Mexico’s Poorest Receive Less Funding Under López Obrador’s Government

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President Andrés Manuel López Obrador took office nearly six years ago with a simple motto that set the priorities of his government: “For the good of all, the poor first.”

His administration eliminated a series of existing social programs and established its own, rapidly increasing overall social spending to unprecedented levels for the elderly, unemployed youth, students, farmers, and people with disabilities.

However, less noticed was that the new list of social programs dramatically changed who was receiving that money. Suddenly, Mexico’s poorest were receiving a smaller portion of public spending and less money than in previous governments.

Meanwhile, some of the wealthiest began to receive money they didn’t really need.

The change was largely due to a massive “universal” pension benefit for the elderly that López Obrador launched on a cold January day on the outskirts of Mexico City in 2019, just weeks after taking office. He announced that he was going to nearly double the existing federal pension—which has since doubled—and expand it, regardless of income, to people who previously did not qualify, such as those retirees who were already receiving a pension.

If much more money is not injected into the system, “universal programs distribute benefits more sparsely across the entire population, with the result that the people who need them most get worse,” said Robert Greenstein, a member of the Brookings Institution, a non-profit American organization that conducts research to improve policies at all levels of government. “Poverty can increase. Inequality may be greater than it would be under a more specific plan.”

But López Obrador’s social programs have proven so popular that even opposition candidates running to replace him in the June 2 elections have promised to expand them. Some 28 million Mexicans will benefit from one of the programs this year. In the last presidential debate on Sunday, candidate Xóchitl Gálvez said she would reduce the minimum retirement age from 65 to 60 years.

The pension is the largest social program by budget on López Obrador’s list of money handouts, far surpassing the also well-known Jóvenes Construyendo el Futuro, which pays young adults who neither study nor work while they work as apprentices, and Sembrando Vida, which gives money to farmers to plant fruit or timber trees on their land.

Combined with the elimination of his predecessors’ programs that had focused on Mexico’s most needy, experts say the pension dramatically changed the distribution of government funds.

Four months before the end of his six-year term, several million people have emerged from poverty, although factors beyond social programs are involved, for example, López Obrador almost tripled the minimum wage and Mexicans abroad continue to send record amounts of money to their relatives.

Interestingly, there are about 400,000 more Mexicans in extreme poverty than at the beginning of his term, according to government data.

A government report published every two years that divides Mexico’s population into 10 segments by income says that the poorest segment in 2018 received about 19% of social spending. Just two years later, that poorest group was receiving only about 6%, said Manuel Martínez Espinoza, a researcher at the National Council for Humanities, Sciences, and Technologies (Conahcyt) of Mexico. For unknown reasons, the government has not published the 2022 report.

Cash for families, but with conditions

At the counter of a store in a downtown Mexico City market, Arturo García leaned over a steaming plate of beef belly broth one recent morning. The 73-year-old retired taxi driver said he stopped accepting passengers during the pandemic.

Now, his only sources of income are the six thousand pesos he receives from his universal pension every two months and some money he gets by renting out space in his house as a warehouse to street vendors.

“Whether you have money or not, they give it to you,” García said of the pension. “The government is trying to make us all equal.”

One of the programs López Obrador ended when he took office was called Prospera. It targeted Mexico’s poorest families for about two decades under different names with what became known as conditional cash transfers. Poor families received money, which was restricted by income level, and beneficiaries had to meet some requirements to receive it, such as taking their children for medical check-ups.

The president said the program was clientelist and suffered from systematic corruption, although cases of corruption have also been found in López Obrador’s programs.

Targeted social programs like Prospera try to be more precise in directing public funds to specific segments of the population. For this reason, they are usually less costly than universal programs. Critics, however, say they stigmatize the poor, have less political support—making them vulnerable to being cut—require more administration to determine eligibility, and fewer people sign up, explained Greenstein of the Brookings Institution, who added that those risks are not inherent in targeted programs.

The Ministry of Welfare did not respond to requests for comment.

Prospera’s funds were redirected to López Obrador’s programs—mainly the universal pension—marking a significant change from a resource-verified program that primarily benefited poor children to one that provided cash to all elderly people.

One of the most cynical criticisms of the change is that children don’t vote, but older people do.

The flip side of Mexico’s poorest receiving a smaller proportion of social spending in this government is that people who don’t really need it receive more.

One late April morning, César Herrera took his elderly mother to a Banco Bienestar branch in Mexico City to withdraw her pension payment. The bank was created by López Obrador as a vehicle to get payments from his administration’s programs directly into the hands of Mexicans.

Herrera said he and his mother had gone in February when the last pension deposit was made and saw that the line stretched down the street. But unlike many older people who live paycheck to paycheck, Herrera said his mother doesn’t need the money, so they left.

“However, it’s there,” he added when they returned a month and a half later. “Of course you have to take it.”

The ninth of 10 income strata, or the second highest analyzed by the government, went from receiving about $4.40 out of every $100 of social spending in 2018 to receiving about $10 in 2020, reported Martínez, the researcher at the National Council for Humanities, Sciences, and Technologies.

Martínez said his fieldwork in Chiapas, Mexico’s poorest state, found many people who were not receiving as much money as before with Prospera, but who nevertheless fervently supported López Obrador.

“I have spoken with a lot of people; they feel valued, they feel that the president values them, which they did not feel before,” Martinez stated.

Martinez hypothesizes that the growth of extreme poverty during this government was partly due to the elimination of Prospera, but also to the fact that people in extreme poverty tend to work in the informal sector, and therefore, would not have benefited in the same way from the increase in the minimum wage. Another factor was that the COVID-19 pandemic forced many families to exhaust their limited savings on medical care.

The president and his chosen successor, Claudia Sheinbaum, insist that Gálvez will end social programs if she wins, while the opposition candidate promises she will not. Much of that debate is unnecessary since the pension is now enshrined in the Constitution.

Martinez said that even with the current minimum age of 65 years, the program consumes public funds too quickly.

“In the short term, it will be a time bomb because it will generate problems, because it will not be fiscally sustainable,” he asserted.

Source: Proceso