4. The long and winding road to reform.
As we have tried to argue on our brief history of the Uruguayan
Social State the period that goes from the 1960s to 1970s can
be considered as one of denial. One in which all relevant actors
playing the distributional game chose to look the other way and
shift the blame from one to the other. Uruguay was living above
its means, and it did not want or its political system was not
able to, impose the necessary costs of adjustment that such a
Shock and the closing of communication between its different
participants followed the period of denial.
A military dictatorship closed the channels of demands and participation
and imposed the costs of austerity. It did not advance much in
the way of social sector reform, limiting itself to cut social
expenditure, rather than changing its institutional design and
its sets of rights and duties.
From 1985 to 1989 the new democratic administration, with the
complicity of the opposition seemed to go back to an exercise
A closer look, though, suggests the need for a more accurate
diagnosis. Rather than denying a constraining reality, the Uruguayan
political system and very especially the government sought to
administer the crises of the social state. In order to do so
it attempted to control public expenditure, limit the expansion
of new services and benefits and increase forms of basic coverage.
This was an attempt to reshape a social state oroginally oriented
to middle class expectations, to more realistic goals. The new
administration allowed for the recovery of the old participatory
channels while at the same time it made abundant use of the few
but important institutional resources it had at hand to limit,
defer and mediate demands.
The process that this government strategy unleashed is worth
a more detailed analyses. It illustrates the peculiar ways in
which the political system and the social state interacted supported
by and reproducing an environment that was conducive to "voice"
and that made extensive use of "loyalty", rather than
"exit" from the social state and its programs.
The two administrations that followed attempted to reform the
social state in a more radical form. The Lacalle administration
(1990-1994) relied on a more market oriented paradigm
and its attempts were systematically vetoed. It was able to show
some success in the development of new flexible programs oriented
at targeted social policies, though without dismantling the previous
universalistic matrix, but simply adding a layer of policies
traditionally underdeveloped in the country and targetting within
the old social programs.
The present administration, has so far, showed an impressive
record of reform in the areas of social security and public education,
and is getting ready now to face health sector reform and the
state role as regulator of the labor market. The next pages will
precisely deal with social sector reform in those areas.
Besides the specificities of each sector and the challenges that
are unique to each case, we will try to show the common political
dynamics in which "voice" and "loyalty" led
the reform process, and in doing so ended up producing a unique
blend of the new wisdom in social policy and the old statist
and redistributional legacies of one hundred years of social
The process of reform is still unfolding and the final outcome
not certain yet. The magnitude of the task that lay ahead the
new democratic administration is one simple factor that accounts
for the lengthiness of this process. A scant review at what the
system looked like circa 1985 and the major challenges and problems
it faced, will help us convey the message more clearly.
Regarding labor rights
and labor capital relations, the situation, resembled, as we
noted, that of the years before the coming of the dictatorship.
Labor rights both collective and individual were by regional
standards comparatively high. They included unemployment and
sickness benefits, labor courts in which an employer had to demonstrate
reasons for firing or pay for dismissal in proportion with time
in the job, constitutionally granted rights to organize and strike,
and public status of the trade union movement as legitimate representatives
of workers in all labor disputes and bargaining.
i. Social Security Reform: coming to terms
and sharing costs.
In 1995 Uruguay finally
reformed its Social Security system. It moved from a state monopoly
"pay as you go" system to a mixed system that included
private agents and mandatory levels defined by income of individual
capitalization. This is no doubt, the most important reform to
the system since the 1950s when the last categories of workers
were included and the 1970s when the system reunified under one
centralized agancy most categories of workers. The system was
in financial disarray since the 1960s, and the situation had
worsened in the last thirty five years. The reform had been on
the agenda of the last two democratic administrations. Furthermore
several projects of reform had been discussed, and many of those
actually sent to congress where they had been systematically
Four aspects of the final outcome of reform should be highlighted.
The first one is that the rights and benefits of retired persons
in the old system where not affected, and in the years that go
from 1985 to the actual reform, the quality of benefits improved.
More specifically a social movement composed of retired persons
was able to gain the support of the people and in 1989 through
a plebiscite approved an amendment to the constitution in which
pensions were to be raised each time the state functionaries
received a raise and in the same proportion as the mean wage
index. This, in short as a constitutional guarantee against the
erosion of benefits quality. as a matter of fact, since public
wages were indexedby past inflation in a context of declining
inflation, benefits quality actually improved.
The second aspect that is important to keep in mind is that the
first pillar of the new system is not a capitalization system
but a pay as you go system , and that everyone has to contribute
part of their income to it. Being in the capitalization pillar
does not excuse workers from contributing to the pay as you go
system, which will remain the monopoly of the state.
Thirdly, while the administration of capitalization funds (AFAP´s),
can be in the hands of private agents, the state is also present
with its own AFAP, and has to date, more than fifty per-cent
of the market share. A additional statist feature, is that the
80% of the AFAP´s capital has to be invested for a period
of time in state treasury bonds.
Finally, this reform only covers old age, disability, and survivors
benefits. The system of social security includes besides that,
unemployment, family allowances and non contributory pensions.
Those remain within the state administration and are funded as
before. An additional feature that so far holds but might change
and that marks an important difference with other regional experiences
(see Kay, 1996), is the fact that employers
continue to contribute to the system.
Thus while this reform constitutes a clear departure from the
old system, it is a far cry from the Chilean model, and also
remains statist and committed to some redistributional goals,
that have been rather neglected in other countries experiences
(Mesa Lago, 1994).
To understand this peculiar outcome one has to introduce on the
one hand the development of the previous system and on the other,
the political logic that dominated the last 15 years of the country,
when reform was on the center of the agenda.
The single most important development regarding the arena of
social security policy, was the emergence in the first democratic
administration of a social movement of retired persons that was
able to form a successful coalition with the trade union movement
and with a good part of the political opposition.
