Opinion of the European Economic and Social Committee on ‘Social cohesion in Latin America and the Caribbean’
Date: 2004-02-25
Institutions: European Economic and Social Committee
Subjects: Caribbean Islands, Latin America, economic and social cohesion, sustainable development

30.4.2004

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Official Journal of the European Union

C 110/55

Opinion of the European Economic and Social Committee on ‘Social cohesion in Latin America
and the Caribbean’

(2004/C 110/12)

On 1 July 2003, in a letter from Mr Christopher Patten, the Commission asked the Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, to draw up an opinion
on Social cohesion in Latin America and the Caribbean.

The Section for External Relations, which was responsible for preparing the Committee's work on the
subject, adopted its opinion on 6 February 2004. The rapporteur was Mr Zufiaur.

At its 406th plenary session of 25 and 26 February 2004 (meeting of 25 February), the Economic and
Social Committee adopted the following opinion by 94 votes to 5, with 11 abstentions.

Summary

i.
The present exploratory opinion, requested by Commis-
sioner Patten, sets out to express the views of European, Latin
American and Caribbean organised civil society on social cohe-
sion in Latin America and the Caribbean (LAC). It will focus in
particular on how civil society organisations can contribute to
this objective by means, for example, of social consultation,
developing social protection systems or promoting corporate
social responsibility. To this end, the EESC opinion should be
fleshed out by contributions from Latin American and Carib-
bean organisations, and by the outcome of the proceedings at
the third meeting of EU-Latin America civil society to be held
in Mexico City in April 2004.

ii.
The opinion does not seek to define the concept of social
cohesion, but rather to point out its various dimensions – poli-
tical, economic, social and territorial – so that account is taken
not only of
the usual macroeconomic factors, but also of
institutions or access to essential
others, such as education,
public assets: these are fundamental to any analysis of the
degree of social cohesion in LAC.

iii.
As the opinion explains, the lack of social cohesion in
LAC countries is most clearly illustrated by poverty and
inequality. Although poverty figures have improved in relative
terms over the last decade (affecting 48 % of the population in
1990, falling to 43 % in 2002),
inequality has continued to
worsen to the point where it has become chronic. Although
the picture varies widely, Latin America as a whole is now the
most unequal part of the world. Physical poverty is aggravated
by intangible forms of poverty (access to education, spread of
opportunities) and legal poverty (effective inequality before the
law, weak civil, political and social citizenship and general inse-
curity in terms of life events). This generates violence, social
breakdown and alienation, and undermines the credibility of
institutions and the democratic system. A recent UNDP report
(Report on democracy in Latin America 2004) highlighted the
danger that the perception among Latin Americans that their
democracies are irrelevant could spread.

iv.
The lack of solid pillars which underpin any advanced
society (infrastructure, education, health and tax systems,
justice, social protection, framework for labour relations, etc.) is
a common feature of all Latin American and Caribbean coun-
tries. The UNDP report even goes so far as to describe the
‘absent State’ as a typical characteristic of many Latin American
countries. The education system's low quality, unequal access
and dissociation from the economy, the inadequacy and unfair-
ness of the region's prevailing tax systems, and the lack of
universal social protection schemes in most of the region's
countries are three of the clearest expressions of this state of
affairs. The result is drastic inequality and the exclusion of
most of the population from cover under existing systems.

The opinion argues that one of

v.
the key factors to
boosting social cohesion lies in achieving greater efficiency and
democratisation within the economy, which is held back by the
extent of the informal economy, the small size of markets, lack
of economic diversification, underdeveloped infrastructure –
especially in transport and communications – delay in agrarian
reform, the lack of financial resources and the region's ensuing
external dependence in this area, the penury of different forms
of social economy, poor employment quality and protection,
and the virtual absence of labour relations systems based on
compliance with basic labour rights, a balanced approach and
trust.

vi.
Similarly, the opinion points to an aspect of key impor-
tance to the EESC: securing higher levels of democracy, human
development and governance in LAC depends on strengthening
civil society organisations and involving them more closely in
decision-making. This is a prerequisite for successfully boosting
political democracy, achieving fairer distribution of material
and intangible wealth and facilitating the integration into poli-
tical, economic and social life of sectors of society and minori-
ties, such as indigenous populations, who have been excluded
for centuries.

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vii.
Lastly, the opinion makes a series of proposals on the
contribution which EU-LAC relations can make to social cohe-
sion in this part of the Americas. These are based on two
starting-points. Firstly, the strategic importance for the EU of
its relations with Latin America and the Caribbean, both in
order to boost its role in world affairs and to foster a new inter-
national order and fair, solidarity-based governance of globali-
sation, together with the importance for LAC of its relations
with the EU, with a view to achieving balanced integration in
the area and strengthening its negotiating position in the inter-
national arena. Secondly, the conviction that, as well as helping
to increase social cohesion in LAC through development aid
and cooperation, the EU must place this objective at the heart
of all its relations – in all spheres – with Latin America and the
Caribbean.

Some of

the opinion's

viii.
suggestions are geared to
strengthening organised civil society (support for projects to
boost the social dimension in regional
integration processes;
support for joint EU-LAC forums bringing together socio-occu-
pational organisations; introducing a budget line for strength-
ening socio-economic organisations; setting up a programme
to protect those working for human rights in LAC, etc.); others
aim to have an impact on developing the productive system
and establishing democratic frameworks for labour relations
and social dialogue (transfer of European know-how on social
consultation; encouragement for the development of infrastruc-
ture to attract foreign direct investment; setting up an SME
fund for Latin America; joint development plans with the coun-
tries of origin of migrants from LAC to the EU; drawing up a
charter of
the principles of corporate social responsibility).
Some initiatives aim to reduce the external debt burden and
finance development (formulas for renegotiating, relieving or
cancelling external debt by means of programmes for poverty
reduction, environmental or educational cooperation, recom-
mendations to attempt to prevent rating agency dependence).
A number of proposals seek to reinforce social protection
systems (transfer of European know-how, support for interna-
tional agreements on migration, support for management and
specialist training). Lastly, a series of suggestions are also put
forward concerning development aid and development coop-
eration: stepping up coordination between European donors,
adjusting aid more closely to the stated objectives, trying to
ensure that the recipient countries take the basic decisions on
where to intervene, and helping the most needy countries to
facilitate and strengthen their ability to act autonomously in
multilateral negotiations. The overall priority should be with
provision of training, and strengthening of institutions.

1. Introduction

1.1
On 28 March 2003, Commissioner Patten unveiled to
the members of the Rio Group meeting in Vouliagmeni, Greece
an initiative aimed at boosting social cohesion in the countries

of Latin America. The starting point for the initiative – which
is set to be a central theme at the summit of EU-Latin America
and Caribbean Heads of State and Government to be held in
Guadalajara (Mexico) on 28 and 29 May 2004 - is the observa-
tion that the benefits of democratisation and economic devel-
opment achieved during the 1990s have failed to reach large
from
sectors of
inequality and exclusion. This constitutes a barrier to further
economic development and is a source of instability across the
region.

the population, who continue to suffer

1.2
The EU is ready to back a new consensus between the
governments of Latin America and the Caribbean, which must
take official form at the Mexico Summit with a firm commit-
ment to achieving a number of targets relating to social, tax,
economic development and social expenditure policy amongst
others. The EU plans to contribute to this objective, which is
an aspect of particular importance for the strategic association
between the two regions, with a EUR 30 million programme
aimed at transferring experience and know-how in defining and
implementing social policies.

1.3
To kick-start this initiative, on 5 and 6 June 2003 the
Commission and the Inter-American Development Bank (IADB)
organised a seminar on Social Cohesion in Latin America and
the Caribbean, the objective of which was to open a broad
debate on the scope of the problem, its negative impact on
development and stability, different policy options and steps
that must be taken by Latin American governments to tackle
problems arising from the lack of social cohesion, such as
inequality and social exclusion.

1.4
On 1 July 2003, Commissioner Patten asked the EESC
to draw up an exploratory opinion on social cohesion in Latin
America in preparation for the third meeting of EU-Latin
America civil society to be organised by the EESC, in conjunc-
tion with its Latin American and Caribbean counterparts,
in
Mexico on 13, 14 and 15 April 2004.

In Commissioner Patten's view,

1.5
the opinion should
reflect the views of Latin American, Caribbean and European
civil society organisations on social cohesion in LAC, build on
documents drawn up in connection with the above-mentioned
seminar in June 2003, take account of the role currently played
by the social partners in Latin America and the Caribbean, and
analyse – together with Latin American and Caribbean civil
society organisations – how the social partners can contribute
towards greater social cohesion in their countries. Possible
answers could be social dialogue, joint management of social
protection systems and the implementation by European
companies that invest in Latin America of a policy of social
responsibility (1) that simultaneously improves business compe-
titiveness and social cohesion for all those concerned.

