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Recent Trends in the Development Agenda of Latin America: An Analysis of Conditional Cash Transfers

Author: T Britto
Date: 2005
Size: 29 pages (116 KB)

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Summary

How and why did conditional cash transfer (CCT) programmes come about? What can they actually deliver, and what issues arise in their implementation? This paper discusses CCTs in Mexico and Brazil. It examines particular characteristics and implementation aspects, as well as contextual factors that help explain these programmes’ popularity. It concludes that whilst these programmes have potential, there are limits to what they can achieve.

Mexico launched its nationwide CCT programme, ‘Progresa’, in 1997. It consisted of cash and in-kind transfers to households, conditional on school attendance and regular visits to healthcare centres. There was a positive gender bias towards females (transfers were 15% higher for female children), and the programme claimed to be apolitical due to targeting mechanisms designed to eliminate the discretional management of public funds.In Brazil, the ‘Bolsa Escola’ programme was implemented quickly, reaching over 5 million households within a year. Transfers were conditional on school education, but were smaller than in Mexico. Household targeting was left to municipal governments, which led to considerable variations. Both programmes attracted considerable international attention and funding.

Initial evaluations show that CCTs have positive effects on school enrolment and nutrition patterns, though their impact on poverty reduction is not yet clear. It seems likely that CCTs’ popularity is not only be related to their basic characteristics, but also to how they are implemented and other contextual factors. In the cases studied:

• Electoral concerns were important, and cash transfers establish a direct and visible link between government and beneficiaries.
• The programmes were highly politically feasible: the ‘co-responsibility’ component was popular and the programmes were seen as reducing the poverty and inequality that leads to urban violence.
• Despite striving for accurate targeting to the poor, the programmes’ targeting mechanisms suffered from serious flaws and resulted in undercoverage of poor households.
• There were problems with administrative operability: CCTs entail considerable costs and capability requirements, which perhaps explains their initial introduction in middle-income countries. Some administrative obstacles are connected to political economy considerations that affect the programmes’ political feasibility.

CCTs have the advantage of tackling several problems in one policy, for example: They provide additional income to poor households, and have significant impacts on human capital. However:

• These programmes can only be adequate where no supply biases and geographic barriers exist. CCTs can only be complements to broader social provisioning.
• CCTs assume that poor households would not choose to invest in human capital. However, it is worth asking whether unconditional transfers combined with improvements in service delivery would have the same impact, though this may raise questions of political feasibility and administrative operability.
• There may be positive collateral effects in terms of women’s empowerment if the subsidies are targeted at women, and also an impact on the local economy. However there are private costs, and targeting might undermine community cohesion.
• The international replication of CCTs is related to the way big donors function rather than innovations or results. CCTs match the concerns of the international community, have ‘scientifically proven’ results and their designers have links with international organisations.
• CCTs might have an important role in structural poverty reduction, but will be limited if they are not matched by complementary macroeconomic policies or interventions to tackle deeply rooted inequalities.

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Source: Britto, T., 2005, ‘Recent Trends in the Development Agenda of Latin America: An Analysis of Conditional Cash Transfers’, Brazil