Latin America’s Anti-poverty Programs: How to Make a Little Go a Long Way

During her successful campaign to become Brazil's new president last year, Dilma Rousseff promised to lift 16 million Brazilians out of poverty during her term. That would be in addition to the 36 million poor in the country, who entered the middle class over the past decade or so under Rousseff's predecessors, Fernando Henrique Cardoso and Luiz Inacio Lula da Silva. According to Rousseff, Bolsa Familia, the national anti-poverty program, has and will continue to be a means to that end.

“We can’t forget that the most permanent, challenging and anguishing crisis we have in Brazil is chronic poverty," Rousseff said during a June 2 event held in Brasilia to announce a supplementary program, called Brazil Without Misery. The welfare add-on will be directed at small farmers and the desperately poor, including garbage cullers. Currently, about 12 million Brazilian families — an estimated 52 million people, or one quarter of the population — receive monthly payments under Bolsa Familia (or Family Grant, in English), the continent’s largest so-called "conditional cash transfer" (CCT) program.

The gospel of CCT is spreading. Bolsa Familia is one of 19 such programs run by governments throughout Latin America and the Caribbean. Brazil has the largest, followed by Mexico with 23.2 million people covered and Colombia with 10.4 million. According to the United Nation’s Economic Commission for Latin America and the Caribbean (ECLAC), the CCT programs encompass 113 million people, or 19% of the region’s population. 

The Bonus Plan

They are “conditional” because poor families are given monthly cash stipends, which typically range from US$50 to US$100, only if their children attend school for a minimum of class days and visit health clinics for regular check-ups and vaccinations. Parents are also required to attend hygiene and basic health classes and given incentives to further their education. The stipends may not sound like much in a developed country context, but for the 45% of Colombian families, for example, earning US$250 or less per month, it’s a significant bonus.

Major advocates of the programs include institutions like the World Bank and the Inter-American Development Bank (IADB), which provide both CCT technical and financial support. They say they have reduced poverty, narrowed income inequality and raised the standard of living among the hemisphere’s poor. Ferdinando Regalia, an economist with Washington-based IADB, notes that as far as the hemisphere’s war on poverty is concerned, the CCT programs have been "the most important innovation in social programs and assistance in Latin America in the last 15 years."

But he is among the experts who say that it is too soon to know whether the programs’ long-term goal of raising the global competitiveness of the region's human capital. One reason is that the education system in many parts of Latin America continues to lag that of other emerging markets. What's more, Latin America’s current economic good times have more to do with natural resources than human resources, and its prosperity in coming decades will depend on it developing a more competitive and innovative labor force, including by improving primary and secondary education, note experts.

Still, Simone Cecchini, an economist with ECLAC in Santiago, Chile, says studies of programs that have been running for 10 years or more, such as the Mexican forerunner called Oportunidades, indicate that social benefits created by the schemes, especially in promoting impoverished people’s access to education and medical services, are significant.

Progress Report

Research conducted in Mexico and published last year by a team of academics that included Jere R. Behrman and Petra E. Todd, both economics professors and research associates at the University of Pennsylvania's Population Studies Center, highlighted the success and challenges of Oportunidades. Their analysis focused on around 15,000 girls and boys wholived in Mexico's cities and were between six and 20 years old in 2002. Having been launched in rural Mexico in 1997 before expanding into cities five years later, one shortcoming of Oportunidades was was that about one third of nonparticipatingbut eligible urban households taking part in the research reported not being aware of the program; others reported difficulty finding time to visit a program office to sign themselves up. What's more research found a "statistically signi?cant negative impact" of the program on thepercentage of children whose parents help them with their homework and "no discernible" impact ofthe program on average earnings of the children who worked for wages.

Yet the analysis also found highly positive impact for both boys and girls on schooling attainment, school enrollment, the proportion of working children and the amount of time children spent doinghomework. The program seemed particularly helpful for the boys between the ages of 14 and 16, who showed a big decrease in the amount of time they spent doing homework rather than working. Such findings chime with those in other parts of Latin America. Among the advances credited to CCT programs is the 11% increase in school attendance in Northeast Brazil. In Colombia, malnutrition among children six years old or younger in some rural areas has fallen 9%, while the average duration of breast feeding increased from 12 months to 15 monthsin rural areas, a positive health indicator, Cecchini points out.

The IADB's Regalia adds that total primary school years completed by children whose parents are enrolled in the programs has grown in percentage terms by double digits in countries such as Nicaragua, an encouraging sign in a region where youths lag the rest of the world by most educational standards.

Helena Ribe, an economist with the World Bank who oversees the institution’s involvement in Latin American CCT programs, says they help equitably redistribute income in a region that includes 14 of the 15 most unequal countries in the world in terms of income distribution. The upshot has been a narrowing of income extremes in Brazil and elsewhere as measured by the so-called GINI coefficient, a commonly used metric of unequal income distribution, she says. "The objectives of these programs are to lower poverty in the short term and raise human capital in the long term," Ribe says. "Lower poverty rates in countries like Brazil and Mexico, and the fact there is less child labor and malnutrition in Colombia, reflect progress toward both those goals."

