Over the last four decades, Professor Mesa-Lago has been the most consistently authoritative analyst of social security institutions in Latin America in a period characterised by acute change and transformation of social security institutions, and where the justification for, and outcomes of, the reforms have been highly contested. The book provides a comprehensive and masterly account of pension and health reforms, reflecting the attributes one has come to expect from the author's work: depth of knowledge, acute understanding, and easy accessibility. The book has a claim to be the definitive study on social security reforms in the region.
The book divides into four sections. The first maps out a framework for examining pension and health reforms. This is followed by two substantial sections on pension and health reforms respectively. The final section summarises the assessment of the reforms, identifies the challenges ahead and maps out in some detail the kind of policies that would be required to meet these challenges.
The framework for assessing the pension and health reforms is a set of social security principles extracted from the work of international organisations, especially the International Labour Organisation. In international development, this approach would be described as ‘rights-based’. Six fundamental principles are identified and explained: (i) universal coverage; (ii) equal treatment; (iii) solidarity and income distribution; (iv) comprehensiveness and sufficiency of benefits; (v) unity, state responsibility, efficiency, and social participation; and (vi) financial sustainability. The basis for, and evolution of, the principles is carefully examined. They are subsequently applied to the reforms and provide the basis for their evaluation.
The analysis of pension reform is far-reaching. In contrast to much of the available literature, it considers the wide range of experiences with reform, including ten cases of countries that implemented fundamental reforms and twelve cases of countries with parametric reforms or with largely unreformed pension systems. Chile was the first country in the region to undertake a fundamental reform of its pension system, replacing its social insurance funds with individual retirement accounts (and individual health insurance), negotiated with private pension fund managers (and health insurance providers). Nine other countries followed suit, but in five of these countries, arrangements diverged from the Chilean model of pension reform in important ways. Twelve countries opted instead to adapt their existing pension systems by changing the parameters of contributions and benefits, mainly by reducing the generosity of pension benefits and/or strengthening the incentives to make contributions. Brazil has gone furthest by incorporating demographic factors in the calculation of pension benefits. Some countries have opted not to reform their social insurance pensions.
Professor Mesa-Lago's assessment of the reforms is done in detail and with considerable care. It gives little ground for optimism. The pension systems that underwent fundamental reform have not managed to extend coverage to wider groups of workers; if anything the reforms have been associated with a decline in coverage. On most of the six criteria of assessment, fundamental reforms have not led to significant improvement. This is not to say that the other countries, those opting to implement parametric reforms or avoiding reform altogether, are in a better position, especially as their coverage of the labour force is limited and many face acute financial sustainability issues. A depressing conclusion is that after two decades of pension reforms, Latin American countries are not closer to establishing the institutions needed to ensure old-age income security to their populations.
All the countries in the region have undertaken health reforms, but there is greater diversity in their features than is the case with pension reform. As many as ten different reform types are identified, reduced to four clusters where the focus is on the type of health provider. The plurality of providers is a defining feature of health systems in the region. As with pension reform, the assessment of the health reforms yields few positive findings. Coverage of health provision, harder to estimate than for pensions, shows a declining trend. The integration of highly segmented provision has not advanced as reformers expected. In addition, out-of-pocket expenditure continues to be the most important source of financing health care, suggesting both insufficiency and inefficiency in health provision.
The final section focuses on the way forward. One of the contributions of the book is to map, on the basis of this assessment, the measures needed to meet the goal of ensuring old-age income security and health care for all. Here, the principles underpinning the assessment of reforms are used to identify policies for advancement. There are few critical points that could be made on the book. It explicitly aims to cover Latin America, and it certainly fulfils its remit. However, some reference to Caribbean countries would have been interesting and informative. There is scarce literature covering social security in the Caribbean, and the book's coverage of Haiti, in addition to Cuba and the Dominican Republic, shows how their inclusion would have been a bonus. The book is focused on pension and health reforms, but it delivers much more. In my view, the book can be read usefully as a stocktaking of where Latin American countries are with the social insurance model of social security. A final chapter, reflecting on the social insurance model and its future in the region could have rounded this particular reading of the book. This is an important book, which will find a wide readership among specialists, researchers, practitioners and students. This reviewer fully shares the author's hope that the ‘book will stimulate debate, improve understanding of these reforms and, above all, contribute to better pensions and health care for the peoples of Latin America and elsewhere’.
