Cash Transfers, Poverty and Covid-19 in Mexico

This blog is based on an article in the Journal of International and Comparative Social Policy. Click here to access the article.

Conditional cash transfer (CCT) programmes have been implemented in several countries to promote capacity development for people in poverty. CCTs have had different effects in the reduction of poverty and inequality; in Argentina, Chile and Uruguay they had strong impacts, while in Bolivia, Brazil and Peru the results have been modest.

The last Mexican CCT programme was Social Inclusion PROSPERA (formerly Oportunidades), which granted a money transfer every two months. It was mainly made up of school scholarships and food support, with the condition that children and young people attend school and other members of the household take part in preventive clinical consultations and health workshops.

Although the transfer is used in the most urgent household expenses, such as food, it may not have an effect in reducing poverty. For this reason, our study aimed to determine the impact of PROSPERA on poverty reduction; we used the methodology of poverty lines and with the Foster-Greer–Thorbecke index we estimate the incidence, intensity and inequality of poverty in a group of beneficiaries and non-beneficiaries.

Our findings demonstrate that the greatest effects of PROSPERA were only in households in extreme poverty; in other types of households in poverty their effect was not significant. The reason is that the amount received for scholarships is low: even less than the minimum wage. Furthermore, the scholarships were not paid during the holidays because students are considered to have no expenses during that time for not attending school.

Even though cash transfers did not take beneficiaries out of poverty, they did increase their incomes; without them there would be higher levels of incidence, intensity, and inequality among beneficiaries. Similarly, our results indicate that the socioeconomic characteristics between beneficiaries and non-beneficiaries were similar, including household income; this finding shows problems with the inclusion of households.

Due to the low amounts of transfers (which also have a limit per household), as well as type I and II errors, the impact of the programme is questionable. In addition to this, the experience of covid-19 in Mexico has generated the loss of millions of formal and informal jobs, as well as an increase in unemployment and income reductions, especially where heads of household have low educational levels.

For this reason, the National Council for the Evaluation of Social Development Policy has estimated that between 6 and 10 million people would fall into extreme poverty due to the pandemic. This requires a programme such as Universal Basic Income (UBI), which must be for all members of the household (universal), with no limits, and at least, equivalent to a minimum wage per person

This strategy could eradicate poverty income as some studies have shown, as well as cover a minimum level of well-being, especially because of the covid-19 pandemic. But it is important that these resources are sufficient to maintain a standard of living, otherwise we can fall into the trap of monetary transfer, which consists of granting a monetary support programme to a large percentage of the population. However, the amount is so low that it does not take them out of poverty, it only allows them to buy food for a few days.

Implementing an alternative such as UBI in Latin America is urgent due to the economic effects of covid-19; this implies designing a mechanism in stages. The first could be granted to all people in extreme poverty, then those in poverty or those vulnerable.

Finally, UBI awakens the debate on its financing. It could be the result of a reallocation of resources from current social policy instruments that have little evidence of being effective and have the same objectives. In the Mexican case, they could be like the social programmes of the current administration, whose evaluations have not shown an efficient design . It could also be financed through more efficient tax collection, through the increase of taxes on the richest, or through credits with multilateral organizations. Likewise, it will be a priority to establish a monitoring and evaluation system and to analyse the social and economic effects.


About the authors

Oscar A. Martínez-Martínez, is professor in Department of Social and Political Sciences, Universidad Iberoamericana, Mexico City. Among his recent papers are Vulnerability in health and social capital: a qualitative analysis by levels of marginalization in Mexico (International Journal for Equity in Health, 2020) and Validation of a Multidimensional Social-Cohesion Scale (Sociological Methods & Research, 2020). https://socialesypoliticas.ibero.mx/oscarmartinez/
Email: oscar.martinez@ibero.mx, Twitter: @oamartinez2

Mauricio Coronado-García is the Director of Public Policies Evaluation in the Government of the State of Nuevo León. Among his recent papers ‘Challenges in the quantification of the potential population of public policies by demand that pursue efficiency’ (Universidad Autónoma Metropolitana, 2017) and ‘Rethinking the construction of welfare in Mexico: Going beyond the economic measures’ (Journal of Social Welfare, 2016). Twitter: @MouCoronado

Dania Orta-Aleman is a PhD candidate in International Health and a fellow at the Johns Hopkins Center for a Livable Future. Her work focuses on the design and evaluation of policy and environmental public health interventions for chronic disease prevention.

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