This movement did not emerge from nowhere. Retired persons, awaited
with great expectation the return to democracy, seeing there
the possibility to recover some of the value lost during the
dictatorship. An agreement by social and political forces previous
to the return to democracy, established the general aim of doing
just so, especially favoring those pensions that had lost more
value (the older people and poorer people) by establishing differential
Raises were given, but below the level that had been established.
To increase the discontent of the beneficiaries, those that had
the better pensions saw their benefits increase at a slower pace
than the other pensioners.
An additional factor that must be kept in mind is that neither
those already in the system nor those approaching retirement
had any easy ways out of the system. Private funds were in place
even before 1984, and increased somewhat after a law regulating
them was passed. Yet these were complementary funds outside the
public system, and contributions to the public system still had
to be done at the levels defined by law. To have a sense of how
small the "exit" option had advanced consider that
all private complementary funds added to 3000 persons (Mesa Lago, 1994). The public social security system covered
more than 700000 people. In Hirschman´s words members were
securely "locked in" the system. Thus followed the
activation of "voice" from the more quality conscious
members. By 1989, this social movement was able to approve the
Eighty percent of the population voted in favor of the amendment.
Thus an important degree of "loyalty" was also present
in most of the population. Loyalty should not be confused here
with faith or solidarity. Both faith, in the sense of a sort
of statist religion that underpins Uruguayan political culture,
and solidarity, emanating from an egalitarian social structure
and an egalitarian culture, fearsome of large differences, probably
had its share of influence. But by "loyalty" we are
refering to the commonsensical reasoning that with imperfect
information people make and through which they evaluate the chances
that a system can be improved from the inside, against the uncertainty
and risks involved in dropping out and seeking alternatives outside
The Lacalle administration was then faced with a time bomb. A
system that was already without financial resources, would require
even more of the state resources if it was to meet its obligations.
The administration adopted a two pronged strategy. On the one
hand it increased taxes to meet the new demand, and made it absolutely
clear that the reason for raising taxes was the people's vote
in the plebiscite. This made people realize more clearly than
ever the costs of generosity, and also the need to reform the
On the other hand it pushed forward an ambitious project of building
consensus under technical criteria in a multyparty commission.
By 1992 the commission came up with three alternatives, and picked
a reformed pay as you go system with tougher retirement ages,
adjusted periods for the number of final years for benefit determination,
and a much closer relation between contributions and benefits.
Strictly speaking this was a far more moderate law than the one
that was finally approved in 1995, yet congress blocked the 1992
The major reason was that the overall thrust in Lacalle´s
reformist impulses were perceived by the population as to radical
or neoliberal, and had turned the colorados -a reluctant partner
so far- into something closer to opposition than coalitional
partner. Three additional attempts were made by the Lacalle administration,
all of them defeated.
The major outcome of this period of failed reformist impulses,
was on the one hand making reformers come to the conclusion that
only a strong and wide coalition would be able to pass important
laws of reform. On the other hand, these years allowed for the
accumulation of domestic technical expertise on the subject and
the configuration of basic political consensus regarding the
viable options of reform. In fact the, 1995 reform, was quite
similar with one of the alternatives handled but finally not
proposed by the technical multyparty commission of 1992. One
major difference, that we suspect but have not been able to confirm,
between 1992 and 1995, is that the costs of transition in 1995
were mostly covered by an Inter-America Development Bank loan
of 150.000.000 U$.
The national election of 1994 in which the left coalition captured
a third of the vote (same as the colorados and blancos) was the
decisive and final component that glued the colorado-blanco coalition
and allowed them to carry out the social security reform. Overall
the final outcome has been positive; honoring entitlements, maintaining
and important role of the state in the new model, and keeping
some redistributional instruments both inside the new system
and in the programs that remain in the BPS.
Social Security Changes 1985-1995
Sources: Cominetti, 1994;
CEPAL, 1996; descriptive statements from multiple sources. (a)
in 1987 dollars; (b) estimated from Cominetti and CEPAL.
per-cápita expenditure (a)
|| 238.2 (b)
as % of GDP
|| 17.0 (b)
||Pay as you go State
||Pay as you go State
||Old system remains
unchanged for retired persons and persons close to retirement.
New system combines pay as you go and capitalization system.
Private and public administration
||For low income families
||For low income families
Insurance for retired persons
|| Yes (1997)
A process of reform
that has as its major moments a plebiscite, a multyparty commission
and a broad coalition that passed the law in congress stands
in sharp contrast with decrees, dictatorships, and semiauthoritarian
measures that dominated the processes of reform in other Latin
A reform that allowed for present day beneficiaries to increase
the real value of pensions, that kept a strong hold of the state
on the overall system and that maintained some explicit redistributional
measures, should not then, surprise us.
ii. The reform of education: the stubbornness of public goods.
Public education, once the pride of the nation, was perceived,
with no small reason, to be in shambles at the return to democracy.
Teacher's wages, inadequate infrastructure, overcrowded classrooms,
curricula's inadequacy to labor market needs, and an important
number of parents that had chosen to "exit" the system,
and seek private alternatives, were just the most salient symptoms
of an important crises.
With democracy the administration of primary and secondary education
returned to a semiautonomous decentralized structure and the
University to its selfgoverment, though it remained dependent
for resources on the central government. These were symbolic
gestures - and consensual for that matter-, that did little to
improve the quality of education.
The teacher's association pressure for increased funds and the
University pressure, together with governmental interest given
the perception of the population and the high legitimacy of potential
measures allowed for some more substantive changes than the formal
ones. Measured in real terms as percapita expenditure, education
expenditure increased some 70 % from 1985 to 1990 (Cominetti, 1994). As a percentage of GDP the increase
is far less spectacular, but we have to consider that the GDP
was growing, and so was the share of education: it went from
some 1,5 to 2.1 and then down again to 1.9, between 1985 and
1990 (Cominetti, 1994).
No major structural reforms were attempted during the first administration,
besides some increasing attention to schools in poor neighborhoods.