(1) See letter from Commissioner Patten to President Briesch on 1 July
2003, which refers to ‘the role of European businesses that invest in
the Latin American and Caribbean countries in demonstrating that
’social policies‘ practised by companies can be beneficial for compe-
titiveness’. See also the EESC opinion of 20 March 2002 on the
Green Paper: Promoting a European framework for corporate social
responsibility (OJ C 125 of 27 May 2002), which describes the
corporate social responsibility concept.

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2. The concept of economic and social cohesion

development, resulting in economic backwardness and social
de-structuring.

2.1
The concept of economic and social cohesion is open to
many interpretations. For the purposes of this opinion, we start
that has been devised by the European
with the concept
Commission in its successive reports on economic and social
cohesion in the EU, incorporating in the analysis a number of
aspects specific to Latin America, such as hunger, indigenous
peoples and informal employment, together with greater social
determinism in access to equal opportunities.

According to Enrique Iglesias,

in
2.1.1
order to achieve greater social cohesion, States need to be
provided with the mechanisms and institutions to reduce
inequalities and divisions. From this perspective, the concept of
social cohesion is not limited to a set of socio-economic indica-
tors, but encompasses various dimensions.

IADB president,

2.3.2
At the same time, there will be no major improvement
in social cohesion in the LAC countries without sustained
economic growth and social development. To this end, a
greater degree of macroeconomic stability is needed – without
this standing in the way of considerable improvements in
social equity – as well as structural reforms to energise produc-
tive resources in the region, in particular providing company
start-up incentives,
training employees, distributing wealth
more fairly and creating democratic frameworks for labour
relations.

2.4 The territorial dimension

2.2 The political dimension

Social cohesion firstly has a fundamental political
2.2.1
dimension which ranges from the quality of democratic institu-
tions to grassroots involvement in public affairs, encompassing
protection of social ties, establishment of more equitable socie-
ties and of social protection and solidarity systems, conserva-
tion of cultural heritage and natural resources, and active parti-
cipation of economic and social stakeholders in economic and
social life.

Social cohesion is intrinsically linked to territorial
2.4.1
cohesion: the ability to generate synergies between all players
in a given area; sufficient provision of all types of infrastruc-
ture, including new information and communication technolo-
gies; and access for all to essential public services (ranging from
health and education to water supplies, transport, electricity
and housing). Inequalities are reflected on the ground, between
the centre and outskirts, between urban and rural areas,
between coastal
regions and the interior, and concerning
sectors of society such as indigenous peoples, new migration
patterns, etc.

Improving social cohesion requires intervention by the
2.2.2
State and public institutions,
in terms of effective legislation
and action: developing infrastructures, high-quality public
services, independent courts, labour relations standards, etc. In
short, public bodies have an essential role to play in promoting
rights and civic, political and social citizenship. Social cohesion
is therefore first and foremost a political issue.

2.3 The economic dimension

2.3.1
The economic dimension of social cohesion relates to
wealth and its distribution, the growth of the production base
increase in factors affecting
(e.g. access to basic resources,
productivity, favourable environment for the growth of invest-
ment and SMEs, etc.), research, development and innovation,
the rate of employment and the quality of jobs, pay levels and
existing pay differences. Among the obstacles to achieving
in the case of the Latin American and
these objectives are,
Caribbean countries, the dual nature of the labour market,
divided between formal and informal employment, the lack of
productive investment and low skill levels among the region's
human resources. High levels of economic inequality, such as
those characterising Latin American societies, hinder economic

2.5 The social dimension

The fair distribution of wealth, of the various sources
2.5.1
of material and non-material wealth and of income, is inherent
to the concept of social cohesion. The characteristic feature of
the European social model (in terms of the common features of
the various models co-existing in Europe: a high level of social
protection expenditure, a regulatory role for the State and a
key role for social stakeholders) has been the attempt to link
economic and social development. In other words, defining the
rules of wealth distribution (labour and social standards, social
protection systems for old age, illness, unemployment, family
protection, collective bargaining and the tax system) for the
benefit of all and without waiting for economic results and
such wealth to be produced.

2.5.2
The social dimension of the concept of social cohesion
also relates to the very topical issue of horizontal inequality,
which is related to discrimination on the grounds of gender,
racial or ethnic origin, or other aspects identifying a specific
social group. The main principles underpinning social cohesion
are therefore security in terms of life events and guaranteed
rights for all.

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2.5.3
An all-inclusive interpretation of the concept of social
cohesion, such as the one proposed in this opinion, opens up a
wide spectrum of possibilities for strengthening it, whether
through policies to be developed by Latin American and Carib-
bean countries or through EU-LAC relations. Firstly, material
support and the experience acquired in the EU must be used to
bolster strategic vectors that help raise social cohesion levels in
Latin America and the Caribbean. Secondly, EU-LAC relations,
as well as earmarking resources for development cooperation,
ensure that the aim of promoting social cohesion in Latin
into exchanges and
America and the Caribbean is built
commercial, educational, technological and social policies. This
was upheld by the first two meetings of EU-LAC civil society
organisations and expressed recently by a number of Latin
American leaders, such as President Lagos of Chile, President
Lula da Silva of Brazil and President Néstor Kirchner of Argen-
tina.

3. The social deficit in Latin America

3.1
Any analysis of Latin America and the Caribbean must
begin by acknowledging the considerable economic, political
and social heterogeneity of countries in the region. However,
while we are aware of the risk of simplification, this opinion
will lay down a number of common guidelines for analysing
economic and social cohesion levels in the region as a whole
and drawing conclusions on how to address this cohesion
deficit, which to a greater or lesser extent affects all these coun-
tries.

poor economic growth in the past six years and, in general, to
what has also been described by ECLAC as the ‘lost half-
decade’.

Poverty is more pronounced in rural areas, where
3.2.2.2
the poverty level is twice that of urban areas (59.1 % compared
to 26.1 %). However,
in absolute terms, and owing to the
growing rural exodus, poor people are distributed equally
between the rural and urban population. Poverty is concen-
trated in homes where the head of the family works in agri-
culture or non-financial urban services (35.5 % and 29.1 % of
the region's poor, respectively).
inequalities are also
particularly blatant in many countries such as Brazil, Guatemala
or Colombia, where the lack of territorial cohesion is a factor
in stoking political violence.

Internal

3.2.2.3
Poverty affects women more than men. The percen-
tage of women receiving no income is higher in both urban
areas (45 % compared to 21 %) and rural areas (53 % compared
to 20 %). In urban areas, the percentage of poor homes where
the head of the family is a woman is higher than the percen-
tage of homes where the head of the family is a man (30.4 %
compared to 25 %). Poverty is also much more pronounced
among people of indigenous origin or African descent than for
the rest of the population. A number of studies on Brazil,
Bolivia, Guatemala and Peru show that the poverty level
in
these groups is twice that for the rest of the population.

3.1.1
This opinion will analyse the situation in Latin
America and the Caribbean on three levels: the socio-economic
sphere, the political sphere and social discontent indicators.

3.2.3 Di str i b u t i on of i ncome

3.2 The socio-economic sphere

Latin Americans consider poverty and inequality to be
3.2.1
the worst problems affecting them. According to Latinobarom-
eter, more than half
the population considers the major
problems affecting the region to be unemployment, low wages
and poverty.
In 2003 almost a quarter of Latin Americans
declared that their income did not cover their basic needs.
These problems are considered to be more important than
other problems such as corruption and crime.

3.2.3.1
The richest decile of the LAC population receives
48 % of total income, while the poorest decile receives only
1.6 %. Over the past three years, inequality, as measured by the
Gini
index, rose in Latin America and the Caribbean. An
ECLAC study of eleven countries in the region (Argentina,
Bolivia, Brazil, Colombia, Costa Rica, Ecuador, Mexico, Nicar-
agua, Panama, Uruguay and Venezuela) reveals an increase in
the concentration of income in all these countries bar Mexico.
However,
the distribution of
income varies considerably from one country to another and is
not related to the level of industrial development.

it must be remembered that

3.2.2 Pove r ty

According to the Economic Commission for Latin
3.2.2.1
America and the Caribbean (ECLAC) (2), in 2002 the poverty
level in Latin America and the Caribbean reached 43.4 % of the
population while the level of extreme poverty reached 18.8 %.
In absolute terms, this corresponds to 220 million inhabitants
and 95 million inhabitants respectively. Forecasts for 2003
predict a 0.5 % rise in the number of poor people, which
means that for a third consecutive year LAC poverty levels
have risen. Between 1997 and 2002, the level of poverty stabi-
lised at around 43.5 % of the population; however, in absolute
terms, the number of people with an insufficient standard of
living rose from 204 million to 220 million. This is due to

(2) Social Panorama of Latin America 2002-2003, ECLAC (2003),

Santiago de Chile.

