Building a

1

• Building a
• More Effective and Efficient Safety Net for the
  Poor through Human Capital Investment
• Mexicos Progresa/Oportunidades

Local Poverty Reduction and MDG Localization
Good Practices and Lessons Learned

Evelyne Rodriguez evelyne_rodriguez_at_hotmail.com
Colombo, Sri Lanka October 31, 2007.
2
Introduction

• In 1997 Mexico initiated Progresa a cash
  transfer program for poor families conditioned on
  the attendance of family members to health
  centers and children to school. This program
• now benefits 5 million families in 90,000
  communities, 25 of total population with an
  annual cost of 3.6 Billion US.
• gradually substituted food subsidies (generalized
  and targeted)
• evaluations indicate its positive impact on
  educational, health and nutritional status of the
  poor.
• Progresa was part of a change in Mexicos poverty
  alleviation strategy, which involved changes in
  other programs.
• After Progresa there has been an proliferation of
  conditional cash transfers (CCTs) around the
  world.

3

• This presentation is divided in three parts
• 1. Why was Progresa created?
• 2. What is Progresa and why it became a best
  practice?
• 3. What was the process of change?

4

• 1. Why was Progresa created?

5
Governments Interventions
In 1996 2.6 Billion US spent on food subsidies,
both generalized and targeted. There were a
large number of food, health and education
programs characterized by

• little effectiveness. Despite the resources
• infant malnutrition for rural children under five
  remained at 50 from 1974 to 1996
• 60 of poor rural families did not receive any
  support from the government.
• increasing fiscal resources, most through
  generalized subsidies
• uncoordinated operation and little transparency
• duplication of efforts and excessive bureaucracy
  
• urban/rural imbalance
• lack of evaluation.

6
Diagnosis of poverty and social risks in Mexico
(1996)

• 29 of the population in extreme poverty, 4.8 M
  families 2.8 rural and 2 urban.
• Poverty concentrated in children
• Even among the poor, differences in the severity
  and depth of poverty, larger in the rural sector.
• Large differences in the human capital indicators
  of the poor and the non poor (education
  dependency ratio participation of youngsters in
  the labor market prenatal care, etc.)
• Income and wages of the poor are low and
  fluctuating, specially in the rural sector
  because of the seasonality in labor demand.
• Poor are more vulnerable to natural disasters
  lack of access to insurance mechanisms.

7
Education, Gender and Poverty
8
Conclusion Gaps in income and indicators are so
significant that the poor need targeted actions
to

• Maintain a minimum level of income
• Income support
  INCOME TRANSFERS
• 2. Increase their capacity to generate income by
  themselves
• Increase the amount and quality of their assets
• Human HUMAN CAPITAL
  DEVELOPMENT
• Physical PHYSICAL ASSETS
  HOUSING, LAND, ETC
• Income opportunities
  INCOME GENERATION/JOB CREATION
• 3. Improve their environment community and
  household SOCIAL INFRASTRUCTURE
• These actions form the poverty alleviation
  strategy
• Food programs were mostly directed to
  income transfer.

9
Progresa was part of a change in poverty
alleviation strategy
10
How can human capital development be supported by
government?
Two types of actions 1) Supply Side Interventions

• Increase coverage and quality of health services
• Increase coverage and quality of educational
  services

These benefit the whole community and should be
the main strategy. 2) Demand Side
Interventions Transfers tied to human capital
investment actions (ie. school attendance/preventi
ve care/growth monitoring) by the family.
These are directed to families who cannot benefit
fully by broad actions.
11
II. New strategy proposed

• Increase impact exploiting complementarities
  (conditionality) linking tansfers to changes in
  behaviour

Associate transfers with appropriate incentives
that (i) improve capacities and well
being (ii) change their risk structure
(iii) give beneficiaries a central role
and responsibility and, (iv) avoid long
term dependency on welfare.
Identify poor families Increase coverage and
efficiency of resources by targeting on the
poor
TARGETING
IMPACT
INCOME SUPPORT
EFFECTIVENESS
TODAY

• Transfer resources in an effective and
  transparent manner. Increase cost effectiveness
  and more market oriented instruments through
  changing modes of income transfer (cash).

12

• What is Progresa/Oportunidades?

13
Oportunidades objectives

• Improve the education, health and nutritional
  status of families in extreme poverty
• integrate education, health and nutrition
  interventions
• encourage the responsibility and active
  participation of the family and,
• redistribute income to those in extreme poverty.

