Oportunidades: The Value of Conditional Cash Transfer Programs

BY CINDY ALVARREZ

   Although classified as a middle income country, Mexico is characterized by vast inequality that divides the population into the frivolously wealthy and the extremely poor. In 2000, approximately a quarter of Mexico’s population was living in extreme poverty. In other words, a quarter of Mexico’s population did not have enough income to cover basic food needs, much less vital health needs.1 In fact, in 2000, an estimated 3 to 4 million families incurred catastrophic or impoverishing health expenditures.2 In recent years, however, efforts to reduce the inequality gap have begun to pay off. Through a focus on progressive spending on education, health, and nutrition, Mexico has seen the income of the bottom 10 percent grow twice as fast as the income of the top 10 percent.3 The relationship between access to proper education and the overall health and wellbeing of an individual has been studied as a point of interest and utilized by countries to improve their economic state and the health of their population. In 1997, Mexico introduced a program called Progresa, later renamed Oportunidades, based on this relationship. The program’s benefits continue to be significant today, covering roughly 5.8 million poor households or around 19% of households in 2012.4

   Why should it matter to a government whether or not its population is healthy? Besides important ethical reasons, there are great economic implications associated with an unhealthy population. When people are unhealthy, they do not go to work or they do not perform as well as their healthier counterparts, resulting in a loss in productivity that is ultimately detrimental to the economy. Many African countries, for example, continue to grapple with the effects of malaria on their economies, and it is postulated that their GDPs are actually 37% lower than it would be in the absence of malaria.5 Similar effects on the GDPs of other countries can be caused by other communicable and non-communicable diseases that could perhaps be partly prevented through improved education. Governments are aware of this and are working to find ways to help low income families overcome the barriers they face when enrolling their kids in school. The greatest of these barriers is cost, which grows with the child. For many low income families, not only do the direct costs of keeping a child enrolled in school increase with age through the demand for books, uniforms, and other materials, but the opportunity cost of going to school also increases. As kids get older, they also have the option to work and contribute to the economic wellbeing of their family. Children who choose to work sacrifice their education and are inadvertently trapped within a cycle of poverty.

     So how can governments help low income families overcome this barrier and encourage the enrollment of children in school at all ages? Countries such as Brazil, the Philippines, and Bangladesh are choosing to decrease the burden of the direct and indirect costs of education by sharing these costs and “helping families invest in human capital.”6 They accomplish this through conditional cash transfer programs (CCTs). These programs are an opportunity for governments to incentivize specific behaviors in exchange for money. Conditions can range from up-to-date vaccinations to children’s school attendance. CCTs are seen as a cost effective investment on the government’s part, as they will yield better long-term effects and work to break the transmission of poverty from one generation to the next.7

     One of the most well-known cases of the use of conditional cash transfer programs is Mexico’s Oportunidades. Oportunidades, originally called Progresa, is a CCT program that was established in 1997, designed to improve the overall health, education, and nutrition of Mexico’s children. At its inception, it primarily targeted rural villages as these were home to the most at-risk populations. Within the education sector, the government incentivized child attendance in school by providing grants from primary school to high school.8 In order to address the increasing opportunity cost that comes with age, the grants increased as the children got older. They ranged from about “$10.50 in the third grade of primary to about $58 for boys and $66 for girls in the third year of high school.”9 The program yielded positive results; specifically, there was a 30 to 60% increase in regular health visits by children under 5, the proportion of malnourished children decreased by 17.2%, disease incidence decreased by 12% among children under two years of age, and enrollment in secondary school increased by 11% among girls and 7.5% among boys.10

 

Because of the success brought upon by Oportunidades in Mexico and other conditional cash transfer programs in countries such as Brazil (Bolsa Familia) and Bangladesh, many other nations have begun to consider these programs to tackle issues of poverty, lack of education, and poor health. One example is the Philippines. Although the Philippines underwent economic growth between 2003 and 2006, poverty increased from 24.9% in 2003 to 26.5% in 2009 and the number of poor increased from 22.2 million to 23.1 million from 2006 to 2009.11 Its program, Pantawid Pamilya, was designed to target these issues and includes conditions that require pregnant women to attain pre- and post- natal care and have a trained professional present during childbirth. Children under 5 years of age are also required to receive vaccinations and preventative health checkups.12 Education is an important part of the program, as children aged 3 to 18 must not only enroll in school, but also maintain at least an 85% attendance rate each month.13 A recent assessment of the Philippines’ Pantawid Pamyla conditional cash transfer program found that it has been instrumental in boosting the enrollment of children in primary school and has helped bring about near universal enrollment of this age group.14 The same study also noted a 10% increase in the number of poor mothers receiving antenatal care in areas where the program had been established and a reduction in the rate of severe stunting among poor children aged 6 to 36 months by 10.1%.15

 

    After witnessing the great success of these programs, it may be tempting to suggest that conditional cash transfer programs should become a standard in many, if not all, low income countries. After all, if education promotes health and health is viewed as a human right, governments must do all that they can to ensure equitable access to proper education. However, as stated by Nicholas Rowe in his essay, Mexico’s Oportunidades: Conditional Cash Transfers as the Solution to Global Poverty, it is important to acknowledge that in order for a conditional cash transfer program to be successful, we assume that the program will have certain, specific outcomes: “first, that the supply of publicly provided educational and health infrastructure is adequate or an increase in services will follow the increase in demand; second, that the use of
educational and health services will result in human capital accumulation; and third, that labor markets will respond to increased human capital with gainful, productive employment opportunities that match demand.”16 Of course, because the economic situation, as well as the cultural and political climate varies dramatically across countries, these assumptions cannot always be justified and success cannot be guaranteed.