3.2.4 H u ng e r

fell

In general, hunger (measured as the percentage of
3.2.4.1
the population suffering from malnutrition)
in Latin
America and the Caribbean between the period 1990-1992
and 1998-2000, affecting on average 11 % of the population.
However, it must be remembered that figures vary considerably
from one country to another. The case of data for 1998-2000,
for example,
includes countries (Bolivia, Guatemala, Haiti,
Honduras, Nicaragua and the Dominican Republic) where more
than 20 % of the population suffered malnutrition, together
with others (Argentina, Chile and Uruguay) where the figure
was less than 5 %. According to ECLAC, malnutrition is caused
- among other things - by unequal access to food supplies,
scarce supplies and poor distribution of income.

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3.2.4.2 Malnutrition affects children in particular and merits
special attention given its long-term consequences. Although
child malnutrition indicators improved for the period 1995-
2001, they are still very high, with chronic and severe child
malnutrition affecting 19.5 % of under five-year-olds.

3.2.4.3
Chronic child malnutrition is the main way in which
under-development and poverty is passed from one generation
to another, as a lack of food during the most critical years of a
seriously
child's physical
compromises their intellectual capacity, performance at school,
productive capacity and social
integration, and has a major
impact on society's potential for development.

and psychomotor development

3.2.5 E du ca ti on a n d a c ce ss t o e du c a ti on

Illiteracy levels are high compared to developed
3.2.5.1
In some
countries, but vary considerably across the region.
countries, such as Argentina, Chile, Costa Rica, Cuba and
Uruguay, the illiteracy rate is less than 5 % among over fifteen-
year-olds. However,
this rate exceeds 20 % in El Salvador,
Guatemala, Haiti, Honduras and Nicaragua. In general, illiteracy
is higher among women.

Access to basic education (pupils between seven and
3.2.5.2
is very high in urban areas, with levels
twelve years old)
exceeding 90 % (although regular attendance in classes or over
the school career is another matter: according to ECLAC (3), in
2000 almost 15 million young people between fifteen and
nineteen years old, out of a total of 49 million,
left school
before completing twelve years of studies). School attendance
levels are always much higher in higher income families, parti-
cularly in countries with a higher concentration of income and
less
such as Colombia, Ecuador, El
Salvador, Guatemala, Honduras, Nicaragua and the Dominican
Republic. The relation between access to education and income
level becomes even more apparent as the child grows older, as
they are often required to work to supplement the family's
income. In most LAC countries, the level of school education is
higher among women than men (for all income levels), in par-
ticular in the 20 to 24-year-old age group.

relative development,

3.2.5.3
Educational problems in the LAC countries are
concentrated in three aspects. Firstly, the quality of education
on offer which, in areas such as primary and middle education,
is very low, reflected in high drop-out and failure levels, low
educational performance by pupils, poor school equipment,
and low teacher motivation. Secondly, great inequalities exist in
access to education: imbalances in enrolment rates and perfor-
mances between urban and rural areas,
in terms of ethnic
origin or even gender are obvious. Lastly, there is a serious
mismatch between the educational and training system and
labour market needs, not only on account of the shortcomings
of the labour markets, but also due to the weaknesses of,
amongst others, middle and vocational education.

3.2.6 H e a lth

3.2.6.1
Life expectancy varies from 59 in Haiti to 77 in
Costa Rica and Barbados, with infant mortality ranging from 7
per thousand in Cuba up to 59 per thousand in Haiti (4).

3.2.6.2
In comparative terms, the life expectancy of people
in Latin America is eight years below that for a European
country such as Spain. The health gap is also reflected in the
relatively high mortality rates which persist in the region, being
seven times higher than those in Spain or Germany.

3.2.7 Soci a l e x p e ndi t u r e a n d soc i a l p r ote ct i on

3.2.7.1
Average social expenditure in Latin America and the
Caribbean (under four headings only: education, health, social
security and assistance, and housing) reached 13.8 % of GDP in
the period 2000-2001, a 1.7 % rise on the period 1996-1997.
Expenditure is distributed as follows: 4.2 % on education, 3.1 %
on sanitation, 5.1 % on social security and assistance, and
1.4 % on housing and other areas. Average per capita public
social expenditure is almost 30 times lower than the EU
average.

Throughout

the 1990s, LAC social expenditure
3.2.7.2
followed a cyclical pattern, rising in periods of growth and
falling in periods of economic crisis. For this reason, although
public social expenditure in the region has not fallen, since
1998 it has increased at a slower rate owing to the slowdown
in growth in the region.

3.2.7.3
In comparative terms, spending on social protection
systems (old age, illness, disability) provides a very low level of
cover. In the vast majority of LAC countries, only 10 to 15 %
of the relevant population benefits from an adequate social
protection system; even in the best-equipped countries cover
the working population. A
does not rise beyond 50 % of
worrying downward trend has emerged as a result of
the
burgeoning informal economy.

3.2.7.4
The reforms of social protection systems carried out
over recent decades – privatisation of pension and health
scheme management and replacement of distribution-based
funding systems by individual capitalisation – have failed to
secure the expected results, undermined state control and
revenue-raising capacity, boosted informal employment and are
leaving a growing majority of the population without cover by
protection systems. The increasing intra-regional migration
flows, produced by the on-going integration processes, are also
helping to generate pockets of poverty and social exclusion
given the lack of recognised social protection mechanisms.

3.2.7.5
The Ibero-American Heads of State and Government
have declared 2004 as the Ibero-American Year of Disabled
Persons.
It is estimated that there are between 45 and 65
million disabled people in Latin America, most of whom suffer
from social exclusion and poverty. This is often the case for
their families too.

(3) Social Panorama of Latin America 2002-2003, ECLAC (2003),

(4) Meeting the Millennium Poverty Reduction Targets in Latin America

Santiago de Chile.

and the Caribbean, ECLAC, Santiago de Chile.

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3.2.8 T h e la bou r ma r ke t

3.2.8.1
The labour market in Latin America and the Carib-
bean is going through a period of deteriorating labour relations
owing to a slowdown in economic growth in the last six years.
Urban unemployment rose to 9.2 % in the first quarter of
2002, the highest rate registered in the last twenty-two years.
More than 70 % of the region's households depend exclusively
on income from employment; one in every two workers is in
receipt of pay levels placing them on the edge of poverty. A
growing majority of the working population is not covered by
labour
the
1990s.

steadily declined throughout

legislation; cover

Between 1990 and 2002 (5), there was a growing
3.2.8.2
trend towards informal employment (seven out of ten jobs
created since 1990 have been in the informal sector and
informal employment accounts for 46.3 % of Latin America's
total employment) and precarious working conditions (only six
out of ten new jobs in the formal sector and two out of ten in
the informal sector provide access to some form of social
cover). It is estimated that 93 million LAC workers are without
‘decent work’ – 30 million more than in 1990 (meaning the
50.5 % of the working population who, lacking proper employ-
ment, work in the informal sector, or who work in the formal
economy but without social benefits or under precarious condi-
tions).

3.2.8.3
Labour relations are marked by patchy and incom-
plete recognition of basic labour rights (ranging from countries
with labour relations systems nominally comparable to those in
Europe to others where dozens of trade unionist activists are
murdered each year in the course of their work), under-devel-
oped systems for collective bargaining and consultation,
low
levels of trade union membership (only 14 % of the urban
work force) and few employers' associations, and mistrust and
conflict as
the form in relations between workers and
employers.

3.2.9 M i g r a ti on

3.2.9.1 Migration has a huge impact – both positive and
negative - on the socio-economic situation in LAC countries.
The greatest migration flows from ALC countries have been
northwards, i.e. towards the US and Canada, though in the last
decade there have also been considerable flows towards the
European Union.

3.2.9.2
The positive aspect of migration is that immigrants
send money back to their countries of origin, often providing
an important source of foreign currency for the country and
alleviating the lack of resources in many sectors of the popula-
tion.

3.2.9.3
However, migration also has many negative aspects.
Here we refer only to macroeconomic aspects and do not
touch upon the effect that abandoning country and being far
from family has on people. The primary negative aspect is the
tends to be the most highly
loss of human capital, as it

(5) Good Jobs Wanted: Labor Markets

in Latin America (http://

www.iadb.org/res/ipes).

educated and enterprising people with the most initiative who
emigrate. Moreover, migration flows over a long period of time
create a certain ‘culture of emigration’, encouraging the idea
that only by emigrating can a person prosper. This undermines
the economic dynamics of society and favours social discohe-
sion.

