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Latin American Lessons on Poverty Reduction

Successes and opportunities from 15 years of conditional cash transfers

Conditional Cash Transfer (CCT) programs have been the most important and effective social assistance interventions in Latin America and the Caribbean in the last 15 years. In 2010, 129 million people in 18 countries benefited from these programs, a figure that corresponds to 24 percent of the region’s population. The results show positive impacts: poverty reduction, a decline in child labor, and improvement in children’s levels of nutrition and education.

A recent IDB study, Conditions for Success in Implementing CCT Programs: Lessons for Asia from Latin America and the Caribbean by R. Paes-Sousa, F. Regalia and M. Stampini, analyzes the application of these programs with an eye toward drawing lessons that may be of use to policymakers in other countries, particularly in Asia, who are considering the introduction of CCTs or have done so recently. The study focused on six countries (Brazil, Colombia, Honduras, Jamaica, Mexico and Peru) and was developed within the framework of South-South cooperation between the IDB and the Asian Development Bank.

The research, based on data analysis, a review of the literature, and interviews with key program implementers, focuses on four areas: financial sustainability, efficient selection of beneficiaries and an advanced monitoring and evaluation system, definition of the most appropriate administrative structure for each country, and strategies to address gender inequality.

The publication shows that CCT budgets grow rapidly in the first few years following implementation, typically reaching 0.3 to 0.4% of the country’s gross domestic product. Initially, resources come from a reallocation of the budget available for social assistance, through the consolidation of existing programs. In some cases, funding involves the substitution of inefficient generalized subsidies with targeted cash transfers.

Since CCT programs entail a redistribution of money, in order to survive political changes they need strong public credibility and political capital, which result from their transparency and efficiency. These characteristics chiefly depend on the quality of the targeting of beneficiaries and of the monitoring and evaluation systems. In these areas, CCTs have demonstrated superior performance in comparison to preexisting social assistance programs.

CCTs have improved the identification of poor beneficiaries through a combination of geographic targeting, income estimates and community validation. The programs have invested significant financial and human resources in the implementation of impact evaluations that demonstrated their effectiveness, and in advanced monitoring systems that allowed for the identification of program weaknesses in order to take corrective action. These efforts were supplemented by regular audits and dynamic management of the registry of beneficiaries.

The implementation of CCT programs requires a complex set of institutional interactions with ministries of education and health and local governments. In particular, coordination between the expansion of the transfers and the supply of education and health care services (at the central and local levels) is critical for programs to achieve their objectives concerning human capital development. This is an area of possible improvement that requires additional investment.

The IDB report discusses the operational phases of CCT programs’ implementation. These include the registration of beneficiaries, verification of co-responsibilities, payment of transfers, follow-up in the event of non-compliance, and periodic recertification of beneficiaries, among others.

To an increasing extent, transfer payments are processed through the banking system. In Mexico, for example, the percentage of transactions handled by banks has grown from 26% in 2009 to almost 100% in 2011. This system reduces administrative costs, increases transparency, and provides an opportunity to incorporate previously unbanked households into the financial market.

Another possible area of improvement is in the reduction of gender inequalities. Although there is evidence of women’s empowerment in some cases, in general the programs have not altered the traditional division of labor in the home.

In summary, this IDB publication offers an important compendium of lessons learned through CCT program design and implementation, providing a basis for discussion on the development of a second generation of programs not only in other regions of the world, but also in Latin America and the Caribbean.

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