     Critics of CCT programs argue that although they provide an adequate temporary solution for poverty in some countries, they should be seen as no more than that, temporary solutions. Countries should not depend solely on conditional cash transfer programs to solve economic issues and they should not view them as substitutes for proper structural reform.17 Indeed, many lower income countries can only afford to maintain families enrolled in the conditional cash transfer program for a couple of years because of a lack of financial and institutional support for the programs.18 Even countries, like the Philippines, that have already implemented successful conditional cash transfer programs must continue to face issues that are not completely resolved by the CCTs, such as unsatisfied school enrollment goals at all ages and persistent low vaccination levels among the poor. Thus, although the importance of conditional cash transfer programs in alleviating poverty in the short run cannot be understated, low income countries should continue to pursue efforts to bring about more permanent structural change.

    However, conditional cash transfer programs’ emphasis on education, health, and nutrition has proved to be predominantly effective, as seen in Mexico and Brazil, and could serve as a paradigm for long-term solutions. These positive effects of CCT programs have been documented, acknowledged, and endorsed by major global institutions such as the World Bank and UNICEF. In the race to meet the Millennium Development Goals, conditional cash transfer programs were instrumental and now, as we work towards meeting the Sustainable Development Goals, CCTs will continue to have the potential to play a vital role in the fight to end poverty and ensure prosperity for all.   

Cindy Alvarez is a sophomore in Calhoun College. Cindy is a History of Science, Medicine, and Public Health major from Texas. She can be contacted at cindy.alvarez@yale.edu.

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References:

1. Parker, S. (2003). The Oportunidades Program in Mexico. In Shanghai Poverty Conference http://politiquessociales. net/IMG/pdf/Mexico_oportunidades. pdf.
2. Frenk, J., Gómez-Dantés, O., & Knaul, F. M. (2009). The democratization of health in Mexico: financial innovations for universal coverage. Bulletin of the World Health Organization, 87(7), 542-548. Retrieved from http://www.who.int/bulletin/volumes/87/7/08-053199/en/.
3. Lustig, N., Lopez-Calva, L. F., & Ortiz-Juarez, E. (2013). Declining inequality in Latin America in the 2000s: the cases of Argentina, Brazil, and Mexico. World Development, 44, 129-141.
4. Ibid.
5. Ashraf, Q. H., Lester, A., & Weil, D. N. (2008). When does improving health raise GDP?(No. w14449). National Bureau of Economic Research. Retrieved from http://www.nber.org/chapters/c7278.pdf.
6. Parker. “The Oportunidades Program in Mexico.”
7. Doetinchem, O., Xu, K., & Carrin, G. (2008). Conditional cash transfers: what’s in it for health. Genebra: World Health Organization. Retrieved from http://www.who.int/health_financing/documents/pb_e_08_1-cct.pdf.
8. Parker. “The Oportunidades Program in Mexico.”
9. Ibid.
10. “Mexico: Scaling up Progresa / Oportunidades—Conditional Cash Transfer Programme.” (2011). United Nations Development Program.
11. Kim, E., & Yoo, J. (2015). Conditional Cash Transfer in the Philippines: How to Overcome Institutional Constraints for Implementing Social Protection. Asia & the Pacific Policy Studies, 2(1), 75-89.
12. “Pantawid Pamilyang Pilipino Program | GOVPH.” (n.d.) Official Gazette of the Republic of the Philippines. Retrieved from http://www.gov.ph/programs/conditional-cash-transfer/.
13. Ibid.
14. Chaudhury, N., Friedman, J., & Onishi, J. (2013). Philippines conditional cash transfer program impact evaluation 2012. Manila: The World Bank.
15. Ibid.
16. Rowe, N. (2010). Mexico’s Oportunidades: Conditional Cash Transfers as the Solution to Global Poverty? Clarement: Keck Center for International and Strategic Studies. Retrieved from

https://www.cmc.edu/sites/default/files/keck/student/RoweN%20Fellowship%20REP%2010-11.pdf.

17. Bello, W. (2010). “The Conditional Cash Transfer Debate and the Coalition against the Poor.” Focus on the Global South. Retrieved from

http://focusweb.org/content/conditional-cash-transfer-debate-and-coalition-against-poor.

18. Soares, F. V., & Britto, T. (2007). Growing Pains?: Key Challenges for New Conditional Cash Transfer Programmes in Latin America 44. Retrieved from

http://www.unicef.org/socialpolicy/files/Growing_Pains.pdf.