3.2.10 G r ow t h , de ve lop me nt a nd str u ctu r a l r e for ms

3.2.10.1
Economic conditions in the region are not ideal for
ensuring sustained economic growth. The major improvements
in recent years in macroeconomic stability in many countries
in the region is an essential, albeit insufficient, step towards
ensuring higher and more stable rates of economic growth.

The external side of Latin American economies
3.2.10.2
continues to seriously hinder sustained growth. These econo-
mies are extremely dependent on external capital and this
considerably limits internal development. Because of the vola-
tile nature of these capital flows, which are at the mercy of
international crises or changes in the investing countries'
economies, local economic stakeholders are excluded from the
continuity and growth of productive investment. Such depen-
dency also means that the cost for Latin American countries of
financing their debt – the other area in which they suffer from
is constantly fluctuating. That Latin
external
restrictions -
American economies
external
are
economic cycle is one of the most significant factors preventing
them from being more dynamic.

so vulnerable

to the

3.2.10.3
However, the real reason for this high degree of
external dependency and vulnerability is the weakness of local
institutions themselves,
the lack of diversification in Latin
the burden of external debt and the
American economies,
inability to generate their own financial resources (savings). In
this context, considerably strengthening the internal market
(not to be confused, simplistically, with substituting imports)
could open up new possibilities for economic development in
Latin America.

3.2.10.4
In this light, boosting regional economic integra-
tion would help create larger markets, creating economies of
scale and thereby providing an incentive for local production
bases to expand and for attracting foreign investment.

At the moment, the region's production base is
3.2.10.5
extremely fragmented, characterised by a highly informal insti-
tutional
framework and forced to operate in local markets
which are often very small and enjoy some kind of protection
from external competition. However, before subjecting these
markets to external competition, we need to address why their
productivity levels are so low.

The growth of small and micro enterprises faces
3.2.10.6
insurmountable obstacles owing to an inadequate business
culture, a lack of human capital, and the legal uncertainty of
the institutional environment in which they operate. Moreover,
the financial system has evolved little and its brokerage instru-
ments are poorly developed.

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3.2.10.7
In the same way, the unfair distribution of produc-
tive assets (from land to physical and human capital) exacer-
bates existing obstacles facing the business community in Latin
America.

3.3.3
Equal opportunities are created through social policies,
i.e. investment in health, education, employment and housing.
These policies also contribute towards a fairer distribution of
income and enable people to be more actively involved in poli-
tical decisions. This in turn strengthens democracy and govern-
ability.

The expansion of business activity in Latin Amer-
3.2.10.8
is a pre-requisite for achieving sustained
ican economies
growth. However, reforms in this area come up against indiffer-
ence among some business circles, a lack of credibility or conti-
nuity in government industrialisation or agrarian reform plans,
the absence of political and social consensus on progress to a
democratic society and, sometimes, resistance from certain
local elites, who are more interested in how the profits from
dismantling the now obsolete industrial State will be distributed
than in creating a competitive industrial and productive fabric.

3.3.4
In this context, LAC citizens are noticeably switching
off from politics. This is expressed through increasing demands
on democracy in terms of satisfying material needs and rising
electoral absenteeism. This is particularly true of young people,
who demonstrate a considerable level of political disaffection
with political parties and other political organisations and insti-
tutions. According to a UNDP report, 54.7 % of Latin Ameri-
cans would be prepared to accept an authoritarian government
if this meant an improvement in the economic situation.

In this context, the social economy can play a key
3.2.10.9
role as a factor that generates social fabric, economic develop-
ment and social cohesion. It is also a valuable solution in times
of economic crisis and industrial
restructuring (e.g. when
failing companies are taken over by their own employees) and
an effective alternative for fostering local development (e.g.
local development cooperatives, etc.).

3.4 Social discontent indicators

Following on closely from the above, an analysis of social frag-
mentation in Latin America and the Caribbean requires knowl-
edge about the levels of social dissatisfaction. It also requires
considering different social expressions of rejection, e.g. urban
violence, delinquency, and the emergence of parallel societies
and ‘mafia legality’.

3.3 The political sphere: political elements that define the quality of

institutions and machinery for political participation.

3.4.1 Di sconte nt w i th i nst i tu t i ons

3.3.1
Despite the emergence of democratic systems across
practically the whole of Latin America, social citizenship has
not
increased (employment, welfare provision for old age,
illness, unemployment and disability, education, housing, equal
opportunities, civic security, better economic level, access to
new means of information and communication). Many citizens
have no basic civil and social rights. The inability or failure of
LAC States to safeguard fundamental rights - such as fair taxa-
tion, access to justice, protection from different
forms of
violence, universal social protection systems,
involvement of
citizens in issues affecting them, etc. - has led some people to
speak about absentee States and low-intensity citizenship.

3.3.2
The social fabric of Latin America is very weak. Civil
society is not very well organised and the role of the institu-
tions does nothing to improve this situation, as the political
elite seems to have serious reservations about allowing civil
society to participate in them. This simply results in a weak
and vulnerable social fabric. It is, nonetheless, essential to be
able to call on efficient and socially credible social partners and
effective cooperation between the public and private spheres of
action, in order to make social cohesion policies more effective.

According to Latinobarometer (6), people's trust in
3.4.1.1
all institutions, but especially in political institutions, is falling.
There is no doubt that this affects the performance of these
institutions and has a negative impact on citizens' participation
in the management of public affairs.

3.4.2 E q u a li ty be for e th e la w

3.4.2.1
This seems to be closely related to the evolution of
social and economic equity in the region and to the lack of
fundamental civic and political rights. For example, more than
50 % of Latin Americans interviewed by Latinobarometer said
that the most important factor for determining confidence in
institutions was ‘whether they treat everyone as equals’ (as well
as wealth distribution issues, this may be influenced by discri-
mination – including in legally recognised forms – against
certain social or ethnic minorities: this can help explain the rise
of indigenous-population movements in several countries of
the region and the survival of phenomena such as forced
labour and slavery).

(6) http://www.latinobarometro.org.

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3.4.2.2
Although all the countries in the region have ratified
the number of
international conventions on human rights,
human rights violations remains high. These can no longer be
attributed to the actions of dictatorships, but to widespread
violence practised by individual groups (e.g. drug traffickers
and private militias, sometimes in collusion with repressive
State apparatuses). It is therefore essential that a respected and
autonomous judicial system, along with other related policies,
is reinforced so that citizenship can be based on the rule of
law. This must be done in such a way as to eliminate one of
the gap
the major contradictions in LAC democracies,
between legislation and its practical implementation.

i.e.

3.4.3 Cor r u p ti on

3.4.3.1
Latin Americans' faith in democracy as a form of
government fell steadily throughout the 1990s (7). There is a
clear correlation between the consolidation of institutions and
the degree to which people accept them. However, for the
latter to occur, the transparent management of public affairs is
essential.

3.4.3.2
Political and economic corruption is a phenomenon
that is found in almost every country in the world and, it must
be remembered, always has two faces: the corrupted and the
corrupter. Such corruption is considered to be one of the most
serious problems affecting the region. This may explain the
increasingly negative image of governments and the political
parties that underpin them – but not democracy itself – the re-
emergence of populist political groupings and the rejection of a
number of economic reforms, including some of the privatisa-
tions of the 1990s.

Corruption and institutionalised unlawfulness break
3.4.3.3
the basic ethical, legal and community-related bonds that hold
society together. To mend these bonds, action must be taken in
the area of education, rebuilding confidence in the credibility of
the rule of
law and effective legislation. Reducing social
inequalities through policies on protection and inclusion, indi-
genous people, women, young people
in general,
extending and developing social citizenship for all is essential if
development is to be sustainable and if South Americans are to
have more confidence in political institutions and the demo-
cratic system.

and,

3.4.4 Vi ole nc e , c r i me a nd c i vi c i nse c u r i ty

3.4.4.1
The high level of crime and violence in the region is
linked to social exclusion, extreme poverty and inequality. The
UN's victimology index shows that LAC crime levels are among
the highest in the world. A study commissioned by the World
Bank in 2000 (8) reveals a close relationship between economic
inequality and crime levels. In Latin America and the Carib-
bean, the number of violent deaths rose from 8 per 100,000
inhabitants in the 1970s to 13 per 100,000 inhabitants in the

(7) http://www.latinobarometro.org.
(8) Pablo Fajnzylber, Daniel Lederman and Norman Loayza: Inequality

and violent crime, World Bank, Washington, 2000.

1990s. Colombia tops the list, with 60 (non-political) murders
per 100,000 inhabitants.

