Evaluating the impact of the global financial crisis that began in 2008 is still complicated as there are not enough data available and we do not know how economic conditions will evolve in the near future, yet this evaluation is precisely the task that Carmelo Mesa-Lago attempts in this short but informative and ambitious book published by the London-based Institute for the Study of the Americas. The book aims to determine the impact of the crisis on social security (health and pensions) in Latin America and offer some policy recommendations. While the analysis cannot provide concluding answers given global uncertainty and insufficient statistics, it presents a useful methodology through which to explore the short-, medium- and long-term evolution of social security.

To achieve this, Mesa-Lago concentrates on three key dimensions: (1) the impact of the 1980s debt crisis on social security; (2) the recent trajectory of Latin America's social models; and (3) the different characteristics of those models among three groups of countries, differences that are likely to be accentuated in the future. The 1980s crisis had a significant effect on health and pensions all over the region. In the short run, pension coverage decreased or stagnated in 13 of the 17 countries studied, health spending went down even in successful cases such as Costa Rica, and the equity and generosity of the system worsened. In the long run, the crisis triggered structural reforms in ten countries, resulting in the creation of private pension systems and the expansion of private provision of health services, and parametric reforms in several others, including Brazil and Cuba. The effects of these reforms on the coverage, generosity, equity and efficiency of social security were quite diverse, but Mesa-Lago is generally critical of market-friendly reforms.

By 2008, after many of the reforms had been consolidated and before the crisis exploded, social security systems could be divided into three groups. Group 1 (pioneer-high) included Chile, Costa Rica, Uruguay, Argentina, Brazil and Panama and was characterized by early adoption of social security, higher coverage and less segmentation than in the other two groups. Group 2 (intermediate) included Mexico, Venezuela and Colombia – countries with intermediate positions in terms of coverage, extension and equity of pensions and health services. Group 3 (latecomer-low) included all Central American countries but Costa Rica, plus Peru, Bolivia, Ecuador and Paraguay. These countries had a highly segmented system in which few groups benefited from social benefits and the poor (who worked in the large informal economy) had almost no access to social provision.

Mesa-Lago uses this classification to evaluate the impact of the crisis on pensions and health services. As he recognises, the picture that emerges from this analysis is somewhat preliminary and incomplete and relies on some well-informed speculations about future trends. In general, it is evident that the crisis has had pernicious effects in all countries, although the impact may end up being less dramatic than initially expected. Social security coverage will likely go down given the increase in unemployment and the reduction in medium-term growth rates, yet this reduction will be more evident in group 3 countries, which have higher levels of informality, lower supply of health services and more limited fiscal space than the other two groups. At the same time, successful responses to the crisis have concentrated primarily on group 1 countries, which have continued many of the reforms started in the mid-2000s. Chile's 2008 pension counter-reform, for example, ‘decreed free healthcare access for all non-contributory pensioners and the gradual extension of mandatory coverage to self-employed workers’ (p. 56).

In terms of generosity of benefits and sustainability of schemes, capitalisation pension systems have generally suffered particularly high losses. Mesa-Lago's discussion of the impact of the financial shock on pension schemes in various countries is one of the most informative parts of the book. He concludes that ‘pure individual capitalisation schemes are likely to be more affected in the short run because … of volatile stock markets’ (p. 70). In this environment, the ability of governments to maintain non-contributory pensions and commit to the sustainability of the public pension system will be particularly important.

Two general messages from Mesa-Lago's detailed analysis are particularly clear. Firstly, poor countries are likely to suffer more than the rest and will have more difficulties in implementing successful policy responses. It is for this reason that targeted social assistance for the new poor may be particularly important in Central America, where the crisis is also likely to last longer than in the Southern Cone. Secondly, policy experimentation and policymakers' decisions still matter. Uruguay's institutional reforms and commitment to improving health and pension provision, for example, have been particularly impressive. Among poor countries, the Dominican Republic has advanced more than other countries towards a more universal system, even if financial constraints and institutional bottlenecks are still severe.

So what can we predict for the future? Something that is evident from this book's historical review is that the length and depth of the global crisis will determine the severity of its social consequences. In this sense, the rapid recovery by large countries such as Brazil and Chile leads to some optimism, although global conditions could easily worsen again in the months ahead. Yet, as we look at the future, it may be even more important to think about the likelihood of dramatic policy shifts. Have Keynesian interventions at the macro level translated into a new vision on social policy in general and social security in particular? Will the healthcare reform in the United States influence policy discussions in Latin America, particularly in countries with poor services and low spending? These are not questions that Mesa-Lago's book aims to answer, partly because it is still too early to know, but they are fundamental. At the moment, there may be more reasons for pessimism than optimism. While it is true that development ideas in Latin America have become more progressive and that even latecomers such as the Dominican Republic or El Salvador have undertaken more ambitious reforms than ever before, the global discourse may not have changed as much as initially expected. In fact, the increasing attention to public debt levels and ‘sound’ economic policy in OECD countries may trigger a new era of macro-economic austerity and minimalist approaches to social policy, something that will be far from the ambitious redistributive agenda that Mesa-Lago has been promoting during his whole career.