The Lacalle administration continued this trend, and developed
a system by which some schools in neighborhoods with high levels
of Unsatisfied Basic Needs were defined as schools of "priority
requirement" and teacher's wages increased accordingly as
The year after the last election, 1995, saw again the launching
of the most ambitious project of reform, known as the "Rama
reform" for it is German Rama, previously the director of
CEPAL in Uruguay, the president of the CODICEN and leader of
this reform. The most important features of this reform can be
summarily pointed out.
In the first place, it strongly reforms the high school curricula,
loosing much of its humanist bend and increasing pragmatic content
that prepares the individual for the labor market, rather that
for college. This transformation implies a regrouping of subjects
and the preparation of professors with training courses to meet
the new demands. Secondly, this reform, undertakes the very ambitious
aim of expanding public, free and obligatory education to preprimary
level, something that had been done through private schools before
and that had increased significantly for middle and upper middle
classes in the last two decades.
This fact had been pointed out in analyses carried out by CEPAL
in previous years to be a major factor in children's performance
in later years, and thus a major element in potentially increasing
the inequality of human capital allocation. In the third place,
the reform seeks to develop for some areas full-time schools
and has already launched some pilot experiences. The central
idea here is to keep the kids out of the streets, and provide
a frame of reference that goes beyond teaching and includes services
and some presence of role models.
To understand a reform that quite clearly opposes the blueprint
of market oriented social reform we must take three factors into
consideration. The first one is that even the Multilateral Lending
Agencies are much more tolerant of state expenditure in basic
education than in other sectors such as social security. Secondly,
the legacies of a comprehensive and for the most part, high quality
system of public education in the fifties and sixties, left an
indelible mark on political elite's perspective and on the citizenry
in general regarding the desirability of public education. Finally,
"voice" and "loyalty" were present again
as basic mechanism that became activated to confront the deteriorating
quality of education. We shall concentrate on the last two aspects.
Education was the myth of the Uruguayan social state. Perceived
as founder of citizenship in a country of immigrants, ladder
of social mobility for a people with middle class expectations,
and guarantee of equality and equal opportunity, any attempt
at dismantling the public system would have been penalized strongly
by the electorate. Even more importantly, it is doubtful that
most of the political elite would have, from their own convictions,
supported this kind of transformation.
A good part of the political elite was a product of public education.
Yet it is true, that there was a crises, and it is also true
that the state had few resources. The signs that the people gave
to the political elites were clear enough, and deterred any strategy
of reform by default on their side.
In 1989, previous to the national election, one of the longest
strikes of the period took place and it was led by the teacher's
association. Interestingly enough, despite the disruptions that
such a strike had on people's life this strike survived because
the people and of course the rest of the trade union movement,
including at moments the teachers in private education, supported
it. This conflict coupled with internal conflicts in the colorado
party hurt the government chances for electoral success significantly.
The strikers pressed for increases in wages and budget under
the general banner of a dignified education.
The next administration gave an important, but nonetheless unsatisfactory
increase in wages to teachers, but was always under the threat
of a major conflict unleashing. Soon came a more drastic warning.
The teacher's association, the leftist coalition and the trade
union movement proposed to plebiscite in 1994 a constititutional
amendment that would grant a 27% fixed floor of the national
budget for public education. At the time it did not reach 15%.
This time the political elites of the traditional parties did
not escape confrontation as they had done in the retired people's
proposal, and the amendment was finally defeated. "Voice"
again in the form of direct democracy and trade union pressure
had made a tough entry and warned elites that it would not only
veto privatization attempts, it would also not stand silent at
a reform by-default of the public system. Maybe in this case,
"loyalty", is clearer than ever. The "exit"
option, is for an important part of the population certainly
available, and in effect many have exited, doubling and tripling
between 1985 and 1992 the enrollment in private schools and high
schools. Yet many parents sent their children to public education
because it was "the right thing to do" not because
they cannot afford another option while the system lost quality,
postponing the "exit" option.
Furthermore, and this is were "loyalty" in the sense
Hirschman gives it operates in its strongest form, public education
constitutes a public good that Uruguayans feel they can never
"exit" completely, even if their children attend private
schools. Public education has an effect on the social fabric
in general, from which they cannot extricate themselves -or at
least that seems to be their perception if we consider the overall
support that the public education systems and the corporations
representing its demands had received until the start of the
"Rama reform" in 1995.
After the "Rama reform" was launched strong corporatist
veto groups started to question what had in fact the broad consensus
of the political system. Another strike by students and teachers
at the secondary level attempted to roll back reforms and criticized
the reform for being imposed without dialogue on the people that
would actually have to live with such a reform.
This time around support from the population was less clear and
with time the corporations accepted reluctantly what was mostly
a symbolic gesture by the authorities to open dialogue mechanisms.
So far the "Rama reform" continues to evolve, and opposition,
while active is concentrated and has received little support
from the broader political arena.
Tertiary education, until 1984 the monopoly of the state university
has undergone transformations that fit better with the overall
market oriented paradigm of reform. In 1984 one of the last decree
of the military regime was to grant tertiary level credentials
to the Catholic Institute Dámaso Antonio Larrañaga,
recognizing many careers as equivalent to University careers.
Between then and today three other higher education institutes
have been accepted, and some more are applying for such status.
Between 1985 and 1997 the improvement in education has been scant,
but compared to the deterioration of previous years it has improved.
The fiscal effort, the real expenditure and the expansion of
services with a strong redistributional bend support this statement.
Evolution of public education
Sources: Cominetti, 1994;
CEPAL, 1996; descriptive statements from multiple sources. (a)
in 1987 dollars; (b) estimated from Cominetti and CEPAL.
as a % of GDP
per-cápita expenditure (a)
||Only covered 5 years
||Expanded for some
schools to 4 year old children
||Aim at universal
coverage for 4 year old children by 1999
The legacies -both
ideological and structural, of a largely successful system in
the past, the pressure of corporations and citizenry activating
"voice", backed by important degrees of "loyalty"
towards such system, and the responsiveness of a highly democratized
political system with access to direct channel of policy prescription,
contributed to put a stop on public education decay, and contributed
to shape a reform, that has as its main blueprints the expansion
of the state role in basic education, redistributional goals,
and a shift from a system that prepared "doctores"
to one that also prepares young, non-college oriented workers.
iii. Facing health care crises.