3.4.4.2
There are many complex historical and social
reasons behind the violence that characterises everyday life in
Latin America's big cities and which has worsened in recent
years owing to economic crises and weakened institutions.
Apart from those countries in which violence has political
roots, in the rest of Latin America the main causes of violence
are the widespread presence of criminal organisations involved
in drug trafficking, and social
inequalities. Such widespread
violence is a major obstacle to social harmony, democracy and
productive development.

Drug trafficking is a source of

3.4.4.3
insecurity and
violence which affects the poorest sectors, weakens political
institutions and destabilises economic systems and social rela-
tions. It also feeds corruption and civil wars, and exacerbates
inequalities
the eradication of
networks and laboratories requires not only international police
and judicial cooperation, but also a significant
financial
commitment by the countries concerned.

in Latin America. Finally,

The roots of

3.4.4.3.1
illegal crop production in Latin
America, which continues to be a tricky subject in north-south
relations, can be found in the extreme poverty of some rural
areas, which have no other means of surviving.

3.4.4.3.2
Consumer countries should accept their share of
the responsibility in combating drug cultivation instead of
placing all the responsibility on producer countries, especially
as it is in the former that the financial systems for laundering
drug money are found.

The EESC calls on the EU to continue and step up
3.4.4.3.3
trade liberalisation, in full compliance with WTO rules, with
those Andean countries that are willing to reduce and replace
illegal crops, and condemns the arbitrary destruction of crops
from the air. This approach has clearly failed to achieve its
objective, succeeding only in stirring up social and political
violence.

In order to make crop replacement systems more
3.4.4.3.4
efficient, these new crops need to be given financial and tech-
nical aid and promoted through local transport networks that
make it easier to sell alternative products regionally.

3.4.4.4
Crime networks – particularly those found on the
outskirts of cities – very often constitute parallel forms of social
organisation that use violence to hinder and prevent the devel-
opment of organised civil society, an essential component for
building a democratic State that is satisfactory for the majority
of citizens. By imposing their own rules on the area in which
they operate, such parallel societies undermine and sometimes
even call into question the democratic State itself.

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4. The origins of social inequality in Latin America

real balance: employment,
income growth and distribution.
Indeed, as seen above, some of these parameters have actually
worsened (especially in countries such as Argentina).

4.1
In most Latin American countries, independence from
empire failed to trigger a process of thorough-going social,
economic and political reform. In general, it signalled a change
of political elite without a significant overhaul of the institu-
tional field. Many pre-capitalist social and economic structures
lived on, keeping Latin American societies
in a sort of
economic timewarp.

The result of this colonial social and economic heritage
4.2
and the successive failures to change it significantly has been
highly concentrated ownership of resources (land ownership is
emblematic of this state of affairs in several Latin American
countries), the political, economic and social marginalisation of
entire sectors of Latin American society, the often parasitical
appropriation of economic activity by ruling elites, with its
familiar fall-out
in terms of corruption and inefficiency of
public action, poor market regulation, generating numerous
in particular, profoundly unequal
negative externalities and,
distribution of income, and lastly, an increasing and unstruc-
tured level of urbanisation,
in which the social bases of a
market economy are dissolving into an informal economy.

Ever

region's

attempts

imbalances penalising the

4.3
since decolonisation, LAC economic history
(although to very different degrees between countries) has
displayed a seamless sequence of deep crises, marked by
external
to
promote development. In brief, three common phases can be
distinguished in the economic dynamics of LAC countries over
the last two centuries. For a substantial part of the 19th and
the early part of the 20th centuries, Latin American economies
developed according to the ‘primary exporter’ model, based on
strong specialisation in exports of primary products. In the
second phase, beginning in the 1920s and 30s, the powerful
economic growth generated in some Latin American countries
by the First World War, triggered a shift towards an ‘import
substitution’ model, striving to replace the imports resulting
from a process of integration, of national economies in the
global trade environment with national products and to create
a domestic productive fabric. However,
the appearance of
profound macroeconomic imbalances (inflation and balance of
payments deficits)
jeopardised these internal development
efforts. Lastly, in the late 1970s and early 80s, the widespread
implementation in LAC countries of economic policies at the
urging of international organisations (the so-called ‘Washington
consensus’) promoted the opening up of economies to the
outside world, basing economic and social development on the
market.

the

last

Over

although the

radical
few decades,
4.4
economic reforms in Latin America in keeping with the
‘Washington consensus’ have secured their
third objective
(privatisation, liberalisation and macroeconomic stability), over-
coming high inflation levels and monetary instability, they have
not produced substantial improvements in the variables of a

4.5
Not only have many of the policies advocated by the
‘Washington consensus’ become ends in themselves, rather
than means for achieving sustainable and fair growth; in addi-
tion, other external factors are having a negative impact on the
level of social cohesion in LAC countries. These include the
double standards employed by the developed nations in their
trade relations with the Latin American region; the structural
adjustment programmes imposed by the international financial
in most cases, have aggravated the crises
institutions which,
affecting LAC countries; the lack of appropriate and stringent
legislation regulating foreign investment, or sometimes a failure
to apply it, has in some cases had the effect of destroying local
competition and creating monopolies instead of helping to
enhance the productive fabric and social responsibility of
companies; rising debts since the 1960s, which the debtor
countries have more than cleared through interest payments;
and official development aid, which is not always channelled to
comprehensive, coherent projects, but occasionally simply
serves as a tool for cultivating preferential commercial or diplo-
matic relations. These are all key factors which affect
the
progress of social cohesion in Latin America and the Carib-
bean.

5. Weaknesses in Latin American societies concerning the

process of social cohesion

It can be seen from the above points that Latin Amer-
5.1
ican societies suffer a number of core weaknesses preventing
them from meeting the challenge of achieving acceptable levels
of social cohesion and which may be condensed into the five
following shortcomings:

Shortcomings in the state's function as a body respon-
5.2
sible for upholding the common interest and promoting the
common good, as a body for regulating the development of the
market economy and the social pact, as an essential instrument
for ensuring social cohesion since civil society alone does not
have the necessary means for achieving and maintaining it. The
state, in LAC societies, has not performed the role of moder-
nising and stimulating economic development and social
protection, a role which has been fundamental in other, now
developed parts of the world. According to the point in time
and specific circumstances of each country, LAC states have
tended to be at the service of the spurious interests of certain
social groups rather than the very different role the state has
played in most developed countries, as a market economy regu-
lator, a go-between in social conflicts, and a spur for economic
activity by means of a framework of appropriate micro- and
macroeconomic and social policies backing up the develop-
ment process. In many cases, the weakness of the state has
prevented it from implementing – or even framing – effective
social cohesion policies.

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5.3
Social inequality which, quite apart from wealth distri-
social and
bution statistics, acts as a brake on citizens'
economic mobility. In the absence of machinery for breaking
out of pre-determined social moulds, more traditional patterns
of perpetuating social groups and classes operate.
In this
context,
the participatory instruments which are typical of
democratic systems experience enormous difficulty in taking
root and consolidating their position as means of social organi-
sation.

6.2 The state, institutions and policy

6.2.1
Discussion of social cohesion is meaningless unless all
citizens are guaranteed equal rights which are in turn guaran-
teed by law, upheld in the courts and endorsed by specific
economic and social programmes.

5.4
The weakness of organised civil society. Setting up
democratic institutions and establishing a market economy are
not enough to produce economic development and social cohe-
sion. Social change must come about, extreme poverty and
exclusion banished,
the conditions for equal opportunities
created, and access to essential services such as health and
education facilitated. This process cannot be dictated from
within each individual country, or imposed from outside. Each
country must assume its responsibilities. This will be impossible
unless society is involved on a permanent basis in decision-
taking, through its various outlets: political parties, employers'
associations, trade unions and social organisations. Fairer distri-
bution of wealth – a precondition for social cohesion – always
entails sharing power, which cannot come about unless orga-
nised civil society is strengthened. This weakness has a direct
impact on the productivity of the economic system, since areas
of discohesion pose a permanent threat to the foundations of
legal and political stability which are needed for any economic
institution to function adequately.

5.5
Globalisation-related imbalances. Latin American econo-
mies are particularly vulnerable to events beyond their borders.
In some cases, their integration into the accelerating process of
economic globalisation is accompanied by declining relative
among their
efficiency and international
production structures. This fuels what
the Swedish Nobel-
winning economist, Gunnar Myrdal, described as ‘circular
causation’, especially in the recession phase of the international
levels of
economic cycle, standing in the path of higher
economic and social cohesion.

competitiveness

The structural policies put

5.6
into practice over recent
decades, often under various forms of pressure from interna-
tional organisations, have served to aggravate some of the tradi-
tional imbalances in these societies, particularly with regard to
levels of social cohesion.

