in the north of the city)', while
another seller, Ana's, attitude, was, 'At least we are eating today,
after this, who knows?'
The hostility of the sellers over the new reforms was directed
specifically at the social worker, Marta, who, as a representative of
ED IS, was identified as a direct threat. The purpose of introducing a
social worker into the market was not only to conduct a superficial
census, but at the same time to 'change the minds of the sellers' as
Marta herself termed it, which she considered could be accomplished
'in three weeks'. In coping with the immense problem of informing
the hundreds of sellers working at that time in EDIS's markets in
Bogota of the fundamental changes it could be argued that the
Corporation of Supply were adopting what has been termed the
'social-work solution' to the 'culture of poverty' (Lewis 1965, Valen-
tine 1968). The problems confronting sellers in marketing were seen
in 'cultural' terms, with the solution identified not in terms of eradi-
cating or reducing the poverty, but as the necessity to change the
attitudes of sellers towards their work. Despite the rent-collector,
Don Roberto's, instructions that the sellers should co-operate with
Marta, even before her arrival in the market he had expressed his
own misgivings: 'No social worker will get valid information from
these sellers because the hostility will be too great'. These doubts
were confirmed by the news that another social worker attempting to
conduct a survey in the Plaza Santander had been driven out of the
market, pelted with potatoes and tomatoes. In fact, the sellers'
reaction to Marta was one of non-cooperation, mutually understood
though never openly affirmed throughout the market. She, in turn,
accentuated the status differentation by wearing expensive clothing
and a profusion of gold jewellery, smoking expensive cigarettes and
speaking to the sellers in the same off-hand manner that the average
middle-class woman adopted when addressing her maid. While it may
be assumed that this was designed to gain respect, it only succeeded
in alienating the sellers even further. 'Why does she have to show us
how rich she is?' asked Victoria, one of the sellers, while Don
Roberto referred to her as 'very autocratic' (muy autocratica).
The failure of the social worker to obtain survey information from

the sellers resulted in a formal meeting, in which she attempted to
read out the regulations. However the deigning, formal manner in
which they conducted the meeting, allowing as little dialogue as
possible, was not conducive to genuine communication between the
two groups. From the start Marta, as a young inexperienced female
middle-class social worker, was in a distinctly disadvantageous posi-
tion. Some sellers attended with the express intention of causing as
much confusion as possible and she appeared to have had little
experience of handling aggressive, slightly drunken, workers such as
these. Failure to win the sellers' sympathy was analysed in terms of
the tatters' 'mental violence'. The social worker and administrator
expressed their shock and alarm at this 'hostility', but failed to see it
as the consequence of the sellers' fear for their livelihoods. The
solution was seen in terms of educating them, 'The people will have
to be "taught" to give information, they will have to be "taught" to
cooperate with us; before that nothing can be done', concluded the
Administrator.
In reality, the sellers were not homogeneous, but divided into three
distinct groups in terms of their response. First were those sellers who
throughout the entire affair expressed no interest whatsoever, either
through a basic mistrust of any intervention of the administration, or
simply an overriding preoccupation with their daily survival. These
sellers attended none of the meetings, refused to answer questions
from an unknown outsider and consequently would not have known
if the new regulations had been to their advantage. With few excep-
tions they were the very small-scale elderly female sellers, many of
whom had been in the market a considerable number of years.
The second group were those sellers who objected on principle
throughout the whole affair, who made little attempt to understand
what was involved and therefore were also unlikely to have known
even if the reforms were to their advantage and who saw any change
as detrimental to their interests. Unlike the first group, however,
these were not passive, but reacted with aggression towards the social
worker. They attended meetings with the express intention of causing
confusion and hurling abuse. They were mainly medium- and larger-
scale sellers in terms of their puesto operations but tended to be the
more articulate 'rough' drinking group in the market.
The third group of sellers concerned with the new regulations made
an effort to understand what was involved, to put their point of view
to the administration and to attend all the meetings with considerable
patience. Their rejection of the reforms was made after an objective

assessment of what was involved, within the limitations of incomplete
information. These sellers, referred to as 'respectable' by the others,
were mainly the larger, more successful operators. Of the three, this
was the only group which attempted to express reasons for their
rejection of the new regulations. In their assessment, however, they
tended to concentrate on the regulations affecting the running of the
puestos and to ignore those concerning personal characteristics. Above
all, they were reluctant to consider the proposal of low-interest loans,
from a deeply-rooted fear of insolvency. This regulation, together
with the law which involved sellers signing a legal contract, were seen
as threatening their 'liberty and democracy'. Diego, one of the largest
sellers, summed up their attitude when he said:
If you make a man sign a contract of loan - and this will not be
voluntary because if the market is enlarged sellers will have to
increase their turnover to survive- then EDIS is restraining a man
from doing what he wishes. He is no longer managing his livelihood
in a way which with his intelligence, his ambitions, he can cope
with. He is no longer a free man ... he is in the grasp of the
authority. These are the sort of rules and regulations that make
people into revolutionaries. Take away your freedom and there's
nothing to do but fight.
Although superficial and sketchy in their criticisms they understood

that the new regulations would destroy their independence and pre-
sent method of operating in the market.
It is apparent therefore that the sellers were not all united in
hostility against EDIS. Although Marta and the Administrator saw
all the sellers displaying 'mental violence' and presenting a united
front of aggressive hostility, the situation was more complex. Among
the sellers at the second meeting were men and women who were not
in principle hostile but fully aware that there was considerable room
for improvement in the Plaza San Juan. It was the frustration and
despair of such sellers at the lack at any real dialogue and the
constraints of the new regulations that resulted in their alignment
with those more hostile sellers. This co-operation was negative and
hostile in form and achieved nothing concrete except to alienate
officials who then concluded, not that the regulations should be
modified but that the sellers themselves would have to be 'taught' to
accept what the Corporation wished to implement.
CONCLUSION
It is clear that in the formulation of new marketing policy EDIS and

the Corporacion de Abastos legitimized their concerns in terms of a
'modernization' approach to economic development. Although the
sellers were never identified specifically as 'marginal', the concept of
marginality was certainly utilized to legitimize the reforms, to justify
the solutions to the problems of the lack of expansion of small scale
enterprises, and then to interpret the sellers' hostile response to the
introduction of such reforms.
The fact that the reforms were not implemented was a consequence
of political conflicts within EDIS, rather than the nature of the
reforms. Indeed during the same period the wholesale market system
of Bogota was also reformed, with the building of a new Central de
Abastos and the establishment of a semi-public agency, Corobastos,
to control and administer it. Both reforms were intended to upgrade
the market system of Bogota, wholesale and retail, and through the
expansion of the scale of individual market enterprises, to assist in
accelerating the economic growth of the city. Evaluation of the
rationalization of the wholesale marketing system showed that it
promoted the interests of large-scale capital with an inevitable de-
veloping tendency for economic concentration of the wholesale mar-
ket in the hands of certain groups, such that in the simultaneous
development of monopolistic and oligopolistic pricing practices
smaller-scale wholesalers were increasingly placed in a disadvan-
tageous position (Silva 1976; Moser 1980).
In fact, the intended reforms of the market places of Bogota were
not an isolated example but integral to the development paradigm
dominating Colombian development policy during the 1960s. As
such, poverty was assessed in terms of cultural characteristics, rather
than economic disadvantages, with reform measures emphasizing the
necessity for individual change rather than structural reform. Histori-
cally such an approach contrasts very markedly with the later 'Basic
Needs', 'Redistribution with Growth' approach of the 1970s which
recognized with greater clarity both the function of small-scale enter-
prises in the informal sector within the economy of the city, and the
very exploitative economic constraints which severely restricted the
capacity of such enterprises to expand and 'modernize' (Moser 1978).
References
Lewis, 0. (1965) La Vida: A Puerto Rican Family in the Culture of Poverty,
San Juan and New York (New York).
Lewis, 0. (1969) 'Culture and Poverty: Critique and Counter Proposal',
book review, Current Anthropology, vol. 10, no. 2-3.
Lewis, 0. (1961) The Children of Sanchez (New York).
Lipton, M. (1977) Why Poor People Stay Poor (London).
Mintz, S. (1964) 'Market Systems and Wholesale Societies', Economic De-
velopment and Social Change 12, 444-8.
Moser, C.O.N. (1978) 'Informal Sector or Petty Commodity Production:
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Moser, C.O.N. (1977) 'The Dual Economy and Marginality Debate and the
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Moser, C.O.N. (1975) 'Differentiation and Mobility in a Bogota Retail
Market', PhD dissertation, University of Sussex.
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Bogota Market Traders in the 1970s', Journal of Interamerican Studies
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Perlman, J. (1976) The Myth of Marginality (Berkeley).
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and C. Gerry (eds) Casual Work and Poverty in Third World Cities
(London).
Silva, A. (1976) 'Evaluation of Food Market Reform: Corobastos, Bogota',
PhD dissertation, Michigan State University.
Valentine, C. (1968) Culture of Poverty: Critique and Counter Proposals
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Williams, G. and E. Tumusiime-Mutebile (1978) 'Capitalist and Petty Com-
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1103-4.
16 Politics, Equity and Social
Security Policy in Brazil:
A Case-Study of Statecraft
and Citizenship, 1965-85
James M. Malloy and Carlos A. Parodi
This chapter analyses interactions among three dimensions of politi-

cal economy, namely, statecraft, public policy - specifically social
welfare policy - and regime transition. In doing so it contributes to
two current discussions among social scientists: first, the debate over
the 'role of the state' in political economy; second, the concern about
the democratization of authoritarian regimes or rather the alternation
over time between de facto authoritarian regimes and formally consti-
tuted democratic regimes. Hence the chapter will focus on rela-
tionships around issues of authority, obligations and rights as aspects
of governance. From this perspective the central relationship is that
between state and citizens. Put another way the phenomena of
citizenship and statecraft are interactive. Statecraft is an essential
mediating process which gives form and substance to citizenship. The
elaboration of the relationship state-citizen is a manifestation of the
horizontal and vertical production of power and control within a
society. In addressing the debate about statecraft and citizenship, the
chapter will analyse the issue of the social rights of citizenship in
Brazil. Basically, this means examining these social rights as articu-
lated in social welfare or social protection policy.
MILITARY STATECRAFT AND SOCIAL POLICY
The military uprising of 1964 was a complicated series of events which

set in motion an equally complex process of socio-political trans-
formation in Brazil. In terms of regime transformation the picture is
quite murky. To some extent the most apt characterization was
advanced in O'Donnell's Concept of Bureaucratic/Authoritarian
Regime. Nonetheless, in retrospect it seems clear that the only stable
341
342 James M. Malloy and Carlos A. Parodi
characteristics of the new regime were its concentration of authori-

tarian decision-making power in the executive, and the alliance be-
tween military and civilian technocratic elites that controlled the
apparatus of the state. At the same time the support coalition behind
the regime was fluid over time and there was extensive experimenta-
tion with the structural form of the government. For these reasons we
tend to agree with observers Baretta and Markoff (1987) who argue
that a regime form never really settled and that the most enduring
quality of the 1964 to 1985 period was its essentially transitional
nature. The major point is that while we will raise the notion of
regime to talk about statecraft and social policy in this period it is
important to keep in mind the fact that the fashioning and refashion-
ing critical aspects of the regime went on throughout the period, and
this fed into the policy process in important ways.
One thing certain is that social insurance policy read as an issue of
structural reform became a central concern of the new government.
The policy strategy took shape over time and reflected (a) the con-
solidation of an overall style of statecraft derived in part from the
military's national security doctrine and (b) a shifting policy context
shaped by the changing pattern of interaction between the state and
civil society as well as important developments in the concepts of
state and citizen.
During the first phase, two governmental goals were important in
creating the policy context for social insurance. First was the drive to
reconcentrate decisional initiating capacity at the level of the state,
specifically the executive and the technobureaucracy. This was re-
lated to the second aim of reasserting the capacity of state managers
to direct the accumulation of capital by asserting control over the
economy and reducing general levels of consumption.
In the area of social insurance policy, the first move was a general
purge of labour leaders from the existing institutes and their replace-
ment by social insurance technocrats. This move was obviously part
of the larger strategy of political 'exclusion' aimed mainly at organ-
ized labour. This purge paved the way for a unification in 1966 of
existing institutes covering workers in the private sector into a single
National Institute of Social Insurance (INPS). The new institute was
organized to assert technobureaucratic control over the administra-
tion of the policy by, among other things, eliminating worker-
representation in key administrative councils.
However, it is quite significant that the longstanding plans of social
insurance technocrats to carry forth other reforms were in the im-
Politics, Equity and Social Security in Brazil 343
mediate instance put on hold. This policy glitch, minor at the time,
signalled an interesting development within state-level policy-making
circles. Essentially, the plans for expansion were subjected to the
scrutiny of technobureaucrats charged with macroeconomic manage-
ment who held up other reforms as too costly.
By asserting a practical monopoly of state-based elites over this
and other policy arenas the government shifted the axis of policy
dispute from a debate between state-based elites and elites rooted in
civil society into an intra-technobureaucratic debate within the state
apparatus itself. Within the emerging military technocratic alliance in
control of the state there began a process of intra-bureaucratic con-
flict over social insurance and other policy matters. Within the arena
of social insurance policy the division was primarily between policy-
specific technocrats generated by the old system and macroeconomic
managers who would be lodged mainly in the Ministry of Planning.
This development in social insurance policy was somewhat ironic
because a cadre of senior technocrats drawn from the old social
insurance system, especially the Institute of Industrial Workers, be-
came one of the core components of the new military technocratic
alliance; indeed they helped set the new technomanagerial tone of
the regime and individuals from the cadre went on to head important
offices, including the Ministry of Planning. Nonetheless, the division
occurred and in our view reflected the fact that the new regime did
have a sense of strategic economic management to which specific
policy areas were subordinated. Hence, in these early debates and
discussions, policy-specific technocrats tended to be bested by the
more macro-oriented technocrats.
In the late 1960s and early 1970s, the policy context began to
change. One factor was the shift from a macro-economic strategy of
economic stabilization to one of rapid and sustained growth, and the
attendant 'economic miracle'. The other factor was the crystallization
of the military regime's statecraft around the goal of making Brazil
a major world power by early in the twenty-first century; a goal
expressed in the much repeated concept of national grandeza
(grandeur).
At the same time the emergent military regime projected the state
as the pivotal point of direction in the pursuit of national grandeza by
means of such things as rapid and sustained economic growth. The
pivotal role of the state was based on an implicit conceptualization of
the state as the Michael Oakeshott has called a universitas; that is as a
unitary association perceived as a corporate entity to be effectively
organized to pursue the central goal of grandeza (Oakeshott 1975).

In this conceptualization of the state, government becomes viewed
as essentially a process of managing the state/nation to maximize its
potential power. In this scheme all policy flows as instrumental to the
larger goal of the unitary corporate association. Such policy flows
through structures based on a derived notion of rule as a depoliticized
top-down process of technobureaucratic management. In so doing,
the regime resurrects in even starker form the essential concep-
tualization of statecraft, informing the Vargas regime; ratifying to
some extent the fact that the process began in 1964 was in large part a
struggle between two wings of the original Vargas regime coalition.
Although somewhat vague, these concepts which we are reading
into the situation are important because they relate to central issues
of constitutional or institutional engineering that have been central in
the process regime transformation in Brazil over this century; par-
ticularly in the alternation between overtly authoritarian and demo-
cratic regime types. Behind these shifts has been a deep conceptual
and structural division between two fundamentally opposed percep-
tions of state-civil society relationships, as well as concepts of the
meaning of governance and rule. Basically the split has been between
a concept of rule expressed through an executive centred government
managing a singular national entity versus a legislative centred con-
cept of government as articulating a multiplicity of interests emerging
out of civil society.
Deep in the military regime's conceptualization of the state and
governance was a significant new mediation in the central relation-
ship of state/citizen; the relation state/citizen was now mediated by the
concept of nation. As a result, another component of the changing
policy context was the perception of statecraft as being a process of
national integration in which the pre-existent dualism was overcome and
a single national entity achieved. In this dimension of statecraft the
expansion or universalization of citizenship becomes a strategic
means toward t))e end of national integration. Social welfare policy as
a mode of establishing and expanding a 'social rights' dimension of
citizenship becomes thereby crucial to these issues of statecraft. In
short, social welfare policy became a very conscious instrument of the
regime's statecraft in the 1970s and 1980s (Demo 1981).
In the 1970s the regime began to move previdencia social along
three major policy trajectories that were to have profound effects on
the system: a movement towards universalization of coverage; a
significant structural reorganization of the system aimed at increased
centralization and consolidation; and finally a significant process of

reconceptualizing the entire system.
In terms of expanding coverage a most significant move was the
implementation of a scheme of rural social insurance that was origi-
nally put forward in 1963. The rural system known as FUNRURAL
(Assistance Programme for Rural Workers) offered a much reduced
package of benefits, the keystone of which is a retirement pension set
at one-half the national minimum wage. In addition, the plan calls
for the extension of medical services as funds become available. The
two most significant aspects of FUNRURAL, however involve the
financing of the programme and the way benefits and services are
delivered. This system saw the first rupture in the concept of a
contractual benefit based on contributions by the insured to one
based on a status category. Under the scheme all rural workers
receive the same benefit and make no contribution. The scheme is
funded in principle by a tax on wholesalers of rural products and a tax
on the wage bill of urban enterprises. FUNRURAL does not main-
tain a large staff but delivers services through recognized associations
of rural workers and/or employers and other recognized groups. We
have little in the way of empirical investigation of the delivery of
rural benefits but it seems clear that the scheme was plugged into
the patronage base of government-supportive political parties and
the like.
Expansion of coverage also took place in the urban sector. In 1972,
all self-employed workers were legally incorporated into the main
INPS system. Later that year coverage was expanded to all domestic
workers. These moves not only expanded the population covered by
the system but also, in theory at least, expanded the system into the
traditional informal sector of the economy. Finally, a measure was
adopted that granted a minimal pension to the aged and handicapped
who were not covered by the main programme. Thus most previously
excluded groups were, in principle at least, brought into the system
although enforcement was obviously another matter.
Aside from expanding the insured population the regime also
promoted an expansion in the benefits of the system, most particu-
larly non-cash services. The most significant aspect of this was a
dramatic expansion of curative health care under the aegis of
previdencia social. In terms of spending, the most significant per-
centage increases came in the area of health care.
There were a number of factors that pushed for an expansion of
the system. Some were endogenous to this type of social insurance
system while others were more reflective of the regime's statecraft.

First it is important to note that social insurance systems of this type
have in fact tended to expand along an inertial track throughout the
global capitalist system in this century. Thus there is a transnational
dimension of functional imperative at work in this policy area. Poli-
tical analyses of these systems shows that expansion has been driven
by technobureaucratic elites pushing the original supply-side logic of
these systems, reinforced by the behaviour of political elites and
representatives of beneficiaries: the so-called iron triangles of dis-
tributive policy expansion (Malloy 1985).
There is another factor that is linked to a deeper logic of these
systems. When organized on a 'pay as you go basis', as was the case in
Brazil, these systems distribute costs over time from one generation
to another. In a kind of ponzi-game logic the system needs to be
pulling in more active contributing-insured to finance the benefits of
the passive benefit-receiving insured. Financially, a crucial calcula-
tion is the ratio between active and passive insured. In brief, the
system has a built-in tendency to expand in search of new contribu-
tors or those in whose name revenue is generated; this reality is
expressed in the formula that the more mature the system the more it
needs to expand its contribution base to offset the increase in the
passive group.
The complex financing logic of the system also relates to the
exogenous political factors linked to the expansion of the system. In a
maturing system the active : passive ratio is linked directly to demo-
graphic and employment factors. In Brazil the conjunction of demo-
graphics, the expansion of employment produced by the economic
miracle and the injection of new active-insured owing to horizontal
expansion of all sectors covered, converged in the mid-1970s to
produce a substantial temporal surplus in the system. A general rule
of thumb, confirmed in the Brazilian case, is that when political and
technobureaucratic elites in control of decision-capacity confront
such a temporal surplus they cannot resist tapping into those re-
sources and using them to pursue their broader political goals.
Our argument is, then, that logic internal to the system converged
with the strategic goals of statecraft of the regime to produce the
expansion of the system both horizontally (covered population) and
vertically (types and values of benefits). Put another way the exist-
ence of the system as well as its own logic in the context of the 1970s
in Brazil provided the regime with a policy structure and set of
resources that could temporarily at least be exploited to serve the

statecraft of the regime.
When looking at the process from the perspective of the regime's
statecraft three contextually defined factors stand out as pushing
social insurance policy forward. First, as we noted above, was the
overall goal of national grandeur which informed the broad statecraft
of the regime and gave it coherence. Most specific here was the
creation of a state/nation identitY with a particular notion of citizen-
ship. The horizontal expansion of previdencia social happened in the
context of an authoritarian regime with a decided predisposition to
emphasizing a top-down flow, not of 'social rights' of citizenship, but
of economic privileges to offset or contain effective articulation of
civil and political rights of citizenship. This latter point is obviously a
complex matter which deserves more study and attention.
Another reason emerged from the regime's statecraft in the 1970s
for seeking a broader base of popularity among the populace, par-
ticularly to legitimize the process of a controlled or managed decom-
pression of decision-making power initiated by President Geisel.
Specifically the regime began to explore ways of ameliorating the
'social costs' of its previous capital accumulation strategy, especially
the regressive effects of its wage and price policies. In this regard,
social insurance was attractive because it was relatively low-cost, was
under central managerial control and was linked into structures
aimed at controlling labour and other groups.
One of the more crucial factors in structuring the climate of expan-
sion was the process of political opening or transition itself. The
strategies of distensao (decompression) and then abertura (opening)
reinjected 'politics' into the managerial model behind the reform of
1966 in at least two crucial ways both of which were mediated by the
party system set up by the regime. The first was the re-emergence of
an electoral market in which party leaders spurred by interest-group
representatives pressed the technobureaucratic executive for popular
policies that would generate votes for the official party, Partido
Democratico Social (PDS). The issue of electoral strategies became
particularly salient after the regime's de facto loss to the official
opposition Movimento Democratico Brasileiro (MDB) in the 1974
elections. Another political factor was the reintroduction into the
social insurance system of party and interest-group based clientelistic
politics. Intermediate elites in alliance with but not necessarily con-
trolled by technobureaucrats in the executive began again to convert
the system into a deployable resource to build clientele through the

same two means as before: legal technicalities allowed intermediate
elites to treat benefits as a scarce resource delivered through clien-
telistic channels while the consolidated and enlarged bureaucratic
apparatus was a lodestone of patronage jobs sliding under the control
of party machines, particularly at the local and regional level. Again
the social insurance system began to be split between a principle of
unified top-down technomanagerial control and a principle of plural-
ized intermediate decision points linked into party and interest group
elites. Political pressures per se became more operative in the late
1970s and early 1980s.
At the formal level, however, the regime did complete an import-
ant process of centralization and unification of the administrative
structure of previdencia social. In 1974, a new Ministry of Social
Security and Social Assistance (Ministerio de Previdencia e Assisten-
cia Social, MPAS) was created to oversee all programmes in these
areas. Then in 1977, the functional and financial unification of the
system was completed when the National System of Social Security
and Social Assistance (SINPAS) was formed as the chief adminis-
trative entity in the field under the tutelage of the Ministry of Social
Security and Social Assistance.
SINPAS oversees all areas of traditional social insurance and the
newer programmes of social assistance (also introduced in the 1970s)
which are presently functionally differentiated into a series of sep-
arate but subordinate administrative entities. As currently set up,
INPS is charged with disbursing all traditional social security case
benefits in both the urban and rural sectors. Most significantly, INPS
also generates, by far, the bulk of the system's financial resources.
The second most important entity is the Institute for Medical Assist-
ance (INAMPS), that oversees the delivery of all curative medical
services provided by the system. The administration of the system is
overseen by a specific administrative institute (IAPAS) while all
data-gathering and analysis activities are under the charge of a sep-
arate entity called DATAPREV.
Thus, in 1977, the goals of universalization, uniformization and
unification first articulated in the 1940s by social security technocrats
were, for all practical purposes, realized. In the present scheme, the
basic programmes of the military and civil servants remain separate,
however, the definition of civil servant has been tightened consider-
ably so that now the majority of the employees of the government
and state enterprises are covered by INPS.
By the late 1970s according to government data, some 87 per cent

of the EAP received at least some nominal mode of social security
coverage which, in absolute terms, translated into some 37 million
insured. There were more than 3i million receiving retirement be-
nefits, some 1. 7 million receiving survivor pensions, and some 1.2
million receiving old age and disability pensions. When health care is
added, some 7.5 million Brazilians collected from SINPAS in 1980.
In spite of these achievements there is yet, for all practical pur-
poses, a three-tier system in Brazil. The best system is that accruing
to the military and civil servants. The next best (in some cases the
superior) is that of workers employed by public, mixed and private
corporate entities in the oligopolistic sector - for, in addition to their
superior benefits, they receive supplemental programmes adminis-
tered by their firms. Last, and by all means least, are those in the
competitive sector, the self-employed, domestic and rural workers.
The case benefits of rural workers are fewer in number. Among most
of these groups the value of benefits is less and, in most cases, they
receive no supplemental programmes. The significance of the dif-
ferentiation is heightened by the fact that the bulk of the financing of
the system is still through taxes on the payroll which, in one way or
another, fall regressively on the entire population, causing those with
inferior programmes to support the schemes of those above them in
the hierarchy.
As noted, the final development in the area of social insurance
policy was the beginning of an important reconceptualization of the
system. Here two aspects were crucial: first, the break in the link
between contribution and benefit with FUNRURAL; second was the
growth in non-insurance assistance activities. Aside from two minor
assistance programmes aimed at adults, Legion of Brazilian Assist-
ance (LBA) and at children, the Fund for the Welfare of Minors
(FUNABEM) the most significant development was a dramatic
growth in expenditures for curative medical care which was made
available to non-contributors. At the time and since, the discussion in
Brazil has been couched in terms of shifting from a model of social
insurance to one of social security more in concert with the 'welfare
state' approach of the core capitalist societies. Recently both
academic observers of the system and policy elites have begun to use
the language of citizenship rights to discuss these conceptual changes.
In these discussions some see a shift from contractually generated
rights to rights linked to citizen status that reflects a universalization
of the social rights of citizenship. This is a complex matter which we
will return to below (dos Santos 1979; Feijo Coimbra 1980; Fleury
Teixeira 1984).
POLITICS AND FISCAL CRISIS
The changes introduced into the social insurance system by the

military-backed regime were generally viewed to be quite successful.
Indeed by the latter part of the 1970s, previd~ncia social was one of
the most popular features of the regime; so popular that the minister
of previd~ncia and social insurance instantly became a popular public
figure himself.
Even as the revamped social insurance system was viewed as
success for the regime's technobureaucratic style of statecraft, de-
velopments within and around the system began to politicize it in a
number of ways. First and foremost, in the context of a renewed
salience of electoral politics introduced by the policies of decompres-
sion and opening, regime spokesmen, such as Nascimento e Silva,
openly referred to previd~ncia as one of the most potent political
weapons available to the regime and particularly the official party. At
the same time the position of minister of previd~ncia became an
attractive post for politicians looking to project themselves as
nationally significant figures. As a result the more technical adminis-
trative type of rationality began to be replaced by party-based con-
siderationist politicians. Finally, as the social insurance system and
the new party structure began to link up, party machine-mediated
clientelism intensified. In short the social insurance system again
became a pivot around which moved an intense and complex political
game operating on many levels.
The situation in the area of social insurance, like most else in
Brazil, took a sharp turn for the worse in the early 1980s. In the
context of the general severe economic crisis that hit Brazil the social
insurance system developed a severe fiscal crisis manifested in a 55
billion cruceiro deficit in 1981. As a result, in the context of the
national debate over the economic crisis the fiscal crisis in SINPAS
quickly emerged as a highly visible public issue.
Efforts to come to terms with the fiscal crisis in SINPAS were
shaped significantly by the new political context of the 1980s. Owing
to the advancement of the regime's strategy of a controlled process of
redemocratization, the legislature had again become a player in the
process of launching public policy initiatives. The whole matter was
complicated and intensified further by the fact that the increasingly

open political system was gearing up for the elections scheduled for
the autumn of 1982, which aside from choosing a new legislature
would mark the first direct election of state governors since 1964: a
fact that was given an interesting twist when in May 1981, Jair Soares,
minister of previdencia, announced his intention to run for governor
of Rio Grande do Sui.
The debate over social insurance policy soon revealed that in the
eyes of most experts the deficit was not a transitory event by an
outcropping of a deeper structural crisis besetting the system. Some
pointed to the rapid increase in the cost of medical assistance along
with waste, mismanagement and fraud in medical payments as the
chief culprit. While the problems in the area of medical assistance
were and are real, their full significance comes out only in relation to
even deeper structural questions related to the internal logic of social
insurance and to the previous policy strategy followed by the regime
in the 1970s.
In spite of the expansion into the areas of assistance like curative
medical care, SINPAS was still financed according to classic social
insurance principles; the bulk of funds come from contributions by
the insured and employers supplemented by a modest government
contribution to aid in administrative costs. In the early 1970s the
government policy and an expanding economy increased the con-
tributing base of the system both in terms of numbers and the
overall value of the taxable wage bill. Indeed by the time SINPAS
was established the system had run out of new groups to incorporate
into the system unless the government was willing and able to rede-
sign FUNRURAL into a contributory scheme. Henceforth, the con-
tributory base would be driven by the age structures of the population
and the growth dynamics of the economy.
However, as we saw, strategic and contextual political factors were
pushing the policy into a mode of increasing expenditure particularly
in assistance even as the structural limit of contributing base was
becoming fixed. It was against this reality that the issue of financing
medical assistance took on real significance, for medical assistance
was not independently financed. Furthermore, it was a sub-policy
that had its own economic and political factors driving it forward in
such a way that it was difficult if not impossible to put effective limits
on expenditures. However, health expenditures were not driven by
the needs of the population, or by the workers' demand: they were
supply-driven. Both in terms of quantity and price, as well as in the
quality and type of service offered, health was determined by deci-