Someone said once,
that "if you want a health reform, you need a military regime".
Going against the medical corporation, the laboratories, the
mutual aid societies and the medical red tape and bureaucracy
is not a task to be carried out in a democracy. Uruguay so far
seems to support this statement. A national health care plan
was accorded by all parties and social groups prior to the return
to democracy. It was never even attempted to launch that program
of reform. More recently the health ministry sent a reform to
parliament. The minister of health went back to his day job,
and parliament never treated the project. This neglect to treat
health care reform projects is in no way due to the fact that
the system is in good health -to play with words. On the contrary,
the Uruguayan health system is in serious trouble, and according
to some on the verge of collapse.
The system of health care in the country is a complex articulation
of private and public agencies that interact with each other
at different levels (cooperation, financial, etc.).
Historically two different systems can be distinguished. On the
one hand the private system in which mutual aid societies (MAS)
covered the middle and upper classes and with time part of the
working class, and on the other the public system that covered
those that could not pay the fee of the MAS.
In the 1960s and 1970s, bilateral agreements between state agencies
and MAS created a system by which state employees, with a small
discount could become members of a MAS. The state in this way
started to subsidize the MAS and their employees health care
cost. In the 1970s some laws and tripartite agreements opened
the door for the first categories of private workers to a similar
deal. Now employers, employees and the state contributed to the
health care of the individual.
In 1984, the mechanism became universal as the last categories
of formal sector workers (rural and domestic service) acquired
the right to a mutual aid society. These mandatory health insurance
was administered by a new state directory (DISSE) that played
an intermediary role between the worker and the MAS of choice.
By 1988, according to the Ministry of Public Health, 1.400.000
people were members of mutual aid societies. The public system
continued to serve around 1.000.000 people, and some private
or specific public facilities (Military Hospital, State enterprises
medical facilities) added to an almost complete coverage of the
Uruguayan population. There is no doubt that the implementation
of the agreements between the state and the MAS and afterwards
the creation of DISSE increased coverage in the higher quality
layer of health care, and did so with a strong redistributional
bend (the amount of money one pays to belong to a MAS from one's
income, is proportional to that income).
Less clear, given the increased costs of customer co-payment
meant at controlling consumer use, is how much the new popular
sectors incorporated to the system could and actually did use
the system (Sánchez and Fernández, 1995).
This process of incorporation of new sectors also placed strains
on MAS. As a matter of fact these societies were already in financial
trouble before this system was implemented; this process increased
the problems, and the solution was a strong subsidy from the
state to keep the MAS system working. Coverage in better quality
services increased, but its flip side was that quality in those
same services declined as overcrowding evolved and financial
resources lagged behind. Also some costs in the form of strong
raises in medicine tickets and red tape costs were passed on
to the consumer -i.e. the member of the MAS.
In the 1980 a third form of medical service appeared: private
emergency mobile units. These services also used a cooperative
prepaid monthly quota that allowed for very low fees by redistributing
costs and risks.
A large part of the middle classes, and almost all of the upper
middle and upper classes became members of these services. Mutual
aid societies were particularly slow and inefficient regarding
minor primary treatment and emergency and out-patient services,
and these were precisely the areas in mobile units -which later
added basic primary care centers, attended. As a matter of fact,
most people that could afford it paid a double fee, one to the
MAS and one to the mobile emergency service.
The end result, is that the country is moving to three tiered
stratificational structure in terms of health care: those that
cannot afford to pay for health care or can afford very little
and thus end up in a public system with stagnant or declining
quality, those who only pay for a mutual aid system with declining
quality, and those that are members of MAS but can also pay and
choose to do so the emergency and out-patient new services.
"Exit" has no doubt in this case played an important
role, but in a very peculiar fashion. The private system of MAS,
at first open to "enter" or "exit" between
different mutual aid societies, has become the basic system for
more than half of the population, and there never truly was for
the better off an "exit" option. The better off (middle
classes and up) were content with a relatively elitist and stratified
system of MAS. DISSE significantly changed that.
A worker could choose any MAS´s he wanted and that did
not influence how much was taken from his salary. Thus the best
MAS´s increased membership, and with time only those efficient
at managing larger numbers and maintaining minimal quality survived.
"Exit" from the system was as hard as ever, but "exit"
within the system (that is between different Mutual Aid Societies)
became easier, to the extent that it could be done at no cost
by the customer.
A partial form of "exit" emerged: emergency mobile
units. But it was only partial, since they did not provide hospitalization
services, thus "locking-in" members to the MAS system.
In that way better off people financed the entry of worse off
people to the MAS system by paying the loss of quality it brought
with it in the market. Yet it is not clear that the MAS system
does a better job at caring for the poor than the public system.
If they do not, then the Mutual Aid Societies themselves, their
inefficiencies and the medical corporation might be the ones
benefiting from the state subsidy.
The problem now faced by the health care system, is that the
MAS system is in deeper financial trouble than before, and quality
suffers proportionally. "Voice" has so far only barely
been activated, and mostly by the medical corporation. The beneficiaries
have voiced complaints but in no organized way yet. Also the
Public System is said to be understaffed, inefficient and with
inadequate financial resources.
The Uruguayan health care system is extremely complex and concentrates
most of its funds in tertiary and secondary levels of health
care. It is true as Uruguayans perceive, that "no ill person
will be left without health care". Yet that is no longer
the point. Quality and preventive care have become critical issues
for assessing the progressiveness of a health care system around
the world. While health is in the minds of Uruguayans a public
good, and has become more so as the state has taken responsibility
for the insurance of workers and for the financial health of
MAS, the quality of such public good, will only improve, if "voice"
from the beneficiaries can form and be heard regarding issues
That is as we all known rare, regarding a health care sector
that does not have for more than half its institutions democratic
decision making arena in which beneficiaries are represented.