6. Possible vectors for social cohesion in Latin America

and the Caribbean

Neither can a modern state, fulfilling the functions
6.2.2
required of
it, be developed without a fair, efficient and
adequate tax system. LAC tax systems are marked by weak
management structures for tax collection and inspection, a
general tendency for systems to revolve around indirect taxa-
tion, low tax pressure and high levels of evasion. This is there-
fore one of the main challenges for LAC societies and econo-
mies. Tax reform will probably encounter resistance from
social
accustomed to
economic activity without taxation, or basically regressive tax
regimes, but it remains an essential requirement for social cohe-
sion.

and economic groups which are

6.2.3
Similarly, social cohesion requires an active presence
on the part of the state in promoting specific policies to redress
social inequalities, implement policies based on redistribution
and solidarity, and promote equal opportunities for all citizens,
breaking down social exclusion. Universal social protection
systems for this purpose are sorely needed in LAC countries; in
most of them, such systems either do not exist or are marked
by serious shortcomings or even inequalities.

6.2.3.1
Social cohesion is not achieved simply by drawing
up action plans against social exclusion; social security systems
are also needed to provide, inter alia, healthcare and pensions
for the whole population. There is therefore a particularly
urgent need to address the profound inequalities affecting the
older segment of the population, who often border on destitu-
social exclusion. The introduction of public
tion and/or
pension schemes – funded by distributive mechanisms and
providing general cover – is absolutely essential if a reasonable
degree of social cohesion is to be attained. This is compatible
with the existence of supplementary systems operating on
different bases.

Social security systems should also analyse formulae
6.2.3.2
for providing cover for the self-employed, false self-employed
and people working in the informal sector – all of which are
very important sectors in LAC – based on experience gained in
some European countries.

in the light of

The purpose here is to indicate some of the vectors
6.1
which could,
the European experience and
taking account of the weaknesses in LAC economic and social
development as identified above, also assume a strategic role in
Latin American circumstances in achieving higher levels of
social cohesion.

6.2.3.3
Improving public health is another key vector for
improving social cohesion in Latin America and the Caribbean.
The social effectiveness of public health systems,
financed
according to the principles of redistribution, have proved them-
selves,
in the European setting, to provide far more mutual
support, to be less costly and more cohesive than schemes
based on private insurance.

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6.2.3.4
A number of LAC countries have, since the 1990s,
introduced public sector social programmes intended to meet
some of the basic needs of the most vulnerable communities.
The programmes are conditional upon certain requirements or
matching measures: educational programmes, for example, are
tied to educational assistance to pupils, and food programmes
to vaccination campaigns and food safety information. These
programmes are promoted and operated by the country in
question; their impact on wealth distribution, educational cover
and health is mixed.
In another sphere, some governments
have set up initiatives to facilitate access to credit. In Brazil, for
example, electronic cards have been distributed providing
easier access to State-guaranteed micro-loans. The EU could
support these kinds of innovative measures as part of a strategy
for social cohesion in the LAC countries.

public authorities and the private sector to develop the most
advanced technology. This is essential if these societies are to
bridge the gap between them and more developed countries,
and meet the challenge of ‘top-down’ development, by gener-
ating added value in the global productive system.

To this end, efforts to improve ongoing training
6.3.3
through vocational and university training systems are essential.
This is an area in which the EU can contribute specific knowl-
edge and experience in managing vocational training systems,
harmonising professional titles and building educational infra-
structure.

Complete social protection of labour relations in the
6.2.3.5
formal economy, progressive extension of cover to workers in
the informal sector, social protection for migration flows and
the eradication of some of the underlying causes of infant
mortality are major priorities for better social cover in LAC
countries.

Some of

6.2.3.6
the EU's outermost regions, which are
located in Latin America and the Caribbean, receive Com-
munity structural aid specifically geared to developing basic
infrastructure. Their level of social cohesion, however, remains
much lower than in Europe; their lack of integration into the
Caribbean region poses serious economic challenges for their
future and some of their basic products, such as in the farm
and tourism sectors, may suffer from competition from ACP
countries benefiting from preferential agreements, while being
burdened with higher costs. Consequently, the EU's new finan-
cial perspectives should take account of the need for continued
specific aid for the Union's outermost regions.

6.3 Economic infrastructure. Research and development

Providing all kinds of

infrastructures (in particular,
6.3.1
with regard to LAC, for transport, communications, drinking
water and energy accompanied by commitments on sustain-
is a basic condition for economic
ability and maintenance)
development,
in short,
improved productivity. Productivity is also improved by intro-
ducing more technology in productive processes and by
training everyone involved in the productive system.

increased production and trade and,

6.4 Education

6.4.1
Education is a key factor in removing the obstacles in
the path of economic and social development, and is the essen-
tial element in ensuring equal opportunities and social mobility.
In view of the educational conditions described above (poor
quality, unequal access and dissociation from the economy),
education in LAC may end up as a mechanism consolidating
and perpetuating social
inequality instead of representing a
factor for progress, social mobility and greater justice. Without
minimising the aspects of education which may be developed
by private initiative, the state must therefore assume responsi-
bility for guaranteeing a basic level of education of proper
quality for all citizens,
for guaranteeing discrimination-free
access to higher levels of education, gearing education more
closely to the labour market, promoting talent wherever it is
and preventing the emergence of new forms of exclusions
arising from the advent of the ‘knowledge society’.

6.5 The productive system and its dynamics

6.5.1
Social cohesion requires an efficient productive system
which can generate employment and income for all citizens. In
this regard, LAC countries must focus on the business fabric at
level, which is made up of a network of
local and regional
small businesses, many of them currently operating in the
informal sector and, since they are only tangentially involved
with the national markets, offer little potential for growth.

6.3.2
Efforts made by LAC societies to compete in the
global economy must be accompanied by a concerted effort by

The mushrooming informal economy is, first and fore-
6.5.2
most, a reflection of states' lack of economic power to regulate
markets capable of expanding. Rather
for
growth, the informal economy most often reflects backward
economies with little capacity for generating proper employ-
ment.

than potential

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6.5.3
The social economy – i.e. cooperatives and com-
munity associations – is a very significant economic and social
reality in several EU countries. In the Latin American countries,
it could be an important vector for future consideration as an
alternative to the informal economy in terms of economic
development, job creation, social integration and the participa-
tion of broad sectors in the productive process, as explicitly
acknowledged in the recent declaration by the countries of
Latin America (9).

6.5.4 Weaknesses in the area of financial resources represent
one of the main bottlenecks in LAC productive systems. Low
levels of saving combine with inefficient intermediary mechan-
isms to make it difficult to provide broader, improved access to
funding for economic players, especially SMEs (approximately
80 % of LAC companies are SMEs or micro-enterprises), the
self-employed, cooperatives, etc. There is then a need to
develop systems for micro loans and to improve the manage-
ment capacity of small enterprises and the self-employed.

6.5.5
The primary sector continues to be relatively impor-
tant in many LAC countries, placing it – together with a policy
of vertical and horizontal industrial development aid – at the
heart of pending reforms intended to boost economic and
social development. The search for greater productivity levels
in agriculture (which is a basic source of foreign exchange in
many countries) must go hand in hand with an effort to solve
deeply rooted social conflicts in LAC rural zones. Agrarian
reform, which varies according to the country concerned,
continues to be an essential factor in offering a solution to
millions of
living in poverty,
increasing agricultural
incomes and production, and thereby
improving economic and social cohesion.

farmers and day labourers

6.5.6
Regional economic integration - which encompasses
not only market liberalisation but also compensation and soli-
darity mechanisms similar to the EU's Structural Funds - is
gradually making headway in Mercosur,
the Andean Com-
munity and between the two sub-regional groupings and repre-
sents an essential element in boosting LAC economic and social
development. This applies in particular to the need for LAC
economies to diversify and the need to build up competitive
sectors of production and attract foreign investment.

6.6 Expansion and quality of employment

6.6.1
According to their own citizens, unemployment is one
of the most serious social problems in most LAC countries (e.g.
Argentina, Colombia, Ecuador,
Jamaica) and illegal employ-
ment, which has reached alarming proportions, continues to

(9) XIII Ibero-American Summit of Heads of State and Government,

Santa Cruz de la Sierra, Bolivia, 14-15 November 2003.

grow. Achieving higher employment levels and decent working
conditions for the working population as a whole are two key
and extremely urgent objectives for LAC public authorities and
social players.

6.6.2
The objective of more and better employment calls for
major intervention, agreed by consensus, in the functioning of
labour markets. The labour reform carried out in many LAC
the stated objectives of generating
countries has not met
employment and increasing decent employment;
in many
cases, it has even contributed towards more widespread precar-
ious employment, as is demonstrated most clearly by the high
levels of informal labour that have been observed.

