Alain de Janvry
“Can Mexico’s Social Programs Reduce Poverty?”

January 31, 2005

Alain de Janvry speaks before a packed house at the Center for Latin American Studies.

Do Mexico’s Social Programs Reduce Poverty?
By Ana P. Ambrosi

Despite some progress, poverty remains a significant challenge for Mexico’s development. In 2002, half of Mexicans lived in poverty with one fifth in extreme poverty. The current poverty level is only slightly lower than before the 1994–95 crisis, according to the World Bank. It is in this context that Alain de Janvry, Professor of Agricultural and Resource Economics at UC Berkeley, has studied the impact of Mexico’s social programs aimed at alleviating and reducing poverty.

A conceptual framework

According to Prof. de Janvry, in order to understand the impact of public spending on poverty reduction, it is important to analyze the differences and complementarities of social development and economic expenditures. On the one hand, social assistance programs, such as the Oportunidades program, increase the assets of the poor, giving them access to land, health, education and food. In addition, expenditures on social protection and insurance programs reduce their vulnerability and risks by building safety nets such as pensions, employment programs and health insurance. On the other hand, public expenditures in the economic sector improve the quality of the context where the assets are used by providing infrastructure, transport and communication, agricultural and rural development and energy. Prof. de Janvry emphasized the importance of the complementary relationship between social and economic programs. While the social programs help to build up the assets of the poor, public expenditures in the economic sector can improve the effectiveness of these assets.

The evolution of poverty in Mexico

In his CLAS presentation, Prof. de Janvry analyzed data regarding the evolution of poverty and basic needs in Mexico. From 1992 to 2002, there has been little decline in the incidence of extreme poverty. However, the overall number of poor has increased. This is due to a number of factors, including the macroeconomic crises during this period of time and the susceptibility of the poor to these crises. The lack of sustained economic growth, the high costs of instability and marked socioeconomic inequality in Mexico have limited the ability of economic growth to reduce poverty, de Janvry argued. Over the same timeframe, however, Mexico has shown some progress in meeting the basic needs of its population, compared to other similar countries. As the indicators presented revealed, the Mexican government’s social policy has been successful in reducing infant mortality and improving secondary school enrollment, for example.

The Contigo strategy

Under the Fox administration, the federal government’s social policies have been incorporated into the Contigo program. However, the impact of this set of initiatives on poverty levels has been limited, according to de Janvry. Due to the government’s failure to increase its tax base, Mexico’s public spending has failed to grow. Thus, even if expenditures on social development have increased, there has been a decline in economic sector expenditures. At the same time, the weak fiscal capacity of the state has limited its ability to redistribute wealth, even in periods of economic growth. The lack of investment in the economic sector, in areas such as infrastructure, also reflects the constraints on government spending.

The design of the Contigo strategy is innovative. It is a multidimensional project that aims to address the income and basic needs of the poor. In addition, it seeks to coordinate the different programs and ministries involved. Finally, it follows the life-cycle needs: prenatal, childhood, adolescence, adult and elderly. However, in terms of the implementation of the strategy, Contigo has not been efficient in reducing poverty. In Mexico, poverty is the result of income scarcity, inequality and the vulnerability and marginalization of the poor. According to de Janvry, this inequality is sometimes reinforced by the same government programs that intend to reduce poverty. Only 20 percent of the social development budget is destined for programs that are directly targeted at the poor population. And at the same time, initiatives directed at the extremely poor usually leave a significant portion of the poor without protection against economic instability, increasing the probability that this larger group could fall under the extreme poverty line.

Professor de Janvry argued that for all of the benefits to health and well-being brought about by Mexico's social programs, very little has been done to effectively address the absolute level of poverty in the country.

Poverty reduction and social development

In his presentation, Prof. de Janvry analyzed why — even when Mexico has shown some progress in terms of social development — its social policy has been inefficient in reducing poverty. According to de Janvry, this is a result of a number of factors. (1) The lack of economic growth and macroeconomic stability in a country with a high level of inequality has led to slow creation of jobs and has affected the ability of the poor to respond to economic crises, resulting in a lack of income gains for the poor. There is a need for stable and sustained economic growth and policies to reduce inequality. (2) Mexico’s tax revenues are very low by international standards. In addition, the failure to implement fiscal reform has left the Mexican state with a weak capacity for redistribution. Social expenditures are a high and rising share of public spending but at the cost of falling economic sector expenditures. (3) The lack of coordination between the different ministries leads to incompatible social and economic investments. (4) The public programs that support income generation and promote competitiveness (what de Janvry classifies as economic sector spending) do not reach the poor, small farmers or indigenous communities. Generally, only large producers benefit from them, as is shown in the case of the Procede, Procampo and Alianza por el Campo programs. (5) At the local level, federal transfers are mismanaged due to the lack of oversight regarding how municipalities spend the funds. The decentralization of resources for economic and social expenditures is not related to local performance. (6) The quality of public services, particularly educational and health services, is very low. (7) Social insurance programs such as pensions and health and unemployment insurance are highly regressive and do not cover the majority of the poor population. Without protection against economic risks, the moderately poor tend to become extremely poor. (8) The program’s top-down centralized decision-making and the weakness of the civil society organizations in Mexico discourage the participation and incorporation of the poor. (9) The lack of accountability, monitoring, and evaluation of the social programs limit the possibilities of feedback and a results-based management of resources causing inefficient spending in programs that are not accomplishing the goal of reducing poverty.

There are a few initiatives, such as Seguro Popular, Impulso, Indesol and the Ley of Desarrollo Social, which have shown some progress. However, the poor often lack information about what programs are available. In addition, there are only a few institutionalized social programs that have continuity beyond the political cycle. Prof. de Janvry concluded his presentation by proposing that in order to have an effective poverty reduction strategy, it cannot be limited to a social development strategy. As we have seen in Mexico, even within a context of improving social development, poverty, vulnerability and inequality persist if social programs are not complemented by an income generation strategy for the poor.

Alain de Janvry is Professor in the Department of Agricultural and Resource Economics at UC Berkeley. He gave a presentation on Mexico’s social programs at CLAS on January 31, 2005 as part of the Bay Area Latin America Forum.

Ana P. Ambrosi is a graduate student in UC Berkeley’s Latin American Studies MA program.

Mexico has been a pioneer in launching ambitious social programs to assist the poor, which are currently coordinated in the Contigo strategy. These programs have been quite effective in meeting basic needs, particularly among the poorest. However, they have been less successful in raising income through productive employment and micro-enterprises. Prof. de Janvry will discuss the reasons for these contradictory achievements and explore ways in which social and income-generating programs could be made complementary.

Alain de Janvry is an economist working on international economic development, with expertise principally in Latin America, Sub-Saharan Africa, the Middle-East and the Indian subcontinent. Fields of work include: poverty analysis, rural development, quantitative analysis of development policies, impact analysis of social programs, technological innovations in agriculture and the management of common property resources.

- Professor de Janvry's homepage
- Professor de Janvry's Powerpoint presentation from the event
- Paper on the effects of transfer payments on keeping children in school (.pdf file)

Professor de Janvry speaks with students after the event.





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