On July 29th, the National Council for Evaluation of Social Development Policies (CONEVAL) released its report on poverty within Mexico. Beyond the general confusion among population regarding absolute (number of individuals) and relative (percentage) figures of Mexicans living in poverty, the report revealed that, between 2010 and 2012, the poverty percentage fell slightly (from 46.1% to 45.5%), while the number of people living in extreme poverty decreased by 1.5% (from 11.3% to 9.8% of Mexican population). After CONEVAL published these figures, the Secretary of Finance, Luis Videgaray, and the Secretary of Social Development, Rosario Robles, became the fiercest critics of the social security system of previous administrations, and argued that public policies and welfare programs have only managed to contain the rise of poverty and not fight it as they should. Videgaray claimed that only with an economic growth of at least 5% could the poverty be effectively decreased, to which – according to the current administration – the energy and tax reforms will prove to be useful. In addition, the federal government is about to propose the creation of a universal social security system – a very ambitious and expensive policy -. What are the real intentions behind Videgaray and Robles’ claims?
Firstly, these statements have the purpose of increasing the arguments about the necessity of reforms that are of interest for President Peña. Secondly, the criticism aims to distance the current government from previous PAN administrations on social security issues, as to boost the agenda of the Executive Power’s third major reform: the Universal Social Security System. While the previous administration as well as several analysts and commentators welcomed the fact of having stable figures in the percentage of individuals living in poverty, especially taking into account economic shocks such as the 2008 financial crisis, nowadays this opportunity is set as a sign of incompetence on social security programs, particularly “Oportunidades” [Opportunities]. It is important not to fall in the trap of evaluating Oportunidades and other programs as the reasons of poverty in Mexico. Even though the main objective has been to lift homes out of poverty, it is clear that, within a context that lacks working opportunities, some major progress on education, health and housing has been made. Besides, there have been many other reasons for the stall on poverty rates: flow of remittances, a variety of subsidies as well as direct and indirect transfers through social programs, and escape routes such as informal economy and U.S. migration.
Beyond the objectives achieved by social security programs, the key issue is the inefficiency and irresponsibility from government expenditure. The extraordinary oil revenue in Mexico, boosted by the Cantarell field during the 2000-2004 period, was mainly used for expenses that were not aimed in enhancing economic growth. During this time, the expansion of the Oportunidades program made possible that more homes would receive direct transfers that would put them further away from the poverty line, even if they still aren’t consolidated as middle class. Taking this into account, neither the current policies or social security programs nor the increase in public resources due to an improved tax recollecting, should be used to perpetuate the dependence of the majority of the population on government money. If done, these programs and the expected potential wealth derived from structural reforms could only be used in putting more Mexicans within the unproductive government’s “payroll”. Besides, history has proved that not always a larger government spending translates into higher growth. The risk lies in Mexico having a larger tax recollection and a higher public expenditure but without an improved economic performance. Brazil serves as the better example for the aforementioned case.
CIDAC
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