| | |  Business News | August 2008 
Incentives Nudge Mexico’s Poor in Right Direction
 Andrew Jack - The Financial Times
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 |  | The idea of payment had been around for a long time but this one had two really key aspects: a conditional financial incentive to change behaviour and a focus on the intergenerational aspects of poverty.
- Stefano Bertozzi |  | | | |
In a poor district of Mexico City, Fiomena Reyes sends her 12-year-old daughter to school and takes her four-month-old for regular medical check-ups. What is more, she gets paid for it.
Ms Reyes says the cash payment of about US$100 (€67, £52) a month that the state provides makes a big difference to her family. “I spend the money on food and shoes. It has helped us keep our children healthy and means they can go to school to have a better life.”
She is part of a pioneering programme started a decade ago in Mexico that is inspiring a growing number of variants around the world, from Bangladesh to New York City. Oportunidades, which now benefits 25m people in 5m households at an annual cost of $4.5bn, is one of the first large-scale examples of a “conditional cash transfer” scheme. It aims to improve health, education and nutrition among the poor by providing direct financial support – on the condition that they meet certain obligations.
Stefano Bertozzi from Mexico’s national institute of public health, who helped design the programme, says: “The idea of payment had been around for a long time but this one had two really key aspects: a conditional financial incentive to change behaviour and a focus on the intergenerational aspects of poverty.”
Launched in 1997 after a pilot project during the previous two years, the programme has principles that have been widely copied. The first element was explicitly to target the poorest – who often miss out on traditional government welfare programmes. The second was to offer cash, reducing the chance that money would be frittered away by officials on overheads or items considered useful but not always required by the poorest households, the best judges of their own needs.
Another innovation was to give the money to the mother of the family, increasing the probability that it would be spent in the best interests of the household and its children rather than, for example, on alcohol. To redress sexual discrimination, cash payments for girls attending school are higher than for boys.
Oportunidades also provides support services designed to help families break out the cycle of poverty, with clinics that offer health check-ups including nutritional supplements for children, and schools that try to prevent them dropping out of education early for jobs with few prospects. Oportunidades withdraws the cash from those who fail to show up regularly.
Finally, the scheme included rigorous evaluation from the start, allowing shortcomings to be corrected and thus strengthening the case for its continuation. When the Mexican government changed after elections in 2000 the programme survived with only minor modifications, such as the replacement of its original name, Progresa.
Julio Frenk, Mexico’s health minister at the time, says: “The stroke of genius was to build in evaluation from the outset. Some said it was launched by the previous administration so let’s stop it, but I said look at the results. It has the right ideology, with equality of opportunity that everyone from the left, centre and right subscribes to.”
The evaluations have been impressive. Michelle Adato from the International Food Policy Research Institute in Washington, points to reductions in stunted growth, anaemia and other problems of early childhood, as well as higher school enrolment, especially for girls.
The results helped Oportunidades extend its operations to urban areas and expand to include incentives to remain in high school. More recently, the system has provided ways to target support at those hit hardest by high food and energy prices.
Critics contend that there has been little impact on the health of children aged over five, or on school attendance and achievement. It remains too soon to judge whether the first “graduates” of a decade ago have been able to break the cycle of poverty. There are also risks of corruption, and frustration among those whose incomes are just above the eligibility thresholds.
Mr Bertozzi cautions that conditional cash transfers cannot work unless they are accompanied by strong supporting services, including good primary schools and health clinics. Because of their absence in parts of Mexico, 300,000 people who meet the criteria cannot participate.
Nonetheless, the Mexican experience quickly inspired other countries in Latin America and, more recently, initiatives in Asia and Africa. Last autumn Michael Bloomberg, the mayor of New York, unveiled the first payments for Opportunity NYC, paying an average of $546 to families in the city who met certain education, health and employment targets.
In Tanzania, researchers attempting to fight the spread of HIV are planning a clinicial trial to test a new application: paying young men and women to avoid unsafe sex, giving a cash reward to those who are proven by regular medical check-up not to have contracted a range of sexually-transmitted infections.
Public health experts concerned about the failure of existing programmes significantly to reduce rates of HIV/Aids in children in Africa are now arguing for the widespread uptake of another variant of cash transfers. Jim Kim from Harvard School of Public Health, who has helped co-ordinate a group of policymakers called the Joint Learning Initiative on Children and HIV/Aids, says: “If you put cash into the hands of the poorest women, they make very good decisions. Instead of giving money to consultants with big Jeeps and PowerPoints, let’s give it directly to those affected by Aids.”
The key difference is that, while Latin America has strong governments able to administer complex programmes, most countries in sub-Saharan Africa do not. Mr Kim therefore argues that local communities should assess need and that transfers should be unconditional. Ms Adato, who has advised him, says that although few of the African pilot projects have been rigorously evaluated, the idea has promise as part of a broader poverty alleviation effort.
Santiago Levy, vice-president of the Inter-American Development Bank and one of the architects of Oportunidades, cautions: “It’s important that these programmes are not overblown. Conditional cash transfers are not going to end poverty. That will also require other measures, including good jobs and a growing economy.”
But, given the failure of so many other attempts to tackle poverty, the Latin American approach looks likely to inspire more experimentation elsewhere. |
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