14
Three closely related and complementary
components
Family

• Nutrition
• cash transfers
• nutritional supplements for children under five
  and pregnant and breastfeeding women
• (tied to regular attendance to health centers)

• Health
• preventive actions
• free basic health package
• education for hygiene and nutrition
• measures to strengthen the quality of services

• Education
• scholarships
• school supplies
• (tied to regular school attendance)

15
First component education

• To promote school attendance, youngsters under 22
  enrolled between third grade of primary and third
  grade of high school, receive
• scholarships conditioned on regular school
  attendance and,
• transfers for school supplies.

• Scholarships amounts
• increase with grade levels
• are higher for girls than for boys, at secondary
  level,.

16
What was novel about progresa?

• Life Cycle Approach Attends main human capital
  risks of all members of the household since their
  conception -e.g. one programme covering different
  risks and different age and gender groups and
  avoids long term dependency.
• One program for different populations and risks
• Cash transfers conditioned on both education and
  health behaviour exploits complementarities,
  very aware of incentives.
• Program focused on the household.
• Operation implies coordination of 3 ministries
  and one agency.
• Evaluation and transparency.

17
Oportunidades concentrates its three components
on the most critical aspects of the individuals
life cycle with an integrated and sustained
perspective
C O M P L E M E N T A R I T I E S

• - Labor training
• Technical assistance and financing of productive
  projects
• Employment opportunities

• Permanent healthcare monitoring
• Cash transfers tied to the compliance of basic
  health package
• Direct provision of nutrients

• Childrens educational development
• Scholarships and school supplies tied to school
  attendance

• Scholarships and school supplies tied to school
  attendance
• Technical education

• RESULTS
• Improved health conditions
• Enhanced basic capabilities to take advantage of
  the benefits of the education system and
  employment opportunities
• Greater redistributive impact when basic
  capabilities are equalled among family members
• Better access to the labor market
• Improved stability and income level.

Income transfer to the family
Pregnant and breastfeeding women Newborn babies
5 years
16 years
21 years
Sector with the greatest impact
HEALTH Main objective To promote preventive
healthcare to avoid the permanent consequences
of malnutrition
LABOR TRAINING / FINANCING Main objective To
increase assets value and their productivity
and consequently improve poor families income
HIGH SCHOOL EDUCATION Main objective To
increase attendance, permanence and school
performance To improve specific skills
BASIC EDUCATION Main objective To increase
attendance, permanence and school performance
18
Oportunidades transfers follow families life
cycle
Monthly cash transfers by component education
and nutrition (family amounts, pesos of 2004)
Monthly amount (pesos)
Education component
Nutrition component
Years of familiar union
Average family cash transfer is approximately 31
US dollars per month. There is a lower limit of
15 US dollars, and an upper limit of 153 US
dollars.
19
One program that cuts different age and
population groups and risks.
20
Program operation

• Cash transfers are individually delivered to the
  mother. They vary depending on number of
  children enrolled in school, their attendance and
  school level and family members attendance to
  health clinics
• cash transfers are paid bi-monthly, after
  validation of attendance to health centers and
  school
• nutrition supplements are given monthly at health
  centers
• beneficiaries are informed that benefits are not
  conditioned on participating in any political
  event or voting for any political party and,
• operation is transparent. Available in internet
  Operation Rules of the Program number of
  beneficiary families by locality, municipality
  and state. All of Oportunidades information is
  auditable.

21
Impact of Oportunidades

• Average monthly cash transfers is 35 dollars
  equivalent to 25 of familys cash income.

Monthly Average Composition of
Transfers
per Family
Monthly Average Composition of
per Family
Total Cash Transfer
In
-
kind
Transfers
-
Food
Transfer
54.8 Pesos (13.6)
347.0 Pesos (86.4)
Scholarship and
school supplies
22
Coverage of Program implies
Beneficiary Households by locality size
3,440,909
Rural Less than 2,500
697,838
urban
861,253
semi
23
Oportunidades budget

• In year 2006, 3.2 billion US was spent in this
  Program, about 0.3 of Mexicos GDP.

Oportunidades Budget in 2004 (millions of pesos
of 2004)
Total 25,594.3 MP
Cash transfers 20,823.2
In-kind transfers 3,290.9
Operational expenses represent less than 6 of
the total cost of the Program.
24
Evaluation and initial results

• At the outset of the Program, IFPRI
  (International Food Policy Research Institute)
  was hired to evaluate its impact. The Government
  at the highest level revised the terms of
  reference and selected the specific consultants.
• A sample scheme and a baseline survey were
  designed to allow statistical evaluation of the
  results, through the continuous monitoring of 24
  thousand families.
• After ten years of operation, results are
  encouraging. These results are partial, and
  point to some trends, but do not capture
  Oportunidades full impact, since this will only
  be fully observed over the long-term.