The other option is that the political system will be able to
push forward reform and impose it over the medical corporation
and the MAS system. So far the only major reforms to the health
care system in Uruguay have come from the only two dictatorships
in the 20th century. As we mentioned recently a law for reform
of the health care system was sent and not even considered in
congress, soon afterwards the Minister of Health resigned.
Despite these shortcomings, one issue is worth highlighting:
the demands of the medical corporation are not about freedom
to "exit" the system, but about more funds for the
system. The bulk of doctors know that their jobs and well being,
however limited it might be, depend on large, subsidized, cheap
health care, not on top notch private practice. Consistently,
and despite the problems that have been mentioned, public health
expenditure has significantly increased in the last fifteen years,
even if such increases may have been not enough to stop quality
Public expendirture in health
care 1985- 1995
Sources: Cominetti, 1994;
CEPAL, 1996; Sánchez and Fernández, 1995; (a) in
1987 dollars; (b) estimated from Cominetti and CEPAL.
as % of GDP
expenditure per-cápita (a)
as a percentage of total expenditure
iv. Housing reform: too much ado about
Like in most Latin American cases housing policy has never truly
entered the realm of the social state, or has done so much less
that other social policies. If something is characteristic of
housing policy in Uruguay it is its inconsistency, lack of stability
and continuity, and relatively low development.
Furthermore, housing policy in the country can barely be considered
neutral, if not outright regressive. During the military government
some steps taken actually worsen the situation; a) The BHU, establishes
criteria for the access to loans that allow almost exclusively
upper and middle class sector to apply for those loans; b) some
resources for housing that were outside the BHU (municipalities,
emergency housing funds) are brought under the general directorate
of the BHU further reducing resources for low income families;
c) a system of "promotores" (private construction entrepreneurs)
is set by which if they come with 20% of the construction cost
they receive subsidized loans, favoring speculative maneuvers
for those with enough capital to do so, but has little to do
with social policy aims; d) a long tradition of credit for cooperatives
and mutual aid undertakings that were organized by civil society
The end result of these measures was the booming of housing solution
for privileged sectors and a subsidy to the construction industry.
Probably this was the worst period Uruguay knew in terms of housing
policy. With democratic restoration things change for the better.
The first democratic administration restores funds for emergency
and low income housing and separated it from the BHU, distinguishing
between funds oriented to facilitate the typical middle class
self financing of housing, and policies truly oriented towards
Also an attempt is made to develop some lines of financing in
the BHU towards lower middle class sectors. these attempts are
made as the bank and housing policy in general faced one of the
worse crises, legacy of the inefficient and abundant loans made
before by the BHU. One of the most important achievements of
the Sanguinetti administration was indeed a most modest one:
not to close the BHU, and leave housing issues completely in
private hands. The cost was that the housing policy for a depressed
middle class had to become tougher, as the bank adopted a more
market oriented profile. Loans became tougher, repayment harsher
and interest rates less subsidized.
The Lacalle administration attempted to introduce more important
reforms in the housing policy areas. On the one hand it developed
a quinquenial plan of housing for low income families that was
only partially developed. On the other it finished the job of
increasing the market orientation of the BHU. The fact that a
family unit has to have considerable savings in the bank (60
UR) and an income of a little more than 1000 U$ a month, makes
loans unavailable to poor and even not so poor people. The Lacalle
government created the Ministry of Housing, Territorial Organization
and the Environment, to carry out the quinquenial plan and to
develop new innovations in housing policy.
A limited budget, the absence of open credit lines from MLA´s
and the overall hegemony of the BHU regarding the housing issues,
made such a long name rather ineffective. Nevertheless, the Ministry
carried out part of the original program, and this program later
evolved during the second Sanguinetti administration. As credit
lines opened the program became oriented towards the construction
of "NBE" (Nucleos Básicos Evolutivos; Basic
Evolutionary Units) that provide low income family with minimal
housing facilities that are expected to "evolve" by
the combined efforts of NGO´s incorporated in the program,
the state and the beneficiaries.
Despite the relative neglect of authorities for housing policies,
and interestingly enough, the issue has recently been put in
the center of debate. The president has been designated to head
a commission for the eradication of precarious settlements and
the development of housing solutions for this population. Many
have read this as a populist measure as electoral times, that
come early to Uruguay, approach. No doubt that is part of the
reason. The left coalition has in the last elections grown disproportionally
in precisely those settlements.
No big surprise was, then, the fact that the major of Montevideo
from the left wing coalition asked to be in that commission.
If these measures are simply a promise before and a denial afterwards,
or if they are developed without adequate resources and risking
fiscal discipline and economic development, let's dubbed them
populist. If such is not the case, or at least not completely
the case, let's call them what they are; government responsiveness
to voting patterns in a democracy.
The votes of the poor matter and no fear should come to our disciplined
fiscal hearts for that. Uruguay, has shown, too many times that
it will spend more than it should, and that the political logic
can indeed cause fiscal disasters. If it has learned the lesson,
without forgetting that politics is about distributing and redistributing
resources, at least to a limited extent, then we should take
such development as a promissory note, not as a political threat
to efficient economic management.
v. Labor-Capital relations and the flexibilization
of the labor market: the limits of reform
As we mentioned in
the brief history of the Uruguayan social state, the 1940s saw
the return to democracy and the new found vigor of the trade
union movement. The import substitution model that dominate the
country from there until the 1970s permitted the development
of a strong labor movement that was able to negotiate and win
important rights for workers both at the collective and individual
The political economy behind these developments was one in which
markets as constraints operated only weakly where trade unions
were present (urban protected industry), and strongly were they
weren't (primary exports of cattle and wool). In effect in a
protected industry environment with little competition survival
depended more, political lobbying for protection and subsidies
were more important than efficiency and productivity. The game
played between workers, the state and the entrepreneurs was one
of "voice" rather than "exit".