sions made by owners of clinics and hospitals.
Indeed, medical assistance is such a complex issue that it deserves a
separate policy analysis which is beyond the scope of this chapter.
Suffice it to note that a central political aspect of medical assistance in
Brazil was the fact that the bulk of such assistance was contracted out
to the private sector. As a result medical assistance was a significant
boon to private medicine as well as to both national and multinational
pharmaceutical firms. Indeed in Brazil, as elsewhere, a politically
potent medico-pharmaceutical complex developed. Not surprisingly
this complex became a key actor in the policy process and like other
interests accumulated in the system was loath to accept reforms that
threatened the ftow of capital into· the complex.
The debate over the fiscal crisis in social insurance policy was
intensely political and revealed a number of conflicts and contradic-
tions which were occurring both between the regime and its opposi-
tion and within the regime itself. At the most basic level was a
contradiction between the policy imperatives generated by the severe
general economic crisis and the implications of the gathering momen-
tum around the process of what was by then being called redemo-
cratization. The latter process which had been initiated in better
economic times had clearly produced an internal logic pushed mainly
by the exigencies of electoral politics; the former in turn was driven
not only by domestic economic issues but also by pressure from
international actors focused on the debt issue.
At its core then there was a fundamental contradiction between a
situationally defined political logic and a situationally constrained
economic logic. Since the late 1970s the process of political opening
was increasingly driven by the exigencies of competitive electoral
politics in which more popular distributional policies led to some
increase in general levels of consumption. The immediate economic
crisis and its attendant international pressures provoked the percep-
tion among technocratic decision-makers of the need to 'manage' the
economic crisis by means of consumption-reducing austerity pro-
grammes. In many respects this basic division has persisted into the
present, undermining both the process of legitimating a democratic
regime and the government's ability to mount and maintain a coher-
ent approach to the economic crisis. The result has been a severe
malaise which has gripped the nation and threatens to provoke
another deep crisis at the level of state and regime.
Be that as it may, the social welfare system (SINPAS) became an
important focal point around which the fundamental conflict between

political and economic logic was carried out. Put another way, social
insurance policy became a key arena in which central issues regarding
distribution and redistribution were posed; the policy was put at the
heart of the recurring tension between the economic imperative of
capital accumulation and the political imperative of legitimation.
Looming over all was the complex game of statecraft within which an
authoritarian regime sought to manage the process of its own trans-
formation into a more democratic regime form.
At the outset, the two main governmental actors were the Minister
of Planning A. Delfim Netto and the Minister of Social Insurance Jair
Soares. The issues between the two ministers involved questions of
both finance and control. Basically, Delfim sought to assert the
primacy of the macro-economic technocrats over questions like pre-
videncia which they perceived as essentially sub-policies of broad
macro-economic policy, Specifically, at that point. Delfim was
pushing a broad-based policy of austerity designed to stabilize the
economy and reassure foreign actors like the IMF. Central to this
approach was the position that SINPAS had to solve its financial
problems through a policy of austerity in which balance was achieved
exclusively by raising contributions and reducing benefits.
Intimately connected with these questions was the fact that, his-
torically, contributory social insurance in Brazil has amounted to a
programme of forced savings that was often tapped into by other
state actors to finance short-term political goals like building subsi-
dized housing, or more strategic goals such as financing the national
steel industry. It is noteworthy that even in the context of the fiscal
crisis the main cash benefit part of the system, INPS, was in surplus.
The problem arose from the diversion of INPS revenues to finance
assistance programmes, especially health care. Thus there is reason
to believe that by cutting back on health care and increasing benefits
Delfim and the planning technocrats were seeking to tap into the
capital accumulating capacity of INPS to finance other macro-
economic goals, especially in relation to the debt ( 0 Estado de Sao
Paulo, 9 June 1981, p. 14 and 5 November 1982, p. 16).
Not unexpectedly the planning ministry came up with a plan to
solve deficits in SINPAS by 'rationalizing' medical expenses deemed
by Delfim to be the chief culprit in the deficit and to raise the
contribution of employers and insured from 8 per cent to 10 per cent
of the wage. This approach provoked tension with the more politi-
cally attuned Jair Soares and SINPAS over questions of control and
specific plans to deal with the crisis. Soares and his technocrats
questioned the primacy of health assistance in generating the deficit
and pointed instead to broader structural factors like demography
and employment levels; factors which they perceived as aggravated
by previous labour policies and the immediate programme of auster-
ity which was causing an economic recession and thereby increased
unemployment. The political implication of this argument was that
the planning minister's proposal for SINPAS amounted to forcing the
latter to raise its tax contribution rate to offset negative implications
of broader macro-economic policies. Thus Soares and SINPAS sug-
gested that while assistance services should indeed be scaled back the
revenue side of the problem should be resolved through new broader
taxes outside of the INPS contributory base.
Following through on its commitment to foster a democratic open-
ing the government presented the planning ministry's plan to cut
benefits and raise contributions to Congress. The plan or 'pacote'
(social insurance package) immediately ran into resistance not only
from the opposition PMDB party but also from within the govern-
ment's own support party, the PDS, which split sharply on the issue.
Whatever the programmatic basis for congressional resistance it was
surely stiffened by a wave of protest from a variety of sources which
included organized labour and employer associations- popular press-
ure that gained significance with the 1982 congressional elections in
the offing. Thus, the battle over plans to deal with the deficit of
SINPAS generalized quickly into a complex clash involving intra-
bureaucratic struggle, tensions between the executive and legislature
and the activation of interest groups in civil society.
In the ensuing struggle an 'affinity of predisposition', if not an
alliance, developed between the congressional opposition within the
PDS and the 'political' minister of previdencia, Jair Soares. President
Figueiredo attempted to assume an Olympian position above the
fray, and the task of pushing the government position fell to Delfim
and his technocrats in planning. The final personality in the struggle
was Senator Jarbas Passarinho, the PDS leader, who increasingly
moved to the fore of the congressional opposition.
To restate a previous point, this policy battle over and above any
clash of the regime with opposition forces also revealed again a
division within the regime's basic support coalition between a party-
based wing politically sensitive to signals from civil society and a
technobureaucratic wing committed to a top-down resolution of
policy issues within a broader managerial perspective of statecraft.
The issue also reflected, however dimly, the recurring tension within
the regime over issues of capital accumulation versus generating
some degree of popularity, if not legitimacy, by means of distribution
policies. The Delfim line was clearly towards capital-accumulating
austerity and to a large extent marked a substantial shift away from
some progressive distributional policies adopted by the regime in the
late 1970s.
During August and September of 1981 the battle was joined in
Congress. The government presented its package and then tried to
ram it through using a complicated parliamentary manoeuvre called
the decurso a prazo. Congress reacted negatively to the manoeuvre.
It was at this point that Jarbas Passarinho came to the fore, leading
the opposition and also putting together a policy coalition between
a faction of the PDS and the PMDB. This grouping came up with
its own package which quickly sailed through Congress. The con-
gressional package eliminated most cuts and proposed a 2 per cent
tax on luxury goods to provide new revenues. The congressional
action was lauded in many quarters, not only for the tamer approach
to the policy issue but also because it was seen as an assertion of
congressional authority in the face of government technocrats.
Delfim Netto and his technocrats assailed the plan as incapable of
solving the problem. However, he shrewdly pointed out that at the
least Congress ratified the concept that some type of tax increase was
indeed crucial. Jair Soares pivoted around the issue and finally
opined that the deficits were probably not as bad as the planners
projected and therefore the congressional approach could well work.
There the matter seemed to stand as Congress turned its attention
to another electoral law and the impending Christmas recess. Then,
in a surprise move, the government used the recess to revert to its old
ways and simply decreed a new pacote on social security.
The pacote of 30 December 1981 (decree law 1910), not only
returned to but considerably stiffened the original stringent proposals
produced by the technocrats of planning. Payroll taxes were in-
creased according to a sliding scale for insured and a flat 2 per cent for
employers. The wage-base was raised from 15 to 20 minimum sal-
aries, and pensions for the first time were subject to taxation. The
taxes on superfluous goods remained in force. Finally, the govern-
ment granted a special loan of Cr.168 billion to SINPAS to cover its
immediate deficit.
Like a good soldier, Soares backed the programme once it was
decreed and announced that the loan would solve the system's
immediate problem while the new taxes would resolve the long-
term problem. He even opined that all the controversy of the last
months would not really hurt his electoral campaign.
While many congressional figures were unhappy with both the
content of the pacote and the way it was decreed, debate at that point
shifted to the issue of choosing a successor to Soares. Both Soares
and Delfim publicly backed different figures for the post. Other
candidates were also discussed but, in the end, President Figueiredo
came up with a surprise choice, Helio Beltrao, who at the time was a
special cabinet-level official charged with debureaucratizing the state
in Brazil. In addition to that post, Beltrao had been a highly success-
ful businessman; somewhat less well known was the fact that he had
begun his career as one of the original social security technocrats
formed in the original institute of industrial workers back in the
1940s. By all accounts, Beltrao, who held on to his other position,
was a most popular choice both within the government and among
the public at large.
With the pacote in force and a new popular minister in place, the
issue of social security faded from the open public agenda. In-
creasingly, attention shifted to the problem in the economy, the
ballooning debt crisis and to upcoming elections of the autumn of
1982. However, the attention and concern of technocrats in social
security did not fade. Very quickly, private reports began to circulate
among policy elites arguing that the pacote of 1981 was only a
short-term palliative and that quite soon a new and even more severe
fiscal crisis would develop within SINPAS.
Beltrao's period as minister was an interesting interlude that re-
vealed much about SINPAS; above all the degree to which party-
based clientelism had again penetrated the administrative apparatus
of social insurance and was converting it again into patronage. Bel-
trao made this political penetration of SINPAS an issue when he
immediately rescinded 2500 new hires that Soares, in time-honoured
political fashion, had made on the eve of his leaving to run for
governor. As the hirings were patronage funnelled through the PDS
it is not surprising that party leaders assailed Beltrao's move. Un-
daunted, Beltrao, already a popular figure, made it clear that he
intended to recentralize decision-making in SINPAS and reimpose an
essentially technocratic managerial style.
Even as Beltrao moved to reassert technocratic authority he set out
to implement the provisions to rationalize the health system called for
in the 30 December pacote. For a variety of complex reasons this
action brought the minister into conflict with the various private
sector interests embedded in the health system as well as federal
employees in the system and other popular sector interest groups.
This opposition converged with that of the PDS politicians around
Beltrao's resolution to remove 'political' regional superintendents of
social insurance and replace them with individuals controlled by the
ministry.
This de-facto coalition revealed that in a relatively open political
system parties and interest groups again converged to form blocking
coalitions aimed at resisting structural innovations which threatened
their control of pieces of this administrative manifestation of the
state. Again essentially technobureaucratic structural innovations
reflecting an initial (late 1960s and early 1970s) concentration of
decision initiative in one bureaucratic component of the state led to
a structural reality in which, as the system opened up, initiative ca-
pacity began to diffuse into a multiplicity of points. Moreover what
began as a more or less coherent regime began to divide internally
around rival images of governance in which a more society-focused
political wing came into tension with a more state-centred tech-
nobureaucratic wing. At that point, the executive-based technocrats
could still ram their views through but that capacity to 'act auton-
omously' was clearly slipping away.
At that stage, Beltrao and Delfim Netto appeared to be partners
pushing the same technocratic line of governance and policy manage-
ment. This presumed harmony was soon proved to be an illusion. In
mid-1983 the two powerful figures found themselves in an intense
intra-administrative rivalry which came to centre on the president.
While this clash of titans surely reflected the personal ambitions of
the two men it also revealed a deeper conflict over rival views
regarding the relative emphasis to be put by state managers on
national and internal international factors when the two were per-
ceived to be in conflict.
As we observed, Delfim represented a technocratic policy line of
resolving the general economic crisis through an austerity programme
meant in no small part to be acceptable to international interests as
represented by the IMF. Behind this was the clear view that Brazil's
economic future was tied to a relatively open interaction with the
international economic system. This view had run deep and long in
the regime and was rooted in the notion that to project itself as a
world-class power Brazil had to play a self-confident international
economic game.
The approach pushed by Delfim clashed with that of Beltrao on at

least two levels. First was the implicit tension seen at the outset of the
regime between policy-specific administrators and macro-economic
planners. By 1983 SINPAS was again in a deficit situation and again
Delfim suggested the way out to be through managing benefits and
taxes in the system. Beltrao, now a very popular figure who was
openly talked of as a possible presidential candidate, counter-
attacked. Backed by his own technocrats Beltrao argued that the
problem was in fact structural and that the austerity policies pushed
by Delfim were undercutting social insurance because in a variety of
ways they were reducing the overall wage-bill upon which social
insurance relied for its finances. Furthermore, he advanced the not
unpolitical stance for one considering an electoral run that the aus-
terity programme was counter to national economic interests.
This conflict of nationally versus internationally focused policy
lines was joined again around Beltrao's approach to rationalizing the
pharmaceutical aspects of medical assistance. Basically he was
pushing a plan whereby the government would promote a substantial
increase in the role of national firms in supplying the system. Delfim
in turn argued against any hint of such a protectionist policy that
would close an important area of Brazil to external investment; the
battle between the two was projected in the highly-charged tones of
nationalism.
By November, the clash between the two wings of the government
came to a head again around the question of the SINPAS deficit.
President Figueiredo, on his return from a medical leave, aligned
himself with Delfim and informed Beltrao that the government would
cover only part of the SINPAS deficit and that a further solution
should be sought from economies internal to the system. Beltrao
resigned in protest, publicly denouncing Delfim's policies as a sell-out
to international interests symbolized by the IMF that would in the
end have dire consequences for Brazil.
With the withdrawal of Beltrao the government turned to one of its
wildest political leaders, the Senate president Jarbas Passarinho to
assume the ministry government. This move was an obvious bow to
the political groups that had recently opposed government proposals
for SINPAS. Beyond that the appointment confirmed the definitive
repoliticization of social welfare policy as well as the fact that tech-
nobureaucratic managers had lost their monopoly over policy in this
area. In effect, the government recognized the reality that in this
policy-arena at least initiative capacity was diffusing out from the
executive centred bureaucratic apparatus of 'the state' to intermedi-

ate points where electorally-focused party organizations interfaced
with group organizations produced by civil society.
From 1983 SINPAS survived through a process of stop-gap bor-
rowing from the government, revenue increases produced by the
pacote of 1981 and economic reactivation. As a result the dramatic
policy-debate generated by questions of the system's immediate
solvency faded somewhat - a development helped along by the push
to centre stage of the debate over the form and pace of redemocra-
tization. The fact is, however, that the structural realities that pro-
duced the fiscal crisis of previd~ncia remain in place and therefore the
spectre of a future crisis of dramatic proportions lurks in the wings.
As the immediate crisis in previd~ncia faded the policy discussion
shifted into a less public and less intense mode. Moreover, while the
discussion has remained one among elites construed as specialists and
experts, the range of participants has expanded beyond regime tech-
nobureaucratic elites and politicians to include non-regime academic
specialists housed in universities and non-governmental think-tanks.
To some extent non-governmental social scientists over the last few
years have begun to shape the central issues of the debate. Questions
of financing are still central but lately those issues have been con-
verted into a broader discussion over the question of citizenship,
particularly the social rights of citizens and the linkage of these issues
to the problem of grounding a democratic regime formation. It has
been a rich and fascinating discussion which we will only briefly
highlight here (dos Santos 1985; Fleury Teixeira 1984; de Araujo
Oliveira & Fleury Teixeira 1986; Rumos da Nova Previdencia 1986).
CONCLUSION
There is no question that during the military regime social insurance

was expanded into, for all practical purposes, a universal right in
Brazil. Serious questions remain, however, regarding the content of
the right, unequal distribution of the right, how a claim is made on
the right and who pays for the right and how?
First it must be recognized that while substantial steps were made
to unify the system at least four substantial differentiations persist:
separate systems exist for the military and civil servants, for urban
employees (INPS), for rural workers (FUNRURAL), and finally,
numerous citizens can claim assistance benefits but not the cash
benefits of either INPS or FUNRURAL. The comparative quality of

benefits among the programmes varies substantially, descending from
the programmes for the military and civil servants to those of INPS to
the rural programme. Moreover within INPS there is a stratification
of benefits based on amount of contribution while medical facilities
are very unevenly distributed throughout the country. Finally, the
fact is that the cash and assistance benefits provided through SINPAS
are financed largely through employer contributions based on wage-
bills that are passed off as a de-facto indirect tax on the general
populace.
In the current debate, however, the issues have been framed
around the opposition between a claim to benefit based on contribu-
tion (contract) versus one activated simply by the status of citizen and
the financing implications of one or the other principle. At present
the system is divided between the two. FUNRURAL and medical
assistance are non-contributory; INPS is contributory and, in effect,
its dual contributory base (employer and employee) finances itself
and part of the other two programmes. Three questions have
emerged: should medical assistance (INAMPS) be put on a self-
financing basis; should all benefit claims be based on prior contribu-
tion; or should all the systems switch to some mode of social security
based on financing from general state funds eliminating a contribu-
tory base altogether?
The issues in the discussion are obviously weighty and even more
so political in a profound sense. Moreover given the past history of
this policy area and some of the recent trends in diffusion of initiating
capacity one must raise the question of the probability of any such
profound structural overhaul of the system being launched and sus-
tained within an open competitive political framework. There is little
question that in the present political circumstances such an initiative
could be brought off only if it were rooted in a consensus not only
among policy elites but, more important, among the diverse and con-
tradictory interests built into the system (a clear example of these prob-
lems can be seen in the document Rumos da Nova PrevitMncia 1986).
In contemplating this question a hard look must be taken at some
of the de facto structural dynamics that exist in the system behind its
formalized rational legal facade. The processes of decompression,
opening and redemocratization set off a complex chain of interactions
that impacted on the social welfare system; these reactions in turn fed
into the process of regime transition and redemocratization in Brazil.
The opening of the political system in the mid-1970s set off irresist-
ible pressure to democratize the system which created pressure to
increase the salience of electoral politics and the significance of
political parties. However, as most observers would agree, the auth-
oritarian regime was never able to do much more than suppress the
traditional parties and arrange a somewhat superficial formal reor-
ganization of nomenclature. The regime did not really transform
the previous parties, the previous political dynamics or the modus
operandi of the repressed system.
Not surprisingly, as the previous party system came back in a new
guise, the party «Stites began to deploy many of their previous tactics
and strategies to capture power points in the system and compete
both in the bureaucratic and electoral arenas. Most relevant is the
time-honoured strategy of capturing intermediate points in bureau-
cratically articulated policy structures like SINPAS and converting
them into power-generating patronage bases deployed in a complex
set a patron-client networks controlled by party and interest-group
IS lites.
The problem with this dynamic is at least twofold. First, such
clientelism is associated historically with more patriarchal and patri-
monial regime forms the personalistic logics of which clash with
both formal bureaucratic rationality and the logic of modem democ-
racy articulated as a set of formalized and predictable 'rules of the
game'. This dimension, which might well be containable in some
'democratic' regime-types, is negatively reinforced by the fact that
clientelism also reinforces the old tendency toward the politics of
access and turf which feeds into the tendency for party and interest
group «Stites to overlap into blocking coalitions which tend to create
ruptures between executives and legislatures. This in turn sets off
inertial movement toward immobilized stand-offs between the two
and a general disruption of initiative capacity in the system. This set
of processes has not come to full fruition in the newly democratic
system as yet but there are unmistakable signs that the tendency
is there.
As far as SINPAS is concerned it is important to note that party-
based clientelism was reintroduced by the technobureaucratic el-
ements of the regime itself in response to the regime statecraft of
national integration and political decompression. Indeed it was the
relatively technocratic minister of previd~ncia, Nascimento e Silva,
who explicitly and publicly described the policy of previd~ncia social
as a major electoral weapon available to the then official party

ARENA. Moreover, the decision to deliver rural previd~ncia
through approved regional organizations such as employer and em-
ployee associations all but demanded that the structure be plugged
into regional and local clientelistic control nets.
Clientelism in the current previd~ncia system has developed along
at least two intersecting lines. First is a kind of intra-elite competition
in which party factions vie for control of intermediate administrative
positions, most particularly regional and local superintendent posts.
The reality of the dimension was brought to the fore by Beltrao when
he sought to undo the some-3000 appointments made by Jair Soares
before he departed the ministry. Beltrao openly attacked the
appointments as political and clientelistic while Soares had previously
opined that such a political distribution of posts was 'quite natural'. A
point of contention no doubt was that Soares, like others before and
since, doled out the positions not so much to help his party as such
but to build his personal strength in the party to underpin his presi-
dential ambitions, which of course clashed with those of Beltrao.
The other line of development has been the utilization of in-
termediate posts by party elites to build clientele· among would-be
beneficiaries of the system. The fact remains that the formal
bureaucratic rules to make a claim are so complex particularly re-
garding the documentation of a work-record that the mass of rural
and urban poor folk find it hard to comprehend the rules let alone
maintain the lifestyle, especially record-keeping, demanded by the
rules. Hence, as in so much else in Brazil where complex formal rules
stymie ordinary citizens, one needs a go-between (despachante) with
the bureaucracy to claim one's legally mandated benefits or what-
ever. In short, one needs the proverbialjeito (a way), and the average
beneficiary finds it in party and interest-group elites. The rule may
say that benefits are rights of citizenship but de-facto decision struc-
tures demand many if not most low-income people enrol as client of
some intermediate-level patron. The precarious nature of the exist-
ence of the rural and urban poor, especially in the recent years of
economic crisis, serves to reinforce the need to find security around a
politically based protector (Miranda Ontaneda 1977; Hanes de
Acevedo 1984).
These clientelistic nets probably developed first in the rural hinter-
lands of the poorest states and regions but in recent years have
tended to spread throughout the country. Moreover, as we saw, this
reincarnation of the old party and group-based pattern was stimu-

lated and pushed by the authoritarian regime itself, but there are
numerous indications that it is a central dynamic both within and
among parties in the new more democratic regime. Once again the
structures of previdencia are a focal point of intense competition
among political and interest-group elites. Once again this fact results
in a system where practical de-facto political logics clash with and
undermine the formalized and legalistic concepts of citizenship which
in theory define the reciprocal relationships among state, citizen and
regime in Brazil.
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17 Welfare in Nicaragua: The
Somocista and Sandinista
Experiences Compared*
Peter Sollis
INTRODUCfiON
This chapter examines the importance attached to social welfare

services in Nicaragua during the last years of the somocista dicta-
torship which ended in 1979, after a long and bloody liberation war,
and the decade from 1979 to 1989 in which the Sandinistas im-
plemented their social policies in a context of economic crisis and low
intensity war. The first section provides an overview of the structure
of the Nicaraguan economy and the nature of the agroexport model
developed during the somocista period. The second section analyses
the residual model of social welfare operating under the Somoza
dictatorship. The third section contrasts this with the incremental
model that was introduced by the Sandinistas. 1 The final section
considers the effect of war and economic crisis on welfare provision
and examines whether the Sandinista model of welfare provision is
applicable elsewhere in Latin America.
THE SOMOZA MODEL OF DEVELOPMENT
Development policy under the Somozas was guided by the classical

theory of comparative advantage. In the case of Nicaragua this meant
the cultivation of coffee and, from the mid 1950s, cotton, for export.
Subsequent economic growth resulted from government action in
support of export diversification, agro-industrialization (sugar-cane,
tobacco, shellfish) and import-substitution industrialization. (Dun-
kerley 1988: 171-214) A further stimulus to food processing and
agrochemical production came during the 1960s from the Central
• The views expressed in this chapter are those of the author and do not necessarily
reflect those of Oxfam UK.
365
366 Peter Soltis
American Common Market. Despite initiatives which caused indus-

trial output to grow threefold between 1960 and 1978, industry's
contribution to employment increased slowly, rising from 14.5 per
cent of the economically active population (EAP) in 1950 to just over
20 per cent in 1980.
Comparative advantage worked well between 1950 and 1977 and
real economic output tripled. Nicaragua's growth rates of 5.8 per cent
in the 1950s, 8.7 per cent during the 1960s and 5.5 per cent in the
1970s were among the highest in Latin America. Notwithstanding
declining terms of trade, mild recessions in 1967, 1968 and 1970, and
economic crisis in 1972, per capita GDP doubled between 1950 and
1977 (Gibson 1987:24).
Wealth created by agroexports was not distributed equitably, and
export-led growth and import substitution in Nicaragua favoured a
tiny minority of the population. Throughout the 1950s land own-
ership became more concentrated. Large-scale agroexporters rapidly
displaced small basic grain producers in the fertile Pacific coast low-
lands. With demand for casual labour limited to three months per
year, dispossessed peasants had few options: to move to the poor
mountain soils of the Central Highlands and the isolation of the
agricultural frontier of the Atlantic coast region or migrate to Ma-
nagua to form part of the growing urban informal-sector labour force.
(Bulmer-Thomas 1987: 1~2) In addition, peasant farmers produc-
ing basic grains were denied access to credit and technical assistance
and suffered from cheap food policies designed to maintain low urban
wages.
The labour force was increasingly marginalized from the dynamic
sectors of the economy. Over the period 1950-80 the proportion of
the agricultural labour force employed in modern farms fell from 62
per cent to 43 per cent. As indicated above, labour displaced from
agriculture to Managua had little opportunity to find employment in
manufacturing. Thus the share of urban employment represented by
the size of the urban informal sector grew from 42.6 per cent to 48.6
per cent of the urban labour force. (CIERA 1984:24)
By the 1970s the consequences of comparative advantage had
become plain. Income distribution was grossly skewed. The top five
per cent of the EAP received 28 per cent of total income, i.e. US$
5409 per head per annum. The poorest 50 per cent received only 15
per cent of total income, i.e. US$ 289 per head per annum. (Fitz-
gerald 1982:205) Rural income distribution was even more distorted
Welfare in Nicaragua 367
because of differential access to land, credit, inputs and technical

assistance. In 1971 the ratio of per capita income of landowners to
wage labourers was estimated to be 123 to 1. (Nunez 1981:50) At the
end of the 1970s, 80 per cent of the rural population were living in a
state of extreme poverty and 61.5 per cent of the population were
classified as living in a state of poverty. (CEPAL 1984:54)
From the mid-1960s to the mid-1970s national income tripled,
agricultural output grew rapidly, and there was a large stock of land
yet to be cultivated. Furthermore, Nicaragua had the highest per
capita supply of proteins and calories among the Central America
countries. But the problem was one of distribution and access. The
rural and urban poor were estimated to have insufficient incomes to
obtain a 'least cost' nutritionally adequate diet, even if they used all
their income on food. (Barraclough 1982:37) Nutritional indicators
show that the poorest 50 per cent of the population consumed less
than half the calories, protein and fat consumed by the top five per
cent of the population. More than three-fifths of the rural population
had deficient food intake and two-thirds did not consume meat or fish
of any kind. Half the population did not drink milk and almost
three-fifths did not eat vegetables. By the mid-1970s, 60 per cent of
children under four years old were suffering from malnutrition, and
the infant mortality rate had reached 200 per 1000. (World Bank
1981:32)
ECONOMIC PLANNING, GROWTH AND SOCIAL

DEVELOPMENT UNDER THE SOMOZAS
Prior to 1979 the scarcity of welfare services was a reflection not of

