Colombia : reforming the social safety net

INTERNATIONALBANK FOR WORLD BANK R E T C N O E N STRUCTION PM AND DEVELO February 2003 No.18 A regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank`s Latin America and Caribbean Region COLOMBIA: REFORMING THE SOCIAL SAFETY NET Laura B. Rawlings The Economic Crisis and finance a response to the crisis. As part of this effort, In 1999, Colombia experienced its most severe recession in Colombia's social safety net was reviewed and a number of 70 years, fueled by unsustainable growth in government steps taken, including: (i) rapid crafting of a short-term spending beginning in the early 1990s and external macro- emergency safety net investment program called the Social economic shocks in the late 1990s. Compounding the eco- Support Network (Red de Apoyo Social, RAS); (ii) a nomic downturn, Colombia's internal conflict intensified, poverty assessment and a social safety net assessment; and hundreds of thousands of people were displaced, and vio- (iii) implementation of two social sector adjustment lence and insecurity increased. The social consequences in- operations focused on medium term reforms of the social cluded a doubling of the historical rate of unemployment in safety net, health and education systems. the late 1990s, a continued rise in inequality , and a dra- matic increase in poverty that reversed a decade of progress The Colombia Social Safety Net Assessment included: (i) a in poverty reduction. risk and vulnerability assessment based on the analysis of new and existing household survey data as well as a rapid Historically, Colombia's "safety nets" were economic qualitative study and (ii) an institutional analysis of growth and a now unsustainable expansion of social ser- Colombia's new and existing federal social assistance vices, notably in health, education, and pensions. Social as- programs. With the Colombia Poverty Assessment, this sistance (SA) was not included in the dramatic social sector analytical work provided an empirical basis and a reforms of the 1990s, implying that the social safety net did participatory process for outlining priorities for reforming not benefit from increased spending, decentralization and the social protection system. the strategic prioritization afforded to other social sector ar- eas. SA remains under-financed compared to national de- Vulnerable Groups and Risk Management mands and international norms (Box 1). Furthermore, the SA programs that could have provided a safety net during Despite a modest economic recovery, poverty, inequality the crisis were hampered by structural constraints, including and key social indicators continue to deteriorate, suggesting poor poverty targeting in certain programs, institutional in- that the shock to income and human capital is longer-term flexibility, and unfocused mandates. than the macroeconomic effects of the recession. Quantitative and qualitative analysis confirm that certain The Government of Colombia asked the World Bank and groups remained highly vulnerable and in need of attention Inter-American Development Bank (IDB) to help craft (see Table A, back page): Box 1 - International Comparisons Colombia's level of social assistance spending at 0.6 percent of GDP is very low compared to countries at a similar stage of development. Each of nine Latin America and Caribbean region countries included in a recent social protection expenditure review devotes a higher share of GDP to social assistance, including Argentina (0.9 percent), Mexico (1.1 percent), Peru (1.4 percent), Uruguay (3.4 percent) and Venezuela (1 percent). Source: Dulitsky, Gragnaloti, and Lindert 2001 1