Thus this was a context in which the organizational and numerical
power of the working class increased significantly and many times
matched the structural power of domestic capital. In such a context
working class conquests were indeed large. between 1970 and 1985,
Uruguay went from a structure in non-traditional exports accounted
for 28% of total exports to one in which those kind of exports
are 65% (Filgueira, F and
Papadópulos, J, 1997).
Those new export oriented entrepreneurs were price takers in
the world market and had to increase productivity and efficiency
to remain competitive. Wages, taxes on wages, firing and hiring
costs, and wage bargaining had to be brought under control. Entrepreneurs
began to favor a new less centralized and less politicized form
of trade unionism, decentralized wage bargaining and more flexible
Yet to achieve these goals they had to confront a strong trade
union movement under a democratic regime. The first Sanguinetti
administration restored the overall institutional framework regulating
the labor markets that used to be in place before the authoritarian
The Ministry of Labor recovered many of its functions mediating
labor disputes, upholding workers individual rights and overlooking
labor-capital relations in general. The "wage councils"
started to operate again with the participation of the state,
entrepreneurs associations and trade unions negotiating at the
sector level. In the state, workers did not have wage councils,
and informal bargaining and at times open confrontation took
place to set wage levels.
The administration was particularly tough in the first years
regarding state workers unions, declaring state services as services
of "essential need" -a constitutional right- in order
to break up strikes.
One important difference with the system of wage bargaining from
pre-1973, is that the executive could decree "ceilings"
for wage increases to the private sector. In this form it attempted
to control inflationary pressures and protect those sectors without
bargaining capacity from the inflationary game. Regarding the
labor market normative aspects, no relevant changes occurred
in this period.
The Lacalle administration as it had done in other areas attempted
a more liberal approach to labor market regulation and labor-capital
relations. In the first place it announced that it would regulate
the right to strike and move to decentralized system of wage
bargaining without the participation of the state. In the transitional
period from one system to another it would fix wages by decree.
None of this proposals were carried out, as the trade union movement
greeted these news with three consecutive general strikes. Nevertheless
more decentralized forms of negotiation and the partial retreat
of state as a mediator have slowly developed. Labor market flexibilization
has also taken place, but not through executive decrees or even
congress laws but through the agreements reached between business
associations and the trade unions.
In this sense it is quite clear that adaptive changes are taking
place where they are more needed; that is, in export oriented
sectors and enterprises. In effect agreements on productivity,
technical change and more flexible productive systems reach almost
50% in high export enterprises, while less than 25% in businesses
that export less than third of their production (Pucci, 1992).
Also sectors with a strong export orientation reach firm level
agreement for 20% of the cases, while non-export oriented sectors
firm level agreements are less than 15%.
These data is for 1991-1992, and it is reasonable to expect that
the trend continued to our days.
Besides these changes the flexibilization of the labor market
has been once again brought to the political arena. The reason
is quite simple. Unemployment has reached 12% of the population
and remains high despite growth in the economy. Liberal oriented
reformers and businesses have argued that the responsibility
for this state of affairs is a rigid labor market and especially
the high costs associated with hiring and firing people.
So far the government has not moved in that direction, and trade
unions have not yet either had to move against these proposals.
To a large extent flexibilization is being processed on case
by case basis. Where capital enjoys structural power, more flexible
arrangements are usually imposed, and informal labor-capital
relations take shape. Where trade unions are powerful but the
economic environment truly constraining, businesses and trade
unions have or are in the process of negotiating agreements.
vi. The new targeted social policies.
The new generation of targeted social policies are a veritable
product of the last 15 years in Uruguay. The military dictatorship
had experimented with some paternalistic social policies for
marginal sectors without much success, and had also, with better
results, developed vaccination campaigns and expanded maternal
infant programs. Yet none of these programs are really the idea
of targeted last generation social policies that have mushroomed
in Latin America in the last decade and a half. The first democratic
administration did little to develop this kind of programs. Two
stand out for its magnitude.
One was the CAIF (Infant attention centers) centers with the
support of UNICEF which developed important levels of maternal
and infant protection; the other were programs of food distribution
for retired persons and the shift form the traditional community
kitchens to food coupons. Little else was done until the Lacalle
administration. His was a more determined attempt to develop
the new paradigm of social policies and for that a particular
institution directly dependent on the executive was created:
the PRIS (Social Investment Program).
Later this program would change its name to FAS (Fortalecimiento
del Area Social; Strengthening of the Social Area). This program
had three very ambitious aims. In the first place and following
the dominant discourse in social policy it was meant to become
the basic flexible and targeted instrument to combat extreme
poverty through strategic investment (construction of emergency
housing, donations and infrastructure for primary education,
integrated nutrition and health programs).
Secondly it was aimed at developing technical expertise on social
development issues and social programs diagnosis, becoming the
center of information on social indicators and playing a critical
role as advisors regarding allocation of social expenditure.
Thirdly, its most ambitious goal was to guide the reform of the
social state, form its present day, statist, centralized and
universal matrix, to an integrated set of better targeted and
decentralized social policies. For such tasks the PRIS-FAS experience
received a total budget of 70.000.000 dollars, of which 57.000.000
came form MLA´s loans.
Of the three goals, only the first and second, and to a limited
extent have been carried out. Though less visible, and with far
less impact than expected, the PRIS-FAS has invested in critically
poor neighborhood and has become a partner in other social sector
programs contributing informational resources and financial support.
Also, a number of documents on social development and social
sector diagnosis, did become influential references to policy
makers and social sector staff.