The evaluation carried out by researchers
independent of the Government.
25
Results in five areas can be reported

• Targeting methods
• methods for identifying localities and households
  are effective, especially for the extremely poor
  less effective for the moderately poor
• considering selection costs, Oportunidades
  method to identify beneficiaries is more
  efficient to reduce the poverty gap and severity
  of poverty indexes than methods based only on
  geographical targeting.

26

• Health component
• 18 increase in attendance to health centers
• 7 increase in attendance for children under 1,
  and 8 for those between 1 and 4 years old
• 22 decrease in morbility for children between 0
  and 2 years of age
• 5 increase in the number of pre-natal health
  visits, raising the number of first-time visits
  during the first three months of pregnancy by
  8 and,
• 17 decrease of sickness days in adults.

27

• Food component
• increase in the variety of food items consumed.
  Increases of 19 in the consumption of fruits and
  vegetables and 32 of bread
• increase of consumption of food with high levels
  of protein, 33 for milk and cheese, and 24 for
  meat and,
• change in food consumption patterns, as well as
  purchases of clothes, shoes and school supplies
  for children. Childrens clothes spending is 58
  higher.

Families are increasing food consumption and
having a more balanced and diversified diet,
explained jointly by cash transfers and health
lectures. The rest of the transfers went to
savings or purchases of durable goods evidence
that some families are investing in productive
projects. No evidence of increased domestic
violence or increased alcohol consumption.
28

• Education component
• In rural areas
• 24 increase in enrollment rates between primary
  and secondary school
• 28.7 increase in girls enrollment to secondary
  school and 15.7 for boys
• 23 Increase in youngsters finishing secondary
  school
• An increase in schooling level by at least one
  year, which will translate in an increase of 13
  in income throughout their life-cycle. Temporary
  investment of Oportunidades is transformed into a
  permanent increase of income.
• in the first year of granting high school
  scholarships, enrollment increased 26 in the
  rural areas and 6 in the urban area

Parents schooling has impacts on childrens
enrollment. If both parents have nine years of
education, the probability of taking their
children to school is 3.6 higher than for
parents with only two years of schooling. Thus,
schooling increases have an impact on current
household income and an impact on the schooling
of the next generations.
29

• Impact at the community level
• organization of beneficiaries in new activities.
  For example, women coordinate transportation to
  go get their cash transfers and to engage in
  productive activities.
• No evidence that
• Oportunidades has created inflationary pressures
  in the localities nor,
• open conflict among the population of the
  localities, between those that receive
  Oportunidades and those that do not.

30
The Change Process General Strategy

• Gradual approach phase in and phase out.
• Gradual phase-in of the new program was the only
  option because of
• Operational capacity
• Budget constraints
• Learning curve
• Main instructions
• improvement of the conditions of the poor
  (legitimate reasons for change)
• financial sustainability (short and long term)
• political feasibility
• gradualism
• use of current resources

31
The Change Process Main Issues in the design and
implementation of Progresa

• Targeting
• Cash vs. In Kind
• Giving subsidies to women
• Impact on fertility
• Defining conditionalities
• Setting the amounts of the transfers
• Organizational, administrative and budgetary
  considerations
• Each aspect of the program was supported by the
  best international and national information
  available and discussed.

32
Composition and Regional Distribution of Federal
Resources for Food Subsidies (millions of pesos
of 2004)
Regional Distribution of Poor Population 60
Rural and 40 Urban
33

• Conclusions

34
Some lessons from poverty policy change in Mexico

• Design a conceptual framework for poverty
  alleviation

• identify / give transparency to subsidies and
  income transfers
• role of individual programs and,
• consistency and coherence of the overall effort.

• Define the institutional arrangement

• few good programs and,
• Identify level of government responsible for each
  program.

• Strengthen the ability to carry out and maintain
  change

• need an agency with strong decision power over
  budget allocation and program design
• promote a horizontal view of what ministries
  and agencies do
• strong political support
• legitimize proposal on empirical evidence and,
• design and monitor implementation carefully.

• Insure financial sustainability

• no add-ons and,
• consistency with economic policy.

35

• Continuity, consistency and coherence overtime

• transparency public information on objectives,
  operation rules and results
• evaluation and monitoring
• no link to political activities or individual
  persons and,
• keep all the mentioned above.