Eliminating Poverty at Low Cost

By Mario Osava and - - Reprint | | Print |

RIO DE JANIERO, Apr 21 2008 (IPS) - Monetary aid to the poorest of the poor, with certain conditions to be met, has born fruit in Latin America, and at relatively low cost to government. The success of pioneering countries in efforts to reduce inequality and poverty using relatively few resources has led to an expansion in Latin America of direct aid, focused on the most vulnerable families, especially in rural areas.

Known as “conditional cash transfer”, it encompasses many different strategies in more than a dozen Latin American countries. In Brazil and Mexico, they are massive programs, reaching 11.1 million and 5.0 million impoverished families, respectively. Colombia's program involves just 1,500 families.

Chile Solidario, often included in the same category, “is not comparable to other programs in sums or objectives,” like Brazil's “Family-Grant” and Mexico's “Opportunities”, said Verónica Silva, executive secretary of Chile's Social Protection System.

The Chilean program, created in 2002, today includes 290,000 families, about 40 percent of which are rural. “The incidence is much higher in rural zones because if you want to find the poorest of the poor in Chile you only have to look for a mother who is head of family in a rural area and is also indigenous,” Silva told Tierramérica.

The focus is on extreme poverty, which affected 5.6 percent of the Chilean population in 2000, a sector so marginalized that it falls outside the social welfare networks. The aim is to bring these families into the fold with psycho-social support and a monthly stipend to cover fees, which gradually declines from 28 to eight dollars over the two years of the process.

“The reduction in poverty and indigence was 20 percent for rural homes benefiting from the system,” according to the latest report by the World Bank, which provides technical assistance to Chile Solidario. Official data indicate that in 2006, “for the first time, poverty rates in rural areas was below that of urban areas (12.3 and 14 percent, respectively).”

The World Bank estimates that Chile Solidario is responsible for 18 percent of the reduction of indigence and 35 percent of the decline in poverty.

Brazil's Family-Grant, created in 2003 by uniting social programs from the 1990s, achieved its goal of providing aid to 11.1 million families in 2006. It offers between 10.5 and 100 dollars a month to each family group, conditional on children's school attendance, taking care of health problems and nutrition.

The program achieved a 21-percent reduction in inequality between rich and poor between 1995 and 2004 — an outcome identical to Mexico's Opportunities program, according to the International Poverty Center of the United Nations Development Program.

From 1993 to 2006, the portion of Brazilians in poverty fell from 35.3 percent to 19.3 percent of the population. Family-Grant and the Continued Benefit program, a stipend for the elderly and infirm, played “a fundamental role” in that achievement, Marcelo Neri, social policy expert with the Getulio Vargas Foundation, told Tierramérica.

In 2006 alone, 5.8 million people escaped officially defined poverty in this country with a population of 188 million.

Poverty in rural areas fell from 63.7 to 40.9 percent between 1993 and 2006. Rural retirement pensions, guaranteed by the constitution even for informal workers, today offer the minimum monthly salary (245 dollars) to 7.7 million farm workers and also contributed to this result, despite its high fiscal cost.

There is a tax burden of 35 percent of the gross domestic product (GDP), similar to that of very rich countries, noted Neri. But Family-Grant provides the best results with proportionally lower costs, of just 0.7 percent GDP, he added.

The Grant benefits children, in contrast to retirees, and a dynamic boost to the local economy, expanding the market for food produced by small farmers, Neri said.

This also reduces rural poverty. Acquisition of food is the main destiny of the grant, which promotes family farming and smaller local commerce, said Rosani Cunha, secretary of Citizen Income at the Ministry of Social Development.

Of the families receiving the grant last year, 30.8 percent were rural, a proportion much higher than the 18 percent of Brazil's total rural population, due to the higher incidence of poverty in the countryside.

The statistics show higher school attendance rates, especially in the north and northeast, the country's poorest regions, reducing the risk of poverty of future generations and belying “the laziness effect” that critics had warned of, Cunha told Tierramérica.

In Pombal, an impoverished town in the northeastern state of Paraíba, a woman who used part of the grant to raise chickens and thus was able to get off government support, became an example of initiatives for exiting the program, she said.

Pombal, with 3,710 families receiving the grants out of a population of 33,000, has seen several hundred families leave the program. The city government is preparing an initiative for raising poultry involving 25 families in a pilot group.

The municipal registry, which includes all poor families, is “an important instrument” of integration and reinforcement of other policies, like food security and housing, which generates “synergies”, city social worker Cizia Romeu said in a Tierramérica interview.

The Brazilian program is notable for its decentralization. The local authorities take on much of the responsibility, given that some of the conditions for receiving the grants, such as school attendance and health, depend on municipal and state governments, explained Cunha.

It was in Mexico that the first program of massive conditional cash transfer was launched, in 1997, with the name “Progresa”, later replaced by “Oportunidades” (Opportunities), in response to the 1994-1995 economic crisis.

From 2000 to 2006, poverty in Mexico fell from 53.6 to 42.6 percent, and infant mortality dropped 11 percent, largely thanks to the program that began with 300,000 families and today helps 5 million in 96,000 marginalized sites, 86 percent of them in rural areas.

Nevertheless, “it doesn't seem to have prevented migration, and we don't see a direct impact on the countryside's economic problems,” which are the result of other factors, like credit, irrigation and land quality, but it has “helped many families to remain on their land,” according to Santiago Fernández, a consultant who evaluates social programs.

“The young people end up emigrating” due to poverty and the attraction of the bigger cities and the United States, even though Opportunities “has provided improvement in the situation of many families, and the statistics show it,” he said in a conversation with Tierramérica.

In Colombia, the “Families in Action” program, launched in 2001, has a limited impact of 1,500 family groups, with subsidies for food and education of 8.5 to 27 dollars a month, distributed almost exclusively to mothers.

But the program responds to a unique facet of Colombian reality: the population displaced from rural areas by the decades-long armed conflict. “The benefit was great, as if it fell from heaven,” said Fernando Parra, displaced in 2001 from the southern department of Huila, with an 11-member family. He is now a community leader in Ciudad Bolívar, a poor suburb of Bogotá that is home to many who have fled the war.

“I like the program a lot, but they aren't taking registrations now, and many people need it,” lamented Rubiela Castro, who lives in Usme, district of southeastern Bogotá.