One of the main instruments for combating poverty loses its relevance between the end of the "golden decade" and the beginning of the "second lost decade

The so-called Conditional Cash Transfers (CCTs) submission cash transfers to underprivileged families with a commitment to schooling, medical check-ups or other basic requirements that, along with improving household income, sought to promote the options of the younger generation - have helped in the last two decades to significantly increase theaverage class in Latin America. But once the subsistence level was surpassed, citizens recently began to demand improved services, such as teaching, healthcare or transportation - as seen in the protests of recent months in the region - to which the CCTs no longer provided an answer. Just when the countries were thinking of readapting their policies in response to this change of perspective, the crisis triggered by Covid-19 threatened to throw millions of people back into poverty, making cash transfers necessary once again, this time without conditionalities.

▲ Beneficiaries of Brazil's Bolsa Família, one of the pioneering conditional cash transfer programs [Gov. of Brazil].

article / María Gabriela Fajardo

The first Conditional Cash Transfer (CCT) programs in Latin America, a pioneer region in the implementation of this instrument, were developed in the mid-1990s in Brazil and Mexico with the intention of "transforming and halting the intergenerational transmission of poverty through the development of human capabilities in the most vulnerable families," as stated in a report by ECLAC (United Nations Economic Commission for Latin America and the Caribbean). CCTs were designed to provide support to families status poverty or extreme poverty with minor children. The submission these monetary aids (also non-monetary) was made as long as the families complied with basic conditions of health, Education and nutrition of the minors.

The implementation of CCTs spread rapidly throughout the region. In 1997, only four countries had any of these programs: Brazil (Bolsa Escola), Ecuador (Bono Solidario), Honduras (Programa de Asignación Familiar) and Mexico (Progresa). A decade later, almost all Latin American countries had adapted the initiative.

Although in some cases this tool has been controversial, given that some governments have been able to use it as "an instrument of social policy and its targeting is discussed as a strategy to address actions that must operate under restricted budgets", according to the aforementioned ECLAC report , the truth is that CCTs are considered to have contributed to the socioeconomic progress of the region. This was recently pointed out by Alejandro Werner, director for the Western Hemisphere of the International Monetary Fund (IMF). "In the last 15 years," he said, attributing part of the credit to CCTs, "important progress has been made in the topic poverty alleviation and reduction of income maldistribution. Thus, Latin America is probably the region with the greatest improvement in income distribution.

Between 2002 and 2014, a time known in Latin America as the "golden decade" (a consequence of the commodities boom ), the poverty rate in the region fell from 45.4% to 27.8%, so that 66 million people overcame that status, agreement to the Social Panorama of Latin America 2019 published by ECLAC. Additionally, the extreme poverty rate decreased from 12.2% to 7.8%. However, since 2015, the level of poverty and extreme poverty began to increase, a patron saint that has continued since then, albeit moderately. For 2019, ECLAC predicted an increase in poverty and extreme poverty to fees of 30.8% and 11.5%, respectively, so that 27 million more people returned to situations of poverty compared to 2014. 

The challenge: from extreme poverty to the class average

This slight reversal indicates that many who in that "golden decade" gained access to the class average, making this sector of the population a majority for the first time, now find themselves in a high Degree of vulnerability Degree At the same time, these people have seen how, having overcome their previous survival status , their expectations of subsequent progress and access to better services from the State have not been met. The new challenge in many countries was to make public policies revolve around other factors that would allow the consolidation of these people in the class average. This neglect generated discontent that contributed to the large protests experienced in several Latin American countries at the end of 2019.

The greater demands of a population in better conditions made structural deficiencies more evident. "The region's structural deficiencies have become more evident and their solution is part of the demands of broad social groups, particularly the new generations," according to the Social Panorama report . Specifically, ECLAC warned about "segmented access to quality public and cultural services".

In Werner's words, "having achieved such a significant reduction in the reduction of poverty also generates an important challenge for policy makers in Latin America, since the design of social policies must be oriented to address other factors, not to the reduction of extreme poverty. It is not that we have to forget about that, but clearly the challenge now is to focus also on addressing those segments of the population that are no longer in poverty, which are class average". After highlighting the precariousness of this large group of the population that has moved up the social ladder, the IMF manager for the Western Hemisphere indicated that "clearly the instruments to address this vulnerability are different from the conditional transfer schemes that were implemented in the past", and he specifically mentioned access to quality Education and health.

But the States have faced the need for this paradigm shift without budgetary support. It is evident that there is little state reaction capacity to meet the new needs of the vulnerable population affected by low educational levels, few work opportunities and the inefficiency of the pension system.

The countries have found that economic growth, which between 2000 and 2013 hovered jointly around 2%, has been weakening since 2014. Thus, real GDP per capita in the region has declined by 0.6% per year. The causes of this decline in economic growth can be classified into two factors, as explained by Werner. First, structural causes have inhibited potential growth due to "the scarcity of investment, slow productivity growth, a Pass business climate, leave infrastructure quality and Education". Secondly, within the cyclical causes, the weak global economic growth and the low price of raw materials have also affected the uncertainty of large regional economies such as Brazil and Mexico, the sudden economic stoppages of stressed economies such as Argentina and Ecuador, and the social tensions that took place in the last quarter of 2019.

Coronavirus

The emergence of the Covid-19 pandemic has worsened the economic outlook for Latin America and the Caribbean, for which the April 2020 report forecasts a 5.2% drop in GDP this year. Although the IMF estimates a recovery of 3.4% in 2021, this will not be enough to allay fears of a new "lost decade". In his most recent intervention to comment on these data, Werner warned that between 2015 and 2025 GDP per capita "will be flat".

To cope with this new status, socially aggravated by the health crisis and the suffering of so many people, governments are resorting to direct cash transfers, no longer conditional, to vulnerable households. In a way, we are returning to a stage of need, even prior to the moment when CCTs were extended. We are returning to the urgency of the 1980s, known in Latin America as the lost decade, when countries had to apply shock measures to get out of a serious public debt crisis.

The president of the Inter-American development Bank (IDB), Luis Alberto Moreno, believes that it is still too early to speak of a second lost decade, but agrees that the moment leads to unconditional transfer programs. "The big question is whether everything we have achieved in the last 15 years in terms of reducing poverty and extreme poverty, with the incorporation of some Latin Americans into the middle classes, will be lost or whether, on the contrary, the capacity of the social systems and the governments' drive to increase debt and public expense will cushion the effects," Moreno said. All the countries "are strengthening the transfer programs that were developed almost two decades ago, and which have been very successful", although "in this case they will not be conditional, in order to preserve the income of many families".