1.1.1 SITUATION ANALYSIS

The road towards debt reduction, restricted government spending, privatization, market liberalization, globalization, and democracy has been one which many Latin American countries have traveled for several years. And although much progress has been made, economic and social changes have been brutal. Regional GDP per capita dropped 9.6% from 1980 to 1990 while consumer prices increased dramatically due to uncontrolled inflation [1]. The percent of the population of the region living in poverty had been steadily declining until 1980, but it increased throughout the following ten years. Although the severity of the economic crisis varied from country to country, the region as a whole experienced very difficult years which have come to be referred to by many as “the lost decade” for development.

The economic stabilization and adjustment programs of the 1980s were criticized for damaging the social welfare of the population, particularly the indigent. In 1987, UNICEF suggested that while economic adjustments were necessary their implementation should be changed to a more gradual approach which incorporated measures to safeguard the more vulnerable portions of the population. This approach became known as “adjustment with a human face.”

The 1990s, with its continuing structural adjustments, have brought partial stabilization to the macroeconomic situation. But at the household level, the pain continues despite efforts to “humanize” reforms. Unemployment is increasing while real wages for those who are employed continue to decrease [2].

In 1991, the population of Latin America and the Caribbean (LAC) was 423 million and it is estimated that this will grow to 533 million by the year 2000. Approximately one-third of this population lives in poverty and has no access to regular health care [3]. Urbanization is a continuing trend, with 100 cities in the region expected to exceed populations of one million by the end of the century [4]. Latin America has the notorious distinction of leading the world in both the degree of income inequality and violence. These are urgent social problems which require addressing.

1.1.2 SOCIAL AND ECONOMIC DEVELOPMENT

The growing role of markets in reforming and strengthening economies can be accompanied by a belief that markets provide optimal answers to all issues of resource allocation. Or in other words, that markets through their “invisible hands,” and not governments, should determine the allocation of resources for health and other social areas and that these allocations will necessarily be in the best public interest.

This logic has an undeniable appeal and can be politically convenient. The pitfall is that health care is a good with significant social value characterized by externalities which are not properly reflected in its market price (as this reflects an aggregate of private values). It is not a consumer good, and market failures in this area justify government involvement. Health services should be made available to all, not just to those whose affluence allows them to participate in the market.

A renewed interest in the role of markets in health financing and provision highlights the economic forces and incentives which can be positively used to shape health care systems. But a complete market approach to social resource allocation will result in inequity because markets cannot address issues of redistribution. Even if income and social service distribution were equitable, this approach in health would be flawed because markets reflect the aggregate of the private wants not the whole of social needs.

Where social objectives are given a lower priority than economic ones, the problems of society risk becoming more pronounced and may eventually undermine the legitimacy and the very sustainability of political and economic systems. Although governments are not without their own failings, it is in the political forum where issues such as equity can be addressed. Policy should be formulated and measures for achieving objectives (which may involve markets) determined through the “visible hand” of government. In the end, market approaches can bring benefits, but alone are insufficient to guarantee social development for all, and they do not liberate governments from their obligation to strive for the social well-being of the people they represent. Ensuring adequate access to quality health systems remains the responsibility of the state.