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IDB approves its largest-ever loan for Mexico: $1 billion for expansion of the Progresa poverty-reduction program

The Inter-American Development Bank today announced the approval of its largest loan ever to Mexico, $1 billion for the consolidation and expansion of the Progresa* anti-poverty program, which provides education, health and nutrition aid to millions of indigent families.

The IDB resources will support a $4.755 billion, six-year, multiphase project that will expand Progresa’s coverage to urban areas, ensure the medium- and long-term impact of its aid to poor families and improve its operating efficiency.

“Due to its innovative characteristics and its concrete means of attacking the problem of poverty, Progresa represents an experience that holds lessons for other countries in our region,” said IDB President Enrique V. Iglesias after the loan was approved.

Through Progresa, which combines incentives and requirements for its beneficiaries, the Mexican government helps indigent families keep their children in school, obtain access to basic health services and improve their nutrition. The program seeks to break the vicious circle of structural poverty, which is transferred from generation to generation.

“Progresa is one of the few poverty-reduction programs that has been able to prove its impact on the levels of schooling of its beneficiares, their use of health services, the quality and quantity of their food, and the reduction of child labor,” said the IDB project team leader, Carola Alvarez.

An independent assessment of Progresa carried out by the International Food Policy Research Institute** concluded that the Mexican program is cost-effective, selects its target population appropriately and has positive impacts in the education, health and nutrition.

Launched in 1997, Progresa focused initially on rural areas that have the highest concentrations of extreme poverty in Mexico. To join the program families are chosen through established rules, in a process that must be validated by local communities. Families can receive support during three years as long as they meet their counterpart obligations. After that period, they can reapply for benefits but must undergo a certification of their socioeconomic conditions.

Another feature of Progresa, which is coordinated by Mexico’s Social Development Secretariat***, is that it works directly with the women in beneficiary families, trusting they will manage resources in the best interest of their children.

The program provides free food supplements to expectant and breast-feeding mothers and to infants between the ages of 4 months and 2 years to prevent undernourishment from the pregnancy stage. Progresa also awards cash grants to families to help them improve the quantity, quality and variety of their diet, as long as beneficiaries comply with a series of medical consultations and attend courses on health and nutrition.

Progresa also provides student grants and school supplies to encourage indigent families to keep their children in school. The size of the grants increases as children pass to higher grades. After the sixth grade girls get larger grants than boys, who have lower dropout rates at that stage of education.

During its first year Progresa benefited 400,000 families. In 2001 it reached nearly 2.5 million families. Under the new project supported by the IDB, the Mexican government will expand Progresa’s coverage to urban areas and will offer education support to students in the higher grades of secondary education. As a result of the project’s three-year first phase, the program is expected to reach one million additional families.

The project will also consolidate Progresa’s aid services in rural areas and improve the program’s operating efficiency by strengthening its monitoring, auditing and social communications capabilities. Diagnostic studies will be performed to adapt the program to its new goals and steps will be take to coordinate Progresa with other social programs to avoid the duplication of efforts.

The IDB is taking part in this project under its strategy of supporting Mexico’s social program to address regional imbalances, reduce income disparity and reduce extreme poverty. Other recent IDB loans have supported Mexican programs for small farmers, low-income housing, labor training and government decentralization.

The new loan was granted for a 25-year, with a three-year grace period, at a variable interest rate, currently at 6.97 per cent a year. Counterpart funds for the first phase will total $1.377 billion.

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