Nicaragua's poverty but of underdevelopment, dependence on
fluctuating export prices and, particularly, the reluctance of the
Somoza regime to intervene in either the reproduction of the labour
force or productive investment. Fiscal and monetary policies were
used to counteract the impact of economic dislocations only when the
interests of the Somoza clan were affected. As a result of liberal
policies the state's share of output remained below 10 per cent and
between 1950 and 1965 there were budget surpluses in 11 of the 15
years. When fiscal deficits occurred in the 1970s they were mainly
covered by foreign borrowing. Not only did the state resort to foreign
borrowing to cover fiscal deficits when they arose in the 1970s, but it
368 Peter Sol/is
tolerated widespread tax evasion and relied heavily on regressive

taxation, so that Nicaragua's ratio of tax revenue to GDP was the
lowest in Central America. (Gibson 1987:28)
The only departure from non-interventionism that occurred was a
consequence of World Bank criticisms in the 1950s. But the policies
implemented exacerbated pre-existing tendencies towards concentra-
tion. Subsidies were given for the import of labour-saving agricultural
machinery and processing facilities for coffee, sugar and cotton
exports. Infrastructure investments in roads, port installations, irriga-
tion and marketing facilities mainly served agroexporters. (Barrac-
lough 1982:34) The attitude of the Somoza regime was that expendi-
ture on social services was non-productive and a drain on national
resources. Public spending on health, housing, education and other
welfare projects was politically targeted, as the Somoza health system
illustrates.
The Somoza Health System
By criteria of funding, beds and human resources the Somoza health

system compared favourably to those of the other Central American
countries, except Costa Rica, and appeared adequate for a popula-
tion of only 2.3 millions. However, the system functioned poorly, and
Nicaragua had the lowest life expectancy at birth and one of the
highest levels of infant mortality in the region. This woeful perform-
ance can be traced to the system's elitism, its administrative chaos
and its underlying political rationale.
The Somoza health system was made up of four separate health
agencies as well as independent health ministry offices in each prov-
ince. The most powerful agency was the Nicaraguan Social Security
Institute (INSS) founded in 1957 when the first legislation on health
insurance was passed. The INSS served mainly sectors of the middle-
class population of Le6n and Managua rather than the upper classes
who could afford private care or specialist treatment in the United
States. Although the INSS controlled 39 per cent of the planned and
over 50 per cent of the actual monies spent in the health sector, less
than 10 per cent of the total population or 16 per cent of the EAP,
had access to them in 1979. (Garfield and Taboada 1984:1139) INSS
services were overwhelmingly curative and heavily focused in Ma-
nagua. The INSS covered 67 per cent of the salaried population of
Managua, the majority of whom consisted of bureaucrats employed
by the regime. By contrast the ministry of health was a weak,
resource-scarce institution controlling only about 16 per cent of

health sector expenditure. The ministry had sole responsibility for
rural health care, but still spent 75 per cent of its funds in Managua.
Instead of allocating resources to preventive medicine appropriate to
a rural population - three-quarters of which suffered from intestinal
diseases - much of the budget went on curative care treatment.
The concentration of resources meant that Managua with only 25
per cent of the population consumed 60 per cent of all human and
material health resources. The rural population depended almost
entirely on folk healers and herbal medicines. This inequitable dis-
tribution of health services persisted for various reasons, in particular
the disenfranchisement of the rural masses and the lack of pressure
from agroexporters. Large landowners were not concerned about
labour reproduction despite a high incidence of infant mortality and a
high death rate, because seasonal labour was available as a conse-
quence of the transformation of the rural sector mentioned above.
Only in the late 1970s, somewhat behind the rest of Central Amer-
ica, did the Somoza regime take an interest in rural-based primary
health care (PHC) and public health programmes. (Bossert 1982:263}
The location, content and intent of somocista programmes neverthe-
less differed substantially from those in neighbouring republics.
While in Honduras, Costa Rica and to some extent Guatemala, the
focus of PHC programmes was the elimination of disease, in Nica-
ragua it was concerned with national security. The main objective of
the Somoza regime was to undermine growing support for the Sandi-
nista guerrillas. The regime hoped to achieve this by various means.
One was an Institute of Peasant Welfare, created with a loan of US$
14 million from the United States, which attempted an integrated
civic action programme involving social development, technical
assistance, co-operatives and marketing schemes (Black 1981:53).
Another was the Rural Community Action Campaigns (PRACS) in
which health programmes- particularly birth control and sterilization
- played a large part. (Envio 1988:24) It may be argued that the
campaigns undertaken in the departments of Nueva Segovia, Esteli,
Madriz, Matagalpa and Jinotega had clear counter-insurgency objec-
tives of reducing population pressure on the means of subsistence and
raising family incomes.
The fragmentation and stratification of health-care institutions were
seen in an extreme form in somocista Nicaragua where 23 separate
agencies and autonomous programmes existed. There was such a
diversity of norms, administrative procedures and salary structures
370 Peter So/lis
that repeated efforts at reform and co-ordination were nullified. The

first five-year national health plan of 1968, which was designed to
co-ordinate health endeavours, failed through lack of resources, in-
sufficient administrative competence and a lack of trained staff. A
second effort at integration proposed by USAID and backed by
large-scale funding also foundered. A more modest proposal to co-
ordinate Managua's services failed in part because exponents of
preventive care preferred to see it fail, since they feared that preven-
tive programmes would be marginalized by the more powerful cura-
tive services. (Garfield and Taboada 1984:1138) The main obstacle to
policy implementation came from within the health system. The
Somoza associates who dominated it, in particular the last minister of
health before 1979, resisted a reorganization that would reduce
patronage possibilities. Among this group was the First Lady,
American-born and raised Hope Somoza, who fulfilled her duty by
being President of both the INSS and of the Junta Nacional de
Asistencia y Prevision Social (JNAPS), which built hospitals with
lottery funds.
The Role of Non-Public Institutions
Given the inadequate and incomplete public health system, private

and charitable institutions sought to provide cover for the large
sectors of the population not served by the state. By the mid-1970s
local non-government organizations, charities, church-related institu-
tions and private insurance groups controlled 34 per cent of health
expenditures. 2 Rural PHC programmes depended on grants from
foreign funding organizations. Notwithstanding this assistance, they
were usually under-resourced and unable to meet demands made
upon them. Medicines were in short supply; competent human re-
sources were scarce. Doctors and other health professionals saw no
career prospects in rural work and low levels of rural literacy inhi-
bited the training of health promotors and auxiliaries in the country-
side. Nicaragua's illiteracy rate was among the highest in Central
America. The experience of rural PHC led to the inescapable conclu-
sion that health and education problems were so closely linked they
had to be tackled simultaneously. A similar conclusion was reached
by many community-based education programmes- there was a close
correlation between illiteracy, high malnutrition and infant mortality.
Somocista authorities tolerated the existence of charitable health
and literacy programmes. These performed a remedial function, had

local reach and adopted an apolitical stance. Furthermore, the
regime welcomed the development of social promotion organizations
that espoused conformist objectives. One example of a non-radical
social promotion organization was the Institute for Human Promo-
tion (INPHRU) which worked in the marginal barrios of Managua,
and was at first very much influenced by the Venezuelan Christian
Democratic experience in community development. Similarly, the
John XXIII Institute of the Jesuit Central America University
(UCA) which was created in 1966, provided a social-work antidote to
radical student movements active in the National Autonomous Uni-
versity (UNAN).
The End of the Somocisto Regime
The events following the Managua earthquake of 23 December 1972

exposed the true nature of the Somoza regime. A National Emer-
gency Committee, set up under Somoza's control and run by the
National Guard, institutionalized the misappropriation of emergency
relief. As the city sought to come to terms with massive destruction,
the National Guard established a flourishing black market in stolen
foreign aid and looted goods. Somoza himself monopolized contracts
for the reconstruction of Managua. His companies seized control of
the demolition work, the supply of concrete, building materials,
metal structures, roofing, asbestos and plastics. In addition, he
started new construction and real-estate companies to take advantage
of expanding business opportunities. Large quantities of aid flowed
into the country from the United States and the Inter-American
Development Bank, with the main intention of shoring up the regime
rather than the provision of humanitarian relief. The regime re-
mained indifferent to the plight of the urban poor who faced great
hardship as house rents increased and legal battles began over land
ownership. Several years later, in an interview with Le Monde in
1978, Somoza summed up the official attitude towards reconstruc-
tion, 'Our climate lends itself to good living without our needing to
make massive investments in housing' (Black 1981:60).
In the face of official corruption and indifference over social prob-
lems the Sandinistas were able to seize the initiative. Despite media
censorship the Historic Programme of the Sandinistas covering agra-
rian and education reform, labour legislation and social security was
372 Peter So/lis
made known through communiques that accompanied high-profile

military action and through grass-roots political work that was con-
ducted among the rural and urban poor (Randall1983).
The earthquake and its aftermath highlighted the inequalities and
corruption of the somocista regime. When the Sandinista threat grew,
even conformist, religious and secular organizations involved in
social welfare work were considered by the regime to be supportive
of the anti-Somoza struggle, whether this was the case or not. In
particularly active parishes like San Marcos in Carazo, which had
built rural schools and an old people's home, secured funding for
rural water supplies and started a successful housing co-operative, a
special watch was kept on the weekly mass for 'subversive' content.
Literacy and health classes were infiltrated by informers who tape-
recorded lessons. Subsequently, direct threats were made against
participants and courses were closed because no one dared to ven-
ture out at night. In areas of heaviest guerrilla activity the mere
possession of medicines and health materials posed dangers to per-
sons encountered by Somoza's National Guard. The repression
claimed the lives of many community activists but also led to the
radicalization of previously apolitical organizations and their even-
tual support for the Sandinista cause. And the Sandinistas were
provided with an opportunity to consolidate their popular base
around a welfare-oriented programme for national reconstruction
and development.
REVOLUTIONIZING WELFARE: THE SANDINISTA

EXPERIENCE
The Period of Expansion 1979-83
At a meeting of the Asociaci6n de Instituciones de Seguridad Social

de Centro America y Panama (AISSCAP), held in Managua in July
1980, the Sandinista vision of social security was presented to Central
American ministers of social welfare by Moises Hassan, then a mem-
ber of the ruling junta. Hassan distinguished between the Somoza
dictatorship that had presided over a corrupt, technically backward
and elitist INSS, and those countries where social progress and popu-
lar participation in public affairs had reached a high level. These
countries were characterized by a universal and trustworthy social
security system in which citizens had confidence. Nicaragua, he sug-
gested, had moved from the first to the second category as a result of
the revolution. Moreover, for the Sandinistas, social security was not
just a basic human right but also a means of creating 'el hombre
nuevo Nicara~uense' (Hassan 1981:4).
When viewed from a Western developed-country perspective the
social welfare measures taken by the Sandinistas are strictly conven-
tional. However, from the perspective of poor Latin American
countries - and specifically Nicaragua - Sandinista social security
legislation introduced for the first time to Nicaragua the principles of
'integration' and 'universality'. The institutionalization of these prin-
ciples took effect in 1982 with the creation of the Social and Family
Welfare Institute (INSSBI), formed by the merger of the INSS and
the ministry of social welfare. The basis was laid for a programme of
cover to all workers and employees including rural labourers, to be
completed by 1984. In only eight years the number of contributors to
INSSBI tripled from 122 597 to 308 810, including nearly 54 000 rural
and all urban formal sector workers (INSSBI 1987:13).
The definition of areas of state concern also widened, from health
and medical care to all 'those social services necessary for the promo-
tion and development of Nicaraguans'. This meant housing, savings
and credit, employment and recreation. INSSBI worked to provide
three types of services: social security covering pensions, funeral
subsidies and a retirement centre; social welfare covering children's
programmes, rehabilitation of disabled, old people's programme,
family protection, emergency requirements mainly of displaced peo-
ple, political refugees, repatriated refugees; and decentralized
businesses such as holiday centres, popular opticians, the state lottery
and undertakers (INSSBI 1987). These, together with commitments
to provide free health care and to establish a free education system,
obligatory at some levels, signalled the creation of a range of services.
A welfare state from 'cradle to grave' was indeed planned for Nica-
ragua.
Bossert and Garfield and Taboada, show how a Unified Health
System was created, (Bossert 1982; Garfield and Taboada 1984)
while Miller and Hirshon demonstrate also the success of the literacy
crusade. (Miller 1982; Hirshon 1983). Other examples of the welfare
system have received less attention but are important in order to
indicate the breadth of services. For example, the Office for Family
Protection and Counselling, established only 15 days after the 1979
victory, besides providing counselling to resolve family conflicts of
various types has provided new insight into the nature of family
374 Peter Sollis
structure and the significance of woman-headed households (Envio

1984}. Recognizing the role that the family plays in a child's educa-
tion, the ministry of education began its Parental Guidance Pro-
grammes in 1981 and opened 422 centres in primary and intermediate
schools throughout the country. Meanwhile, INSSBI moved quickly
to build three holiday centres on the site of Somoza's confiscated
beachside residences. In six years these centres have catered for
464 000 visitors (INSSBI 1987:32). Furthermore, INISER, the state-
run insurance and reinsurance company founded in 1980, both
rationalized the twelve insurance companies and promoted the im-
mediate development of new markets in life, accident and liability
assurance, especially with the expanding co-operative sector.
While the new social policies represented a significant change for
most Nicaraguans there was a strong thread of continuity of person-
nel. Many individuals who had worked before the revolution in
non-public community development projects of various types now
held senior positions in the ministries of health, education, social
welfare and agrarian reform. Their experience in the field of the
problems of the poor was crucial in shaping new national priorities
and guaranteeing that international non-government organizations
would fund government-promoted nation-wide initiatives designed to
tackle poverty at its roots. Acknowledging that a key precondition for
the successful completion of development projects was an active
involvement of community organizations in setting project agendas,
the international agencies willingly collaborated with government
ministries (Melrose 1985:13; Barraclough et al. 1988}.
The construction of the welfare state on the basis of new social
values formed a significant component of a larger development
strategy. The quality of human capital was upgraded, and there was a
massive shift of resources towards the countryside as a result of new
social policies. During and after the mobilizations of the literacy
crusade and the follow-up adult education programme, 1404 new
schools were built (1979-84}, of which 95 per cent were in rural areas.
A programme of rural health-centre construction together with Popu-
lar Health Days overseen by the ministry of health meant that by
1984 the number of people with regular access to health care had
tripled to more than 80 per cent of the population. A more equitable
distribution of income was achieved through the establishment of a
social wage, massive land distribution under the agrarian reform and
the introduction of a property income tax (impuesto patriotico).
Industrial capacity was reorientated to meeting basic needs producer
and consumer goods (Irvin and Croes 1988:34). This redistribution of

resources towards the state and popular consumption during the
period of reconstruction was intended to lay the foundations for
subsequent industrialization (Fitzgerald 1988:19).
THE COST OF THE AGGRESSION
After 1983 the revolutionary strategy was undermined by four fac-

tors. First was the US-inspired economic embargo. Second was war:
direct losses between 1980 and 1987 are estimated at US$1.2 billion,
and the aggregate effect on GOP is estimated at US$3.6 billion
(Marchetti and Jerez 1988:6). A third problem was falling export
prices (Gibson 1987:35). Finally, irreconcilable economic policies-
excessive rates of state accumulation and price support for exporters
at a time when resources were shifted to defence and a commitment
made to maintain living standards of the popular sectors - led to
increasing internal resources deficits and galloping inflation (Fitz-
gerald 1988:23).
The zones most affected by the war were the rural areas in the
north of the country where nearly 300 000 people were displaced. 3
Enormous effort was made to provide health care, housing, educa-
tion and agricultural supplies to the displaced population at the
expense of social projects elsewhere in Nicaragua. The Contras con-
centrated their attacks on social service facilities. Two hundred and
thirty schools were abandoned or destroyed and 149 teachers killed.
The studies of more than 35 000 students were disrupted (Fitzgerald
1987:204). By the end of 1987, 106 health centres had been de-
stroyed, damaged or forced to close by the Contras (right-wing op-
ponents of the government). Forty-six health workers were killed,
others were kidnapped and many more wounded. In addition, the
construction of another 22 new health posts was abandoned. Thus,
the provision of health care for 300 000 people was adversely affected
(Garfield and Williams 1989). Furthermore, 125 social service centres
serving 17 000 children and old people were destroyed, while build-
ing was stopped on 2000 rural homes. The construction of roads,
water supplies and sanitation facilities in the countryside was halted.
The impact of the war was also observed in the reversal of
epidemiological advances. The immunization system broke down in
the more isolated rural areas as a consequence of the war. In 1985-6
the first measles epidemic since 1979 affected thousands of children:
376 Peter So/lis
in Matagalpa department alone the number of measles cases rose

from 153 in 1985 to 956 in 1986. Malaria control was also severely
affected: 70 per cent of reported malaria cases in 1986 were in war
zones compared to only 35 per cent in 1983. Furthermore, there were
localized epidemics of tubercular meningitis in Jinotega because
health workers could not enter the zone when the first cases were
reported (Garfield and Williams 1989). A fall in the number of
consultations, a decline in popular participation and an infant mor-
tality rate that had stopped falling, indicated a crisis in health-care.
Reappraisal of the Health Service
The economic crisis coloured the debate on what type of social

welfare was affordable, especially with regard to the health service.
The clear objective of the Sandinista health programme can be
summarized as the delivery of free health care to all Nicaraguans.
Less certain was the means of achieving this end. One radical change
was brought into effect by the creation of a Unified Health Service
that was partly funded by social security quotas, was a responsibility
of the state and which planned integral services focusing on priority
groups. But full realization was limited first by a mismatch of re-
sources and needs - hospitals and health professionals resources
inherited from the Somoza period were concentrated in Managua
while the priority of Sandinista policy was the countryside, and
second by indecision over the choice between curative and preven-
tive care.
The choice between a low cost, community-based, preventive
approach and a high-cost, hospital-based, curative approach was not
easy. The Sandinistas were committed from 1969 to formal institu-
tionalized health care and were impressed by the success of the
Cuban programme of integrated health care, encompassing the cura-
tive and preventive, specialist and general hospitals, multi-purpose
clinics and health posts (FSLN: 1969). Yet primary health care pro-
grammes, expanded from 1979 on a large scale by the World Health
Organization (WHO) and the Pan-American Health Organization
(PAHO), were consistent with the Sandinista approach that empha-
sized equity in health care and the participation of the community in
shaping health priorities and implementing programmes. This
strategy was disputed by the medical establishment which advocated
a high level of curative care in sophisticated modern hospitals staffed
by highly trained medical professionals.
The tension was acute in very specific activities. For example, the
training of traditional birth attendants (TBAs) which began in 1981
was heavily criticized by the medical establishment on the grounds
that TBAs were doing the work of physicians. Physicians held this
position notwithstanding the fact that most rural births took place at
home with TBAs present, and that this was not likely to change in the
foreseeable future. The Ministry of Health was initially persuaded by
the doctors' arguments even though improvements in TBA hygiene
contributed to tetanus control. Eventually, the TBA training pro-
gramme was retained and expanded, although the ministry insisted
this was an interim measure and that physicians would eventually
replace TBAs.
The debate over cost and priorities continued in the Ministry of
Health between 1980 and 1983, while hospitals, clinics and health
posts were built at a frenetic rate and the inoculation campaigns of
the Popular Health Days eradicated polio, tetanus, whooping cough
and measles. In these years Nicaragua was spending US$40 per head
on health, one of the highest levels of expenditure in Latin America.
Although by 1981 curative care was favoured rather than preventive
programmes, the debate between curative and preventive care was
never finally resolved, since community participation remained im-
portant in vaccination campaigns and primary health care in remote
rural regions.
By 1983 the Integrated Programme for Activities in Health Areas
(PlASS) was drawing together a number of disparate initiatives into
a single coherent national programme. The PlASS comprised 18
specific disease-control programmes which emphasized prevention
and community participation, and was intended to foster demand for
health services. It was also expected to stimulate community initia-
tives to reduce illiteracy, combat childhood diseases, improve hous-
ing and nutrition and generally raise the quality of life. The PlASS
was successfully piloted in one rural area and in Managua. But when
the programme was applied nationally, it came up against the dual
crisis of a deteriorating economy and the pressures of a rapidly
growing population.
Contraction of Services and New Approaches
Notwithstanding the austerity measures taken almost annually since

1985, health and other social services were spared until the massive
budget reductions from 1988-9 that affected most other sectors of
378 Peter So/lis
state activity. For example, in the 1985 budget, health and defence
allocations were increased when others were reduced. In the early
1989 economies, the ministries of defence, interior and education
were those most severely cut by 29 per cent, 40 per cent and 39 per
cent respectively. Clearly, health and social-security spending were
not to be immune to the consequences of economic downturn in
Nicaragua. While the Ministry of Health allocation still remained
1989 at 9 per cent of total government expenditure, a figure that was
exceeded only during the early 1980s when it peaked at 13 per cent in
1981, a cut of 20 per cent in the overall national budget means a
substantial reduction in available resources, especially since 80 per
cent of the health budget is provided by central government. 4 The
overall health budget was affected too by a continuing gradual decline
in INSSBI contributions. For example, whereas INSSBI contribu-
tions represented nearly 30 per cent of health service funds in 1986,
following the first wave of redundancies from the state apparatus,
INSSBI contributions provided only 20 per cent of health-service
funds. Falling contributions also had an adverse impact on INSSBI's
own budget.
From 1983 the government tried to tone down expectations and to
tailor health and welfare services appropriate to a survival economy.
The plans for comprehensive primary health care envisaged in PlASS
for example were revised downwards step by step toward selective
interventions. Yet budget reductions coincided with increased de-
mands on services. INSSBI, for example, was now only beginning to
face the long-term costs of the war. Its child-care services catered for
over 30 000 children in 1987, an increase of 5000 over 1986 and
double the number cared for in 1984. There were also by 1987 15 000
people disabled because of the war. Disability provision was limited
to three rehabilitation centres with 240 places, which nevertheless
represented an improvement on the situation before the revolution
when what rehabilitation services there were, were all private. Com-
munity care therefore was regarded as the best solution partly be-
cause attitudes in the public at large towards disability changed; every
family had someone in military service, so that people were prepared
for the fact that at any time a member of their family maybe disabled.
However, the Ministry of Health has to make the most difficult
choices. The three-year plan (1988-90) focused on the better use of
available resources for priority areas. A comprehensive examination
by FETSALUD, the health-workers' union, during 1988 found many
areas of waste. For example, more than fifty per cent of ministry
employees worked either in administration or non-priority pro-

grammes. Likewise, sixty per cent of the ministry's budget was spent
on non-priority programmes. The practice of buying medicines from
COFARMA, the Ministry of Health's drug company, when other-
cheaper- national sources were available, also came under criticism.
The plan proposed a comprehensive administrative reorganization.
Responsibility for salaries, budgets and purchasing was decentra-
lized. Purchase of medicines became the responsibility of either the
operational unit, in the case of a hospital, or the municipality. For
example, the director of the Bertha Calder6n hospital became re-
sponsible only for that hospital's medicine, which could be ordered
from any supplier, and not for the nearby San Judas clinic.
Designation of priorities was reappraised. This process is best seen
in the campaign to defend. the lives of children. Infant mortality
which was successfully reduced by approximately 46 per cent between
1978 and 1983, subsequently stabilized. More than 40 per cent of all
deaths in the late 1980s occured in the under-five age group which
represented 20 per cent of the total population. The majority of
infant deaths were the result of diarrhoea and a small number of
common diseases. The campaign targeted diarrhoea control, im-
munization, breastfeeding, impaired nutrition and birth-spacing
(Garfield and Williams 1989). Priority designation at the local level
was intended to avoid the problem of national priorities, for example
the TB programme, absorbing resources locally even when the need
for them did not exist.
The three-year plan also proposed changes in the relationship
between public and private medicine. Specialists worked only a few
hours in the state system in the mornings, before taking surgery in
their private practices during the afternoons. In the Manolo Morales
hospital this situation meant that 20 beds for internal medicine which
required only 3 specialists, had in fact 15 doctors giving consultations.
Rationalization at the Bertha Calder6n maternity hospital, after 70
infants died in one month, precipitated a 48-hour doctors' strike.
Eventually, the consultants accepted a Ministry of Health proposal to
provide a 24-hour service for the first time, with the result that infant
mortality rates fell dramatically.
Both the Ministry of Health and FETSALUD recognized the
economic unsustainability of a totally state-run health system with
equal and free access to all. As a result, a number of cost-recovery
measures were introduced. The intention was to introduce charges
for services such as x-rays, laboratory tests and some dental work. A
380 Peter So/lis
system of payment for medicines already functioned under the guid-

ance of hospital committees, comprising social workers, hospital
administrators and FETSALUD, who determined who could afford
to pay. Under this policy the state sub-system depended for part of its
funding on the private sub-system. Most important however was the
reintroduction into public hospitals of pensionados, or paybeds, for
the first time since 1979. There was no intention of replicating the
system in place previously, when paybed patients had better treat-
ment, their own nurses and a direct financial relationship with the
doctor. Instead FETSALUD proposed a jointly administered system
with hospital authorities, to fix fees and number of paybeds (FETSA-
LUD 1989). Payment would guarantee only a private room and no
other benefits. This measure was justified by cash-ftow problems and
the prevailing feeling that 'those who cap afford to pay for treatment
should do so'.
In the light of the vulnerability of the social security system to
economic and fiscal factors and to cuts in central government fund-
ing, INSSBI envisaged more collaboration with international agencies
(INSSBI1988). In October 1988 discussions were held in Managua
with international NGOs about possible funding of a number of
areas. The Ministry of Health likewise drew up a package of projects
covering a range of priority programmes that was presented to inter-
national funders in May 1989. International funding for social pro-
jects was also prioritized by the government of the Southern Atlantic
Autonomous Region when coping with reconstruction after the Octo-
ber 1988 hurricane. There all available monies were invested in
productive activities, especially the fishing fleet.
With the redefinition of government commitment and responsibil-
ity for health care provision a more sustainable two-tier system
emerged. There was a difference between the health care enjoyed on
the one hand by the middle classes and urban workers and on the
other by the rural poor. This difference derived both from the nature
of the services that were inherited from Somoza and the fact that the
Ministry of Health controlled only 70 per cent of health expenditure.
The system was no longer committed to providing a replica of the
Cuban model, so that the minister of health redefined the principle of
government responsibility as 'to provide health care, but only to the
degree that people demonstrate a direct interest and willingness to
take part'. Yet the ministry argued that public health care would
retain its geographical cover in the rural areas and could respond to
basic needs, and evidence of the commitment to maintain services
was adduced from the fact that health expenditure as a percentage of

GDP increased relatively between 1985 and 1989 to stand at nearly 8
per cent, compared to under 2 per cent in the last year of the Somoza
regime.
CONCLUSION
This chapter has compared two periods in Nicaragua's recent history.

It shows how welfare services have been differently conceived and
delivered during the somocista and Sandinista regimes. An elitist,
partial system of a residual nature was replaced with an integrated
programme depending upon a greater state intervention both in
service delivery and provision of resources required. There can be no
question that benefits reaching the poorer sectors of society increased
despite the difficulties caused by eight years of war and economic
crisis.
Whether the welfare model the Sandinistas developed is applicable
elsewhere in Latin America can be doubted. The Nicaraguan model
serves as an example and illustrates the debates about priorities and
options required in order to determine the most effective form of
resource allocation - especially true in the health sector where high-
cost curative facilities may not give value for money in small underde-
veloped primary export economies such as Nicaragua. It must be
recognized that Nicaragua survived almost intolerable external press-
ures and nevertheless continued to provide welfare services to the
poorer sectors of the community. Indeed, it would be a great step
forward if Nicaraguan levels of coverage in health care were applied
to other countries of Latin America, many of which are more affluent
but deny access to modern health care to upwards of 30 per cent of
their populations.
POSTSCRIPT
The February 1990 Presidential, National Assembly, Municipal and

Regional Autonomous Elections which saw the unexpected defeat of
the Sandinistas raise two main questions. The first concerns the
importance oi Sandmista weltare policy in the electoral campaign.
How important was Sandinista welfare performance - either the
failure to deliver on promises or the failure to emphasise successes -
382 Peter Sol/is
in the election campaign? The second focuses on the intentions of the

incoming Chamorro government in this area: - how will the new
regime government handle welfare? The elections took place during
Nicaragua's worst-ever economic crisis. GDP fell by 12 per cent over
the 1986-9 period; the balance of payments was in chronic deficit;
and foreign debt was mounting. The crisis was exacerbated in 1989 by
an adjustment programme implemented without the compensatory
measures usually accompanying World Bank/IMF structural adjust-
ment programmes. Thus, as the inflation rate came down from over
30 000 per cent in 1988 to about 1700 per cent in 1989, production
slumped, underemployment and unemployment rose to 35 per cent,
there was a liquidity crisis and social services deteriorated.
Various indicators demonstrate the magnitude of the crisis. Real
wages fell precipitously. Milk consumption fell by 50 per cent in 1988,
and sugar by 40 per cent. The rate of infant mortality doubled
between 1988 and 1989. TB and malaria cases increased. Rates of
literacy fell, even in Managua.
As the governing coalition during economic decline the Sandinistas
were held primarily responsible by the electorate, notwithstanding the
damage caused by a decade of war against the Contras and five years
of US trade embargo. The Sandinista election slogan 'Everything will
be better' had little impact. Manifesto promises to protect structural
reforms in the agrarian sector, medical services, education and social
security, and to redouble efforts to counter malnutrition, diarrhoea,
and illiteracy failed to convince the majority of voters that a Sandinis-
ta victory in the polls would improve their prospects for survival.
A lack of specificity by UNO on social issues, beyond a promise to
give greater parental control over the school curriculum, to decen-
tralize the health system and to reinstate the social security health
provision, did not become an electoral issue. Indeed, UNO's promise
to end military conscription touched on war-weariness and instincts
of family self-preservation. Parents no longer wanted their sons to go
to war. Conscripts were more reluctant to serve. With its links to the
US administration, UNO therefore emerged as the party most likely
to improve the economic situation and to end the war.
The impact of the Chamorro government on the welfare of Nica-
ragua's poor only slowly emerged. What the government offered
Nicaraguans economically in the short and medium term was not
known after three months; but decrees on the confiscation and leas-
ing of agricultural land, on changes in interest rates for producers and
a series of devaluations caused disquiet in the co-operative and small
farmer sector and fuelled inflation. These decisions pointed to the

loss of influence enjoyed during ten years of Sandinismo by the mass
organizations.
What was the Chamorro government offering in the social services
sphere? What were the consequences of privatization in the health
and education services, charges for medicines, changes in rural chil-
dren's services, and pensions policy? While outright dismantling of
services was not stated policy, the policy practice might be otherwise.
Confronted by economic crisis the official response was to implement
further public spending cuts which threw the health sector into its
most serious crisis yet. Some hospitals and health centres had not
received their budget allocations for May 1990 by early June, and
those that had were tied to budgets set before three devaluations.
Supply shortages left hospitals on standby and working on minimum
service.
In the face of rapidly deteriorating epidemiological profiles - with
measles epidemics and the fear of the return of polio - little was
done. The official response to the measles epidemic was to encourage
mothers to bring their babies in for vaccination, although the practice
of ten years preventive care shows that total cover is attained only by
taking the service into the community through house to house visits.
Mobilization of health promotors is likely to remain a secondary
priority. Indeed an emphasis on hospitals and a much talked about
three-tier system implies the neglect of rural areas, primary and
preventive services (Nicaragua Health Fund 1990).
Notes
1. The terms 'residual' and 'incremental' are taken from Hardiman and
Midgley 1982.
2. While private insurance appealed to those able to plan their health-care,
covering thereby an exclusive market, other institutions developed a
range of services for distinct marginal groups. For example, the Baptist
Hospital was built in the 1920s in Managua to serve the evangelical
population; the Moravian church's hospital at Bilwascarma on the Atlan-
tic coast became the Miskito Hospital; and PHC programmes using com-
munity health promotors sprang up in many rural areas.
3. The main war areas are Zones I, V, VI and the Special Zones which cover
the departments of Esteli, Madriz, Nueva Segovia, Jinotega, Matagalpa,
Boaco, Chontales, Rio San Juan and Zelaya. At the war's height over 10 per
cent of Nicaragua's population was displaced, although this figure reached
more than 50 per cent in areas such as Las Minas in Zelaya department.
384 Peter Soltis
4. Commitment to health-spending is a fundamental Sandinista tenet. Nica-

ragua's recent record compares favourably with El Salvador's, where
between 1979 and 1987 health sector spending fell from 9.5 per cent to 5.5
per cent of public expenditure, while defence allocations grew from 19 per
cent to 45 per cent.
References
Barraclough, S. (1982) A Preliminary Analysis of the Nicaraguan Food
System (Geneva).
Barraclough, S., et al. (1988) Aid that Counts: The Western Contribution to
Development and Survival in Nicaragua (Amsterdam).
Black, G. (1981) Triumph of the People: The Sandinista Revolution in Nica-
ragua (London).
Bossert, T. (1982) 'Health care in revolutionary Nicaragua', in T. Walker
(ed.), Nicaragua in Revolution (New York).
Bulmer-Thomas, V. (1987) The political economy of Central America since
1920 (Cambridge).
CEPAL (1984) 'The crisis in Central America: Its Origins, Scope and Con-
sequences', CEPAL Review no. 22.
CIERA (1984) Managua es Nicaragua (Managua).
Dunkerley, J. (1988) Power in the Isthmus: A Political History of Modern
Central America (London).
ENVIO (1984) 'The Nicaraguan family in a time of transition', vol. 3, no. 34.
ENVIO (1988) 'Revolutionising Health - A Study in Complexity', vol. 7,
no. 80.
FETSALUD (1989) 'Principales Planteamentos de los trabajadores sobre el
sistema nacional de salud'. Mimeo (Managua).
Fitzgerald, E.V.K. (1982) 'The economics of the revolution', in T. Walker
(ed.), Nicaragua in Revolution (New York).
Fitzgerald, E.V.K. (1987) 'An evaluation of the economic costs to Nicaragua
of US aggression', in R.J. Spalding (ed.), The Political Economy of Re-
volutionary Nicaragua (London).
Fitzgerald, E.V.K. (1988) 'State and Economy in Nicaragua', in 'Nicaragua:
Development under Fire', IDS Bulletin, vol. 19, no. 3, pp. 17-24.
FSLN, (1969) 'The Historic Programme of the FSLN', reprinted in P. Ros-
sert and J. Vandermeer (eds), The Nicaraguan Reader (New York).
Garfield, R. and E. Taboada (1984) 'Health services reform in Revolution-
ary Nicaragua', American Journal of Public Health, vol. 74, no. 10, pp.
1138-44.
Garfield, R. and G. Williams (1989) Health and Revolution: The Nicaraguan
Experience (Oxford).
Gibson, B. (1987) 'A structural overview of the Nicaraguan economy', in
R.J. Spalding (ed.) The Political Economy of Revolutionary Nicaragua
(London).
Hardiman, M. and J. Midgley (1982) The Social Dimension of Development:
Social Policy and Planning in the Third World (London).
Hassan, M. (1981) 'La Nueva Seguridad Social y La Revoluci6n Sandinista',

in La Nueva Seguridad Social (Managua).
Hirshon, S. (1983) And Also Teach Them to Read (Westport).
Irvin, G. and E. Croes (1988) 'Nicaragua: the accumulation trap', in 'Nica-
ragua: Development under Fire', IDS Bulletin, vol. 19, no. 3, pp. 17-24.
INSSBI (1987) Ocho alios de Revolucion en el INSSBI (Managua).
INSSBI (1988) 'Perspectivas de Ia cooperaci6n externa a corto y mediano
plazo', mimeo.
Marchetti, P. and C. Jerez (1988) 'Democracy and Militarisation: War and
Development', in 'Nicaragua; Development under Fire', IDS Bulletin, vol.
19, no. 3, pp. 3--12.
Melrose, D. (1985) Nicaragua: The threat of a good example? (Oxford).
Miller, V. (1982) 'The Nicaragua Literacy Crusade', in T. Walker (ed.)
Nicaragua in Revolution (New York).
Nicaragua Health Fund (1990). Report on trip to Nicaragua by Sarah Jack-
son. mimeo.
Nunez, 0. (1981) El Somocismo y el modelo capitalista exportador (Mana-
gua).
Randall, M. (1983) Christians in the Nicaraguan Revolution (Vancouver).
Sollis, P. (1989) The Atlantic Coast of Nicaragua: Development and Auton-
omy, Journal of Latin American Studies, vol. 21, no. 3, pp. 481-520.
World Bank (1981) Nicaragua: The challenge of reconstruction (Washington,
DC).
18 The Campaign Against
Absolute Poverty in
Colombia: An Evaluation of
a Liberal Social Policy
Alicia Puyana
This chapter examines the political project of President Virgilio