In this context,

6.6.3
there are a number of structural
requirements that relate to the objective of more and better
employment
in LAC. These include: establishing macroeco-
nomic policies designed to reduce the extremely volatile nature
of their economies, perfecting mediation systems in the work-
place, strengthening the link between the education system and
job creation, developing appropriate mechanisms to protect
employees from loss of income caused by continual changes in
the workforce, providing more
employees,
complying with labour legislation and promoting labour rela-
tions based on negotiation and consensus.

training for

6.7 Employment rights and social dialogue

6.7.1
The former President of the European Commission,
Jacques Delors, defined the European social model as one
which combines the state and the market, private initiative and
collective rights, businesses and trade unions. In Europe, the
existence of democratic frameworks for labour relations has
been, and continues to be, an essential factor for economic
competitiveness and social cohesion.

6.7.2
Labour relations systems of this kind are characterised
not only by respect for human rights in the workplace (as set
out in the basic ILO conventions), but also by the existence of
representative trade unions and employers' organisations, by
collective bargaining procedures at various levels and, in some
cases, by forms of tripartite consultation on economic and
social policy guidelines (ranging from types of negotiated legis-
lation to social pacts on pay levels) and by several means of
worker participation in companies and social
institutions
(social security, vocational training, etc.).

6.7.3
The underdevelopment of fully democratic labour rela-
tions systems is one of the main factors in Latin American
societies' failure to strengthen social cohesion.

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6.7.4
In July 2001 the European Commission published a
Green Paper promoting a European framework for corporate
social responsibility. This initiative, together with others, comes
on top of the International Labour Organisation's Tripartite
Declaration of Principles concerning Multinational Enterprises
and Social Policy.

actors in various social
institutions (social dialogue, social
protection, protection from unemployment, public employ-
ment and training agencies, etc.) at sectoral and cross-sector
level.

6.7.5
The green paper establishes a number of criteria for
defining the social responsibility of European companies: the
voluntary character (therefore extending beyond the legal obli-
gations to which companies may be subject) of the steps under-
taken; the lasting nature of the commitment entered into (a
new form of corporate governance rather than one-off actions);
involvement of those affected, both within and outside compa-
nies, in matters of concern to them; the requirement for trans-
parency when demonstrating practices related to social respon-
sibility.

These criteria should be promoted so that all multina-
6.7.6
tional companies in LAC countries,
in particular European
ones, take them on board voluntarily in such a way that they
become a catalysing and exemplary factor in building up demo-
cratic structures for labour relations and responsible corporate
practice in respecting labour and environmental rights.

6.8 A structured society. Strengthening civil society

6.8.1
Achieving higher levels of democracy, human develop-
ment and governability entails boosting forms of social partici-
pation. Civil society involvement is an expression of public
demands in securing the general interest, an incentive for more
efficient public management, an instrument for public moni-
toring and a means of real participation in decision-making in
public and private institutions. It is a precondition for sound
democratic governance.

According to Latinobarometer,

striking
6.8.2
feature of Latin America culture is the low level of
trust
between individuals. Promoting collective projects is therefore a
basic condition for giving political support to address the chal-
lenge of social cohesion in Latin America and the Caribbean.

the most

Strengthening independent

6.8.3
representative economic
and social organisations which are capable of compromise is a
key condition for bringing about social dialogue and fruitful
civil dialogue and, therefore, for the very development of LAC
countries.

6.8.5
The legal recognition of the social associative move-
ment – as part of which NGOs have gained particular signifi-
cance and relevance in recent years - has been another of the
pillars on which civil society involvement rests, as has dialogue
with the various organisations defending particular groups and,
more recently, the development of civil dialogue.

6.8.6
The local sphere has proved particularly effective in
giving shape to such participation and in facilitating interaction
between representative social dialogue and civil dialogue orga-
nisations.

7. Relations between the European Union and Latin
America and the Caribbean. Their impact on social
cohesion

The EESC has drawn up a series of opinions on EU-LAC
7.1
relations, the FTAA initiative and relations with a number of
regional groupings or countries (Mercosur, Mexico, Chile)
which assess the current state of such relations, especially from
the point of view of the socio-economic dimension of the
various association agreements.

7.2 More complete and balanced relations

In the EESC's view, strengthening EU-LAC relations
7.2.1
can, under certain conditions, be extremely influential
in
achieving greater social cohesion in LAC. The EU has therefore
recently concluded Political Association Agreements with the
Andean Community and with Central America. A timetable
and deadline have also been established for completing negotia-
tions with Mercosur.

7.2.2
The EESC has consistently advocated rapid completion
of these negotiations with Mercosur – arguing too that they
should not depend on WTO negotiations, which came to a
standstill following the failure of the last summit in Cancún –
as well as a balanced and satisfactory agreement that includes,
amongst others, issues relating to agriculture and the trade in
services.

6.8.4
Civil society involvement in the European venture has
historically rested on both the party system and the labour rela-
tions and social consultation systems
referred to above,
reflected in part in the establishment of economic and social
councils or committees, as well as on the involvement of social

Achievement of an agreement with Mercosur, and
7.2.3
further development of the agreements with the Andean Com-
munity of Nations and the Central American Common Market,
should contribute
relations
between the EU and LAC, which are at present marked by the
Latin American countries' growing trade deficit with the EU.

to more balanced economic

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7.2.4
In the EESC's view, implementing a bi-regional stra-
tegic alliance, as proclaimed at the Madrid and Rio Summits of
Heads of State and Government, requires a common agenda to
be drawn up to enable negotiations to begin as soon as possible
on an association agreement for the entire Latin American
region.

tional dimension and fund projects designed to strengthen the
social dimension of sub-regional integration processes and civil
society organisations throughout LAC.

The institutional instruments for EU-LAC relations are
7.2.5
essentially limited to agreements and summits. A more opera-
tive agenda would require more structured relations. EU-ACP
relations,
for example, already have a Joint Parliamentary
Assembly and a General Secretariat, based in Brussels. In the
EESC's view, EU-LAC relations need to be more flexible, perma-
nent and structured in order to promote this Europe-Latin
America alliance.

7.2.6
In short, EU relations require a strategic orientation in
all aspects – development aid and cooperation, but also
commercial, technological, political, educational, cultural, etc.
aspects – so that they all include the objective of social cohe-
sion in LAC.

7.2.7
The EESC believes that EU-LAC relations are not
in order to
limited to trade agreements but are essential
strengthen the EU's role as international player; to support a
regional integration process in LAC which, unlike the original
FTAA project, would provide the region and its various subre-
gional groups with greater negotiating capacity on the interna-
tional stage; and to promote a new international economic
order and worldwide governance of globalisation. This type of
governance must be of a multilateral nature and subject to
international law, protect the environment, preserve peace and
reduce the development gap between North and South on a
global scale.

7.3 Strengthening and participation of civil society organisations

7.3.1
From the EESC's point of view, EU-LAC relations must
facilitate regional integration processes in Latin America which,
mirroring the European experience,
include not only larger
markets in order to promote economic development, but also
solidarity-based mechanisms and a set of social standards
which accompany the completion of the single market and
promote a higher degree of social cohesion.

7.3.2
The EESC also calls on the EU to draw upon the
example of the project supporting Mercosur's socio-occupa-

7.3.3
The EESC also calls for all agreements between the EU
and the various countries or sub-regional groupings of LAC to
Joint Consultative
establish formal procedures – such as
Committees – to ensure that civil society organisations are
involved and consulted when such agreements are drawn up.
The EU should therefore encourage civil society organisations
to be set up or developed in areas where they are either non-
existent or embryonic, in order to meet this objective.

7.3.4
Promoting direct relations between socio-occupational
organisations in the EU and LAC can contribute towards the
transfer of experience and to economic, political, social and
cultural exchanges, as well as stronger civil society organisa-
tions. The EESC is of the view that existing experiences – e.g.
the EU-Mercosur Business Forum, forums for NGOs from the
EU, Central America and Mexico, etc. – should be extended to
other sectors such as trade unions (an EU-Mercosur Labour
Forum has already been set up), the social economy and agri-
culture.

7.3.5
Similarly, the EESC urges the EU to create a budget
line similar to those for promoting urban development and
technology or training exchanges, and dedicated to reinforcing
civil society organisations – e.g. trade unions, employers' asso-
ciations and social groups – in LAC countries.