In Tunja, Colombia, a conservative Andean town of 300,000, Humberto Araque, a city social programs director, says the national Families in Action program has been highly positive for the 4,600 poor families enrolled in it. For example, cases of measles have fallen to “almost nothing” from the 100 in 2007 because the program requires parents to have their children vaccinated. There have also been some unintended — positive — consequences. “Reports of family violence are up, not because there are more attacks but because women have become more assertive of their rights,” Araque says, crediting empowerment classes that many mothers in the program have taken.

He says the program has heightened poor women’s political awareness as well. Five years ago, there were no female members on the 70 neighborhood councils in Tunja. Now, there are 15 female council members, many of whom are Family in Action group leaders.

One of those women is Luz Dary Lopez. As a consequence of equal rights classes she took through adult education offered through the program, the mother of three left her physically abusive, “machista” husband and became a hairdresser, gaining a measure of financial independence and self-respect along the way. “Too many men in this city thought that all women were good for was having children and keeping house,” she says. "We’ve learned we don’t have to accept those limits."

She now receives US$100 a month as long as her children — aged seven, 11 and 18 — are present for 80% of their school days. In Colombia's program, all children seven years and under must have four medical check-ups a year, which provide vaccinations, monitor weight and vision, and test for bacterial infections. Adolescents must receive family planning classes. In addition, parents must attend diet and hygiene classes. Peer pressure comes into play because participants meet regularly to review monthly reports showing which families in the neighborhood are complying with the conditions and which ones are not.

Families in Action may have saved the life of two-year-old Paula Parra. Her mother, Viviana, an impoverished domestic worker, was unaware that Paula was severely undernourished until last summer when she took her daughter for a medical exam to qualify for the monthly stipend. Doctors placed the emaciated infant with 24 other children in a recuperation center set up by the state to fight malnutrition, a persistent problem in the region. The center's director says Paula may have already suffered developmental damage from malnutrition.

Good nutrition is a central goal of all CCT programs because of its correlation to a child’s cognitive development, an essential building block of future human capital in the region. "Before the program, all we knew was how to fill our kids up with potatoes and rice. Now we know how to give them nutrition," says Olga Benavides, a mother of two.

How Long Can They Last?

Ana Hamon, a Families in Action administrator in charge of the Tunja program, says her biggest worry is that the program is becoming a victim of its own success, driving up greater demand among the poor for medical and education services than the government can meet. "Demand for services has increased, but institutions haven't been ready for it," Hamon says. In her home state of Boyaca, enrollment in Families in Action exploded from 6,000 families in 2001 to 80,000 in 2009. But because of government funding limits, the program has not accepted new enrollees since 2009. One of the reasons is that the nation doesn’t have the budget to expand schools. "Many who would like to join the program sadly cannot," she says.

Regalia of the IADB says Hamon’s concerns are not uncommon as many governments are failing, whether for political or economic reasons, to expand health and education services. It's particularly discouraging, he says, given the poor's heightened understanding of their rights thanks to the programs. “These programs were born with the idea of putting the new generation on a better footing, to improve youths’ human capital,” Regalia says. “The idea was that with better health, education and nutrition, you could break the cycle of poverty and prepare these kids for a better future."

Other economists worry about the programs' sustainability. They are relatively cheap to run when compared with, say, social programs like pensions and social security, costing US$12 billion region-wide, or less than one half of 1% of the US$2.8 trillion the economies of Latin America and the Caribbean generate. But Francisco Thoumi, Colombian economist and retired University of Texas professor, fears they may be discontinued if the region, now enjoying a commodities-fueled economic boom, suffers a downturn.

Meanwhile, some analysts acknowledge that the “conditionality” feature is applied unevenly in some countries. Studies show education and health gains have dropped dramatically in countries like Ecuador and Honduras, because enforcement for, say, school attendance is less strict than in Colombia and Brazil. Administrators are also concerned that in some countries the payments have grown to more than 30% of families' monthly incomes, at which point they can be a “disincentivizing" force.

Another worry is what experts call “clientelism,” with programs often vulnerable to political corruption with public officials rewarding poor supporters with enrollment in exchange for votes. Such concerns have come to the fore in countries such as Colombia where there are long waiting lists of applicants wanting to Families in Action.

While Mexico and Brazil have the best record in expanding the supply of services, other countries are dropping the ball. As a result, the long-term aim of CCT programs — which Regalia describes as improved human capital as measured by standardized educational test results, an area in which Latin American consistently lags counterparts in Southeast Asia — are unclear. “These programs work great at redistributing income, but the real test is whether the children of these families will be able to enter the labor market without having to rely on these kinds of programs themselves,” Regalia says. “That’s not the desired outcome.”  

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