Barco (1986-90) and looks, in particular, at his Plan to Eradicate
Absolute Poverty (PEAP). Using government budgetary data and
the evolving structure of public expenditure, the chapter considers
the constraints upon the realization of official social programmes that
arose from the stability and homogeneity of development plans. The
social policies of the Barco administration are placed within the
broader context of gradualist reformism, the impact of the world
recession and such domestic political considerations as the struggle
against guerrilla violence and the consolidation of a democratic
order.
GRADUALIST REFORM AND THE PLAN FOR THE

ERADICATION OF ABSOLUTE POVERTY
For the past thirty years Colombian policy-makers have aimed to

redistribute wealth in such a way that power structures are not
affected and growth not jeopardized. The technocratic elite and
producer associations have tolerated trade union and social security
reform so long as their power has not been diminished and economic
orthodoxies have not been distorted. Economic policy-making was
conducted along 'prudently conservative' lines, with counter-inflation
policy as a consistently high priority, because it was interpreted as a
source of economic and political stability (Puyana 1983; Puyana
Interview, March 1988). Thus social policy spending was limited.
And policy advances occurred mainly in the large industry sector
where the models of developed countries could be applied in mod-
ified form. Packages of promotion policies, subsidies, and tax and
387
388 Alicia Puyana
tariff exemptions made high profits in large industry possible; and

high profits, in turn, assured the employment of a skilled and stable
labour force and the financing of welfare measures.
Since the 1960s, and especially since the near-defeat of the ruling
Liberal-Conservative coalition in 1970, successive governments made
constant references to social (and, especially, to urban) policy. This
can be explained by the processes of urbanization and spatial integra-
tion, combined with the political need every two years to mobilize the
electorate to vote in either presidential or Congressional, departmen-
tal and municipal elections. Social policy promises were used to
counter the declining legitimacy of the political system and the lack of
popular credibility of the traditional parties (including the Com-
munists). These problems were observed in phases of high levels of
electoral abstention, which were a recurrent matter of concern
among civilian elites (Bagley 1987; Hoskin 1986).
In the 1980s world recession and debt crises slowed down the
growth that most of Latin America had experienced continuously
since 1945, and gave rise to policies of adjustment and stabilization
that had a pernicious impact upon the living levels of the poorest and
most vulnerable groups [Cornia, Jolly, Stewart 1987]. A deteriora-
tion in living standards occurred just as the process of democratiza-
tion began in Brazil, Argentina, Peru, Uruguay and Bolivia. And this
led to the elaboration of models of adjustment with a human face -
redistribution policies and relief measures that mitigated the econ-
omic and political consequences of the crisis. Thus the Economic
Commission for Latin America, the Inter-American Development
Bank and national governments coincided in stressing the urgency of
paying off the social debt both as a prerequisite to resolving the
problem of the external debt and as an essential feature of redemo-
cratization.
At the same time, Colombian governments had immediate political
considerations to take into account that had a profound influence
upon development policy. There was the problem of forestalling the
revival of armed guerrillas in areas of recent violence, which was
confronted by the National Plan of Rehabilitation and Normaliza-
tion, established by President Belisario Betancur (1982-6) with fund-
ing from multilateral agencies like the World Bank. As the PEAP
was being formulated, the problem of rural violence became more
acute and forced some major changes in its priorities. An emphasis
upon general policies aimed at the large and intermediate cities was
replaced by a stress upon identifying specific instruments that might
Campaign Against Absolute Poverty in Colombia 389
resolve socio-political conflict in the countryside. Meanwhile, both

the Betancur and the Barco governments spoke of a democratic
opening that broke with the coalition politics prevailing since 1958.
This commitment had one particular consequence for social policy.
New policies of political and fiscal decentralization to the munici-
palities and of the direct election of mayors were intended to enhance
democratic consolidation by enlarging participation and extending
accountability. But they also had profound consequences for social
policy, since their introduction intedered with established practices
with regard to the elaboration, implementation and execution of
development plans.
Colombian reformists have shown a willingness to execute selective
reforms, always controlled from above, that have embodied elite
responses to popular pressure rather than elite initiatives to mobilize
the social bases in favour of a national project (Palacios 1980: 136,
291; Hirschman 1977: 61-98). The PEAP stood within these tradi-
tions of gradualist reformism, but also had special features that gave
it an innovative flavour. Formally, the plan acknowledged the exist-
ence of the absolute poverty in which the poorest 25 per cent of the
population lived. Indeed, the PEAP stated frankly that at least
one-quarter of the population lived in conditions of critical poverty,
where incomes did not reach levels necessary to satisfy minimum
needs, and a further one-quarter of the population lived in absolute
poverty, where income was insufficient to cover other basic necessi-
ties (housing, education, health) (DNP-Conpes, 1986). Several in-
dicators demonstrated the dimensions of poverty. The poorest 30 per
cent of the total population had in 1987 a mean annual per capita
income of US$249.3, representing only 7.9 per cent of national
income. At the same time the richest 20 per cent of the total popula-
tion had an annual per capita income of US$2620, which represented
54.0 per cent of national income. Table 18.1 shows that 31.3 per cent
of households in 1987 had a total annual income ot three minimum
wages and below (one minimum wage was the equivalent of US$80.2).
The lnstituto Colombiano de Bienestar Familiar (Colombian Insti-
tute of Family Welfare) calculated that the minimum basket of goods
and services cost three minimum wages.
For the first time the Colombian technocratic elite spoke of abso-
lute poverty, admitted it as a national reality and accepted that
government policy should be redesigned to improve the working
conditions of the poor. The conditions of the bottom 25 per cent of
the population would be improved through the PEAP and those of
390 Alicia Puyana
Table 18.1 Annual household income, Colombia.

Minimum wage movement according to Household Survey (Encuesta de
Hogares) 1984 in 15 cities (US dollars 1987)
Number of minimum Average Number of Percentage Accumulated

wages per household income households of households share in number
of households
1-2 80.2 55.619 2.4 2.4
2-3 160.4 295.106 12.7 15.1
3-4 240.6 376.980 16.2 31.3
4-5 401.0 251.040 10.8 56.2
S-6 481.2 196.979 8.4 64.6
6-7 561.4 1252.326 6.5 71.1
7-8 641.6 120.204 5.1 76.2
8-9 721.8 90.434 3.9 80.1
9-15 1602.5 269.134 11.5 91.6
More than 15 1283.2 196.510 8.4 100.0
2332.715
SoURCE: Calculations of author based on DANE, lngresos y Gastos, 1984.
the next 25 per cent of the population would be improved by means

of employment and income generation combined with a drive to redis-
tribute the benefits of growth (Presidencia de Ia Republica 1986).
The PEAP was an essential feature of the Barco campaign. It
explains in large measure why he won the biggest landslide recorded
in Colombian freely contested elections. He was the first victorious
presidential candidate to acknowledge sincerely that absolute poverty
existed in Colombia and was founded upon a problem of extreme
income concentration (observed in Table 18.2). Social policy was
envisaged as a substantia~ factor both in economic growth and in
promoting democratic consolidation. The state was harnessed at all
levels to the programme; and it was assumed that a broadening of
community participation would occur in the diagnosis, planning and
monitoring of programmes and the auditing of state spending (DNP
1987: 13, 16). The overall thrust of the Barco programme was to
combine participation, welfare and growth.
POLITICAL UTOPIA, THE 'TECHNOCRATIC WISDOM'

ANDTHEPEAP
In his election campaign Barco emphasized that a fall in levels of

income, education, housing and health reduced the quality of life and
Table 18.2 Income distribution of the population, by deciles

(US dollars 1987)
Highest Average % %
Deciles income income income accumulated
1 161.5 120.9 1.7 1.7
2 219.0 190.1 2.7 4.4
3 281.2 249.3 3.5 7.9
4 385.5 318.2 4.5 12.4
5 448.1 402.5 5.7 18.2
6 565.6 503.0 7.1 25.2
7 838.8 634.7 9.0 34.2
8 957.1 822.2 11.7 45.9
9 1470.9 1162.5 16.8 62.7
10 2620.9 37.2 100.0
SouRCE: Calculations of author from DANE Household Survey (Encuesta

de hogares) 1984.
fostered conflict. Aiming to facilitate the integration of most low-

income earners into economic activity and to promote a pattern of
growth whose benefits reached the entire population, Barco laid out
basic strategies within a 'plan of social economy' (PSE): the satisfac-
tion of essential human needs; a struggle against unemployment;
social development, urban reform and agrarian modernization; and
social change and peace (Barco 1986: 6). Each of these strategies was
designed to hold back the expansion of poverty and to consolidate
economic recovery by increasing the levels of welfare of the poorest
groups in society, while stimulating a revival of sectors in recession,
notably manufacturing and agriculture. Behind the proposed plan lay
the urgency of combating three problems: the recrudescence of vio-
lence, the exacerbation of structural economic problems- by the
world recession, and the lack of efficacy of the state in undertaking
structural reform. The problem of poverty was manifest in reductions
of public expenditure (especially social spending), of investment
(public as well as private) and increases in inflation and unemploy-
ment, both rural and urban. According to Barco, the danger posed by
these problems was of so great a magnitude that in the short term
they 'could place at risk ... the stability of democratic institutions'
(Barco 1986: 9).
Policies consistent with his manifesto aims were formulated after
Barco's election victory (DNP-Conpes 1986a; DNP 1987). They
presupposed practices of economic management which were broadly
392 Alicia Puyana
consonant with social development and specifically favoured the

struggle against absolute poverty (Ayala and G6mez 1987). In most
developing countries it is urgent to establish a more harmonious
relationship between income distribution and economic growth so as
to mitigate social and income inequalities that deepen the pauperiza-
tion of low-income groups. In consequence, they adopt development
plans based in the social economy, in which the struggle against
poverty is identified as one of the main problems to be resolved in
order to improve growth performance (World Bank 1987). From this
perspective, state intervention in the Colombian economy is inescap-
able if inequalities are to be corrected and growth increased.
The stated intention ot the PEAP - a sub-plan within the PSE -
was the satisfaction of the basic needs of Colombians suffering ex-
treme poverty and their incorporation in the broader life of the
country through the application of three basic strategies enunciated
in three plans and several sectorial policies. The PEAP lacked a
diagnosis of the causes of poverty, and confined itself to pointing out
its characteristic manifestations (like malnutrition and poor health).
It indicated the urgency of taking action to eradicate these effects, as
well as to achieve social integration, political participation and re-
habilitation of zones of violence. However, given the endemic crisis
and the deceleration of economic activity in the early 1980s, it was
politically expedient only to draw attention to those factors that
would not awaken the hostility of entrenched interests (Flores: 1987).
Since identifying the character of the economic system as a cause of
mass poverty was believed to give ammunition to communism, the
effects of poverty were treated in a circular manner as if they were its
causes; and mere gestures and palliatives were depicted as real solu-
tions (cf. Galbraith 1980: 37). Thus, for example, malnutrition was
referred to as a cause of poverty, and the person suffering from
malnutrition was assumed too incapable of efficient work and study;
and nutrition programmes were evolved to supply him with food
rather than jobs generated to assure him an income (DNP 1987:
3~2).
According to one line of interpretation, the executive proposed
that social development should be considered the engine of growth,
but came up against the National Planning Department whose plan
contained the central proposal that should be managed separately, a
practice perhaps in accord with the orthodoxy that social policy
consists of spendin~ rather than investment. An alternative view
argued that concern for the vulnerability of the economy always
prevailed over social policy considerations. Innovation in social pol-

icy could occur only if constants in the orthodox management of the
economy were observed, because if these principles were trans-
gressed, crisis would ensue (Flores 1987):
In the words of the deputy director of the National Planning
Department, the aims of the PSE were to be achieved through the
execution of three strategies (Flores 1987):
(1) The strategy of social development sought to improve the quality
of life of the entire population and especially of those unable to contri-
bute to growth or to participate in its benefits. This could be achieved
through provision of primary health care and education, housing, social
security and justice, combined with access to land, credit and technolo-
gy, within the framework of community participation.
This strategy was based upon an awareness of half a century of
neglect of social policy. Table 18.3 shows the relative weight given to
branches of government spending in social welfare and elsewhere.
The gradual expansion of the education budget reflects first a growth
in the number of children attending primary schools as a result of the
demographic explosion of the 1950s and 1960s, and later, an expan-
sion of secondary and higher education as the same age-group
approached entry to the labour market. After a long period of
relative decline of public health spending, whose consequence was
the failure of health-care provision to expand with population
growth, the Barco administration projected an increase in public
health spending consistent with its aim of 'basic health for all by the
year 2000'. The incoming administration projected the spending of
1300 million pesos over the years 1987-90, i.e. 10 per cent total
government spending, or 173 pesos per capita per annum for each of
the 25 per cent poorest of the population. Expansion of social secur-
ity coverage in Colombia has been limited by the high administrative
and operational costs of the existing system. Thus it has been calcu-
lated that to extend social security coverage during the years 1987-90
to embrace workers and their families who were previously excluded
(an estimated 11 052 000 persons in 1990) would require 69 479
million constant pesos of 1987 or 1568 pesos per capita per annum.
The reduction of relative spending by the social security sector
observed in Table 18.3 between 1970-7 and 1987-8 was dramatic.
The projection for the years 1987-90 (1.1 per cent of total govern-
ment expenditure compared to 13.7 per cent between 1970 and 1977)
was inconsistent with the stated aims of the Barco government.
Table 18.4 shows the impact of the crisis of the external debt upon
394 Alicia Puyana
Table 18.3 Structure of central government spending,

by sub-sector, 1970-89
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979
General services 1 17.2 16.7 17.7 16.6 17.1 18.4 18.5 15.4 26.5 25.3
Economic2 31.0 27.3 27.8 32.7 27.9 24.2 25.5 36.3 21.9 26.2
Education, etc. 3 16.9 16.8 20.0 18.6 21.1 21.8 21.4 17.4 21.1 19.6
Health 5.9 5.3 5.6 5.1 5.8 6.4 5.5 4.4 7.5 6.2
Urban and rural 2.6 2.5 2.9 3.1 2.4 2.4 2.2 2.1 3.9 2.9
Social security 12.1 13.3 13.3 12.7 13.2 14.8 15.5 14.7 8.0 9.0
Public debt 5.8 4.8 5.4 5.0 5.8 4.4 4.5 3.3 10.8 10.5
Other expenses n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.05 0.3
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
General services1 25.9 25.3 25.9 28.6 25.4 25.7 24.5 25.6 2.9 27.9
Economic2 24.9 25.9 23.4 20.2 20.3 19.4 15.1 18.5 18.6 17.2
Education, etc. 3 20.0 20.2 21.2 22.0 22.5 19.8 18.8 17.6 16.5 21.7
Health 6.6 6.1 6.3 6.0 5.6 4.8 4.8 4.9 4.9 5.1
Urban and rural 2.6 2.5 2.5 2.5 5.3 1.5 4.8 0.6 7.2 0.5
Social security 8.4 9.1 9.0 9.2 8.8 9.2 7.5 8.1 7.9 8.0
Public debt 10.6 10.7 11.4 11.3 12.0 12.5 20.6 19.1 20.6 23.3
Other expenses 0.04 0.1 0.3 0.1 0.03 7.0 3.9 5.5 2.7 0.7
SouRCE: DANE: Cuentas nacionales 197a-82 for years 1970-77; Controlana

Generate de Ia Republica, lnforme, December 1987 for years 1978-87.
(1) Defence, public order, public administration.
(2) Industry, commerce, transport, communications, electric energy, water supply,
science and technology, etc.
(3) Includes culture, sport, recreation.
(4) Includes agriculture, housing.
n.a.- not applicable.
the structure of new public investment. Following a period of expan-

sion in the early years of the Liberal government of President Julio
Cesar Turbay Ayala (1978-82), new public investment in education,
health and justice fell from 14.3 per cent total new public investment
in 1980 to 8.7 per cent in 1985, and then began slowly to recover.
Table 18.5 shows that, despite a theoretical commitment to pri-
mary education for all by the year 2000 (a feature of the PEAP) the
Barco administration failed to project a significant redistribution of
new education spending to favour the primary sector, and instead
projected a doubling of spending on higher education, to which only
approximately 6 per cent of the population had access.
(2) The strategy of economic growth aimed at reorientating public
investment and stimulating an increase in private investment and
exports, so that all principal sectors of the economy would generate
more basic goods, jobs and foreign exchange.
Table 18.4 Structure of total investment budget by agency
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989
Controlarfa General 0.08 0.32 0 0 0.27 0.02 0 0.03 o.s 0
Presidency 0.07 0.3S 0.7 1.83 2.S6 0.86 3.83 6.4 4.01 3.49
National Planning
Office (DNP) S.42 4.2 4.3 11.66 2.1 2.04 2.11 2.17 2.06 2.6
Statistical Office 0.08 0.09 0.08 0.08 0.26 0.94 1.97 0.06 0.06 {).1
Civil Service 0.03 0.03 0.01 0.02 0.03 0.02 0.04 0.09 0.04 0.04
National Security 0.06 0.02 0 0.27 0 0 0 0 0.07 0
Civil Aviation 0.1S 0.03 1 0.92 0.23 0.23 0.29 0.07 0.42 0.11
Intendancies, etc. 0.66 0.3S 1.3S 0.4 0.32 0.2 0.29 0.33 0.2 0.33
Co-operatives 0 0 0 0.02 0.03 0.02 o.os 0.02 0.09 0.03
National
Government 0.32 0.1 0.16 0.2S 0.32 O.S1 1.11 0.062 1.97 1.21
Foreign Allairs 0.11 0.19 0.01 0 0 0 0.01 0 0 0.07
Justice (ministry) 0.45 0.72 0.65 1.1 0.18 0.39 0.44 0.41 0.72 0
Treasury 18.2 15.7 13.3 4.S 21.7 21.89 21.87 7.09 6.02 12.44
Defence 3.9 2.4 2.2 5.9 11.62 6.23 9.39 8.22 11.62 13.51
National Police 0.6 0.45 0.4 0.7 1.7 1.3 0.46 2.14 1.09 0.53
Agriculture 8.2 6.2 6.3 8 6.86 21.58 12.6 17.07 15.07 14.34
Employment and
Social Security 0.1 0.5 0.04 0 0.09 0 0.03 0.01 0.5 0.02
Public Health 9.1 7.3 6.9 7.8S 5.5 4.3 6.19 7.41 5.1 5.18
Economic
Development 3.9 2.6 5.9 6.11 8.3 9.62 9.68 8.13 18.17 18.4
Mines and Energy 14.7 21.8 23.3 12.2 8.7 6.42 7.45 9.7S 7.3S 3.S
National Education 4.6 3.3 2.6 3.12 S.67 3.71 3.3 4 3.0S 3.0S
Communications 0.14 0.1 o.os 0.1 0 0.1 0.08 0.14 3 0.31
Public Works
and Transport 29 32.3 29.5 33.4 23 19.29 20 2S 19.13 20.72
Public Registry 0 1.2 0 0 0 0.04 0.02 0.01 0.01 0
Justice (local) 0.2 0.11 1.3 1.9 0.36 0.26 4.53 0.3 0.83 0
Auditing 0 0 0.43 0 0.14 0.03 0.01 0.02 0.11 0
Table 18.5 Structure of new public investment in education

197~. per cent
1970 1972 1974 1976 1978 1980 1982 1986 1987 1988 1989 1990
Primary 38.4 40.3 37.9 40.7 46.5 34.9 24.5 11.6 19.5 23.2 33.4 31.8
Secondary 34.1 36.4 40.0 26.9 19.2 16.4 15.3 11.4 7.9 7.9 5.1 16.2
Higher 14.5 15.5 13.4 17.3 18.3 13.6 16.5 24.6 27.9 31.3 39.1 28.5
Others• 13.0 7.8 8.7 15.1 24.8 35.1 43.7 52.9 44.7 37.6 22.4 23.5
• Including sport and recreation, science and technology.
SOURCES: DANE 'EI Sector Publico Colombiano', DNP Documento DNP 2.353
Enero 1988 'Financiamiento de los Programas Educativos del Gobiemo Nacional'
DNP, 1nforme al Banco Mundial de Desarrollo Social, May 1990.
396 Alicia Puyana
(3) The management of the macro-economic policy was intended

to assure the viability of the plan. It stressed control and efficient
management of fiscal expenditure to hold down internal demand; a
stable exchange-rate policy to manage exports and to hold down
internal demand; a stable exchange-rate policy to manage exports
and imports; and control of inflation and low interest rates to pro-
mote investment.
The sectoral programmes envisaged that all major sectors would be
propelled by the expansion of internal and external demand, greater
public spending in social areas, and, responding to market forces, the
growth of private investment in basic goods. Thus, the PSE adopted a
Keynesian perspective in which the 'accelerator' would be triggered if
demand was enlarged and an environment propitious to the promo-
tion of private investment was created. A favourable environment
was understood to consist of a wages and employment policy shaped
by increases in worker productivity, a policy of control and restriction
of the fiscal deficit in order to stabilize prices, of reorientation of
public expenditure towards social spending, and of equilibrium of the
external sector on the basis of a real exchange rate and liberalization
of imports.
The performance of the external sector was understood in terms of
the diversification and promotion of exports, like coal and coal-
related products, and other commodities, like cut ftowers and bana-
nas, in which Colombia has enjoyed some comparative advantage. A
policy of maintaining a stable real exchange rate was intended to
stimulate exports and to attract foreign saving, while improving the
profitability of food production for the domestic market. The ex-
change rate could have a negative impact on the performance of
those sectors with a high dependence on imported components.
The central thrust of the PSE was an increase in employment of
unskilled workers, public works and infrastructure with a view to the
reactivation of internal demand and, consequently, private invest-
ment in productive activities. Nevertheless, doubts arose as to
whether this goal could be achieved, since the task of generating
employment was assigned to a public sector that had simultaneously
to play a large part in reducing the fiscal deficit and paying off the
external debt, and also to perform a dynamic function in redistribut-
ing wealth.
In general terms the PSE was limited to reorientating public ex-
penditure, without identifying clearly the manner in which programmes
of health, nutrition, education and justice would be financed. Insofar
as it spoke of rationalizing public investment and directing it towards

social priorities, but without mentioning budget increases, the Plan
assumed that a drastic change of priorities was feasible. The Plan
assumed too that the support of the multilateral agencies would be
forthcoming; and that structural changes were consistent with
growth, adjustment and stabilization.
FROM FORMULATION TO EXECUTION: RHETORIC AND

REALITY
The PSE established specific objectives to be fulfilled which, if

achieved, would yield real GDP growth of 5 per cent per annum, give
priority attention to social investment programmes and combat urban
and rural poverty. At the same time it would stimulate private
investment and control the budget deficit, keeping it at 3 per cent of
GDP in order to avoid monetary, exchange and inflationary dise-
quilibria (DNP 1990). As Barco's four-year term came to an end in
1990, it became evident that none of these aims had been achieved.
Various exogenous factors had a negative impact upon the fulfil-
ment of production and inflation objectives: a drop in international
coffee prices with adverse effects on public finances, balance of
payments and aggregate demand, and difficulties in production and
exportation brought about by terrorist action and a weakening of
private investment. Delays in disbursements of foreign credit and the
need to maintain fiscal equilibrium under conditions of stagnant
expenditure forced a selective policy to keep up with priority pro-
grammes for social investment. Therefore, public finance could only
partially compensate for the poor pedormance of the remaining
domestic demand factors. For this reason, growth in demand for 1989
was based to a large degree on foreign-derived factors.
In view of these failures, economic policy had to be reorientated
about mid-1988 towards: (1) stimulating agricultural production to
compensate for the slow growth in other economic sectors and to
decrease inflationary pressure generated by shortages of food pro-
ducts; (2) increasing the rhythm of real devaluation in order to favour
competitiveness of domestic production and exports; (3) encouraging
the recovery of credit in the private sector; and (4) using financial
instruments available for increasing the net flow of capital into the
country in order to fund growth.
398 Alicia Puyana
SOCIAL EXPENDITURE AND THE STRUGGLE AGAINST

POVERTY
The basic component of the PEAP was a reorientation of public

expenditure towards social investment programmes. Table 18.6
shows that public investment remained at moderate levels. Indeed,
there were no strong movements compared to the historical trend in
expenditure of previous administrations (Table 18.3). Table 18.7
shows that total government expenditure sustained its share in GDP
throughout the eighties, while social expenditure fell.
Social security acquired a greater share (Table 18.3) within the
composition of public social spending, but it did not have redistribu-
tive effects. Colombia continued to be unique in Latin America in
that the government did not directly finance social security through
transfers: financing came entirely from the contributions of public
and private enterprise and the workers themselves (Coyuntura Social
1989: 14). It was impossible to achieve the objective of broadening
social security coverage, partly owing to resistance from affiliated
enterprises, employers and workers (Puyana Interview, May 1990).
Capital expenditure in the education sector (Table 18.8) was prin-
cipally aimed at higher and secondary education. These did not
feature in the PEAP, which referred only to basic primary education,
which in the years 1986-90 received investments below the levels
prevailing in the 1970s.
Spending on health care showed only minor participation within
public social expenditure. Two major problems were recognized but
not solved. First, no way was found of increasing the number of
patients receiving primary attention (70 per cent of families with
incomes below the minimum wage level could not afford health care).
Secondly, no means of making more efficient use of existing installa-
tions and infrastructure was found. Both problems were unchanged
by Barco's government, for two reasons: first, the refusal of munici-
pal government to take on the expense of basic health care; and
secondly, the impossibility of reorienting spending from specialist
hospital care towards primary and preventive care.
Housing policy was so poorly financed that in practice it did not
constitute one of the basic strategies in the struggle against absolute
poverty. Scarce resources were allocated to the rehabilitation of
human settlements, through the remodelling of already-constructed
urban areas and the supply of public services. The PEAP contained
five specific programmes: family welfare, health and basic education
Table 18.6 Character of public investment in the Plan of the Social Economy 1986-89
US dollars millions Growth,% Distribution, % Comparison, %
1986 1987 1988 1989 1986 1987 1988 1989 1986 1987 1988 1989 1986 1987 1988 1989
Social Investment 1687.8 1959.7 2104.1 2232.2 16.1 7.4 6.1 44.1 47.9 47.5 49.6 100.0 100.0 100.0 100.0
Agriculture &
livestock 59.1 54.1 58.2 76.6 5.9 7.6 31.6 1.3 1.4 1.3 1.7 3.0 3.0 2.8 3.4
Health 836.0 907.3 1019.0 1094.6 8.5 12.3 7.4 21.8 22.2 23.0 24.3 49.5 46.3 48.4 49.0
Education 699.1 823.4 816.3 832.3 17.8 -0.8 2.0 18.2 20.4 18.4 18.5 41.4 48.0 38.8 37.3
Justice 98.17 165.9 204.8 220.8 69.0 23.4 7.8 2.6 4.1 4.6 4.9 5.8 8.5 9.7 9.9
Other agencies 5.53 3.8 6.0 7.9 -31.2 57.9 31.6 0.1 0.1 0.1 0.2 0.3 0.2 0.3 0.4
Capital expenditure 2142.6 2428.4 2326.9 2268.8 -0.6 9.3 -2.5 55.9 52.1 52.5 50.4 100.0 100.0 100.0 100.0
Health 55.3 47.3 77.8 72.9 -14.5 64.5 -6.3 1.4 1.2 1.8 1.6 2.6 2.2 3.3 3.2
Education 59.9 51.5 55.8 65.9 -14.0 9.3 18.1 1.6 1.3 1.3 1.5 2.8 2.4 2.4 2.9
Justice 8.3 20.2 21.3 15.6 143.4 5.4 -26.8 0.2 0.5 0.5 0.3 0.4 0.9 0.9 0.7
Regional & urban
development 170.5 258.3 299.4 370.4 51.5 15.4 23.7 4.4 6.3 6.8 8.2 8.0 12.1 12.9 16.3
Agriculture &
livestock 55.8 99.2 118.6 97.4 77.8 19.6 -17.9 1.4 2.4 2.7 2.2 2.6 4.7 5.1 4.3
Communications 68.7 123.6 204.2 234.3 79.9 65.2 14.7 1.8 3.0 4.6 5.2 3.2 5.8 3.8 10.3
Transport 349.4 375.1 389.8 420.7 7.4 6.3 3.9 9.1 9.2 8.8 9.3 16.3 17.4 16.8 18.5
Mines 576.1 404.8 436.1 378.3 -24.7 7.7 -13.3 14.5 9.9 9.8 8.4 26.0 19.0 18.7 16.7
Electric energy 530.5 170.5 650.5 375.1 -11.3 -25.5 -21.5 13.8 11.5 7.9 6.1 24.7 22.1 15.1 12.1
Others 287.1 278.2 372.7 338.4 -3.1 34.0 -9.2 7.5 6.8 8.4 7.5 13.4 13.1 16.0 14.9
Total investment 3833.2 4088.4 4431.0 4501.0 6.7 8.3 1.6 100.0 100.0 100.0 100.0
w
\0
\0
400 Alicia Puyana
Table 18.7 Total government and total government social spending as

percentage of GDP
Year Total government expenditure Government social expenditure

as % share of GDP as % share of GDP
1980 21.82 7.45
1981 23.97 8.08
1982 23.59 8.14
1983 24.60 8.80
1984 24.86 9.40
1985 23.92 8.04
1986 23.46 7.75
1987 23.37 7.43
1988 24.52 7.21
SOURCE: 'La situaci6n social en Colombia,' Coyuntura Social, 1989, no. 1,

