Economic Opportunity and Indigenous Peoples in Mexico

1
Economic Opportunity and Indigenous Peoples in
Mexico
Vicente Garcia Moreno (World Bank) Trine Lunde
(World Bank/Johns Hopkins University)
Economic Opportunity and Indigenous Peoples in
Latin America Conference at Georgetown
University, Washington DC February 9, 2007
2
Indigenous Peoples in Mexico

• 11 percent of Mexicos population is indigenous
• Largest indigenous population in Latin America,
  in absolute numbers
• One in four indigenous in Latin America are
  Mexican
• A heterogeneous indigenous population
• 62 indigenous language groups each with their own
  set of cultural characteristics and traditions

3
Despite progress in human development indicators,
indigenous peoples remain marginalized

• Mexico has made progress in poverty reduction
  since the 90s, particularly extreme poverty
• The country has also increased social spending
  and enforced a more progressive use of resources
  more targeted toward the poor
• While progress was also made in expanding access
  to health and education and other basic services
  in indigenous communities, these remain highly
  marginalized
• 92.4 percent of the population in the 50
  municipalities in Mexico with the lowest HDI is
  indigenous (UNDP 2005)
• The lowest ranking municipality is at the same
  level as Malawi (HDI 0.38)

4
Poverty is substantially higher among indigenous
peoples
5
and the indigenous are benefiting less from
past years poverty reduction
Change in Poverty Rates, 1992-2004
6
The percentage of indigenous people surveyed that
7
Indigenous peoples are concentrated in small,
rural communities
8
Yet, differences in poverty remain stark even
when looking at rural and urban areas separately
9
Rural and Indigenous Disadvantages in terms of
Economic Opportunity

• Rural disadvantages faced by all
• Less access to and lower quality of public
  services and infrastructure
• More restricted labor and product markets
• Less diversity of economic opportunity
• In addition, Indigenous face other disadvantages
• Lower asset endowments
• Lower returns to assets
• Potential labor market discrimination
• Lower quality of assets
• Lacking complementarity of assets
• Rural-rural differences
• Smaller more disperse populations
• Concentration in poorer Southern States

10
Economic sectors and activities Concentration of
rural indigenous in low-paying, low-productivity
sectors and occupations
11
In rural areas, indigenous derivealmost half of
their income from agricultural activity
The main income source for indigenous is waged
agricultural labor (40.5), while for
non-indigenous it is waged non-agricultural labor
(21.7)
12
Determinants of Participation in Economic
Activity

• After controlling for other characteristics and
  contextual factors, the study finds that
• Being extreme poor and indigenous results in a
  73 likelihood of engaging in waged agricultural
  work
• Being extreme poor and non-indigenous results in
  only a 22 likelihood of engaging in waged
  agricultural work, and the highest probability of
  engaging in waged non-agricultural work (75)
• Location however matters
• Probability of engaging in waged agricultural
  work is low for both groups in the Southern
  states
• Being indigenous and located in one of the
  Southern States results in a 62 percent
  probability of farming own land, compared to only
  17 percent for non-indigenous

13
Group Differences

• Differ

14
Lower endowments of physical and human capital,
and more restricted access to basic services
among indigenous
15
Access to Productive Assets
16
Access to Credit
17
Land Ownership and Usage Among the Extreme Poor
in Rural Areas

• Among the extreme poor, more indigenous farm
  communal land (70) than non-indigenous (51)
• Land usage is more intense among the
  non-indigenous extreme poor

18
Human Capital

• Indigenous peoples have significantly lower
  levels of human capital than non-indigenous
• Education is an important determinant of poverty,
  but affects indigenous and non-indigenous
  differently
• No schooling has a stronger positive effect on
  the probability of being extremely poor for
  indigenous than for non-indigenous
• No schooling increases the probability of being
  poor by 8 percent for the indigenous and by 2
  percent for the non-indigenous
• Primary school completed has a stronger negative
  effect on the probability of being extremely poor
  for the non-indigenous than the indigenous
• If the head of the households has completed
  primary school the probability of being extremely
  poor falls by 12 percent for the non-indigenous
  and by 7 percent for the indigenous

19
Low returns to assetsamong indigenous raises
concerns about quality of assets, lacking asset
complementarity, and discrimination
20
Complementarity of Assets

• Low asset endowments not only hinders income
  generating activities,
• Important synergies between different assets are
  also lost when one or more assets are lacking or
  in insufficient supply, reducing returns to
  economic activity
• Low levels of education not only prevent people
  from entering into certain occupations they also
  affect the persons ability to exploit other
  income-generating assets
• Access to financial assets - credit and savings -
  helps increasing the productivity of land or
  reducing the volatility of agricultural incomes

21
Returns to Schooling

• Returns to schooling are lower for indigenous
  (5) than for non-indigenous (12), and this
  suggests differences in educational quality of
  education and potential labor market
  discrimination
• Differences in returns to schooling prevail even
  when looking at indigenous areas only, however,
  they differ across indigenous areas and
  indigenous groups 5 percent

Source Patrinos and Garcia (forthcoming)
22
Social capital/social networks are strong in
indigenous communities, however the potential of
these networks in the creation of economic
opportunity is not fully realized
23
Social Capital and Social Networks Effects

• Indigenous have strong social networks and is
  often seen as being well-endowed with social
  capital
• An empirical study of the impact of social
  networks on economic outcomes found that
• The principal effect of social network on
  participation in sector and employment choices
  seem to be to maintain current patterns thus
  reinforcing indigenous/non-indigenous differences
• Network effects are scarce among indigenous
  females
• Networks seem to strengthen participation in cash
  transfer programs such as Oportunidades and
  Procampo
• There are strong positive network effects on
  school attendance - in particular among females -
  and no effect of social networks on child labor

24
Case studies provide important examples of
indigenous social capital transformed into
economic opportunity

• Migrant networks and US-based Home Town
  Associations
• Coffee and Handicraft Cooperatives producing for
  exports
• Economically and socially successful forestry
  enterprises
• Strong communitarian values and organizational
  capacity among indigenous communities

25
Questions for Policy Debates

• Why is the closing of the indigenous/non-indigenou
  s schooling gap not reflected in employment
  outcomes, and why did the indigenous seemingly
  benefit less from the expansion of
  non-agricultural jobs in rural areas in the last
  decade?
• Networks and peer effects, quality of education,
  or labor market discrimination?
• How do we increase productivity in agricultural
  activities and lower dependency on seasonal
  harvests?
• Training and education, access to credit,
  infrastructure (irrigation, roads etc.),
  productive machinery, or bundled interventions
  to gain synergies?
• How can we build on the strengths of indigenous
  socioeconomic structures in policy formulation
  and implementation?
• These include reciprocal and mutually supportive
  work systems, communal land ownership and sharing
  of natural resources, a strong sense of communal
  responsibility