SUNS  4333 Friday 27 November 1998



CARIBBEAN: BALANCING SOCIAL NEEDS AND FALLING INCOME

Port of Spain, Nov 25 (IPS/Wesley Gibbings) -- Social expenditure in the English-speaking Caribbean continues to outstrip Latin American spending in this area, but now analysts say even this has not been enough to stem the growing tide of social displacement.

Discussions on the subject have been convened by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) which last May submitted the framework for what it described as a "new fiscal covenant".

During an examination of the proposal at a meeting here Monday, ECLAC's Sub-regional Director for the Caribbean, Len Ishmael argued that despite relatively high levels of expenditure on social services in the region, services and facilities remain "well below the level expected by the population".

She however added that "although the poor have no doubt benefitted from these programmes, those less in need have also benefitted and mechanisms are still being sought to improve the efficiency of social programmes and to better target them to those most in need."

She acknowledged that social spending in the Caribbean had historically been higher as a percentage of Gross Domestic Product than in Latin America and that areas such as health care, education, public transportation and subsidised housing have benefitted from such expenditure.

ECLAC's new fiscal covenant envisages fiscal consolidation, raising the productivity of public expenditure, transparency and the promotion of social equity.

"Society usually entrusts the state in particular with a crucial role in the promotion of social equity," an ECLAC document on the covenant says, "a fiscal covenant would be incomplete and unsatisfactory if that role were not provided for or were ignored or inadequately performed."

Trinidad and Tobago's Minister of Finance, Brian Kuei Tung said in his country there has been a recognition of the need to promote social equity and that there is a realisation that expenditure on important areas such as education and health has "a long gestation period".

He added that the results from such spending were "not immediately apparent since they contribute to the long term development of human capital". During the fiscal crisis precipitated by dramatically
decreased oil production and prices in the 1980s, social investment in Trinidad and Tobago, according to Kuei Tung, "fell dramatically".

Regionally, social expenditure averages in the order of 9 percent and 11 percent. This has been so since 1987.

"In Trinidad and Tobago, we are conscious of the important distributional consequences of this kind of expenditure and we are committed to giving higher priority to social spending over the medium
term," the minister said.

"We believe that once all the major elements of health sector reform are in place, this should go a long way towards redressing these particular imbalances," Kuei Tung said.

ECLAC has proposed a strategy for monitoring and correcting such imbalances. This is included in the Commission's voluminous report on the new covenant.

The strategy includes the need to encourage studies and regular estimates of "the distributional impact of fiscal policy," the need to consolidate the upturn in social spending, the restoration of emphasis on the importance of direct taxation, monitoring the effects of decentralisation on social equity and incorporating "specific altruistic mechanisms in the design of schemes for private-sector
involvement in social services".

Ishmael however said she believed recent developments in the world and the region can significantly set back the process of achieving and maintaining the macro-economic stability required to make these things possible.

The Asian Crisis, which has recently spread its wings to include some Latin American countries, was of particular concern to Ishmael who contended that it threatened "to undermine the very foundation of the admittedly fragile macro-economic stability which the countries of Latin America and the Caribbean have been able to achieve after more than a decade of painful structural reforms".

She also spoke of the threat of natural disasters which, she said, expressed itself this year through the passage of Hurricanes Mitch and Georges. The two hurricanes took thousands of lives and caused millions of dollars in damage in the Caribbean and Central America. "The successful continuation of the reform policies will, in no small measure, be dictated by the extent to which these countries are able to continually adapt to new realities and the ever present spectre of
natural disasters," she said.

ECLAC figures suggest the most recent developments can reverse some gains made and send some countries back to the drawing-board. During the height of structural adjustment in Latin America in the 1980s, social spending declined by 24 percent.

ECLAC's Executive Secretary, Jose Ocampo, however said the structural adjustment process must continue to be engaged though the adjustment of the past few years "have left an equity gap".

He however argued that Latin America and the Caribbean have learnt that "adjustment can be good for the poor", and "avoiding adjustment is not the right solution."