Bogota, p. 14.
for all, supplies of basic goods, integral rural development, and

employment. These were carried out by co-ordinating the activities of
various public agencies, rather than as a programme with operative
and financial autonomy. As a consequence, the following insuperable
obstacles arose:
(1) The presidential advisory board on social development, which
was the agency in charge of co-ordination, had neither its own budget
resources nor the institutional tools with which to commit other
agencies to the development of the programme, and it gradually
became an office for the drafting of diagnoses and recommendations.
(2) Institutions directly committed to carrying out programmes
suffered continuous financial and administrative crises that made
them unable to fulfil stated goals. The Colombian Institute of Family
Welfare did not have enough resources by the end of 1988 to continue
its programme of cr~ches for poor children taken care of by volunteer
mothers. Equally, the main housing agency - the lnstituto Colom-
biano de Cr~dito Territorial - could not overcome its immense
financial problems. Furthermore, its lack of experience in the execu-
tion of home improvement programmes was a factor that reduced the
coverage and prevented the completion of its nationwide housing
programme. The Ministry of Health allocated only 10 per cent of its
budget to basic primary care; and the Institute of Social Security and
the cajas de compensacion familiar rendered service to only 15 per
cent of the population and not to the poorest sectors. The Ministry of
Education was unable to reduce the drop-out rate among primary

schoolchildren since it did not provide free books and materials.
(3) The proposed reallocation of financial resources within these
agencies to favour programmes against poverty did not take place.
Instead, a reduction in the intensity and coverage of social pro-
grammes and in the number of beneficiaries occurred. Bureaucratic
inertia and lack of leadership from above explain these trends.
CONCLUSIONS
The PSE was no more than the continuation of the adjustment

process initiated during the Betancur administration that was
oriented towards achieving growth within a framework of adjust-
ment, based on correction of fiscal disequilibria and the efficient use
of public expenditure. The failure to implement the Plan can be
partly attributed to a lack of essential consultation with crucial
groups: industrialists, landowners, municipal leaders and, above all,
the poor themselves. The absence of popular protest against the
failure to execute the Plan reflected a broader lack of popular con-
fidence in the social policy commitment of the executive.
The pendulum swinging between interventionism and gradualism
once again found its equilibrium point near the latter. In the words of
Hirschman, the 'entrepreneurial functions were stronger than the
redistributive functions'; and the logic of gradualism imposed a dise-
quilibrium model in which the premises favouring economic growth
and the accumulation of capital were strengthened (Hirschman 1977;
Fedesarrollo: 1987). Growth strategy and restructuring of supply
towards the production of basic goods at the desired pace and in the
desired direction were not achieved owing to a lack of executive
capacity on the part of the state, a lack of commitment by the private
sector and little support from multilateral agencies (Flores, 1987;
Puyana, Interview, May 1990). Finally, financing for the plan under
adjustment and stability conditions was shown to be unfeasible (Vari-
ous authors 1987, 1990). It was calculated that the plan required
almost 16 853 million US dollars, that is, almost 4. 7 per cent of the
GDP for the period. The public sector would invest nearly 50 per cent
of its total spending. Transfers of resources from surplus sectors to
deficit sectors were very complex and affected important interests
such as the powerful electric energy sector in Bogota, Cali and
Medellin. At the same time, the principal public sector projects (for
402 Alicia Puyana
example, the metro rail systems of Medellin and Bogota) and in-
creases in military spending took resources from social-welfare
spending. Because only US$7982 million were invested in social
programmes over four years, and of this only US$2329 million were
allocated to the PEAP, 'there is an agglomeration of spending with-
out redistributive effects. The presidential desire to reorientate
spending did not materialize, to the degree needed to overcome
resistance'. (Puyana Interviews, May 1987; May 1990).
There are political and institutional elements that contribute to an
explanation of the contradictions between macro-economic manage-
ment and policy in the eradication of poverty and the slow progress in
the financing of public social expenditure. A lack of political will was
observed at the highest executive level. There was neither discussion
of policy nor resolution of contradictions within policy. The appoint-
ment of experts in the highest economic policy-making positions that
were more committed to orthodox policies than to redistributionism
pointed out the conflict. 'The president did not really "give his all" to
his plan for a struggle against poverty' (Puyana Interviews, March
1987: ratified May 1990a). Furthermore, the plan was to be carried
out within the context of policies of decentralization; and the co-
ordinating unit (the Office of the Adviser for Social Development)
did not have the necessary competence. International agencies and
the World Bank did not allow adjustment measures to be slowed
down; and the finance ministry and the DNP (National Planning
Department), determined to obtain IMF good-behaviour certifica-
tion, did not negotiate any deceleration for fear of losing approval
and consequent new credits, which finally arrived rather late (Puyana
Interview, May 1990). The office of the Adviser for Social Develop-
ment did not have sufficient expertise to present technically convinc-
ing answers to the macro-economic proposals from the D NP, the
finance ministry and the Bank of the Republic (Puyana Interview,
February 1988).
Meanwhile the ruling Liberal party did not feel committed to the
programme because it was not headed by one of its campaign team-
members. This team drew up a plan for the eradication of poverty,
but it was not taken into account by the President or by his advisers.
'Technical advisers, excellent professionals that they are, have no
political influence; nor did they seek the support of Liberal Congress-
men. They cut themselves off and isolated themselves' (Puyana Inter-
view, November 1986).
Colombian political 'stability' under conditions of extreme income
concentration and extreme levels of poverty and violence, could well

be explained in Hirschman's observation that the National Front
coalition (1958-74) had strengthened a 'tolerance of inequality'
(Hirschman 1973), by mobilizing the country around the task of
peace and understanding between the Liberal and Conservative par-
ties. Continuous economic growth reinforced such tolerance, since,
in spite of a tendency toward greater concentration, it stimulated
expectations of improvement. The crisis and adjustment of the 1980s
perhaps reduced this 'acceptance'; but once again the topic of peace
and the need for 'unpostponable' structural political reform seized
the limelight. Thus the proposal to eradicate absolute poverty and
satisfy basic needs had to wait.
Clearly, in the presidential campaign of May 1990, all the candi-
dates- even the leftist M-19 contender (appointed Minister of Health
in August 1990)- made barely a mention of social justice. All focused
their attention on peace, extradition, the treatment to be given to
narcotraffickers and constitutional reform. This vacuum of social
policies may well explain the high rate (60 per cent) of voter absten-
tion.
References
Ayala, U. and G6mez, H. (1987) Debates de Coyuntura Economica. Plan de
Lucha contra Ia pobreza (Bogota).
Bagley, B. (1987) 'Entre Macondo y el Dorado', Revista de Estudios Col-
ombianos, no. 3.
Barco, V. (1986) Hacia una Colombia nueva (Bogota).
Cornia, J. S. (1987) Ajuste con Rostro Humano. Proteccion de los grupos
vulnerab/es y Promocion del Crecimiento (Bogota).
Coyuntura Social (1989) La situacion social en Colombia (Bogota).
DNP (1987) Departamento Nacional de Planeaci6n As£ estamos cumpliendo.
Plan de econom(a social. Aug. 1987.
- - (1990) Programacion Macroeconomica. Anexo: Ami/isis del Desempelio
de Econom(a en 1989.
DNP-Conpes (1986) 'Plan de Lucha Contra Ia pobreza y para Ia generaci6n
del empleo Bogota. Die. 1986'.
- - (1986a) As£ estamos cumpliendo. Po/{ticas generales de /ucha contra Ia
pobreza y para Ia xeneracion del empleo.
FEDESARROLLO (1987) 'El plan de econom{a social Economfa Col-
ombiana, nos 199, 200, Nov., Dec. 1987.
Flores, L.B. (1987) 'El plan de Econom{a Social: Hacia un nuevo modelo de
desarrollo', Econom(a co/ombiana, nos 199, 200, Nov., Dec. 1987.
Galbraith, J.K. (1980) The Nature of Mass Poverty (Harmondsworth).
404 Alicia Puyana
Htrschman, A.O. (1973) 'The change in tolerance for income inequality in

the course of economic development', Quarterly Journal of Economics, 87,
Nov. 1973, 543-63.
- - (1977) 'The turn to Authoritarianism in Latin America and the search
for economic determinants' in D. Collier, (ed.), The New Authoritarianism
in Latin America (Princeton).
Hoskin, Gary (1986) 'Colombia under stress: a presidency lamed by "insta-
bility'", Caribbean Review, XV, 1, Spring 1986.
Palacios, M. (1980) Coffee in Colombia, 1850-1970. An Economic, Social
and Political History (Cambridge).
Presidencia de Ia Republica. Conpes (1986) Plan para erradicar Ia pobreza y
por Ia generacion de empleo Die. 1986.
Puyana, Alicia (1983) 'EI plan de Desarrollo Cambio con Equidad', Econ-
omfa Colombiana, Sept. 1983.
Puyana, Alicia. Interviews:
Nov. 1986. Liberal Senator.
March 1987, May 1990a. Leader of governing Liberal party.
May 1987. Leader of Bank of the Republic.
Feb. 1988. Official from Presidential Advisory Commission on Social
Development.
March 1988a. Leading financier.
March 1988b. Leader of Sociedad de Agricultores Colombianos.
May 1990. M. Ernesto Rojas, presidential adviser responsible for PAEP
co-ordination, 1986-8.
May 1990a Leader of governing Liberal party.
Various authors (1987) Econom{a Co/ombiana, no. 199-200, 1987.
- - (1990) Coyuntura social, no. 10.
World Bank (1987) 1nforme sobre e/ Desarrollo Mundial.
19 Mobilization and the
Quest for Recognition: The
Struggle of Rural Women in
Southern Brazil for Access to
Welfare Benefits
Anita Brumer
INTRODUCfiON
This chapter will examine the campaign by female rural workers in

Rio Grande do Sui for direct access to welfare benefits, in their own
right and not as dependants. This struggle was an element in larger
patterns of social protest in Brazil during the 1980s. These included
the so-called base social movements (which played a critical role in
the process of re-democratization), the growing feminist movement
and rising popular demand for welfare at a time of declining living
standards associated with the emerging debt crisis. FUNRURAL,
established by Complementary Law No. 11 of 1971, provided for
farmers and male rural workers some of the welfare facilities made
available to urban workers under the varguista labour legislation of
1943. The passive acceptance by rural men of this delay is as difficult
to explain as is that of rural women. Only at the beginning of the
1980s did rural women workers in Rio Grande do Sui stage frequent
protests to draw government and public attention to their plight. Why
did women wait a decade after the institution of FUNRURAL to
state their demands? What was the nature of their movement and
how was it articulated? What was the relationship between this
campaign by rural women and problems confronting farmers in
the state?
The answer to these questions requires first a description and
interpretation of the rural women's movement. An analysis of the
character and role of family farming in the agriculture and society of
Brazil is equally necessary. This in turn requires an understanding of
(1) the major changes in Rio Grande do Sui agriculture over the past
405
406 Anita Brumer
three decades, (2) the role of the state in the development of agricul-
ture in Brazil, (3) the part played by political parties, rural labour
unions and other organizations in the search for a solution to the
problems of the small-scale farming sector. Only by considering these
topics will it be possible to consider the feminist character (or not) of
the rural women movement and its chance of success.
SMALL-SCALE FARMING IN THE STATE OF RIO

GRANDE DO SUL
Since the 1960s, Brazilian agriculture has been going through changes
that have forged a new relation with the industrial sector. Agriculture
has begun to consume inputs and machinery from the industrial
sector, on the one side, while supplying it with raw materials on the
other. As a result of this new relationship agricultural output has
become more industrialized before reaching final consumers. Dis-
placing existing landlord and commercial interests, the agro-industrial
complex gained sufficient power to control both agricultural produc-
tion and the income surplus accumulated by agriculture. In addition
to changes in the scale of production brought about by the develop-
ment of the agribusinesses, there were qualitative transformations in
the way small farms structured and organized themselves. In order to
survive within this type of productive system, farmers had to alter the
production process. This could be done only through the generation
of surplus output and the use of credit.
The modernization process was not homogeneous. It affected basi-
cally large and middle-size farms and agro-exports grown in the south
of Brazil. It had, as pointed out by Silva (1987), an exclusive nature,
for it affected only a portion of the total number of farms. It was also
partial in the sense that it did not affect all the phases of the produc-
tion cycle of the main agricultural commodities. As a result there
were high seasonal rates of rural unemployment and an increase in
rural migration which aggravated the crisis of the cities.
But modernization did affect small-farm structures in some re-
gions. As a result, a process of social differentiation among family
farmers took place which led to impoverishment or enrichment. It
culminated in the elimination of many family farmers (vertical pro-
cess of differentiation by classes) and a separation between family
farms that modernize and those that do not (process of horizontal
differentiation).
Mobilization and the Quest for Recognition 407
The process of social differentiation, which has not yet been com-
pletely defined, evolved in three basic directions: (a) depuration of
capitalist relations of production in large farms; (b) strengthening of
an important segment of capitalized family farmers; (c) creation of a
group of impoverished small farmers who remain excluded from the
mainstream productive system due to their low productivity (Sorj
1980: 12). These three directions, which may present different charac-
teristics according to region, technology and/or type of product, have
their own contradictions and specific problems.
Following the transformation of Rio Grande do Sui agriculture
over the past few decades, three types of family farmers can now be
identified. The contradictions faced by these farmers are the indirect
or direct causes of their participation in the social movements.
Firstly, there are mechanized farmers, producing soya beans and
wheat. These crops require the use of inputs and machinery,
regardless of farm size. This makes mechanized farmers extremely
dependent on government agricultural policies which have been un-
favourable to their interests lately. A large number of these farmers,
stimulated by their co-operatives, began in the 1980s to diversify
production in order to reduce the risk of failure. Other farmers,
however, due to previous investments continued to specialize in
wheat and soyas. Mechanized and/or specialized farmers make use of
normally abundant family labour. Those family members not needed
during the slack season seek jobs outside the rural sector or join Rio
Grande's army of landless peasants. Part-time workers are hired
during periods of peak demand on the farms. The main contradiction
faced by these farmers is the appropriation of their labour and
income surplus by the industrial and financial capitalists. They are
permanently pressed by the need for capital which leads them ulti-
mately to higher indebtedness and lessens their control over market
forces. Changing interest rates, unstable weather conditions, and the
government's policy of setting market prices for agricultural com-
modities at levels that are below costs of production make farmers
vulnerable.
Secondly, there are farmers who supply agro-industries. Their
main cash operations are fruit. for industrial processing, wine, tobac-
co, poultry and hogs. These are produced by family labour and
occasional hired hands. Most of these products have high costs of
production due to outlays on inputs and investments made in accord-
ance with the technologies established and imposed by the processing
firms. These companies are normally interested in intensifying and
408 Anita Brumer
homogenizing the production process. High expenditure on inputs

and heavy capital investment make farmers vulnerable to the system
of product classification, acquisition rules and cost of production
calculations, controlled by the agro-industries. Price policy is usually
established by the government in favour of agro-industries, increas-
ing, therefore, the vulnerability of the farmers. As with mechanized
farmers, the main contradiction faced by this second group is the
appropriation of their labour and income surplus. They are forced to
increase production by consequently longer working hours. As sug-
gested by Beskow (1979), under this form of articulation between
agriculture and industry, the private ownership of land held by the
small farmer and even the independent character of his production
can be questioned.
Thirdly, there are traditional self-sufficient farmers. They produce
a diversified mix of commodities, mainly for their own consumption
with a small surplus sold on the market. Frequently they farm small
plots which they do not own and where the soil is depleted. They are
usually poor and make use of outdated technology. The appropria-
tion of the income surplus of these producers is basically accom-
plished through the following means: payment of a percentage of
total revenue and/or total output to the landlord; provision of labour
to the owner of the land for low wages (below rates prevailing in
regional labour market); high-cost credit or the supply of overpriced
inputs or staple goods (Beskow 1979). This group is virtually extinct.
They have become temporary wage workers on farms managed by
the modern farmers or have migrated to the large cities in search of a
job, better education and social welfare benefits.
All these groups of farmers were dependent on State social welfare
for they did not normally possess resources to cope with illnesses and
retirement.
RURAL BRAZIL: THE STATE, FARMERS'

ORGANIZATIONS AND POLITICAL PARTIES
Since the 1964 military coup, the State in Brazil has changed. Backed
by the bourgeoisie, it became authoritarian and, in the beginning,
repressive. Gradually, however, repression was replaced by other
subtle forms of economic and political-ideological domination. The
integration of rural areas into this authoritarian structure was
effected by: (1) the suppression of traditional, mass, independent
rural labour organizations composed of family farmers and wage

workers and their replacement by new state-controlled labour unions
whose purpose was to provide social assistance rather than defend
class interests; (2) Government incentives for the organization of
marketing co-operatives and dissemination of new technologies; (3)
official support for co-operatives, research agencies and extension
services; (4) reorganization of land policies and adjustment of the
agrarian structure; (5) expansion of the mass media and educational
services as mechanisms of ideological penetration.
The Rural Workers' Statute (Law No. 4214 of March 1963) regu-
lated vacations, labour agreements, minimum wages and the em-
ployment of minors and women. It extended to rural workers benefits
that already applied to urban workers. Subsequently, the Land Sta-
tute (Law No. 4504 of December 1964) established the principles of
agrarian reform and provided conditions for the modernization of
agriculture. These laws were enacted with the purpose of regulating
rural labour relations and creating a modern capitalist agricultural
sector in the face of opposition from traditional landowners. But
neither statute was enforced. 'The reformist aspect of the Land
Statute faded with the surge of new political alliances after the 1964
military coup. The aspects of the law related to a rural develop-
ment oriented towards a capitalist enterprise system prevailed over
the reformist aspects, to the extent that they gradually became the
sole force influencing government agrarian policies.' (Delgado 1985:
43-4).
Social welfare was extended to rural workers only in 1971 with the
organization of FUNRURAL which was intended to facilitate the
implementation of the new modernization project. This was achieved
by granting social welfare benefits to the rural workers and making
use of these benefits to neutralize the demands of the rural labour
unions. The benefits available to the rural workers remained limited
and significantly less than those granted to the urban workers.
Gradually, rural workers came to realize how restricted the benefits
were. The chronic insufficiencies of the social welfare system were
aggravated by the farmers' deteriorating living conditions caused by a
fall in urban employment between 1974 and 1981 and no possibility of
assimilation into the industrial work force after 1981 (Delgado 1985).
Migration to the cities no longer offered an escape from rural pov-
erty. In 1983 the FUNRURAL was integrated to the INPS-INAMPS
system without significantly increasing the benefits allotted to rural
workers.
410 Anita Brumer
For most family farmers, the state came to replace the large land-
owner as a source of general assistance. The state is called upon to
provide health services and credit and is sometimes seen as a power-
ful agent in solving social conflicts. On the other hand, the state is
perceived by the farmers as disjointed since each government minis-
try is in charge of certain specific areas. Subjects related to wage
workers are determined by the Ministry of Labour. Land-related
matters fall within the competence of the Ministry of Agrarian Re-
form and Development (MIRAD) substituted for the National
Institute for Colonization and Agrarian Reform (INCRA) in 1985.
Matters related to the social welfare system are dealt with by the
Ministry of Welfare and Social Assistance.
The distribution of responsibility for the subjects of interest to the
family farmers and rural workers among different government minis-
tries contributes to the segmentation of social protest movements. As
a result of this strategy, wage rural workers and peasants integrated
into agro-industries are dissociated from the agrarian issues that
confront farmers. (Grzybowski 1987: 81). Similarly, family farmers
join large capitalist producers in their struggle for better commodity
prices without the participation of wage workers and landless
peasants. According to Gohn (1985: 37) it can be concluded that the
state's handling of the popular movements bears the following traits.
It 'espouses the interests of certain groups, is conflict soothing, is
participative, is confusing and has an integrative aim'.
The attachment of the rural labour unions to the state was carried
into effect by means of union placement criteria. Depending on
property size, family farmers became either members of the rural
union- representing large farmers' interests- or of the rural workers'
union which represented small family farmers, wage workers and
landless peasants. Participation in one or the other of these organiza-
tions was ensured by using the unions and their structure for the
distribution of welfare benefits. For example, dental surgeries were
set up at union headquarters. Documentation for retirement peti-
tions, hospital care and medical treatments was also centralized at
union offices. Rural unions are politically weak and ineffective in
defending the interests of all of their members. The ineffectiveness of
the rural unions tends to increase in those regions where social
differentiation among family farmers is greatest.
Co-operatives are another mechanism for segmenting the rural
community. Co-operatives were the main agents used by the state to
promote modernization. 'The co-operatives - which provide credit
and inputs - are entities used by the state to discipline small farmers.
These organizations can be easily penetrated and manipulated by the
State because of their management tendency to remain aloof from
the needs of associates and their dependence on the State material
support and legal authorization'. (Sorj and Wilkinson 1983: 181).
Since the late 1950s a large number of co-operatives have been
founded around the wheat-soyabean belt in the State of Rio Grande
do Sui. The co-operatives, united by a federation named FECOTRI-
GO, rapidly expanded their activities in the 1960s and 1970s, dealing
with agricultural inputs, transportation, grain storage, industrial pro-
cessing and grain marketing. The provision of education and techni-
cal assistance to members was also used by the co-operatives as a
means of extending their influence. The diverse activities of some
co-operatives enabled them to harness such political and economic
power that they became, for the small modern farmers, virtual lob-
bying agencies. Both the co-operatives and the rural unions had a
policy of not accepting women as members except in those cases
where women headed a production unit.
Extension service agencies constitute another form of rural orga-
nization. These were set up after 1948 following the North American
model. Their purpose is to modernize agriculture by diffusing tech-
nological progress. Technical information is relayed to male farmers
by male extensionists based on the assumption that the women are
dedicated only to household affairs, not being interested in profes-
sional matters related to agriculture. At the same time female exten-
sionists cater to rural women and transmit the fundamentals of
hygiene, health and nutrition to them. These agencies along with the
schools and other organizations are responsible for applying the
state's vision of the gender division of work in agriculture.
Catholic and Lutheran churches, represented by the Pastoral Land
Commission (CPT), constitute yet another mediatory force to act
between the state and the rural workers. They have been supporting
rural workers' organizations in the defence of farmers' class-interest
in the face of changing social relations. The adherence of ample
sectors and classes of Brazilian society has made it possible for the
Churches to exercise political power within their own ideological
limits and constraints imposed by other groups such as large land-
owners. Although the Churches have demonstrated solidarity with
capitalist family farmers in their claim for higher commodity prices,
the predominant focus of action by the Churches has been in the
struggle for land. As for political parties, their action in the rural
412 Anita Brumer
areas has been extremely limited. Only recently have some parties
made an attempt to correct this omission. For example, the Workers'
Party (PT) was active in the campaign against the construction of
dams and in the movement of landless peasants.
In opposition to the movements of the landless peasants and agra-
rian reform, the large landowners and cattle-raisers founded in 1985 a
national counter-revolutionary organization named Rural Demo-
cratic Union (UDR). It sought to collect funds to finance the struggle
against agrarian reform - including the formation of militias - and
gain support in the federal congress. In 1987 the UDR had the
explicit support of six senators and sixty deputies.
THE MOBILIZATION OF RURAL WOMEN IN THE

STATE OF RIO GRANDE DO SUL
As from 1978 a number of popular social movements erupted in

Brazil following the liberalization (abertura) of the military regime.
These movements were subsequently sustained by the growing econ-
omic crisis. The military dictatorship in power since 1964 had in-
stalled a regime of repression in which the labour unions, the political
parties and the press were controlled by the state. The changes in
agriculture brought about by capitalist modernization made small
farmers increase their market-oriented output and clearly expanded
the participation of women in the so-called productive sphere. The
gender work-division changed partially. The traditional allocation of
the 'productive sphere' to men and the 'household or child care sphere'
to women came to be questioned by women. Women's partici-
pation in productive farm chores was previously regarded by both
men and women as a 'help'. Although women's participation in the
market-oriented production of the farm increased, they continued to
perform traditional domestic activities. But given their increasing
work on the farm, women began to demand recognition and 'pay' for
their labour. An awareness of the family's relative impoverishment
and wives' determination to avoid a dispute with their husbands over
the equal sharing of farm revenue - which could jeopardize family
unity- made both sides, men and women, turn to the state.
The beginning of female peasantry mobilization in Rio Grande do
Sui occurred in a context of a deficient social welfare system and a
crisis of the family farm production. At first they demanded that
existing social welfare benefits already available to male heads of
rural households should be provided to women in their own right and

not as dependants. This struggle can be placed within the broader
context of claims made for the improvement of the state social
welfare provided to rural workers. The provision of social welfare
benefits to women implies a recognition of their status as autonomous
workers, co-responsible for the farms. As participants in agricultural
production, women are affected by the problems of small farm opera-
tions. These problems are subsumed in claims directed at the social
welfare system.
The Second National Congress of the Rural Workers, organized by
the CONTAG (National Confederation of Rural Workers) in Bra-
silia in 1973, attached to its programme demands relating to the
welfare of female rural workers. These included family wages,
maternity assistance, work accident aid and pensions. Female rural
workers from Rio Grande do Sui did not join in this campaign. Their
participation in union movements was almost non-existent at this time
because the rural workers' union was basically a male preserve in
charge of- as perceived by a lot of small farmers - the distribution of
state social welfare benefits. The first meetings organized by the
union of rural workers to discuss farmers' welfare problems took
place in the Northern counties of Rio Grande do Sui in the late 1970s.
Those meetings came about due to the complaints and discontent of
small farmers with the precarious services and assistance they were
receiving.
The emergence of the larger movement and the greater mobiliza-
tion of the women in the regions of modern agriculture in Rio Grande
do Sui can be explained by various circumstances. First, the fragile econ-
omic situation of farmers brought about by the high cost of produc-
tion of specialized market-oriented operations. Second, the region's
tradition of mass mobilization. This increased farmers' consciousness
and developed their sense of self-reliance in confronting different
state agencies. A third factor was the calibre of existing local lead-
ership in co-operatives, rural workers' unions and church-oriented
community organizations.
As has been stated, welfare benefits received by the farmers were
less than those obtained by the urban workers. The relative disadvan-
tages of rural workers vis-a-vis urban workers, arose not only from
the type of benefits they receive (for instance, no right to sickness
benefit, maternity assistance, etc.) but also due to the lower value of
retirement pensions and the poorer quality of rural hospital facilities.
Due to the fact that the female peasants are legally considered
414 Anita Brumer
economically dependent on their husbands, they only benefited mar-

ginally from the welfare system. Their rights were limited.
One of the obstacles to the inclusion of women as beneficiaries of
social welfare was the method by which farmers contribute to the
system. Unlike rural and urban waged workers who pay contributions
to the social welfare system based on their salaries (a percentage is
also paid by the employers), farmers pay a percentage based on their
total annual revenue. The rationale behind this form of contribution
is that farmers earn cash only once or twice a year after marketing
their production. Very few farmers would be able to make monthly
contributions. This foils the inclusion of the women as contributors
since Brazilian legislation considers only one head for each family
unit - usually the man. All other family members were treated as
dependants. The sale of the farm production is registered under the
name of the male or female production unit head and only he or she is
a direct beneficiary of the social welfare system. In order to include
women as beneficiaries (rather than as dependants) it became necess-
ary for them to register as wage workers and or as co-responsible for
the production unit.
During the Third National Congress of the Rural Workers, held in
Brasilia in 1979, male and female rural workers' welfare was again
part of the programme. The participation of women from Rio
Grande do Sui was this time more significant than in the previous
congress. The main social welfare related demands posted during the
congress were (1) the right to retirement based on age for the wives
or female companions of rural workers; (2) a reduction of retirement
age to 55 for men and 50 years for women (these were the ages at
which urban workers could retire); (3) extension to women of invalid-
ity pensions; (4) increase of the pecuniary benefits to a level at least
equivalent to the highest regional minimum wage; (5) equalization of
rural and urban workers' benefits, namely sickness allowance,
maternity grant and allowances, family wage, work accident relief
and retirement based on years of work, not age. Other demands
called for an improvement in medical and hospital services. (Anastas-
sakis 1983). Nevertheless, although during the Second and Third
National Congresses reference was made to rural workers'- and their
wives'- welfare, the main topic addressed was agrarian reform.
The first large mobilization focusing on the problems of rural
women in Rio Grande do Sui took place during the First Congress of
the Female Peasantry in August 1982. During that meeting the 'Char-
ter of the Female Peasantry' was written. It listed grievances against
the concepts of 'family unit' and 'head of a family unit' contained in

existing legislation. Both concepts discriminate against the female
peasantry because they do not provide women with invalidity benefits
and retirement pensions which are considered only a man's privilege
(Zero Hora 31 May 1983: 35). Several other mobilizations were
reported across the state in following years. The union of rural
workers sponsored meetings to address the topic of extending welfare
benefits to women but many meetings ended up discussing other
topics connected to problems faced by rural workers. This diversion
was influenced by the male leadership which was not interested in
stimulating a discussion about women's issues.
One of the main objectives of protests staged by women and rural
workers in general was to obtain visibility and to draw the attention
of the authorities to their problems. Initial protests led by female
rural workers gained massive state press coverage because of the fact
that all other peasant struggles were led by men. Although press
attention subsequently declined, particularly large demonstrations
led by women continued to command widespread coverage. Protest
was also designed to sustain the women's movement and articulate
their claims in the political arena.
Of all the meetings held by the rural women in Rio Grande do Sui
at this time, two deserve special attention, namely the First Meeting
of Regional Rural Women held in the city of Porto Alegre (state
capital) in October 1985, attended by around 10 000 female farmers,
and the March 1986 encounter in the city of Ronda Alta with 1000
female participants. The concluding deliberations of the 1985 meet-
ing were threefold. They demanded (a) the right of female peasants
to unionize; (b) official recognition of their 'worker' status; (c)
equalization of their social welfare benefits with those received by
urban female workers. In addition to the above-cited requests, the
women also sought 'a clear agricultural policy; allocation of property
taxes owed by large landowners to agrarian reform purposes, and fair
prices for agricultural commodities' (Zero Hora, 20 October 1985).
This meeting, which had been sponsored by the rural workers' un-
ions, the FETAG, and the Pastoral Land Commission, surprised the
organizers. A journalist reports: 'It was a demonstration of force, a
proof of the mobilizing and organizing capacity of women to their
husbands and other unionists. From now on, there will be changes in
the traditional unions of rural workers and the FETAG (Zero Hora,
8 October 1985: 26).
Around 1000 women from Ronda Alta, backed by the rural workers
416 Anita Brumer
union and Pastoral Land Commission, staged a protest in March

