Unemployment Compensation in Latin American and Caribbean Countries
The countries of South America, Central America, and the Caribbean face serious economic challenges frequently manifested in high unemployment and/or high inflation. While the economic crisis in Argentina that commenced in late 2001 has received widespread attention, large increases in unemployment also occurred in Chile in 1999 and in Uruguay in 2001—2002. Recent economic statistics also show that the problem of high inflation has not disappeared from the region. Although episodes of hyperinflation did not return during the 1990s, inflation in Argentina during 2002 reached 40 percent while in Uruguay it was approximately 25 percent. 1 Providing social protection for the unemployed of this region presents unique challenges.
Of the 21 countries from this region, only 6 —all of which are in South America—have a formal UC program. The programs in South America are, however, relatively modest in scale—potential benefit duration is short and replacement rates are generally low. Recipiency rates are also relatively low (see Panel D of Table 3.3). These aspects of UC programs are explored in the first section of this chapter. Particular attention is given to the association between inflation and UC replacement rates because past inflation has been severe in many Latin American and Caribbean countries. It is argued that without effective indexation provisions, high inflation would quickly erode the real value of monthly benefits.
The second section examines UC administration in four South American countries: Argentina, Brazil, Chile, and Uruguay. The discussion highlights the important ways in which the administrative arrangements in these countries deviate from those in the OECD-20 countries, arrangements that are more familiar to most readers. As a broad generalization, there is a more substantial disconnect between the benefit payment function and the other reemployment functions traditionally undertaken by a country's PES.