BY RODOLFO DE LA TORRE
A new report shows just how much remains to be done for Mexico to reduce poverty and inequality.
MEXICO CITY – Judging from his predecessor’s performance, Andrés Manuel López Obrador has a low bar to cross when it comes to addressing poverty and inequality in Mexico.
Results released last week by Mexico’s National Council for the Evaluation of Social Development Policy (CONEVAL) show that poverty fell only slightly, from 45.5% of the total population to 41.9%, during former President Enrique Peña Nieto’s six years in office. This despite low but sustained economic growth throughout Peña Nieto’s tenure: A 2.3% average growth rate, adding roughly $192 billion to GDP between 2012 and 2018, only translated to 900,000 fewer people living in poverty.
But despite those poor results, López Obrador may have a difficult time doing any better than Peña Nieto. The root causes of Mexico’s high poverty rate, coupled with the country’s broad economic outlook and López Obrador’s approach to social policy, help explain why.
A deeper look at the CONEVAL report shows the scope of Peña Nieto’s failure. The poverty figures related to income are bad enough, but the situation is bleaker still when considering the non-monetary aspects of the poverty rate. Under Peña Nieto, the number of people with an unmet fundamental need – be it in access to food, health care, social security, education, decent housing or basic services – fell by just 3%. Particularly concerning is that, by the end of his administration, previous downward trends in the number of people with needs in health, food or social security had been reversed.
One of the few positives from the CONEVAL report is in extreme poverty. Two-thirds of the reduction of poverty in the general population can be attributed to reducing the number of people facing three or more unmet non-monetary needs or insufficient income to access a basic basket of goods.
But here, too, there is bad news. The report shows deep regional divisions that highlight Peña Nieto’s inability to address the country’s fundamental inequalities. Much of the northern half of Mexico, in border states like Chihuahua, Nuevo León and Baja California, saw reductions in the poverty rate by around double the national average. In the south and southeast, states like Chiapas, Oaxaca and Veracruz – which in 2012 already had over half of their populations living below the poverty line – actually experienced an increased in the poverty rate by 2018.
CONEVAL’s report goes a long way in explaining why López Obrador’s candidacy, based on the idea of redistributing economic power, was so successful.
In that light, CONEVAL, an autonomous government agency tasked with interpreting poverty data and evaluating social policy, should in theory be a strategic ally of the current administration. But so far, that hasn’t been the case.
López Obrador wants to bring about a profound transformation in the social conditions of the country, but he doesn’t have the resources to significantly increase public spending and he has promised not to increase the national debt or implement tax reform in the near future. Given those circumstances, making a dent in the poverty rate means identifying and preserving elements of social policy that offer the most significant potential impact at the lowest possible cost. This is precisely what CONEVAL’s work sets out to do.
The report issued last week showed that the biggest advances in basic needs under the previous administration came through access to health services. This was partially explained by an expansion in the public health care system and health services provided through the conditional cash transfer program Prospera and the Seguro Popular, a health subsystem for those without a formal job, which attended to around 22 million people who otherwise would not have had access to health services.
But López Obrador has canceled Prospera and Seguro Popular, replacing them with a host of new social programs that don’t include health services. He has also taken a highly hostile stance toward CONEVAL, reducing its budget dramatically and attacking its authority to make judgments about social policy. At a recent public event, López Obrador said that CONEVAL does its work “from luxurious offices, and it doesn’t even know the communities.“ In July the long-time head of the agency was asked to step down.
The effect of AMLO’s stance on CONEVAL is unlikely to have a positive effect on the poverty rate. In dismissing the agency’s work he is also dismissing a crucial ally in improving social policy.
The deep transformation that the administration hopes to bring about will also be hindered by current economic conditions. The creation of a universal social security program is likely the most important step the government could take at this point to combat poverty. The CONEVAL report shows how access to social security is closely linked to meeting other basic needs. But such a system would require deep fiscal reform – likely unavoidable in the face of economic deceleration and an expected fall in tax revenues, but which López Obrador says he will not pursue this early in his administration.
Indeed, that Mexico’s economy registered just 0.4% annual growth in the first half of 2019 does not bode well for the poverty fight. At the current rate, population growth would actually reduce GDP per capita and mitigate the positive effects of monetary transfers included in López Obrador’s new slate of social programs within a couple of years. The administration’s social policy proposals to complement these transfers, such as reforms to the health and education systems, do not show clearly how they would better address social needs.
In sum, the poverty figures released last week provide a stark condemnation of the Peña Nieto administration’s failings. But they are also a warning to the current government. Without solid economic growth and deep transformations of social policy, in particular the construction of a universal social security system, López Obrador will face a low standard for success he may nevertheless have difficulty meeting.