1986. Their written demands were delivered to the chief doctor of the
local health post, to the co-operative, to the city mayor and to the
manager of the local branch of the Banco do Brasil. From the local
health post they sought the right to participate in the operation of
integrated health actions. This was being blocked by a doctor. From
the management of the co-operative they sought the allocation of 25
per cent of the funds channelled to the FUNRURAL for the con-
struction of a community hospital. From the mayor they required
transport services to nearby localities and support for farmers' strug-
gles. From the Banco do Brasil they sought lower interest rates. The
protest march ended with a religious ceremony at the local church.
(Zero Hora, 9 March 1986: 29).
As the movement progressed, the demands of women increased
and became more complex. Different organizations also began to
lend support and tried to play a leading role. In the beginning
women's demands referred only to inclusion as direct beneficiaries in
the social welfare system. Gradually, however, they included an
expansion and improvement of already existing social welfare ser-
vices plus the women's classification as 'workers', or as individuals
co-responsible for the production unit. Later on, as operational dif-
ficulties for the organization of the movement were confronted, the
issue of union organization gained importance. Unionization was
inhibited by the same factor that hindered women's participation in
the co-operatives and welfare system: legally only one person re-
sponsible for the production unit could be a member and that was
usually a man. Finally, the following problems affecting agricultural
production were targeted by the women's movement: price policy,
interest rates, financing and subsidies for production, and agricultural
insurance.
There are two major aspects underlying the women's movement:
the search for a professional identity and the establishment of a
female identity. In seeking a professional identity, the movement
stresses the familial side of farm production and the need of the union
to defend class interests. In this sense, it seems that the women's
movement - in spite of the limitations imposed by its complex nature
- has made greater progress than other rural movements that arose in
the state of Rio Grande do Sui. The establishment of a female
identity emerged as a consequence of the issue of professionalism.
Resistance imposed by husbands and male peasants against their
demands for 'unit co-responsibility' has stimulated women's under-
standing of their particular circumstances. The search for pro-

fessional and female identities can not be dissociated from the broad-
er agricultural context. That is, farmers' struggles for better living
conditions are connected with the fight for family preservation. This
may conflict with the search by women for a professional and female
identity. This is due to the family nature of the production unit and to
women's identification with the family. On the other hand, women's
recognition as 'farmers' involves questioning male domination, bring-
ing as a consequence the man-woman family relation into evidence.
In protests by female peasants, claims have been laid that range from
the generic - problems of small farmers as a whole - to the specific -
inclusion of women as direct beneficiaries of the social welfare
system.
As indicated by Carneiro and Lavinas (1987), 'It is not a question
of infringing the patriarchal order that governs the family relations -
which could shake the foundations of the family. On the contrary, it
is a question of consolidating its permanence. The effort of resuming
the propagating conditions of the family hides a more important
question: sustaining the only space for the definition of the feminine
genus and construction of a social identity. The deeper the crises, the
stronger the woman-family symbiosis.'
The movement of peasant women did not acquire a political charac-
ter in spite of its initial role in helping to focus the attention of groups
opposed to the government political party (ARENA). During the
1982 campaign for the election of state and municipal assemblies, the
support lent by PMDB candidates (mainly women) to the movement
became clear. Once elected, some candidates continued to support
the movement and to stimulate women's demands, others - clearly
political opportunists - did not. The leaders of the rural women's
movement, however, stated their autonomy from political parties.
This distancing from party politics may be partially explained by the
'abandonment' of the movement by opportunists in 1982. But it may
also be explained by fears that the autonomy of the movement may
be weakened as the result of attempts by the political parties, by the
union of rural workers, by the Pastoral Land Commission (CPT) or
by EMATER (State Extension Agency) to lead the women's orga-
nization.
Among the achievements of the movement were the provision
of concrete proposals for the inclusion of female peasants as
beneficiaries of the social welfare system. New Brazilian legislation,
written by the National Constituent Assembly, was expected in
418 Anita Brumer
1986-7 to take into account claims made by women and the rural
population generally. During the first voting session of the Constitu-
ent Assembly the following benefits were approved: retirement at
age of 55 for the women and 60 for the men, or, retirement after 30
years of work for the women and 35 for the men; no retirement
pension to be inferior to the country's minimum wage (this will
double the current retirement pensions received by the rural work-
ers); extension to rural workers of most benefits already obtained by
urban workers. Pressure by women also resulted in the creation of
departments in charge of women's issues by the rural unions and, in
some cases, the inclusion of women on union board of directors.
Since there is no single statute for all unions, the inclusion of women
as union members is decided at an individual level. In some unions,
female members pay an additional fee corresponding to 50 per cent
of their husband's contribution. In others, the fees owed by the
men are equally divided between men and women. It remains to
be seen, though, what the magnitude of female participation will
be. There are signs that it will be only symbolical. Only time will
tell what the effect on man-woman relations in the union and
home domains will be.
CONCLUSIONS
The mobilization of women from the state of Rio Grande do Sui and
their demands for access to social welfare benefits is part of a broader
struggle. As the context of these struggles becomes more clearly
defined through the identification of allies and enemies - stressed by
the alliance and opposition of interests between farmers and agro-
industries, between small farmers and financial capital, between
small and large farmers, between farmers and the state, and between
those who own land and those who do not - the formating process of
a new peasant identity is reinforced. It has not been possible, how-
ever, to detect the existence of a 'peasant ideology' that attributes a
basic value to family work and a separation from the market econ-
omy. Peasant identity arises mainly from the perception of social
inequalities, lack of freedom, and lack of institutional channels
through which demands can be conducted. Living in a capitalist
society, exposed to the urban mass media - which promote a
bourgeois lifestyle - small farmers see in the private ownership of
land their guarantee of survival. They long to climb the social ladder
and frequently wish for their children less demanding work and a
better, more lucrative urban career.
Comparing the movement of female peasants with other social
movements, for example the struggle for agrarian reform, the former
has better chances of attaining its objectives. This happens because
women's claims do not collide with the interests of the large landown-
ers or of any other social class. Besides, public opinion seems to
favour the extension of citizenship to the less privileged classes be-
cause conflicts are eliminated - specially if the additional financial
costs are shared by society as a whole. On the other hand, the state's
acceding to women's demands means not only less social tension in
the rural areas but also a reduction in the rural-urban migration with
consequent relief for the urban crisis. In short, it means the continua-
tion and legitimization of the bourgeois state. As women's demands
mix with the more general claims that affect agriculture as a whole,
and family farming in particular, the future of the movement remains
unpredictable. Equally unpredictable is the way the movement might
affect the peasantry's consciousness as a social class, the roles of men
and women within the family and the role of family farming in
agriculture.
References
Anastassakis, L. (1983) 'A mulher e a legisla~ao rural'. In: Toscano, Moema
(org.), Mulher rural; contribui~iio aoestudo da mulher no campo (Rio de
Janeiro), (s.ed.) pp. 3-19.
Berlan, M. (1987) 'Les paysannes dans Ia rue; division du travail de mani-
festation dans l'agriculture depuis 1970'. Paper presented in the meeting
Les Agriculteurs et Ia politique depuis 1970, promoted by the Association
Fran~aise de Science Politique, Paris: 30 November, 1-2 December. 24pp.
Beskow, P.R. (1979) Agricu/tura e capita/ismo no Brasil (Rio de Janeiro).
Brumer, A. (1985) 'As lutas no campo no Rio Grande do Sui (1964-1983)'.
Revista do lnstituto de Filosof£a e Ciencias Humanas da UFRGS, XIII, pp.
198-218.
Camiero, M.J. and L. Lavinas (1987) Femmes: espace acquislespace permis a
l'heure de Ia reforme agraire (Rio de Janeiro).
Cotrijornal. Ijuf (1987) August, no. 147.
da Silva, J .G. (1982) A moderniza~iio dolorosa; estrutura agraria, fronteira
agricola e trabalhadores rurais no Brasil (Rio de Janeiro).
- - (1987) 'Mas, qual Reforma Agraria?' Reforma Agraria XVII, 1, 1987,
pp. 11-60, April-July.
Delgado, G. da Costa (1985) Capital financeiro e agricu/tura do Brasil (Sao
Paulo).
420 Anita Brumer
dos Santos, J.V.T. (1982) 'Movimentos camponeses no sul: produto e terra

(1978-1981)'. Reforma Agraria XII, (3), 1982, pp. 31}-54.
Gohn, M. da Gl6ria Marcondes (1985) A forfa da periferia; a /uta das
mulheres por creches em Siio Paulo (Petropolis).
Grzybowski, C. (1987) Caminhos e descaminhos dos movimentos sociais do
campo (Petropolis).
Lagrave, R.-M. (1985) 'Egalite de droit, inegalite de fait entre hommes et
femmes en agriculture, comme dynamique du changement social'. Conne-
xions XXXXV, 1985, pp. 93-107.
Sorj, B. and J. Wilkinson (1983) 'Processos sociais e formas de produc;iio na
agricultura brasileira'. In: B. Sorj and M.H.T. de Almeida (org.)
Sociedade e politica no Brasil pos-64 (Siio Paulo), pp. 164--90.
Sorj, B. (1980) Estado e c/ases sociais da agricultura brasileira (Rio de
Janeiro).
Wilkinson, J. (1986) 0 Estado a agroindustria e a pequena produflio. (Sao
Paulo/Salvador).
Zero Hora (daily newspaper) Porto Alegre.
20 Non-Governmental
Organizations and
Development in Brazil under
Dictatorship and Democracy
Anthony Hall
INTRODUCfiON
Non-governmental organizations (NGOs) have, over the past two

decades, come to be recognized as a significant force for develop-
ment, not simply in terms of alleviating material poverty but also for
promoting social justice and human rights. This is true all over the
developing world, and nowhere more so than in Latin America,
including Brazil. The term NGOs (or PVOs - Private Voluntary
Organizations - in US terminology) embraces a wide variety of
organizational forms, ranging from small grassroots community as-
sociations to intermediary bodies working with client groups, the
Church, trade unions and comparable lobby organizations as well as
large, international funding agencies. In the industrialized countries
there are over 2000 NGOs involved with Third World development,
concentrated overwhelmingly in Western Europe and North Amer-
ica. In the developing world NGOs are most concentrated in Asia
(India has over 7000, for example) and in Latin America where they
number several thousand, while in Africa NGOs are a more recent
phenomenon (Schneider 1988). Brazil currently has well over a
thousand (Landim 1987); in addition and most crucially, many Euro-
pean, US and some other overseas funding bodies are active in
Brazil, sometimes operationally (implementing projects) but more
commonly providing the bulk of financial resources necessary for
NGOs there to carry on their work.
NGOs have commonly been dismissed as marginal to the develop-
ment effort, which has been seen by many observers as the exclusive
territory of official agencies. This view, however, now holds little
water and it is clear that voluntary organizations do indeed have a
unique role to play in helping to fill the void created by the inad-
421
422 Anthony Hall
equacy of large-scale, officially funded projects and programmes in

promoting socio-economic progress. According to OECD figures
some 11 per cent of all international development aid (US$ 3.3
billion) originates from NGOs, while 16 per cent is actually chan-
nelled through NGOs if co-funding arrangements are included (Brod-
head 1987; World Bank 1986). Their advantages in terms of small
project size, relatively close monitoring of progress and direct deliv-
ery of goods and services to client groups, moral commitment to the
poor and independence from government interference enable NGOs
to play a distinctive role in the development process, and one which is
increasingly recognized and valued by decision-makers (Drabeck
1987; Schneider 1988).
The purpose of this chapter is three-fold; (1) to examine briefly
the emerging roles of NGOs in Brazil over the past three decades
or so; (2) to consider their current nature and function within the
country's post-1985 democratic political climate; and (3) to high-
light some of the constraints faced by NGOs in achieving the more
ambitious goals set for them during the 1980s both as a check
upon, and complement to, the official machinery of development
policy-making and implementation. Several of the observations
made here will apply equally well to NGOs in other countries and,
indeed, other continents. However, many of the arguments will be
specific to Latin America in general and Brazil in particular, by
virtue of the traditionally antagonistic relationship which has al-
ways existed between official and unofficial bodies involved in
promoting 'development'. In contrast to Asia and Africa, where
there is a stronger tradition of collaboration between government
and voluntary agencies, NGOs in Brazil have seen their major role
as opposing the state which, as in most Latin American countries,
is perceived as essentially hostile to 'popular' interests.
THE CHANGING ROLES OF NGOs IN BRAZIL
To an overwhelming degree NGOs are a product of the socio-

political environment in which they are formed, responding to the
changing demands of populations in need. Thus, over the past thirty
years, they have been through a clear evolutionary process. Several
authors have already made reference to this broad transition in the
major functions of NGOs in the Third World (Brodhead 1987;
Korten 1987; Elliott 1987; Schneider 1988). Despite variations in
Non-Governmental Organizations in Brazil 423
the precise terminology, they all point to three major stages which
characterize the flexible and adaptive roles of NGOs; (a) welfare and
relief (1950s-late 1960s), (b) self-reliant local development (1970s),
and (c) empowerment, lobbying and brokerage (1980s). The above
distinctions are important for, clearly, these phases in NGO growth
are based on vastly different assumptions about the root causes of
poverty and injustice, about the methods by which underdevelop-
ment and oppression may be most effectively dealt with, and about
the relationships between the state and civil society in this process. Of
course, these are not mutually exclusive categories and may well
co-exist within society and even within a single institution at any
given moment, but they do nevertheless reflect a noticeable shift in
the ways in which many NGOs perceive their major purpose.
During the 1950s and most of the 1960s many NGOs in Brazil were
concerned primarily with providing short-term relief from poverty and
malnutrition, both for on-going welfare and in response to sporadic
disasters such as the north-eastern drought; food aid, shelter and even
donations of clothing were common forms of assistance provided to
meet families' immediate needs. Larger international agencies such as
Catholic Relief Services (CRS) and national bodies such as the Brazi-
lian Legion of Assistance (LBA) were active in this field, as well as
smaller NGOs, domestic and foreign. Shortages of essential goods
and services were seen as the fundamental problem to be tackled by
NGOs, while fund-raising was conducted exclusively through the
image of the 'starving child', portraying the Third World poor as
passive victims of climatic and other natural vicissitudes rather than
as classes exploited by domestic and global socio-political forces.
Hence, a humanitarian response was deemed to be the most
appropriate, giving to the poor the goods and services which they
lacked to meet their basic needs. This approach is, of course, still a
major driving force behind many NGOs and comprises at least part of
the work of even some more progressive and forward-looking orga-
nizations working in Brazil, particularly in response to frequent natu-
ral disasters such as drought and flood where government assistance
is often late, inadequate or fails to reach the target population.
However, the limitations of a residual welfare approach as a
longer-term development strategy were soon realized. Although
adequate for solving more immediate, short-term problems such as in
disaster situations, it could not meet people's needs on a more
self-sustaining basis. During the 1970s, therefore, a developmentalist
model emerged in Brazil which paralleled growing international
424 Anthony Hall
concern with meeting 'basic human needs' and instituting an 'aid-

to-the poorest' approach (ILO 1976; World Bank 1975). Increasing
emphasis was placed on small local community projects designed to
provide poor groups with the means to achieve 'self-reliant develop-
ment'. This somewhat cliched phrase epitomized the ideal held by
many donors that projects could not only be 'appropriate' to people's
needs but also self-financing in the long run and even replicable on a
wider basis, and would continue to operate once the funding agency
had withdrawn its support.
Such 'second generation' strategies (Korten 1987) in a general
Third World context do not tend to address the root causes of poverty
as such, nor are they concerned with broader policy issues; attention
is focused rather on specific communities and neighbourhoods being
helped by the NGO. Rather in the mould of the official Community
Development movement of the 1950s and 60s, the causes of under-
development are attributed to local inertia and solutions sought
exclusively in the transfer of capital and skills from outside to the
community. In terms of campaigning, foreign NGOs' messages to
their donating public progressed, at least in part, from the paternal-
istic ('giving a man a fish') to the more constructive ('teaching a man
to fish'), in an attempt to encourage self-reliance.
In Brazil, however, due largely to the influence of the radical
Catholic Church, such a purely materialistic conception of develop-
ment never achieved the widespread popularity it acquired among
NGOs outside Latin America. Intellectuals and development workers
questioned the underlying premises of this essentially modernizationist
strategy, which did not even begin to raise questions about the more
fundamental, structural causes of poverty and deprivation. In Brazil the
radical Catholic Church was at the forefront of this movement.
Liberation theology, which grew rapidly in popularity after the
Second Conference of Latin American Bishops (Vatican II), held
in Medellfn, Colombia, in 1968, and the papal encyclical Popul-
orum Progressio, were crucial factors in a new commitment of many
in the Church to both the immediate needs and the longer-term in-
terests of the poor majority. Brazil having been under military rule
from 1964 to 1985, the Church became for many years virtually the
only institutionalized channel through which opposition to the dicta-
torship could be expressed. Community religious groups (CEBs)
were formed all over the country, with clerical and lay-workers
(agentes pastorais) providing a radical Christian interpretation of the
Bible, promoting a combination of developmental projects in the
more traditional sense, as well as activities aimed increasingly at

advancing social justice and human rights. By the early 1980s there
were some 80 000 CEBs in Brazil, with over two million members
(LAB 1982).
The Catholic Church's response was at first hesitating and isolated,
protest emanating principally from a handful of internationally-known
clerics such as Cardinal Evaristo Arns of Sao Paulo, Dom Helder
Camara, Archbishop of Olinda and Recife, and Dom Pedro Casalda-
liga, Bishop of Sao Felix do Araguaia in northern Mato Grosso. By
the mid-1970s, however, progressive elements within the Church had
become better organized and a number of 'pastoral commissions'
were set up to deal with key social and economic issues affecting the
lives of literally millions of deprived Brazilians in both rural and
urban areas. The Missionary Indigenist Council (CIMI), for example,
took up the cause of indian groups, while in 1975 arguably the most
influential of all, the Church Land Commission (CPT) was estab-
lished. Set up in 1975 following a crisis meeting of Amazon bishops in
Goias, the CPT pledged itself to undertake educational campaigns
and provide legal advice to thousands of poor communities, victims
of Brazil's worsening land struggle. The Church's 1977 manifesto,
'Christian Demands for a New Order', was a landmark, challenging
the government's lack of positive action, demanding social justice
and democracy. All over the country, from the North-East to Ama-
zonia and the Centre-South, the Church took an increasingly radical
stance, working directly with its 'base' communities, together with
other NGOs and with emerging trade union groups. With its 320
bishops, 12 000 priests and 45 000 nuns, the Catholic Church was,
despite its internal conflicts between radicals and conservatives, the
only non-government entity organized on a national scale capable of
mobilizing opposition and developmental efforts at community level
on a nation-wide basis.
The Brazilian Catholic Church's pioneering role in the field of
development and human rights was mirrored by the appearance of
other NGOs sharing fundamentally similar concerns. Many of the
country's larger, non-church intermediary NGOs were also set up
during this period of the 1970s, when formal political opposition was
effectively banned. Organizations such as FASE, MOC, CEAS,
PATAC and ASSESOAR were established during the late 1960s and
early 1970s within a context of strong political repression and sup-
pression of human rights at all levels of society. The work of these
and many other similar bodies, not just in Brazil but in many parts of
426 Anthony Hall
Latin America, involved small-scale community projects in which the

emphasis was gradually switched from conveying purely material
benefits, to encouraging additional collective action by poor groups in
defence of their local or, in a growing number of cases, their class
interests. Implicitly or explicitly, development practitioners made
extensive use of Freirian methods in their work with community
groups. However, rather than linking conscientizaftio to literacy
training, as Freire himself had done in the North-East, agriculture,
health, construction and other small NGO-funded projects were
undertaken. In this way, it was hoped that 'productive' projects could
also serve as vehicles in a wider educational process. Combined
pressure from religious and civil groups thus resulted in a gradual
transition from a welfare orientation, considered paternalistic or
assistencialista, to a more politicized and participatory style of in-
tervention designed to encourage greater beneficiary independence
and politicization in the longer term.
A close interrelationship developed, and continues to exist, be-
tween the Church and other NGOs with similar objectives, even if
their language and methods differ somewhat. Indeed, such NGOs are
full of former priests and nuns who have chosen to pursue their
Christian mission outside the formal structure of the Church. In the
context of Brazil's strong political repression during the late 1960s
and 1970s, former members of left-wing organizations joined NGOs
to fight for social justice. Over the years working with voluntary
organizations has, in fact, become a profession in its own right. It has
enabled a range of individuals with diverse but related backgrounds
and interests to join together under broadly similar organizational
auspices to pursue developmental goals in favour of deprived groups,
whether peasants, urban workers, indians or others. Such an ambi-
tion was certainly impossible to achieve through any other non-
Church channel in the 1970s. Ever since then, as NGOs in Brazil have
grown and widened their range of activities, so they have become
more professionalized, offering an increasing number of job oppor-
tunities to suitably qualified personnel.
During this period, international NGOs greatly increased their
levels of funding in Brazil, in response to new demands from NGOs
in support of 'popular' and 'base' education projects. They too have
come to embrace a more comprehensive definition of 'development'.
The emphasis placed by NGOs such as Oxfam, Christian Aid and
Cafod in Britain, for example, in their aid programmes for Brazil and
Latin America, shifted from welfare, relief and material development
to wider concerns of promoting social justice and human rights.

Brazilian NGOs have thus become heavily dependent upon these
external sources of funding, often leading to ambivalent feelings
between Northern benefactor and Southern recipient. While, gener-
ally speaking, Brazilian NGOs maintain excellent relationships with
overseas funding agencies, conflicts occasionally arise. This is particu-
larly so when, in the interests of accountability, foreign NGOs
attempt to influence clients' policies, for example by refusing to fund
politically sensitive projects which might fall foul of charity laws or
threaten to alienate their sometimes more traditionally-minded
donating public. Funding agencies' need to balance carefully loyalty
to recipient organizations with some evaluation of performance can
also lead to rifts characterized by mutual accusations of 'foreign
domination' and 'project inefficiency'. Some Brazilian voluntary
organizations are, however, exploring the possibility of increasing
local fund-raising as a means of reducing dependence upon foreign
sources.
The more radical stance of many European and US voluntary
agencies in terms of project-funding has only been partly reflected in
educational and fund-raising campaigns back home. Several reasons
may be cited to explain this routine inconsistency between the popu-
lar image and the reality of aid-giving. It is due partly to a fear,
well-founded or not, of alienating the donating public, which might
reject a strategy that seems so far removed from the more traditional
humanitarian role upon which many such NGOs were founded.
Another perhaps more immediate concern is that their much-valued
charitable (i.e. income tax-exempt) status granted in countries such
as the UK might be placed in danger by such apparently 'politicized'
activities. Only a few agencies such as War on Want (UK) openly
declared their radical positions and risked the consequences. This
fundamental contradiction, or 'uneasy choice', as Lissner (1977) calls
it, is one which faces many overseas NGOs today, generating much
internal debate and conflict. In the majority of cases the dilemma
remains unresolved.
This more radical policy has, however, been reflected in the altered
structure of funding itself. From an almost exclusive concern with
providing material inputs to community projects (seeds, fertilizers,
building supplies, etc.), there has been a quite marked shift towards
paying the salaries and expenses of development workers; that is,
staff members of NGOs undertaking work in the field or engaged in
broader networking or lobbying, most earning salaries compatible
428 Anthony Hall
with their frequently middle-class, professional backgrounds. This

has also generated its own set of conflicts between those who wish
to see more tangible and immediate benefits accruing to small com-
munities, and those who place their faith in a longer-term, more
'educative' process which may or may not reap dividends. This de-
bate has raged not just within international NGOs but also within
some community groups themselves, and has had repercussions on
development-thinking into the 1980s and beyond.
CURRENT ROLES OF NGOs IN BRAZIL
There has, of course, been no simple linear evolution from a relief or

welfare role towards a more developmental and/or a more politi-
cized, consciousness-raising approach. These contrasting strategies
co-exist both within Brazilian society and within individual voluntary
organizations, both domestic and international. During the 1980s,
however, another dimension was added to these longer-standing
roles. Direct intervention at community level through projects in-
volving 'popular education' is still the most common line of work but
this is now complemented by a wider function designed to further the
broader interests of underprivileged groups within civil society. Such
'third generation' strategies, as they have been labelled (Korten
1987), are based on NGOs assuming a greater leadership role in
society. In Brazil this has been facilitated by political liberalization
and the advent of civilian government, as well as by voluntary
agencies' own unique qualities as organizations largely independent
of State control.
Rather than engaging solely in direct service-delivery to specific
poor communities, NGOs have been required by the changing de-
mands of client groups in poor communities themselves to adopt
alternative or additional roles to those with which they have tradi-
tionally been associated. These include acting as wider facilitators or
catalysts on behalf of larger social classes or interest groups, vigor-
ously lobbying both federal and multilateral agencies, promoting
sustainable development on a regional or national basis, and becom-
ing more involved with a range of both public and private organiza-
tions which have a bearing on local development. Since the direct,
operational impact of NGOs at community level can, by its very
nature, only be limited, it is a natural step for them to seek to
influence regional, national and international development policy-
making and implementation. New voluntary organizations have

sprung up specifically for this purpose, such as the Brasilia-based
INESC, but more commonly, existing voluntary organizations have
broadened their range of activities to encompass not just grassroots
projects within communities but also wider pressure-group and lob-
bying activities. This has necessarily involved a move away from total
opposition to government and towards establishing closer links with,
and even funding by, state institutions.
In the international field generally NGOs have for many years
exercised a significant influence on official development policy-
making. For example, the International Planned Parenthood Fed-
eration (IPPF) has been instrumental in providing family planning
services, which have subsequently acted as models for government
programmes. Likewise, a number of NGOs during the early 1970s
helped pioneer the concept of primary health care (PHC), which
was later formally adopted by the World Health Organization at
the Alma Ata conference in 1978. Similar examples could be cited
in the field of small enterprises and self-help, low-cost housing.
Such a working relationship is still far from being the norm in Bra-
zil, however. Conflict, not consensus, characterizes relationships
between the state and voluntary organizations. Rather than active-
ly seeking government support, most NGOs in that country are
engaged in opposing official policies and attempting to alleviate
their harmful effects upon deprived sectors of the population. Co-
operation of the sort described above could only take place if
NGOs considered the major thrust of government policy to have
the interests of the nation's mass urban and rural populations at
heart, a view to which most Brazilian NGOs do not subscribe.
Nevertheless, the 1980s in Brazil undoubtedly saw a strengthening
of the brokerage or lobbying function performed by NGOs on behalf
of large sectors of society which have traditionally been unable to
exercise any influence on official policy-making. Indirect political
action benefiting whole classes, as opposed to operational projects
solely for the benefit of small community groups, thus represents the
latest phase in the evolution of NGOs in Brazil. This transition has to
a large degree been facilitated by the changeover from a military to a
civilian government in 1985, and the subsequent Constituent As-
sembly, which has allowed some degree (albeit perhaps limited) of
popular participation, via the intermediary role of NGOs, in drawing
up the new constitution.
Although the political climate is now more open, and NGOs have
430 Anthony Hall
more resources at their disposal and are better organized than ever
before, these factors do not in themselves explain the major raison
d' 2tre for this emerging brokerage or lobbying role. This must be
sought in the lack of any genuine commitment by Brazil's major
political parties, and indeed the Brazilian State itself, to advancing
the interests of deprived and relatively powerless groups in society. A
product of Brazil's aggressive modernization strategy of economic
growth with its residual welfare implications, the key role of NGOs in
that country during the 1980s is also attributable to the decline of
ideologically-based or populist mass mobilization during the two
decades of military rule, from whose legacy the country has not yet
freed itself. In a situation where political parties do not' essentially
represent the interests of the majority of the population, NGOs have
become important channels for the expression and mobilization of pub-
lic opinion around critical policy issues such as labour laws, agrarian
reform, indigenous lands and mineral exploration rights, including the
campaign for the creation of a Yanomami reserve (CCPY).
Additional political leverage has been acquired by giving the move-
ment an international dimension, pressuring multilateral lending
bodies to build stronger safeguards into the design of an increasing
number of large-scale programmes currently being funded. Several
examples of such pressure being successfully applied by a combina-
tion of Brazilian, US and European NGOs can already be cited. In
1985 a campaign by US voluntary organizations concerned with the
environment, such as the Environmental Defence Fund (EDF), in
conjunction with European and Brazilian counterparts, persuaded
the US Congress and the World Bank that loan disbursements on the
POLONOROESTE programme should be temporarily suspended
pending modifications to the project structure and the building-in of
provisions for protecting indigenous rights (Price 1985). Similar ac-
tion over the ltaparica Dam on the River Sao Francisco in the
North-East obliged the power authority, CHESF, to provide fair
compensation for 7000 urban and rural families who would otherwise
have been summarily displaced, largely empty-handed. A new cam-
paign was mounted by domestic and overseas voluntary agencies to
help ameliorate the anticipated social and environmental impacts of
the Xingu River hydro-electric development at Altamira in Amazo-
nia, which could displace up to 60 000 people, including seven indian
tribes (CPI 1987).
Another major publicity and lobbying effort has been set up over
the Grande Carajas Programme (PGC), which involves the indus-

trialization of a large part of eastern Amazonia, with little or no
regard for social or ecological consequences. Some US$1. 7 billion
was forthcoming by 1987 in foreign loans, including US$600 million
from the EC, the largest single contributor, and US$305 million from
the World Bank. In exchange for soft loans, European, North Amer-
ican and Japanese steel companies are guaranteed long-term supplies
of raw materials such as iron-ore and bauxite, as well as other
generous subsidies. Predicted consequences include an intensification
of land conflict in an already embattled region, land concentration,
widespread environmental destruction as the forest is cut down to
supply cheap fuel for charcoal-fired pig-iron smelters along the
Carajas-Sao Luis railway, and further illegal incursions onto indigen-
ous lands by small settlers, land speculators, lumber and livestock
enterprises (Hall1987; Treece 1987).
A number of Brazilian NGOs working both at local and national
levels (such as FASE, IBASE, INESC, CEDI, CIMI, CPT,
CEPASP, etc.) have, since the PGC's inception in 1980, been aware
of its likely repercussions and have taken steps to bring the issues to
the notice of both local affected communities and the wider public
(e.g. IBASE 1983; CEDI 1985; CIMI et al. 1986). This has involved
'networking' or co-operation and information-sharing among NGOs,
as well as direct pressure on policy-makers. International voluntary
organizations have played a vital role in this process. Since 1982
the General Assembly of European NGOs has passed several mo-
tions calling for appropriate social and environmental safeguards to
be built into the PGC. However, despite regular publicity given to
the issues by NGOs such as Survival International and Friends of
the Earth (Treece 1987), the EEC has taken no action to persuade
the Brazilian authorities that changes to the project design are
necessary. In the US the Environmental Defence Fund (EDF) has
been engaged with other NGOs in a similar campaign, with some
indication that the World Bank has taken socio-environmental conse-
quences rather more seriously than they have been viewed across the
North Atlantic. The PGC example illustrates the potential of NGOs
to come together even on an international basis in favour of particu-
lar development objectives through a wider lobbying role, but it
also exposes the limits on their ability to affect decision-making
significantly over development schemes in which powerful econo-
mic and political interests are at stake.
432 Anthony Hall
There is another, related, facet of this expanded lobbying and

