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Report No. 21262 Uruguay Public Disclosure Authorized MaintainingSocial Equity in a ChangingEconomy July 17, 2001 Argentina, Chile, Paraguayand Uruguay Country Management Unit PREM Sector Management Unit Latin America and the Caribbean Region Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Documentof the World Bank wmwmwwwnw~~~~l CurrencyUnit = UruguayPeso 1994 US$1=UP$5.0 1995 US$1=UP$6.5 1996 US$1=UP$8.0 1997 US$1==UP$9.4 1998 US$1=JUP$10.5 1999 US$1=UP$11.3 2000 US$1=UP$12.0 FISCAL YEAR January 1 to December 31 Acronymsand Abbreviations ANEP Administraci6nNacional de Educaci6nPublica ASSE Administraci6nde serviciosde Salud del Estado AFAP Private Fund Pension System BPS Bancode Previsi6n Social CAIF Centrode Atenci6n a la Infanciay a La Familia CEPRE ComiteEjecutivo para la Reformadel Estado CBO CommunityBased Organizations CEPAL Comisi6nEcon6mica para Latinoamericay el Caribe CREDIMAT CreditProgram for HousingImprovements CSO Civil Society Organization DISSE Direcci6nde Seguros Socialespor Enfermedad ECH EncuestaContinuea de Hogares FAS Fortalecimientodel Area Social FTS First timejob seekers FNV FondoNacional de Vivienda FNR Fondo Nacional de Recursos FRL Fondode Reconversi6nLaboral EGIM Income and expenditureSurvey Vice President: David de Ferranti Country Director: Myrna Alexander SectorDirector: ErnestoMay Sector Manager: Norman Hicks Task Manager: Judy Baker IAMC Mutual Health Care System IMF International Monetary Fund IMM Intendencia Municipal de Montevideo fNAME Instituto Nacional de Menor INDA Instituto Nacional de Alimentaci6n INE National Institute of Statistics INJU Instituto Nacional de la Juventud IVS (BPS) Jubilaciones y Pensiones MECAEP Project for Improving Education Quality MERCOSUR Mercado Comuindel Sur MEVIR (MVOTMA) Mejoramiento y Erradicaci6n de la Vivienda Rural Insalubre MSP Public Health Care NGO Non governmental Organizations OPP Oficina de Planeamiento y Presupuesto PRL (MTSS) Programa de Reconversi6n Laboral PAE Programa de Alimentaci6n Escolar PROJOVEN Programa de Capacitaci6n Laboral de J6venes SIAV Sistema Integrado de Acceso a la Vivienda TNPA Todos los nifios pueden Aprender UI (BPS) Seguro de Paro UTU Universidad del Trabajo del Uruguay UwE Unemployed with experience Contents Contents ............................................................. iv Executive Summary and Conclusions............................................................ vii Chapter 1: Trends and Characteristics of Urban Poverty............................................................. 1 Trends in urban poverty and inequality............................................................. 1 Background ............................................................. I Calculating poverty estimates ............................................................. 1 Characteristics of Poverty ............................................................ 8 Chapter 2: Labor Market Performance during Economic Reform............................................................ 15 Macro and Reform Context............................................................ 15 Poverty and the Labor Market............................................................ 17 Unemployment Duration............................................................ 20 Has Employment in UruguayBecome More Precarious?.................................................... 22 The Paradox of the 1990s: Growth with More Unemployment............................................. 25 Chapter 3: Marginalization and Vulnerability............................................................ 32 Background ............................................................ 32 Understanding the characteristics and processes of marginalization................................... 35 Vulnerable Groups-the Poorest of the Poor ............................................................ 36 Main social risks facing the Poorest of the Poor ............................................................ 3 7 Characteristics of marginal neighborhoods............................................................ 39 Listening to what the Poorest of the Poor have to say ..........................................................43 Chapter 4: Improving Social Expenditures for Vulnerable Groups........................................................... 50 Governient Policy and Public Spending............................................................ 52 The Role of Public and Private Institutions............................................................ 53 The Financing of Public Social expenditures............................................................ 56 The Distribution of Social Expenditures: Are Programs Reaching those in Need?.................. 58 Education............................................................ 59 Health ............................................................ 61 Nutrition and Feeding ............................................................ 62 Pensi,sns............................................................ 63 Other BPS cash transfers ............................................................ 65 Housing ............................................................ 67 Quality, Efficiency and Other Pending Problems............................................................ 68 Education............................................................ 68 Health ............................................................ 70 Other Social Protection Programs............................................................ 73 Demographic Concerns............................................................ 74 Managing Public Programs ............................................................ 75 iv References.................................................................. 76 List of Tables Table 1.1 Poverty estimates using various poverty lines ................................................ 4 Table 1.2: Comparison of Selected Characteristics under CEPAL and INE Adult Equivalent Poverty Lines, 1998, All Urban Areas ................................................................... 7 Table 1.3 Decomposition of poverty changes: growth and inequality effects by area................ 8 Table 1.4: Projected Household Income for Urban and Rural Areas, 1995.................................. 10 Table 1.5: School Attendance by Age Group, 1998..................................................... 13 Table 2.1: The Distribution of the Unemployed by Household Income and Consumption Quintile.................................................................. 19 Table 2.2: Mean Real Wage Growth by Education, Sector, Gender................ ................... 22 Table 2.3: Participation Rates by Gender ................................................................. 26 Table 2.4 Performance by Industrial Sector, 1986-1997,Average Annual Growth Rates ........... 27 Table 3.1: Spatial Changes in Montevideo by Neighborhood Clusters........................................ 34 Table 3.2: Within and Between Area Theil Decompositions, Montevideo by Neighborhood Clusters.................................................................. 35 Table 3.3: Characteristics of High and Low Risk Urban Neighborhoods ............................ 36 Table 3.4: Characteristics of Urban Vulnerable Groups................................................................ 38 Table 3.5: Characteristics of the Marginal Neighborhoods included in the Study........................ 41 Table 4.1: Human Development Indicators in Selected Latin American Countries..................... 50 Table 4.2: Scope of Social Intervention in Uruguay.................................................................. 51 Table 4.3: Composition of Social Sector Allocation, Uruguay, 1991-1998,(percent) .................. 52 Table 4.4: Social expenditure composition (%), Uruguay, 1998................................................... 53 Table 4.5: Public School Enrollment in Uruguay, 1998................................................................ 54 Table 4.6: Health Insurance Coverage by Per capita income, Uruguay, 1998............................... 55 Table 4.7: Risk Mitigation and Coping in Uruguay.................................................................. 56 Table 4.8: Financing Composition of Social Expenditures, Uruguay, 1998.................................. 57 Table 4.9: Social Expenditure distribution across population quintiles by Sector, Uruguay, 1998 ................................................................................................................................................58 Table 4.10: Education Expenditure Distribution Across Population Quintiles by Program Uruguay, 1998................................................................ 60 Table 4.11: Health Expenditure Distribution Across Population Quintiles by Program, Uruguay, 1998................................................................ 62 Table 4.12: Feeding and Nutrition Expenditure Distribution Across Population Quintiles by Program, Uruguay, 1998.................................................................... 62 Table 4.13: Coverage and Incidence of IVS, Uruguay 1998......................................................... 64 Table 4.14: Median Pensions (US$), Uruguay, 1998.................................................................... 65 Table 4.15: Distribution of Other Cash Transfers Across Population Quintiles, Uruguay, 1998..67 Table 4.16: Distribution of Housing Expenditures