The World Bank and the IMF should also participate
7.3.6
in strengthening the organisations of social partners and civil
society in cooperation with the EESC and other EU institutions
as well as the ILO.

stable

economic

7.3.7
A developed framework for labour relations is an
essential condition for achieving a form of social dialogue that
promotes productive investment, decent employment with full
rights,
to production
activity,
processes and a better distribution of wealth. The European
experience, business and trade union organisations, and a
variety of bodies –at both EU and Member State level – could
all help to strengthen the social partners, improve systems for
negotiating and settling disputes, and step up company partici-
pation and dialogue between all social stakeholders.

changes

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7.4 Productive investment and corporate social responsibility

7.6 Official development aid

7.4.1
The European Union is one of the biggest investors in
Latin America. The flow of direct investment from European
countries is continuing to grow, presently accounting for the
largest share of investment resources entering the region. EU-
LAC cooperation is essential to creating the national and inter-
national conditions needed to guarantee high-quality and
constant investment, in particular in infrastructure, in order to
attract direct foreign investment. The EESC considers that the
determined work on the part of European companies investing
in Latin America, with the support of the Community institu-
tions and the Member States, must be the cornerstone for rela-
tions with LAC and greater economic and social development.

The EESC agrees with the European Parliament's
7.6.1
recent call for the EU to set up and release the necessary
resources for a bi-regional Solidarity Fund for Latin America
(intended to support
and funding of
programmes on health, education and the fight against extreme
poverty, inter alia), as well as increase the amount of ODA for
Latin America (over and above the commitments already made
by the EU and its Member States) and re-define the ways in
which it is applied. Likewise, coordination with other regional
or international financial bodies should be stepped up.

the management

Financial support

7.4.2
to strengthen SMEs is of special
importance in LAC, first and foremost in order to boost its
physical, technological and human capital. In this connection,
it would be particularly helpful to set up an SME fund for Latin
America, financed by the Member States and the EU.

7.4.3
Increased European investment should go hand-in-
hand with a greater voluntary undertaking on the part of
companies investing in LAC countries to implement a policy of
social responsibility exceeding the relevant national require-
ments, whether based on law or agreements, and the ILO's
basic employment standards. This could serve as a benchmark
in the construction of democratic frameworks for labour rela-
tions.

7.4.4
A charter laying down the principles of corporate
social responsibility for European companies operating in LAC
– which companies based in the region would also be free to
apply - would provide a powerful boost to social dialogue and
respect for the environment and, therefore, to social cohesion
in LAC.

7.5 Immigration

7.5.1 Migration flows from LAC to the EU have increased
substantially over the last few years. The EU could contribute
towards social cohesion in LAC through agreements facilitating
legal immigration, integrating immigrants and their families in
the EU Member States and framing a co-development policy
(e.g. education and funding programmes for productive under-
takings based on professional experience, savings, repatriated
immigrants, etc.) between the countries of origin and the host
countries. This would also help to alleviate the drain on skills
and initiative which migration to the EU represents for Latin
American countries.

7.6.2
As explained above, the EESC believes that the EU
should mainstream the strategic objective of social cohesion in
all its relations (e.g. commercial, technological, business, educa-
tional, etc.) with LAC. However, both development aid and
development cooperation remain highly important. The EU
should spare no effort
in defining a poverty reduction
programme in the poorest LAC countries, ensuring that aid is
channelled towards the central aim of combating poverty and
promoting closer coordination between donors (Community
ones at least). In the least relatively developed LAC countries,
EU development cooperation should be directed to creating the
conditions for these countries to enter the international arena
reducing their degree of
under advantageous conditions,
external vulnerability and devising policies to redress inequal-
ities and help legitimise institutions and root them in society.
To this end, there should be a blend of political dialogue, tech-
nical assistance, financial cooperation and backing in the inter-
national arena.

7.6.3
In all cases, the EU and its Member States should
strive to enhance the quality and efficacy of aid. This should be
done firstly, by attempting to make public policy more consis-
tent; secondly, by stepping up coordination between donors;
and thirdly, by helping aid beneficiaries to take over ownership
of development: it should be up to them to take the key deci-
sions in planning and managing action.

7.6.4
In the EESC's view, a proportion of Community aid
should be earmarked for strengthening the negotiating capacity
of the least developed LAC countries in multilateral forums,
through assistance and support for the relevant institutions.
The EU's efforts should focus throughout the entire region on
training human resources in line with labour market condi-
tions, and on strengthening institutions.

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7.7 Reducing the burden of external debt and funding development

7.9 Strengthening social protection systems

and social cohesion

External debt continues to seriously hinder develop-
7.7.1
ment in many LAC countries. High external debt and poorly
functioning financial markets are related factors affecting both
foreign and national investment. With regard to debt, despite
the World Bank and International Monetary Fund initiative to
alleviate the debt of Highly Indebted Poor Countries (Bolivia,
Guyana, Honduras and Nicaragua are among the Latin Amer-
ican countries benefiting from this initiative),
the problems
facing these countries have not been resolved. Even debt relief
is insufficient if it is not accompanied by measures to promote
productive investment.

Social protection systems are key aspects of any
7.9.1
inclusion, poverty reduction and
strategy geared to social
improved social welfare in South America. The EU could there-
fore contribute by promoting universal
social protection
systems, encouraging the various countries of LAC to sign
international conventions and thereby coordinate their social
security legislation, giving support to modernising the way in
which social protection systems are managed, and promoting
specialised training in this area.

7.10 Fostering a more balanced form of regional development in

LAC

7.7.2
The EU Member States hold over 50 % of the debt of
LAC countries. In the EESC's view, the EU and its Member
States should therefore initiate moves in multi-lateral forums
towards redefining the conditions for debt relief, drawing up
debt relief formulae based on programmes for environmental,
educational and other types of cooperation, and providing
actual debt relief accompanied by investment commitments
(e.g. rural development aid, support for SMEs, basic infrastruc-
tures, programmes to encourage returning immigrants to set
up new productive undertakings, etc.).

7.10.1
In the EESC's view, the EU could encourage greater
and more balanced regional integration in LAC - a key factor
for stepping up its development and autonomy - not only
through association agreements, but also through technical
assistance and investment in infrastructure, introducing formal
procedures based on the experience of Community policies. It
is not only the EU and national governments that should be
given a key role in this, but also business, trade union and
social organisations.

It is practically impossible for LAC countries to raise
7.7.3
funds on the international markets owing to their poor capacity
for generating capital internally. Access to the financial markets
under suitable conditions in terms of sufficiency and cost is
determined to a large degree by rating agencies (risk rating).
Such agencies operate in a de facto oligopoly, often causing
financial instability on the national markets and undermining
LAC access to international credit. An effort by the Community
bodies and European financial bodies to make rating agency
markets more competitive could help improve development
and cohesion in LAC countries.

7.11 Sustainable development

7.11.1
It is generally accepted that sustainable development
cannot be guaranteed in the medium- and long-term unless
environmental protection is improved. In the context of its
relations with LAC, the EU could help promote specialised
forms of production to prevent
the region's considerable
natural resources being overexploited.

7.8 Strengthening the local level

7.12 Defending human rights

Globalisation has reinforced the importance of

7.8.1
the
local level as a fundamental area for productive development,
job creation and social integration, as well as more participa-
tory forms of democracy. The experience and bodies of the EU
and Member States (e.g. various forms of local dialogue, the
Committee of the Regions, the Congress of Local and Regional
Authorities of Europe, etc.) could provide a powerful boost to
strengthening local bodies and action in this area.

7.12.1
There are many reports from international organisa-
tions highlighting the difficulties in LAC countries in terms of
ensuring that human rights are respected. Human rights defen-
ders are often persecuted, slandered,
tortured or murdered.
According to a UN report (2002), 90 % of the human rights
defenders murdered across the globe are from Latin America.
Persecuting and criminalising perfectly legitimate social leaders
seriously undermines attempts to combat exclusion and social
inequality. In the EESC's view, an EU programme to protect
human rights defenders in LAC would be very welcome.

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7.13 Open-ended opinion

The present opinion is open-ended and will only be
7.13.1
finalised following the debate on social cohesion in LAC to be
held during the third meeting of organised civil society in
Mexico in April 2004. This opinion puts forward a number of
proposals concerning ways in which the EU can contribute
towards greater cohesion in LAC. At the moment, however, it
still lacks the views of LAC civil society organisations, which
are called to act in various strategic areas, concerning the role
of the following in boosting social cohesion in the region: the

State and its institutions, fiscal policy, education, health, social
security, economic infrastructures and industrial policy, frame-
works for labour relations, participation of civil society and the
protection of human rights. Once this contribution has been
made and discussed, we will either add an appendix to this
opinion or draw up a supplementary opinion in order to
submit to the Commission ‘the views of civil society organisa-
tions in Latin America, the Caribbean and Europe’, as referred
to by Commissioner Patten in the letter in which he asked for
this opinion to be drawn up.

Brussels, 25 February 2004.

The President

of the European Economic and Social
Committee

Roger BRIESCH