networking function. Brazilian NGOs and their overseas funders
have become concerned with promoting sustainable development
beyond community level, on a regional basis. For example, for over
twenty years, government policy towards Amazonia, has encouraged
the expansion of large landowning interests (for cattle-ranching,
lumbering and mining) at the expense of the majority of smallholders
who, due to the intensity of rural violence and pressure from land-
grabbers, have little security of tenure. Apart from increasing violent
land conflict and reproducing the polarized landownership structure
found elsewhere in the country, such settlement patterns have re-
sulted in rapid environmental degradation. Deforestation for the
formation of cattle pasture, of which perhaps 10-30 per cent has been
for productive investment but most of which has been for speculative
and non-legitimate purposes, is rapidly destroying the rainforest.
Rates of cutting are growing exponentially in many parts of the
region and traditional producers such as rubber-tappers (sering-
ueiros) are seeing their livelihood being gradually destroyed.
One response of NGOs to help prevent the destruction of this
sustainable mode of production has been to support rubber-tappers
in Acre in their attempts to persuade the government to set up
'extractivist reserves' which would be protected from land-grabbers
and other predatory incursions. As a first major step, the National
Council of Rubber Tappers (CNS) was set up in 1985 with foreign
and domestic NGO assistance to lobby the government. Other organ-
izations supporting indian rights and the demarcation of indigenous
reserves, such as CIMI and the CPI, are effectively pursuing the same
quest for a policy of encouraging sustainable development in key
areas of Amazonia, where the fragile environment is so easily dis-
rupted by inappropriate commercial activities.
Although many Brazilian voluntary organizations have been drawn
into a broader lobbying and policy-oriented role, sight should not be
lost of the fact that their main thrust is still at grassroots level, directly
assisting groups which are neglected or adversely affected by the
state. Literally thousands of small community projects exist, working
in the fields of health, agriculture, literacy training, land rights and
human rights, funded by international and Brazilian organizations.
At this level during the 1980s a tradition of closer co-operation has
developed between different types of NGO in the field; the Church,
trades unions, civil intermediary bodies and even political parties.
The Catholic Church and PT, as well as some overseas NGOs have,
for example, supported the 'Movement of the Landless' (MST),

which has organized over 80 estate occupations in southern Brazil,
involving some 13 000 peasant families. In the North-East and in
Amazonia the Church and its CEBs have been instrumental in reviv-
ing the rural trade unions (STRs) and their commitment to support-
ing small farmer interests, bringing about a notable strengthening of
collective action and active resistance to land-grabbing in key areas
such as the Carajas region (Hall1989) which has undoubtedly strength-
ened small farmers' stability of land tenure in key areas of conflict.
Similarly, mobilization of local resistance to the adverse social and
ecological consequences of dam-construction, as mentioned above,
has gained considerable momentum.
It would be tempting to suggest that Brazilian and foreign NGOs
have been able successfully to reconcile their 'second and third
generation' roles. Yet numerous impediments still prevent the attain-
ment of such an ideal. In the first place, a 'third generation' lobbying
role can only be pedormed satisfactorily if there is considerable
agreement and cohesion among the diverse groups involved in
advancing the causes of the under-privileged. As has been pointed
out, however (Gryzbowski 1987), the unity and potential of such
NGO-supported social movements is still seriously undermined by
their fragmented nature and continued lack of co-ordination,
together with political factionalism such as the CUT-CONCLAT/
CGT split and party rivalries. The superficial cohesion which
emerged during the years of military dictatorship has, in too many
instances, given way to internecine strife and inter-NGO conflicts.
Furthermore, the objectives of different popular movements are
frequently contradictory, a fact which state and commercial interests
usually exploit in order to undermine further still any embryonic
co-operation - witness the clashes between landless posseiros and
indian groups in Amazonia which, it is frequently claimed, have been
encouraged by state bodies and commercial lumbering and mining
interests in order to acquire territorial claim.
There are further problems. Such lobbying requires a whole new
set of political and organizational skills, which are often in short
supply. Even international NGOs, for all their commitment and
resources, have failed to co-ordinate their activities on key issues
sufficiently well to have a significant impact on public opinion and
official policy-making. When they do successfuliy engage, many are
faced with the restrictions on their freedom of activity and communi-
cations by outdated charity laws and a conservative constituency.
434 Anthony Hall
Without an extremely efficient and sophisticated machinery, cap-

able of dealing with politically powerful, complex and often de-
vious official bureaucracies, NGOs in this area have little chance of
overcoming their relatively weak position in the national and inter-
national power structure. US organizations have probably been the
most successful in this respect, by virtue of the pressure they have
been able to apply to the World Bank via representations to a Congress
which has often been receptive, for its own diverse reasons, to their
criticisms. Similar tactics by Brazilian and other Third World NGOs,
without such international back-up, stand very little chance of success
since they do not possess sufficient political leverage. It is unlikely
that this situation will change in the foreseeable future.
Another area of controversy surrounds the role of income-generating
projects within the context of current NGO policy in Brazil. 'Economic'
projects associated with the developmental (or 'second generation')
phase of voluntary agencies' work have tended to be downplayed as
the educational or political dimension has gained in importance. The
argument usually advanced was that such seemingly narrow, ma-
terialistic benefits accruing to relatively small groups of people not
only remained limited in their impact but failed to question the root
causes of poverty and inequality. Yet the assumption that income-
generation was a low priority frequently emanated from outside devel-
opment workers rather than from client populations themselves.
However, for a number of reasons, economic schemes are being
re-examined and viewed increasingly as an essential complement
to the wider activities already discussed.
Many 'popular education' schemes have been abject failures be-
cause the NGOs in question engaged in wishful thinking, projecting
onto impoverished slum dwellers and peasants fanciful middle-class
political attitudes which bore little direct relevance to their pressing,
everyday needs. Communities' own rejection of endless words with-
out any concrete benefits has thus obliged voluntary agencies to listen
more carefully and respond more effectively by implementing, in a
participatory fashion, income-generating as well as educational pro-
jects. Both intermediary organizations and their clients have thus
found more fertile common ground. From the international funding
NGO's point of view also, economic projects have certain advan-
tages. They permit the generation of tangible results which can be
easily evaluated and photographed, offering concrete evidence of
progress to the donating public as well as to higher authority. As aid
programmes grow larger, such accountability is becoming more im-
portant. For many reasons, therefore, Brazil is currently witnessing

something of a revival of interest among NGOs (such as FASE,
PATAC, CAPA and ASSESOAR) in productive schemes. To cite
but one example, it was found that small cultivators, having occupied
land through the MST in southern Brazil, requested assistance with
agricultural production. NGOs responded by setting up programmes
designed to develop small farming systems with the aid of intermedi-
ate technology (FASE 1985). The political and the productive are
thus seen as two sides of the same coin, both offering apparently
contrasting perceptions of necessary action but both equally neces-
sary at different junctures.
NGOs IN BRAZIL- WHICH WAY FORWARD?
Despite their obvious limitations NGOs in Brazil, both domestic and

international, play a vital and increasingly important role in promot-
ing socio-economic development. From the Amazon rainforest to the
slums of Sao Paulo, voluntary organizations are frequently the only
channel available to community groups attempting to defend their
homes, livelihoods and human rights against antagonistic government
policies and hostile commercial interests. The expertise acquired
during years of working directly with communities has enabled NGOs
to assist client groups, materially, educationally and politically. Most
recently, their wider lobbying role at a time of constitutional change
offers a unique opportunity for the advancement of popular causes
within a policy context in which NGOs have gradually gained legit-
imacy as a force for progress. However, given the divisions which
exist both among and within such organizations, Brazilian as well as
foreign, serious doubts must continue to exist whether they have
sufficient political or managerial skills to meet this challenge suc-
cessfully.
Non-government agencies have so far enjoyed an undisputed
advantage over official organizations in assessing and meeting the
expressed needs of poor communities. Qualities such as smallness of
scale, directness of funding and bureaucratic simplicity have enabled
NGOs to perform a unique role at grassroots level, which no large
official agency could have performed as well. In attempting to
embrace a wider lobbying function, however, acting as a pressure
group within democratic civil society, they perhaps run the risk of
becoming over-ambitious and losing sight of their own in-built
436 Anthony Hall
limitations. NGOs are subject to the severe constraints imposed by

their lack of leverage or bargaining power within the Brazilian polit-
ical system which subjects politicians and planners alike to little, if any,
public accountability. Yet there are also limits on the organizational
capacity of voluntary agencies and the efficiency with which large-
scale campaigns can be mounted in favour of particular causes. It
might be possible to professionalize NGOs on a par with their coun-
terparts in the world of official development, thus enabling them to
undertake lobbying work more effectively, but this would probably
be at the expense of their losing contact with the poor and under-
privileged whose interests they have traditionally served. How to
reconcile more traditional grassroots activities with their newer
obligations, is perhaps the most serious challenge ever faced by
NGOs in Brazil. If this dilemma can be successfully resolved, they
may indeed be entering their most constructive phase so far. If it
cannot, a period of great uncertainty and perhaps disillusionment lies
ahead.
References
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(ed.), pp. 1-6.
CEDI (1985) Povos Indlgenas do Brasil, vol. 8, Sudeste do Para (Tocantins)
(Sao Paulo).
CIMI et al. (1986) Areas Indlgenas e Grandes Projetos: Carajas (West Ger-
many).
CPI (1987) 'Hydro-electrics of the Xingu and Indigenous People'. Mimeo.
(Sao Paulo).
Drabek, A.G. (ed.) (1987) 'Development Alternatives: The Challenge for
NGOs.' Special Issue of World Development, Autumn.
Elliott, C. (1987) 'Some Aspects of Relations Between the North and South
in the NGO Sector,' in A.G. Drabek (ed.) pp. 57-68.
FASE (1985) 'Tecnologias Alternativas na Agricultura', Proposta, 27, Nov.,
Rio de Janeiro.
Gryzbowski, C. (1987) Caminhos e Descaminhos dos Movimentos Sociais no
Campo (Rio de Janeiro).
Hall, A. (1987) 'Agrarian Crisis in Brazilian Amazonia: the Grande Carajlis
Programme', Journal of Development Studies, July.
- - (1989) Development Without Progress; Brazil's Carajas Programme.
(Manchester).
IBASE (1983) Carajas: 0 Brasil Hipotlca o Seu Futuro (Rio de Janeiro).
ILO (1976) Employment, Growth and Basic Needs; One World Problem
(Geneva).
Korten, D.C. (1987) 'Third Generation NGO Strategies: A Key to People-
Centered Development', in Drabek (ed.) pp. 145-59.
LAB, Latin America Bureau (1982) Brazil: State and Struggle (London).
Landim, L. (1987) 'Non-Governmental Organizations in Latin America',
World Development, Autumn, pp. 29-38.
Lissner, J. (1977) The Politics of Altruism: A Study of the Political Behaviour
of Voluntary Development Agencies (Geneva).
Price, D. (1985) 'The World Bank vs Native Peoples- A Consultant's View',
The Ecologist, vol. 15, no. 1/2, pp. 73-7.
Schneider, B. (1988) The Barefoot Revolution (London).
Treece, D. (1987) Bound in Misery and Iron (London).
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- - (1986) World Development Report 1986 (Washington DC).
21 Chilean Education Policy:
Authoritarianism and
Democracy
Alejandro Jara Weitzmann
REFORM AND COUNTER-REFORM
The education debate has held a place of privilege in recent Chilean

discussions of social welfare and development. These have been
dominated by paradigms of reform and counter-reform, socialism
and neo-liberalism, democracy and authoritarianism. Seen by most
welfare-state partisans and desarrollistas as a means to promote social
mobility and political change, by traditional conservatives as a factor
sustaining the social status quo and by the new right as an instrument
of social modernization in the context of the liberal market model,
education reform projects have changed in significant and even con-
tradictory ways. They have also altered the place of the educational
system in the social and political panorama. The aim of this chapter is
to survey these changes and to examine their centrality in recent
political and economic models applied in Chile. Their long-term
social implications are now especially important as the country enters
a post-authoritarian, democratic phase.
Two kinds of questions arise when analysing the education system.
The first deals with education changes with reference to successive
political and development models. How radical a rupture was
observed under military rule (1973-90)? Did public expenditure and
pupil/student enrolment contract or expand? Were policies of decen-
tralization and privatization of the state sector successfully carried
forward or shelved when confronted by political pressure within the
regime, or bureaucratic interia? How far was curriculum content
altered by the state on ideological grounds? The second deals with
equity and the long-term implications of the present education system
and also with its relative independence from political and economic
constraints. Is the education system inherited by the Concertacion
Nacional government of President Patricio Aylwin (1990-) compatible
with the needs of social and democratic consolidation and stability?
439
440 Alejandro lara Weitzmann
What priorities are being attached to education by the new adminis-

tration, given other welfare demands? After two decades of profound
political and economic change, has the education system the capacity
to absorb further demands for institutional reform?
Before the 1973 coup the expansion of the education sector had
been seen as crucial to development and had also been interpreted as
promoting consensus and raising hopes of social mobility and integra-
tion. Many scholars hold the view that the expansion of the education
system accelerated under the democratic conservative government of
President Arturo Alessandri (1958-64). 1 Each democratic govern-
ment between 1958 and 1973 formulated its own education reform as
part of its overall vision. Each in turn considered that education was
an essential part of active policy-making and that the education
apparatus required thoroughgoing restructuring in order to keep pace
with increasing demands upon it and also to increase access to educa-
tion at all levels.
In 1961 the Alessandri government set up a commission to devise a
programme of General Planning in Education in order to address the
'educational crisis' and 'the urgent need to cover the education de-
ficit'. There were two specific targets: the eradication of illiteracy and
the improvement of technical/professional education. 2 Nevertheless,
these proposals were not implemented until the Christian Democratic
government of President Eduardo Frei (1964-70). 3 The Christian
Democrats, inspired in part by the Alliance for Progress, viewed
education as essential to their project for a social new deal and also as
a feature of their economic development programme. As Frei
pointed out in his final presidential message: 'Education has been the
first priority of the government's programmes and has commanded
the highest increases in public expenditure. ' 4
Basic to Christian Democracy was the notion 'investment in pro-
gress', a progress which was identified with educational and cultural
development. Christian Democrats placed a particular emphasis
upon education in their development strategy so as to underpin a
wide range of structural reforms. Thus the Estado Docente became
the main vehicle to promote social mobility. In order to bring the
Estado Docente into being, the Christian Democratic government
introduced the Extraordinary Plan for Public Education for 'the
immediate extension of cultural goods and wealth to all social groups'
and 'the acceleration of the rate of educational influence on social
mobility in the country'. 5
Chilean Education Policy 441
In many respects the left-wing Popular Unity (Unidad Popular)

coalition government of President Salvador Allende (197G-3) rep-
resented a continuation and intensification of earlier trends towards a
welfare state in education. Because the UP government adopted a
more radical approach, education became one of the main areas of
political polarization. Like its predecessors, the new administration
designed a new education proposal, the National Unified School
(Escuela Nacional Unificada - ENU) which was meant to fill the
education 'demand-gap' while promoting a distinctly socialist view of
social change. 6 (Nufiez 1982). The Allende government aimed to
secure equality of access to education and also, most importantly, to
build a National Unified Regular Educational System that through a
new school structure would correspond to a socialist perception of
development. Provision was made for local and regional decentraliza-
tion. The public debate about the ENU became so heated that the
military, arguing that it was an instrument for a seizure of power by
the left, used it as a pretext for the 1973 coup. So great was the unrest
that the UP government was unable to enforce the ENU scheme and
decided to back-track, trying to reach a negotiated settlement with
the opposition in order to defuse the education debate. 7 Joseph
Farrell has argued that the ENU was the catalyst for the right-wing
reaction of 1973 and was the main cause of the downfall of the
Allende socialist government. 8 Most authors contend that the main
causes of the coup are to be found elsewhere, given that all three
pre-1973 governments shared the view that education reform was
essential to a broader cultural and development strategy. What was
distinctive about the Allende period was a loss of consensus and that
the debate about education goals became subordinate to wider pol-
itical conflict.
As far as public expenditure and welfare indicators are concerned,
it is instructive to compare both patterns of state spending and levels
of student enrolment during the three democratic governments. Con-
tinuity is observed, but growth rates differ substantially. Under Ales-
sandri education spending grew by 33.4 per cent; under Frei by 101.6
per cent; during the short Allende government by 44.7 per cent.
Taking long-term real public education spending between 1960 and
1984, two distinct sub-periods can be distinguished. The first, be-
tween 1960 and 1973, was characterized by a threefold real expansion
of expenditure. In the same years student enrolment doubled. 9
442 Alejandro Jara Weitzmann
Because public expenditure on education and student enrolment

were growing at a similar rate and because the participation rate of
lower income groups in education increased, it is reasonable to
assume that access to education was democratized.
In the second sub-period, 1973-84, these trends were reversed.
While between 1960 and 1973 the participation rate (student enrol-
ment as a proposition of the school-age population) had risen from
43.1 per cent to 65.8 per cent, by 1982 it had fallen to 58.1 per cent.
During the years 1979-81 the absolute number of students enrolled in
education fell by 5.7 per cent although the population of school age
rose by 3.0 per cent. A similar trend may be observed in public
education expenditure, which fell by 14.3 per cent in real terms
between 1974 and 1982. As a share of GDP, state spending on
education increased from 2.3 per cent in 1960 to 5.9 per cent in 1973,
only to fall to 5.7 per cent in 1974 and 4.3 per cent in 1982. 10 The
index of enrolment (1977 = 100) fell to 98.9 in 1980 and to 85.6 in
1982, when only 79.9 per cent of children of school age attended. This
was a consequence of immiseration caused by the neo-liberal econ-
omic model - which pressed particularly upon middle and lower in-
come groups - compounded by a contraction in the labour market.
Furthermore, the military regime imposed policies that rigidified the
social structure in such a way that hopes that education would serve
as a means of upward social mobility evaporated. The government of
General Augusto Pinochet (1973-90) and his neo-liberal policy-
makers set out to reform the education system both to excise welfare
state precepts and to adapt it to their vision of economic moderniza-
tion. This would be achieved by reducing and restructuring education
expenditure, and then by decentralizing education administration
within the framework of an authoritarian institution.
THE NEO-LIBERAL EDUCATION REFORM OF THE

MILITARY REGIME
Decentralization and, subsequently, privatization were the basic pre-

mises of the 'new educational policy' of the military regime. Magend-
zo and Egana suggest that this process unfolded through three stages:
(a) the phase of diagnosis, when regional secretariats of education
were established and the Regional and National Operational Plan
was enforced (1973-5); (b) the transitional phase, when education
administration was restructured and the privatization programme
elaborated (1976-8); (c) the enforcement phase, when the manage-

ment of educational services was transferred to the local authorities
(1979-83). 11
As was often the case on other issues, conflict over education
policy between the neo-liberal and National Security factions of the
military regime was eventually resolved by a policy compromise, as is
revealed in the Directiva Presidencial on education to be analysed
below. The neo-liberal faction, influenced by Hayek and the Chicago
School, saw institutional decentralization as a mechanism for the
promotion of market forces and as a device to reduce the size of the
central bureaucracy. By contrast, exponents of the National Security
doctrine placed a different emphasis on the role of state institutions,
seeing them as means of imposing the leadership of the armed forces
in government and in the state. This view depicted the 'Armed Forces
as the supreme guarantor of national unity and saviour of the nation
from the crisis that threatened its survival' .12 This conflict led to
differences over the question of political control of decentralized
institutions. Although decentralized institutions were created, they
were nevertheless kept under military control through the appoint-
ment by the Interior Ministry of the chairmen of regional and local
authorities (recruited from within the armed forces), parish corpora-
tions and local education departments. Thus authority was transfer-
red from the education ministry to the interior ministry and the
presidential office. This vertical structure assured central control of
budgetary allocations, the education network and the selection of
directors of education.
According to an alternative view, until 1979 the military regime
was principally concerned with reversing earlier trends towards
democratization of access to education. Its priority was authoritarian
control of the education system rather than making it compatible with
the requirements of the neo-liberal project. Central control was to be
secured through the education ministry's direction of primary and
secondary schools, and the imposition of military rectors in the
universities, once dissenting staff had been expelled. After 1979 a
new set of priorities imparted greater coherence to the New Educa-
tional Reform, possibly because the neo-liberal wing gained an
ascendancy. Revised objectives included greater private sector
participation in provision; the devolution of responsibility for financ-
ing public education from central to local level; a re-prioritizing of
education spending to favour the primary, and to some extent, the·
secondary schools; all of these intended to result in a reduction in the
overall public education budget. Related aims included the transfer

to local councils of those education establishments remaining under
central control in such a manner as to facilitate military control at
local level and simultaneously to create a framework for future
privatization, along with the harmonization of management in the
private and public sectors in such areas as job security and pay. 13
What, in terms of its own agenda, did the military regime ac-
complish? The following matrix classifying educational establishment
provides a framework for analysing the achievements of the regime.
Classification of Education Establishments
Public Private
Variables Central Regional/Local Subsidized Non-
subsidized
Ownership Public Public Private Private
Finance Public Public Public/private Private
Administration/
Management Central Decentralized Private Private
SOURCE: Jara and Contardo (1984)
Public and Private Financing of Education
One of the main priorities of the Pinochet regime was to reduce state
spending. Another was to reduce government expenditure on the
social services and to encourage a substitution of private for state
funding in these areas. The evolution of real public expenditure on
education at this time can be analysed from deflated data on the state
budget provided by the finance ministry. Unfortunately, two distinct
methods were devised to analyse finance ministry data with a view to
assessing relative weightings of central government spending. The
official method of extrapolating social expenditure from the national
budget has been challenged by CIEPLAN and PilE methodologies.
Although CIEPLAN and PilE have applied slightly different
methods of categorizing government expenditure, their respective
analyses are compatible and are consistent with official sectoral totals
compiled by the Contralorfa General de Ia Republica. These analyses
show changes in different levels of education expenditure within the
total education budget. Overall, between 1979 and 1982, education
spending as a proportion of total government expenditure declined
slightly. More significant, however, were changes in the composition

of education expenditure. Time-series indicate that, as a proportion
of the total education budget, spending on educacion basica (ex-
tended primary education) rose from 40.3 per cent in 1979 to 51.5 per
cent in 1982, despite the fall in absolute levels of expenditure on
education. Spending on pre-school education fell relatively and ab-
solutely during the same period. Ensenanza media (the last four years
of secondary education) slightly increased its participation in the
overall total education budget from 16.3 to 17.7 per cent. This growth
in spending on schools was accomplished at the expense of the higher
education sub-sector. The share of higher education in the total
education budget fell from 35.6 to 26.2 per cent over the same period.
The decline in total expenditure and the shift in the structure ot the
budget away from the universities indicated the priorities of the
Pinochet regime. Per capita expenditure on education fell at all levels
in real terms. In spite of the increase of 11.2 percentage points in the
proportion of the education budget allocated to educacion basica, the
average real outlay per student fell significantly between 1979 and
1982 in a context of enrolment growth and absolute cuts in total state
funding. The average decline per pupil/student at all levels was 6.3
per cent (or 30.9 per cent for higher education). Overall, public
education expenditure expressed in terms of Gross Domestic Product
(GOP) contracted from 4.7 to 4.3 per cent. As a share of total public
expenditure, spending on education fell from 13.1 to 11.8 per cent.
To what extent was the government successful in enlarging private
participation in education funding? Did increases in private finance
compensate for the sharp contraction in government allocations? Jara
and Contardo provide an estimate of the relative evolution of private
and public finance in the gross value of educational product. 14 Their
study shows that the public contribution fell from 84.2 to 74.5 per
cent between 1977 and 1981, while the private contribution rose from
15.8 to 25.5 per cent. In absolute terms, the gross value of education-
al product grew 4.7 per cent between 1977 and 1979, only to fall
( -1.2 per cent) between 1979 and 1981. It can be observed from the
above data that an increase in private funding more than counter-
balanced the decrease in state funding of education, especially at the
primary and secondary levels. Reduced public spending was largely
accomplished by curtailing subsidies and by making public transfers
to private education.
Despite the stated policy of transferring education funding from
the public sector to the private, the state still provided three-quarters
of total education spending. Perhaps the most significant modification

observable by 1982 was the change in the administration and alloca-
tion of government spending, through a process of decentralization
and via local authorities. The proportion of decentralized expendi-
ture grew from 7.6 to 60.6 per cent between 1977 and 1982, while
centrally allocated funds diminished from 71.4 to 16.9 per cent.
Decentralization and Transfers to Regional and Local Authorities
From ministry of education data on the number of establishments and

educational units (each level within a school was considered as a
separate educational unit (EU]) it can be seen that the number of
establishments and EUs increased during the period 1979-82.
Although the public sector, in terms of establishments and EUs
subordinate to the education ministry and local councils contracted,
there was an overall growth in the number of establishments and
units. This was due to a significant increase in the number of private
schools, probably in the private, subsidized sector. Sectoral data
shows that the number of public educational establishments fell from
7500 in 1979 to 7107 in 1982 (a fall of 5.2 per cent). The number of
private sector establishments grew by 48.5 per cent from 2100 to 3119
in the same period. This resulted in an overall growth of 6.5 per cent
in the number of educational establishments, from 9600 to 10 226.
The evolution of EUs followed a similar pattern: private sector units
increased by 41.4 per cent, public sector units fell by 8.2 per cent,
resulting in a net increase of 2.4 per cent.
The overall increase, however, in the number of units and estab-
lishments was not to be seen at all levels. Expansion was concen-
trated mainly in the pre-primary and ensenanza media levels. A
breakdown by sub-sector demonstrates the following. First, at pre-
primary level the number of state units grew by 16.6 per cent, and the
number of private units by 88.5 per cent. Secondly, at the educacion
basica level, which was the main component of the school system in
terms of student enrolment and EUs, there was an overall decline in
the total number of units from 9676 in 1979 to 8880 in 1982 (a drop of
8.2 per cent), despite a 23.8 per cent increase in the number of private
EUs. Thirdly, the number of ensenanza media units increased from
1180 to 1386 (17.5 per cent); the greater part of this expansion was
accounted for by a 45.9 per cent increase in the private sector.
Finally, at the level of higher education there was a sharp contraction
in public provision and a major restructuring of the sub-sector. In
1979 there were eight universities in Chile, which had regional cam-
puses and faculties. Two were state universities; six were private.
Following restructuring and regionalization, by 1982 there were 41
establishments. Of these, 11 were public decentralized higher educa-
tion establishments. Private universities, which were in receipt of
public subsidies, remained at six. In addition there were 14 private
'professional institutes'. A further seven resulted from the restruc-
turing of the state universities. The National Training Institute
(INACAP) was also considered a higher education institution.
Student Enrolment
Ministry of Education data show that between 1979 and 1982 national
pupil/student enrolment dropped by 4. 7 per cent in absolute terms.
Given the growth in total population, it can be inferred that there was
an overall contraction in coverage of the education system. During
these years the proportion of enrolment represented by the public
sector fell from 80.3 to 75.8 per cent with a corresponding rise in the
share of the private sector. However, in 1982, the overwhelming
majority of enrolments in the private sector were located in state-
subsidized establishments. At the same time national coverage de-
clined from 50.9 to 47.9 per cent. In 1982 the total national enrolment
was 2 889 394 of an education-age cohort (0-24 years) of 6 037 502.
With decentralization, in 1981 77.4 per cent of the total pupiVstudent
population was registered at establishments controlled by regional
and local authorities; only 22.6 per cent was enrolled at centrally
governed establishments.
An analysis of enrolment by educational level indicates that the
pre-primary sub-sector slightly increased its participation in total
national enrolment; that the educacion basica sub-sector dropped
from 71.7 to 69.5 per cent of total enrolment; that the ensenanza
media sub-sector grew slightly but remained around 20 per cent; and
that the tertiary sub-sector remained steady at 3. 9 per cent. All of this
in the context of a decline in absolute pupil/student enrolment. 15
Neo-Liberal Strategies and Alternative Institutions
By the late 1980s, the education apparatus, though basically decen-

tralized, was firmly located within an authoritarian framework. The
conflict among the governing factions - neo-liberals, extreme national-
ists and conservative Catholics - was resolved in favour of the first.
Nco-liberal views on decentralization, the size and distribution of the

budget and a stress on privatization prevailed. Nevertheless, priva-
tization policies were unsuccessful; and a reduction in education
spending per student and an absolute fall in enrolment levels meant
that the education system was more elitist and rigid than at any time
since the 1950s.
Increasing school drop-out rates, coupled with a severe contraction
in funding and access to higher education, left the incoming Aylwin
government with a rigid, shrunken, decentralized but still essentially
state-funded education system, which again became a major focus of
unrest. Disillusioned by lack of social mobility and excluded from
decision-making in an authoritarian education system, the majority
of students and faculty joined the opposition to the military regime
and was crucial to the defeat of Pinochet. The gremialista - pro-
government- branch of the student movement lost ground after 1982
to newly formed democratic unions, some of which owed their origins
to non-governmental bodies organized under the umbrella of the
Catholic Church. Academics expelled from official universities found
refuge in a network of organizations affiliated to the Academia de
Humanismo Cristiano, an institution enjoying international support.
Throughout the 1980s these groups, linked with the democratic
opposition, evaluated neo-liberal education strategies critically with-
in a project for future redemocratization. A source of ideological
pluralism, the democratic academic community contributed to the
formulation of the programme of the united opposition, and fostered
a certain distance from the welfare state paradigm and the old desar-
rollista model characterized by a blind faith in state intervention and
public regulation.
A 'shadow academic world' crystallized in the political opposition.
Paradoxically, a new private sector in higher education was emerg-
ing, but it was not the sector desired by the regime. The Academia
provided a framework of support for academics engaged in research
and publication. Sheltered by the Church, academics were thus able
to perform a co-ordinating role that was crucial to the effectiveness of
the struggles of workers and trade unions who were denied such
privileges. Paradoxically, by expelling dissenting academics from the
universities, the Pinochet regime fostered alternative academic struc-
tures which played an essential part in the restoration of practices of
political bargaining and pluralistic consensus that were critical to the
process of redemocratization.
EDUCATION AND DEMOCRATIC RECONSTRUCTION
Education featured prominently in the programme for democratic