Yet as can already be seen, most of the contribution made by
the PRIS-FAS has been achieved by integrating itself with previous
sector policies rather than by-passing them or creating a parallel
matrix. It should not surprise us then, that nothing was achieved
regarding the more ambitious aim of reforming the social state
from a technocratic logic. To put it more strongly, in words
of Midaglia (1997); "in the PRIS-FAS experience flexibility
and technocratic insularity were its strengths in order to be
approved and its weaknesses in order to change things and become
sustainable. You cannot by-pass social sector logics. Reform
in a mature social state comes from within the system, fighting
the political fights that have to be fought".
5. Closing remarks.
This paper theoretical
purpose grew out of few paragraphs in Hirschman´s "Exit,
Voice and Loyalty. Responses to Declines in Firms, Organizations
and States" so we now let him speak:
"...a no-exit situation will be superior to a situation
with some limited exit on two conditions:
(1) if exit is ineffective as a recuperation mechanism, but does
succeed in draining from the firm or organization its more quality-conscious,
alert, and potentially activist customers or members; and; (2)
if voice could be made into an effective mechanism once these
customers are securely locked-in". Also: "the two principal
determinants of the readiness to resort to voice when exit is
possible were shown to be: (1) the extent to which the customer-members
are willing to trade off the certainty of exit against the uncertainties
of an improvement in the deteriorated product; and; (2) the estimate
of customer-members have of their ability to influence the organization"
Finally regarding the issue of exit, voice and loyalty from public
of course, a private citizen can get out from public education
by sending his children to private schools, but at the same time
he cannot get out, in the sense that his and his children's life
will be affected by the quality of public education."
It is no coincidence
that Hirschman chose public education as an example. Social policies
are cases were these hypothesis render themselves most productive.
What struck us from the last quote is the fact that today in
large parts of Latin America, complete "exit" from
public goods is possible, or at least is perceived by elites
and upper-middle classes to be viable.
This has been pointed out by O´Donnell recently: "Many
of the rich opt for exit: living in fortified ghettos, sending
their children to well-guarded schools where they will only meet
the children of people like them, moving their offices out of
downtown or other dangerous areas, mistrusting the inefficient
and often corrupt police and hiring private guards, and making
trasnational society, more than the national society, the frame
of reference of as much of their activities as possible".
Uruguay, has gone down that road to a limited extent, but clearly
not to the degrees seen in other Latin American countries.
The social state, and the response to the decline in the quality
of the public goods it distributed, has been able to rescue the
public dimension of those goods.
Using the hypothesis about the interactions between exit, voice
and the regulatory role of loyalty, we have tried to explain
why Uruguay responded to the challenges of reforming and updating
its social state in the way it did.
The answers are promising in terms of the productivity of these
categories. The likelihood of people exiting public goods depends
on a number of aspects. We have tried to show that none of these
conditions was present in most cases in Uruguay:
a) there has to be a system of private goods offered in the market
to replace the public good that is being exited.
Education did hava such a system, Social Security to a very limited
extent, and health care while with an important private component
was infiltrated by the state, and no purely private options opened
up for comprehensive health care.
b) the distribution of income and economic resources has to present
an important group of people with the means to exit, or a small
group with high income in order to develop viable exit elitist
alternatives. Uruguay has lowered its upper-middle class expectations,
and decreased overall inequality. A large depressed middle class
is not likely to exit for the simple reasons that it probably
does not have the means to do so.
c) legal barriers and captive institutional structures deter
or ban exit options. If exiting the system allows a person to
stop contributing to the system, then exit has more chances of
becoming the preferred option. In no case, besides housing, is
that an option in the Uruguayan social state.
If these conditions were not conducive to exit, but rather to
loyalty, other ingredients made the system conducive to voice
as a mechanism to confront the decline in quality of benefits.
One, has already been hinted at: quality-conscious members were
many times locked in the system or had to accept the fact that
even after exiting the system they could never perform a complete
exit from the externalities that a decline in quality would have
on their lives. The other aspect that will help voice become
activated is the belief of the member that things can actually
change through the activation of voice. In this sense Uruguay,
stands a better chance than its Latin American peers given its
perception of the legitimacy, responsiveness, accountability
and usefulness of the democratic system.
Opiniones sobre democracia
en siete paises latinoamericanos
1995 (% que responde afirmativamente)
Source: Kaztman, 1996 (with
data from the Latino Barómetro).
democracia es preferible a cualquier otra forma de gobierno
con el funcionamiento de la democracia en el país
democracia permite que se solucionen los problemas del país
elecciones en el país son limpias
senadores y diputados se preocupan de lo que piensa la gente
manera como uno vota puede hacer que las cosas sean diferentes
en el futuro
Voice has been able to play a major role in the defense of the
social state. In fairness it has been less efficient in producing
innovations. The educational reform and the social security reform
have passed despite voice (that defended the traditional systems).
As we have argued voice was critical. It vetoed or warned against
radical liberal reforms and it put a stop in quality decline.
Yet it was a changed political environment regarding party competition
-the near victory of the left that glued a Blanco-Colorado coalition,
that was finally responsible for reform (Filgueira,
C & Filgueira, F. 1997).
Is then voice simply efficient as a defense mechanism and at
setting limits for reform and not as a force of innovation? That
might well be so, and not necessarily bad, as long as the competitive
dynamics of the party system facilitate cooperative behavior
among parties to democratically craft congress majorities for
reform and innovations. But what if the political system becomes
blocked?. Might "voice" become irresponsible again,
simply increasing the load on an already overloaded system. Let
us invite the reader to a rather odd exercise in interdisciplinarity.
Pragmatics is a relatively new discipline that has grown as an
offspring of linguistics, combined with the legacies of rhetoric
and debates in the philosophy of language. Simply put, it concerns
itself with the production and interpretation of meaning in context.
We all know that when we say something there is the semantic
meaning and an extra meaning. An irony is a good example. That
is part of what concerns pragmatics; under what conditions and
which rules govern the production and interpretation of that
The idea of maximizing information, cooperation or relevance
are some of the principles that academics from that field have
come up with to comprehend such production of meaning. This somewhat
extravagant detour also has a meaning. This paper has praised
"voice" as a corrective mechanism when public goods
deteriorate. Yet "voice" will not always produce meaning
that is adequately interpreted by those who are listening.
What's more problematic, sometimes a conversation becomes a "dialogue
of deaf people" since no one is actually guiding their utterances
or interpretative efforts by cooperative or relevantist principles.
The Uruguay of the sixties and seventies, did not lack "voice",
the problem was the quality of the "voice" being produced,
and the predisposition of those engaged in communicative action.
In other words the problem was not the absence of voice but of
communication. Pragmatics is carefull enough to distinguish act
of speech from actual communication.
Communication, by definition, is a process by which those that
engage in it modify in the process their perceptions and cognitive
world. More specifically: "communication presupposes achievement
of the intended effect of verbal communication upon the addressee,
whereas speaking and writing do not".
Pragmatics refers to "unhappy acts of speech" in which
cases communication is not achieved. More often than not, such
unhappy acts are due to the absence of a shared context that
allows those engaged in speech to decodify and interpret meanings
that go beyond simple semantic rules. Institutionalized democratic
political systems, are important precisely for that reason.
They provide actors with shared contexts that in turn permit
them to engage in communication and thus change their perceptions,
positions and preferences in the political arena. Uruguay, can
be said to have an institutionalized political system, and in
that sense a cautious optimistic response to the threat treated
above can be advanced.
Uruguay is, not out of the woods yet. The two most important
reforms are still unfolding, and the other areas of social policy
and labor market policies that successfully faced what seemed
to be an irreversible process of deterioration, still have to
confront the challenge of reform.
Furthermore, while overall indicators of social development have
shown improvement, other less standardized evidence suggest that
important problems lay ahead. True ghettos are a reality in urban
Uruguay (Kaztman, 1996), the number of single mothers
continue an upward trend, families have lost part of their integrative
capacity (Filgueira, C. 1996), and unemployment and underemployment
have increased in the last two years.
Finally, Uruguay received 150.000.000 dollars for the social
security transition period, 140.000.000 for the education reform,
58.000.000 for the PRIS-FAS experience, and additional funds
for a health reform that never developed. These loans will have
to be paid, and those shaping "voice" might not be
aware now, but will certainly be later.
Acevedo, Eduardo. 1936. Anales
históricos del Uruguay, Volume VI and VII, 1894-1915 (Montevideo:
Barreiro y Ramos).
Aguiar, César A. 1982.
Uruguay: País de inmigración (Montevideo: EBO).
Brezzo, Luis A. and Enrique Vispo.
1988. "Experiencia de la concertación de políticas
de ingreso en Uruguay." In Políticas económicas
y actores sociales (Santiago: PREALC).
Búsqueda. 1990-1997. Various
CEPAL. 1994. Panorama social
de América Latina, 1994. (Santiago: CEPAL).
CEPAL. 1997. Panorama social
de América Latina, 1996. (Santiago: CEPAL).
Caetano, Gerardo and Raúl
Jacob. 1989. El nacimiento del terrismo (1930-1933). Volume 1.
Cominetti, Rosella. 1994. "Gasto
Social y Ajuste Fiscal en América Latina". Serie
Reformas de Política Pública, Nr. 20. (Santiago:
Davrieux, Hugo. 1987. Papel de
los gastos públicos en el Uruguay 1955-1984 (Montevideo:
Dos Santos, Wanderley Guilherme.
1979. Cidadania e justiça (Rio de Janeiro: Editora Campus
Fa Robaina, Juan Carlos. 1972.
Cartas a un diputado (Montevideo: Editorial Alfa S.A.).
FAS-INE. 1995. Evolución
de la pobreza estructural en el Uruguay 1984-1994.
Filgueira, Carlos. 1994. "Heterogeneity
and Urban Poverty in Uruguay". Democracy and Social Policy
Series ·Nr. 5. (Kellog Institute. Notre Dame University).
"Sobre revoluciones ocultas: las transformaciones de la
familia en el Uruguay". Documento de Trabajo. (Montevideo:
Filgueira, Fernando. 1995. "A
century of Social Welfare in Uruguay. Growth to Limits of the
Batllista Social State". Democracy and Social Policy Series
·Nr 5. (Kellog Institute. Notre Dame University).
"El nuevo modelo de políticas sociales en América
Latina: Eficiencia, residualismo y ciudadanía estratificada",
in Brian Roberts (ed.) Políticas Sociales en América
Central. (El Salvador: FLACSO, forthcoming).
Papadópulos, Jorge. 1997. "Putting Conservatism to
good Use? Long Crisis and Vetoed Alternatives in Uruguay"
in John Cahlmers et al. (eds.) Rethinking Representation and
Participation in Latin America (Oxford/New York: Oxford University
Rodríguez, Jorge. 1997. "Desarrollo Económico
y desarrollo social: una aproximación política
al problema del déficit y superavit social en América
Latina" en Revista del Claeh Nr. 77; pp. 91-113.
Hanson, Simon. 1938. Utopia in Uruguay (Oxford/New York: Oxford
Hirschman, Albert O. 1970. Exit,
Voice, and Loyalty. Responses to Decline in Firms Organizations,
and States. (Cambridge: Harvard University Press)
Kaztman, Ruben. 1996. "Marginalidad e integración
social en el Uruguay". Documento de Trabajo. CEPAL, Montevideo.
LoVuolo, Rubén. 1997.
"El enfoque del Banco Mundial en el sector de la Seguridad
Social. ¿Una alternativa para los países del cono
sur? en Figueira, C, Midaglia, C y Thumser- Peteresen (comp.)
Desafíos de la Seguridad Social, pp.115-141. (Montevideo:
Mesa-Lago, Carmelo. 1985. El
desarrollo de la seguridad social en América Latina (Santiago:
Papadópulos, Jorge. 1992.
Seguridad Social y Política en el Uruguay. (Montevideo,
Pendle, George. 1985 .
Uruguay: South America's First Welfare State (Westport: Greenwood