reconstruction formulated by the democratic opposition while cam-
paigning before the plebiscite and presidential election of 1990. The
outstanding characteristic of this education policy was a relative
freedom from ideological dogmatism. The main educational objec-
tive of the Aylwin administration was referred to as the re-establish-
ment of the 'alliance between science, the scientific community and
democracy'. This emphasis underwrote a commitment to expand
public funding of the education system in general and the universities
in particular. The democratic coalition also stressed the active role of
the state in scientific and technical research and the responsibility of
the state in making primary education universally accessible. While
acknowledging decentralized administrative and mixed (public-
private) financial arrangements, the new government stressed that
the supervisory role of the education ministry should be re-
established as a matter of principle.
Latorre and Nunez suggest that in order to meet the forecast
demand for education provision by the year 2000, state spending
in the sector should absorb a much higher share of the national
budget. 16 Because this level of budgetary provision was considered to
be highly unrealistic, it was proposed that the new democratic
government should retain the option of private financial provision in
higher education in order to target primary education. This is a
realistic appraisal in view of recent institutional changes and likely
budgetary restrictions. In line with these considerations, the socialist
education minister, Ricardo Lagos, and his team have prioritized
administrative efficiency, and have given some consideration to salary
levels and training in the education services. The importance
attached to the education ministry was signalled by the choice of
Lagos, one of the most senior members of the coalition and an
internationally respected economist, for the portfolio. The con-
tinuing commitment of the coalition parties and the education minis-
ter to a pragmatic and pluralistic approach to education explains why,
in the early 1990s unlike 1973, conservatives accepted the presence of
Lagos.
Setting the strategies and options of the new government in a
long-term perspective, three questions arise. First, does current
policy on access and enrolment correspond to practices of equity
450 Alejandro Jara Weitzmann
consistent with democratic enhancement? Second, is the income-

distribution effect of education expenditure more or less progressive
than during the Welfare State years? Third, does the new curriculum
meet the needs of a developing democratic society?
As has already been seen, there was a great expansion in budgetary
provision and access to primary and secondary education during the
Welfare State period. Given this historic growth, it is unrealistic to
anticipate future expansion at the same pace as the 1960s and early
1970s. Inasmuch as these developments particularly benefited lower
and middle income groups, it is reasonable to assume that the resul-
tant impact upon income distribution was progressive. Nco-liberals
frequently argued that substantial state expenditure on higher educa-
tion was regressive as access was largely restricted to high and upper
income groups. Reduced public expenditure on this sub-sector
coupled with the introduction of fees was consequently socially pro-
gressive as well as consistent with the monetarist philosophy of the
regime. By shifting the weight of public education expenditure to-
wards primary and secondary education, nco-liberals asserted that
they were targeting pupils from lower and middle income brackets.
This was a fallacy. Reduced state funding of higher education denied
lower and middle income groups access to the universities and there-
by discouraged children from completing their secondary schooling.
Hence the increase in the secondary school drop-out rate during the
period of military rule when the education system as a whole became
more elitist. A key priority of the Aylwin government is to reverse
these trends. In conjunction with this, it is concerned to extend
financial support for primary and secondary school children, to ex-
pand access to credit for students in higher education, to introduce a
new vision of parental responsibility at the local level and to intro-
duce new practices of decentralized administration of education
establishments. Behind the social programme of the Concertaci6n
Democnitica lies a conception of inter-active social policy, with a
particular emphasis on the immediate challenges of eradicating abso-
lute poverty, putting an end to institutional authoritarianism and
creating a framework for the democratic management of education.
Notes
1. R. Echeverria, La evolucion de Ia matricula educacional en Chile (San-
tiago, 1982); I. Nunez, El desarrollo de Ia educacion chilena hasta 1973,
2nd edn (Santiago, 1982); S. Gonzalez and A. Jara; Tendencias historicas
del gasto educacional en Chile, 1960-1980 (Santiago, 1985).
2. Republica de Chile, Ministerio de Educaci6n, Directiva La Planificacion
central de Ia educacion (Santiago, 1961).
3. Gonzalez and Jara, op. cit.
4. Republica de Chile, Oficina de Ia Presidencia, Mensaje presidencia/1970
(Santiago, 1970).
5. Republica de Chile, Oficina de Ia Presidencia, Mensaje presidencia/1966
(Santiago, 1966).
6. I. Nunez, op. cit.
7. Ibid.
8. J. Farrell, La escuela nacional unificada en el Chile de Allende: el rot de Ia
educacion en Ia destruccion de una revolucion (Toronto, 1983).
9. Gonzalez and Jara, op. cit.
10. Ibid.
11.. A. Magendzo et al., La desigualdad educacional en Chile (Santiago,
. 1985).
12. Ibid.
13. H. Contardo and A. Jara, La reforma educacional neo-liberal: combros
en Ia oferta de servicios educacionales, 1979-1982, 2nd edn (Santiago,
1984).
14. Ibid.
15. Ibid.
16. L. Latorre and I. Nunez, El financiamento de Ia educacion chilena:
evolucion historica y alternativas futuras (Santiago, 1987).
Index
adjustment policy, see also debt crisis Beveridge, William/Beveridgian model,
Africa, 25 3, 6, 7, 13, 183, 186, 188, 230, 261
agrarian reform, 152, 164-9, 269-74, Bhagwati, Jagdish, 299, 300, 311, 313
282,286,287,371,374,410,415 Bismarck, Otto von/Bismarckian model,
Aleman, Miguel, 82 3, 6, 7, 8, 10, 15, 21, 149, 150, 152,
Alessandri, Arturo, 440, 441 175, 183
Alfonsin, Raul, 89 blancos, 223, 225, 226, 236 n.9
Allende, Salvador, 441 Bogota, 23, 24, 245, 252, 317-39, 401,
Alianza Popular Revolucionaria 402; bogotazo, 83, 240
Americana (APRA), 152, 157, 158, Bolivia, 7, 15, 33-47, 56, 57, 63, 65, 69,
159, 162, 163, 164 116, 136, 388
Alliance for Progress, 17, 240 Brazil, 5, 14, 15, 22, 23, 24, 33-47, 53,
Alvear, Marcelo T. de, 179-81 5~5~~.~.M,M,6~~.W,72
Amazonia, 431, 432, 433 n.12, 75, 76, 77, 78-80, 84, 85, 87,
Am~zaga, Juan Jose, 225, 230, 233 89,92,95,97, 100,104-5,116,117,
anarchism, 272 127,128,135,188,221, 2M, 341-64,
Anaco, 207 388, 405-20, 421-37
Antioquia, 239, 245, 248, 250 Britain, 6, 33, 34, 35, 37, 38, 39, 40, 41,
apprenticeship services, 249-50, 251 42, 44, 45, 257
Aramburu, Pedro E., 191 British West Indies, 257, 2M
Argentina, 7, 14, 21, 22, 25, 53, 56, 59, Buenos Aires, 111, 180, 186
62, 63, 65, 69, 76, 77, 78, 88-9, 91, business organizations, see employers
92, 97, 104-5, 175-200, 116, 117, 127, Bustamente y Rivero, Jos~ Luis, 159,
135, 136, 221, 235 n.6, 388 160
artisans, 157, 179, 271-2
Asociacion Nacional de Agricultores Caldas, 247, 248
Pequeiios (ANAP), 287-92 Caldera, Rafael, 217 n.24
Atllintico, 239 Cali, 85, 252, 401
Attlee, Clement, 6 CAmara, Dom Helder, 425
authoritarianism, 5, 9, 19, 175, 341-64, Campaign against Absolute Poverty,
408, 439-51 387-404
Aylwin, Patricio, 439, 448, 449-50 Canada, 304
Caracas, 120, 122, 123, 124, 127
Baer, Werner, 261 Clirdenas, Lazaro, 80
Baldomir, Alfredo, 225, 228, 233 Caribbean, 55, 257
Barco, Virgilio, 133, 143, 144 n.1, 389, Central America, 14, 18; Common
391, 394, 397 Market, 365-6
basic needs, 4, 9, 133-45, 149, 338, 374, cepalismo, 3, 16, 191-5, 439, 448
424 ~sar, 252
Batlle y Ordonez, Jose, 221, 223, 224, Chamorro, Violeta, 382-3
225, 236 n.14 Chardon, Carlos, 258
Batlle, Luis, 225, 233 Chile, 4, 5, 19, 23, 25, 26, 33-47, 49,
batllismo, 14, 21, 221, 230, 232, 234 53, 56, 57, 60, 61, 62, 63, 65, 68, 69,
Benavides, Oscar R., 157 70, 71 n.3, 77, 84, 91, 92, 97, 104-5,
benefits and beneficiaries, 2, 9, 10, 12, 115, 116, 117, 128, 135, 136, 188, 221,
13, 14, 95, 232, 233, 298, 381 439-51
Betancur, Belisario, 143, 144 n.1, 389, Chinese, 153, 154, 155
391, 401 . Choc6, 252
453
454 Index
Chow test, 58 Dominican Republic, 56, 57, 63, 65, 69,

Christian democracy, 4, 202, 203, 204, 299
209, 210, 371, 440 drugs, abuse, 276; production and
Church, Roman Catholic, welfare role, trafficking, 123
12, 26, 184, 240, 241, 243, 247' 411, Duvalier, Fran~ois, 299, 301
417, 421, 423, 424, 425, 426, 432, 433, Duvalier, Jean-Claude, 299, 301
447,448
citizenship, 260, 341-64 ecology/environment, 25, 95, 430, 432,
civil rights, 21 433,435
clientelism, 297-315, 361, 362 Economic Commission for Latin
Cold War, 7, 260 America (and the Caribbean)
colorados, 223, 224, 225, 226, 228, 233, (ECLA(C)), 17, 18, 191, 388
236 n.9 economic growth, rates of, 33, 34, 36-7,
Colombia, 22, 25, 33-47,56,57,63, 65, 46, 78, 82, 83, 87,90, 92, 98,99, 110,
69, 71 n.3, 75, 77, 78, 83-4, 85, 87, 118, 134, 140, 222
89, 91,92,97,106-7,117,133-4, economically active population (EAP),
239-55, 317-39, 387-404 54, 56, 61, 64,65,66,67,69, 70,71
comisariatos, 208-10, 213, 214, 215 n.2 n.S, 72 n.9, 85, 90, 119, 196 n.5, 349
Comisi6n Econ6mica para America Ecuador, 56, 57, 63, 65, 69, 71 n.3, 136
Latina (CEPAL), see Economic education, 1, 3, 4, 5, 16, 19, 25, 26, 40,
Commission for Latin America 41, 84, 95, 96, 137, 138, 144-5 n.7,
communism, 201, 226, 231, 392 145 nn.S & 9, 150, 154, 159, 163,
community, 305 166-7, 169, 186, 193, 213,214,
concordancia, 184, 185, 188 239-55, 263, 264-6, 275, 276, 283,
conservatism, 228, 242, 388, 439, see 287, 288, 300, 371, 373, 374, 375, 383,
also concordancia 388, 394, 395, 397,398, 399,400,408,
construction industry, 116, 125, 126, 411, 426, 434, 439-51
271 ejido, 128, 130 n.10
consumer durables, consumption of, 43, El Salvador, 56, 57, 63, 65, 66, 69, 70
45, 46, 79, 82, 84 employers/business organizations, 22,
consumption, see consumer durables; 222, 229, 266
household consumption employment/unemployment, 4, 78, 79,
Contras, 375, 382 80,81,85, 86,89, 90,91,92,97,98,
contratista system, 210-13, 214 99, 111, 112, 116, 126, 127' 129, 135,
corporatism, 234, 341-64 136, 149, 193, 202-5, 213, 224, 258,
Costa Rica, 53, 56, 57, 60, 61, 62, 63, 271,388,391,394,395,398,408
65, 69, 70, 71 n.3, 92, 135, 371 environment, see ecology/environment
coverage, 3, 8, 9, 54, 55, 61, 62, 64, 65, equity, 2, 135, 281-95, 341-64
69, 95, 177-8, 196 n.5, 345, 349, Esteli, 369
372-5, 380; definitions of, 10 Europe, Eastern, 283, 289
Creole, 206 exile, see migration and exile
crime, 95, 113, 268, 276
Cruzado plan, 76, 97, 99 family, see household
Cuba,3, 7, 19,22, 53, 56, 57,62,63, farmers, 406-12; co-operative, 281-95,
65,69,245, 270,276,281-95 369; see also peasants and rural
Cundinamarca, 239, 250 workers
fascism, 183
debt crisis, 1, 33-47, 76, 80, 96-9, 100, Fedepetrol, 202, 203, 206, 207, 209, 211
109-32, 350-9, 388, 393, 405 Federaci6n Nacional de Cafeteros,
d~cada infame, 182 (FEDECAFE) 133, 247, 248
de Ia Madrid, Miguel, 120 Fetrahidrocarburos, 202, 206, 209
dependency, 111-16 Figuereido, Joiio Baptista, 356, 358
desarrollismo, 16 First World War, 154, 156, 178, 182,
domestic servants, 10, 85 193, 196 n.7
Index 455
Florida, 272 82, 84, 93, 97, 119, 120, 130 n.S, 135,
food, 79, 84, 96, 116, 117, 119, 120, 139, 413-15; inheritance, 303; life-
122, 135, 137, 139, 140, 144 n.1, 145 cycle, 94; size, 94
n.12, 153, 154, 166-7, 169-71, 258, housing, 4, 9, 15, 24, 79, 95, 109-32,
261, 270, 273, 289, 367; distribution, 150, 153, 154, 160, 161, 186, 196 n.6,
270, 273, 292, 322-4; subsidies 2, 15, 205-8, 213, 214, 227, 258, 267-9, 282,
120, 149-74, 275; supply, 208-10, 273, 288,375,377,389,393,398,400,43 5
287, 322-4, 325, 326, 375
Food and Agriculture Organization ideology, see welfare, ideologies
(FAO), 3 immiseration, 2
France, 33, 34, 35, 37, 38, 39, 41, 42, incomes, see wages and incomes
44, 45, 257, 299 income maintenance, 4
Frei, Eduardo, 440, 441 industrialization, 18, 22, 79, 113, 224-5,
Frondizi, Arturo, 191 226, 229, 259-60, 262-3, 267, 406
Fundo de Assistencia e Previdencia ao infant mortality, 34-6, 96, 136, 137,
Trabalhadores Rural (FUNRURAL), 138, 139, 141, 142, 145 n.11, 382
65, 72 n.11, 345, 349, 351, 359, 360, informal sector, 8, 9, 12, 20, 24, 85, 93,
405, 409, 416 100, 109, 113, 128, 129, 297-315,
317-39, 366
Gaitlin, Jorge E., 83, 240 Inter-American Development Bank
GalAn Sarmiento, Luis Carlos, 252 (IDB), 3, 371, 388
Garcia, Alan, 129 n.3, 133, 136, 144 International Labour Office (ILO), 3, 4,
Geisel, Ernesto, 347 7, 17, 19, 50, 53, 71 n.3, 91, 249
Germany, 33, 34, 35, 37, 38, 39, 41, 42, International Monetary Fund (IMF), 2,
44, 45, 231 19, 20, 99, 100, 402
GI Bill of Rights, 261 International Bank for Reconstruction
Gini coefficient, 52, 135, 136 and Development (IBRD), see World
Goulart, Joao, 79 Bank
Grace, W.R. & Co., 152, 158, 163, 164, Israel, 71 n.6
165 Italy, 33, 34, 35, 37, 38, 39, 41, 42, 44,
Grand Union, 273 45
Greece, 71 n.6
Growth rates, 134, 140 Jamaica, 92
Guadalajara, 117, 118, 121, 122 Japan, 33, 34, 35, 36, 37, 38, 39, 41, 42,
Guatemala, 7, 56, 65, 69, 57, 369 44, 45, 431
Jinotega, 369, 376
Haiti, 24, 33-47, 56, 57, 63, 65, 69, justice, 393, 396, 399
297-315
Hawaii, 272 Keynesianism/neo-Keynesian ism, 101,
health and health-care, 1, 3, 4, 5, 6, 9, 186-94
10, 12, 13, 19, 21, 40, 42, 50, 51, 58, kinship, see household and family
60, 71 n.5, 72 n.14, 95, 96, 137, 150,
153, 154, 155, 157, 159, 166-7, 169, La Paz, 111
171, 213, 214, 258, 263, 267, 268, 282, labour aristocracy, 75, 76, 79, 81-2, 83,
283, 288, 298, 300, 305, 348, 353, 356, 88-90,92,100-1,177,202,215,216
368-71, 374, 375, 376-83, 384 n.4, n.3
~8,E~E3,E4,E5,E~E8,399, labour legislation, 80, 90-3, 151-2,
400, 408, 410, 430 156-9, 205, 217 n.24, 222, 223, 227,
Hirschman, Albert, 401, 403 233
Honduras, 56, 57, 63, 65, 69, 135, 369 labour markets/supply, see employment
Hong Kong, 257 /akou, 302-5, 310
household and family, 115, 122, 125, land invasions, see squatter settlements
135, 273, 298, 301, 305, 306-8, 373, leisure facilities, 150, 166-7, 169
374, 389, 390, 398, 400; consumption, Le6n, 371
456 Index
Lewis, Gordon K., 276 Nicaragua, 22, 24, 56, 57, 63, 65, 69,
Lewis, Oscar, 318, 332 116, 283, 365-85
liberalisrnlneo-liberalism, 16, 36, 78, 90, non-governmental organizations
242, 243, 264, 387-404, 439, 442-9, (NGOs), 2, 19, 20, 24, 25, 26, 421-37
450 nutrition, 4, 40, 42, 96, 137, 144 n.1,
life expectancy, 34-6, 137, 138, 139, 145 150,258,267,367,382,392,396
n.ll; see also infant mortality
Lima, 111, 112, 117, 154, 156 O'Donnell, Guillermo, 341
literacy/illiteracy, 40, 41, 137, 138, 139, Odrfa, Manuel A., 88, 156, 158, 160
145 nn.8 & 11, 283, 373, 377, 382, Organization for Economic Co-
426,432 operation and Development (OECD),
Lonardi, Eduardo, 191 22, 33-47, 422
L6pez Michelsen, Alfonso, 144 n.1 organized labour, 12, 14, 23, 61, 63, 66,
L6pez Portillo, Jose, 120 72 n.12, 79, 81-2, 83, 88-90, 92,
L6pez Pumarejo, Alfonso, 239 100-1, 149, 151, 152, 159-64, 177,
Louisiana, 272 201-19, 221, 225, 230, 231, 233, 243,
Lusinchi, Jaime, 126 249, 272, 274, 387, 408-19, 421
Macao, 154 Pacto de concertacion, 119, 129 n.4

Madriz, 369 Pan American Health Organization
Magdalena, 252 (PAHO), 52, 376
Malloy, James M., welfare and Panama, 56, 57, 63, 65, 66, 69, 70, 91,
co-option, 6, 341-64 92
Managua, 367, 368, 371, 377 Paraguay, 56, 57, 63, 65, 68, 69
maquiladoras, 117 Pastrana Borrero, Misael, 320
Maracaibo, 122 peasants and rural workers, 3, 8, 10, 14,
Matagalpa, 369, 376 15, 26, 85, 147-74, 222, 269-74,
maternity benefit, 183 281-95, 345, 369, 380, 405-20
Maracay, 122 pensions, 2, 3, 4, 6, 9, 10, 176, 177,
Medenrn, 245, 252, 401, 402 179,187,222,223,281,301,345,383
Mexico, 22, 24, 33-47, 56, 57, 60, 61, Perez, Carlos Andres, 110, 129 n.4, 217
62, 63, 65, 69, 70, 71 n.3, 75, 76, 77, n.20
78,80-2,84,85,87,89,92,95, Perez Jimenez, Marcos, 201, 203, 211
106-7, 110, 116, 117-29, 135; oil, 82, Per6n, Juan Domingo, 185, 188
110, 117, 136 peronism, 14, 88, 89, 176, 185-90, 192,
Mexico City, 117, 118, 121, 122, 124, 193, 194
126, 127 Peru, 21, 22, 25, 56, 57, 60, 61, 63, 65,
Miami, 308, 310 66, 69, 70, 71 n.3, 76, 77, 78, 84, 89,
middle class, 2, 110, 115, 129, 223, 342, 91, 92, 97, 106-7, 133-45, 149-74, 388
380 Petr61eos de Venezuela SA (PDVSA),
migration and exile, 153, 154, 155, 223, 207, 218 n.43, 219 nn.54 & 57
235 nn.3 & 6, 272, 301, 305, 309 Pinochet, Augusto, 115, 442, 444, 448
military, 6, 14, 22, 23, 27, 54, 97, 182, Ponzi game, 346
188, 260, 341-64, 378, 382. 442-8 Poor law, 5
Monterrey, 117, 118, 122 population, growth of, 34-5, 297-315;
Morse, Richard, 265 sectoral distribution, 36, 38, 39; see
Munoz Marin, Luis, 261, 274 also migration; urbanization
populism, 9, 177-81, 234
nationalism, 213, 274-5 Port-au-Prince, 300
Netto, A. Delfim, 353, 354, 355, 358 poverty, absolute, 2, 135, 387-404;
nationalization, land, 282, 284; oil, 211 culture of, 111, 318, 332;
New Deal, 258 programmes, 133; and life cycle, 85
New York, 305, 308, 310 Prado y Urgarteche, Manuel, 160
Index 457
Programa Regional del Empleo para social wage, 150, 160, 169, 170, 193
Am~rica Latina y el Caribe somocismo, 365-85
(PREALC), 91, 93, 97, 99, 10~ Somoza, Hope, 370
public works, employment, 2, 396 Soviet Union, 230, 284, 284
Puebla, 121, 122 Spain, 265
Pueblo, 273, 274 squatter settlements, 24, 115, 122-3, 129
Puerto Rico, 22, 247, 257-80 n.2, 267, 318
stabilization, 99, 100; heterodox, 99,
Quintero, Rodolfo, 206 100; orthodox, 99, 100; see also
Cruzado plan
Radicals/radicalism, 177-81, 182, 184, Standard Oil of New Jersey, 206
185, 189, 193, 194 strikes, 83, 88, 91, 100, 150, 159, 160,
Rangel, Domingo Alberto, 216 n.7 168, 172 n.4, 177, 197 n.8, 205-19
recession and restructuring, 2, 24, subsidies, 98, 120, 387; see also food,
109-32, 352, 388 subsidies
rectification, 292 Sucre, 252
redemocratization, 1, 2, 8, 23, 26, 27, Sweden, 298
350, 359, 405, 421-32, 439-51 syndicalism, 225
R~gie du Tabac, 299
rents, 121, 122, 128, 129 taxation, welfare effects, 94-5, 124
revoluci6n en marcha, 239 Terra, Gabriel, 224, 225, 226, 233
Rio Grande do Sui, 405-20 Tijuana, 117
Rojas Pinilla, Gustavo, 251, 320 trade unions, see organized labour
rural modernization, 406-8 training, vocational, 239-55, 264-6
transnational corporations (TNCs), 6, 7,
Salinas, Carlos, 110 13, 14, 15, 21, 23, 149-74
sandinismo, 365-85 Trinidad and Tobago, 71 n.6, 93, 265
sangues, 308 Tugwell, Rexford Guy, 261, 274
San Juan, 259, 268, 273 Turbay, Julio Cesar, 142, 144 n.1, 394
Santiago de Chile, 128
Siio Paulo, 78-80, 85, 111, 128, 435 unemployment see employment/
Second World War, 7, 75, 79, 80, 81, unemployment
83, 89, 96, 100, 172 n.3, 186, 188, United Nations Educational, Scientific
191, 226, 240, 257 and Cultural Organization
Sen, Amartya, 297, 311, 315 (UNESCO), 3, 19, 240
Singapore, 71 n.6 United Nations (International)
slavery, 153 Children's (Emergency) Fund
social debt, 388 (UNICEF), 17
social democracy, 16, 201, 202, 203, United States of America, 19, 33, 34,
204,209,210,221-37 35, 36, 37, 38, 39, 40, 41, 42, 44, 45,
socialism, 3, 16, 184, 185, 193, 194, 225, 152,257-80,304,308,310,411, 430;
227,228,272,281-95,441 USAID, 370
social insurance and social security, 1, urban services, 43, 44, 95, 109, 114,
s, 6, 10, 13, 16, 20, 21, 23, 49-74, 95, 117, 119, 120, 121, 125, 126, 127, 128,
151-2, 156-9, 160-1, 175-200, 221-37, 137, 139, 150, 300, 301, 317-39, 398,
297-315, 341-64, 368, 370, 371, 373, 402; see also housing
380, 383 n.2, 387, 393, 394, 395; for urban workers, 2, 3, 8, 86, 87, 223, 301,
definitions, see welfare, debates and 317-39, 380; see also organized labour
definition urbanization, 12, 43, 62, 63, 109-32,
social justice, 26, 403 267,318
social planning, 13, 261 Uruguay, 14, 17, 21, 33-47, 49, 56, 57,
social security, see social insurance and 60, 61, 62, 62, 65, 69, 71 n.3, 92, 135,
social security 221-37,388
458 Index
Urrutia, Miguel, 84, 85, 87 281-95, 365-85, 439-50; official

provision, 1, 5, 33, 151-2, 15~9.
Valle, 239, 245, 247 175-200; and development, 6, 16, 24,
Valencia, 122 26,33-47,50,58, 70,93,133-45,
Vargas, Getulio, 344 191-5, 257-80, 281-95, 365-85,
varguismo, 14, 344, 405 387-404; and economic crisis, 1, 8,
Velasco, Juan, 133 33-47, ~99; and politics, 3, S-6, 10,
Venezuela, 4, 14, 21, 71 n.6, 84, 110, 11, 16, 18, 19, 21, 22, 54, 62, 66, 69,
117-29, 201-19; oil, 21, 23, 56, 57, 70, 71 n.8, 73-107, 116, 134, 136,
58, 63, 65, 69, 92, 110, 117, 135, 140, 143-4, 175-200, 201-19, 221-37,
201-19,371 257-80, 281-95, 317-39, 341-64,
violencia, 242, 247 365-85,387-404,405-20,422,
voodoo, 305, 310, 312 n.39 429-35, 439-51
welfare state, 3, 4, 7, 22, 49, 185-90,
wages and incomes, 36-40, 75-107, 112, 191, 222, 281-95, 298, 349, 372-5,
114, 115, 117, 119, 121, 122, 127, 129, 439, 448, 450
130 n.7, 136, 139, 149-74, 185, 227, Williams, Eric, 265
298, 317-39, 389, 418; re-distribution, women, 23, 26, 137, 138, 288, 317-39,
222, 374, 391; see also Gini 405-20; participation in labour force,
coefficients 22, 23, 93, 94, 227, 317-39; and
wages councils, 221, 225-33 education, 250-1
welfare, debates and definitions, 2-11, World Bank, 19, 71 nn.3 & 6, 240, 258,
71 n.l; entitlement, 33, 341-64, 388,402,422,430,431
405-20, 423; expenditure/finance, 1, world depression (1929-33), 221, 226,
3, 4, 5, 6, 7, 8, 10, 11, 15, 16, 20, 21, 257
22, 25,49-74,143-4,175-200,277 World Health Organization (WHO), 376
n.6, 342, 345, 387-404, 444-6;
expenditure as percentage of GOP, 5, Yrigoyen, Hip61ito, 178, 179, 180, 181,
50, 51, 53, 56, 57, 60, 67, 68, 69, 70, 182, 196 n.7
442-5; ideologies, 3, 4, 9, 11-20, 21,
78,90, 100,101,175-200,257-80, Zulia, 206

(ST Antony's - Macmillan Series) Christopher Abel, Colin M. Lewis (Eds.) - Welfare, Poverty and Development in Latin America (1993, Palgrave Macmillan UK)

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St Palgrave Macmillan Series

General Editors: Archie Brown (1978-85) and Rosemary Thorp (1985- ),

Recent titles include:

First published 1993 by

8 Social Insurance: Ideology and Policy in the

20 Non-Governmental Organizations and Development

6.1 Real GOP annual growth rates: Colombia, Peru

Jose Miguel Albala-Bertrand lectures in Economics at Queen Mary

Anita Brumer has studied in France and teaches Sociology at the

Maria Amparo Cruz-Saco teaches Economics at the University of the

Steve Ellner teaches History .at the University of Barcelona, Vene-

Henry Finch is Senior Lecturer in Economic History at the Univer-

Alan Gilbert is Professor of Latin American Geography at University

Anthony Hall lectures in Social Policy and Planning in Developing

Aline Helg studied at Geneva University and University College,

Alejandro Jara Weitzmann read Economics at the Catholic Univer-

Colin M. Lewis is Lecturer in Latin American Economic History at

Mats Lundahl is based at the Stockholm School of Economics. His

and labour. His research now embraces Caribbean and African

James M. Malloy is Professor of Politics at the University of Pitts-

Carmelo Mesa-Lago is Distinguished Service Professor of Economics

Caroline O.N. Moser lectures in Social Planning in Developing

Alicia Puyana was educated at universities in Bogota, Prague and

Ian Roxborough, currently Visiting Professor at the State University

is engaged upon a major research project examining re-democratiza-

Christopher D. Scott lectures in Economics at the London School of

Peter Sollis is currently on leave from Oxfam where he is Desk

Rosemary Thorp is Director of the Latin American Centre,

Lorena Zamalloa is a consultant on Peru at the Centre for Develop-

Membership of Social Insurance Fund

YPF Yacimientos PetroUferos Fiscales

INPS Instituto Nacional de Previdencia Social

FUN Federaci6n Universitaria Nacional

This introductory chapter performs four functions. First, it identifies

and submerged groups struggle for survival. During the period of

interrelated debates. Probably the most important refers to the

1. the gradual expansion of institutional arrangements for formal

3. the establishment of basic standards of hygiene, nutrition and

avert revolutionary challenges and a resurgence of the authoritarian

inclusion of spending on military pensions in the war ministry budget;

terms of limited, sector-specific coverage, the emphasis upon worker

Basic strategies for survival formulated by ad hoc urban and rural

these groups obtained invalidity pensions and modest health care. A

without help with the upbringing of children, cost of travel and

ISSUES, IDEOLOGY AND CHRONOLOGY

This section considers the ideological dimension of welfare expansion

identifies major issues that will be addressed elsewhere in the

ployers often preferred company provision, viewing it as a component

gain economic power and social kudos. A third category consists of

involved deficit financing. In this respect welfare projects may have

post-war period. Some of these agencies - notably the ILO and

action assumed a broad responsibility for welfare, and several

which involved, in the extreme case of Chile, the privatization of both

exponents of comprehensiveness. Do social security and welfare have

The nature of the welfare debates compels contributors to this

the concept of universal welfare and the assumption of a progress

on to look at the comprehensive welfare programme undertaken

Puyana shows that political will, competence in public administration

fragmented action could yield benefits given the likelihood of incom-

career structures that have contributed both to a growth in their

responsibility or a requirement of government? Furthermore, she

a permanent stake in the political and social order through welfare

Table 2.1 Basic development indicators: Latin American and OECD