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Programs of conditional cash transfers seen as effective in reducing poverty and exclusion

BELO HORIZONTE, Brasil - Successful conditional cash transfer programs, which had their start more than 10 years ago in Brazil, exemplify the search for models capable of eliminating inefficiencies and inequities that persist in many areas of social policy, according to experts and senior officials at a seminar on social challenges.

This generation of programs--now being carried out and evolved at the international level--ties cash transfers to increases in school attendance and the use of preventative health and nutrition services among the poor and persons living in extreme poverty. The programs, which are supported by the Inter-American Development Bank in many countries, help to increase human capital by raising levels of education and health, ultimately resulting in a more productive labor force.

“The promotion of growth with inclusion requires action in two areas: improving the productive capacity of the poor and promoting their access to job markets with greater opportunities for employment and wealth creation,” said Manuel Rapoport, IDB manager for the Southern Cone countries, in his opening statement. “Since labor is the main factor of production of the poor, a critical element in the fight against poverty and inequality is strengthening investment in human capital beginning at the earliest stages of infancy,” he said.

The participants agreed that in order to attain the Millennium Development Goals’ objective of reducing poverty by half by the year 2015, and improving equity, one of the priorities for the coming decade must be to integrate different programs and expand the scope of the most efficient initiatives, such as conditional cash transfers.

Conditionality is a very important aspect of this kind of program to produce change, and evaluations of impact will make it possible to measure the increases in school attendance and indices of nutrition and determine what are the most efficient approaches in the medium and long term. In addition, it was agreed that a combination of cash incentives and obligatory use of education and health services require an adequate supply of services to satisfy the additional demand.

“These programs are very attractive for Latin America and the Caribbean due to their benefits, their cost-effectiveness and their flexibility, as well as the institutional development they entail,” said Alicia Ritchie, IDB operations manager for the Andean and Caribbean countries at the state of a discussion of how these programs can influence future social policies in the region and in consolidating pending reforms to integrate programs or provide beneficiaries with access to credit services.

Among the participants in the event were Patras Ananias, Brazil’s minister of social development and hunger alleviation; Roberto Lavagna, ex finance minister of Argentina; Ana Teresa Aranda, social development minister of Mexico; Pedro Aguayo Cubillo, former vice president of Ecuador; Mario Marcel, researcher and former budget director of Chile; Carlos Eduardo Vélez, chief of the IDB Poverty and Inequality Unit; and Ricardo Paes de Barros, of Brazil’s Institute of Applied Economic Research.

Lavagna said that, albeit tardily, the region and the multilateral organizations have recognized the importance of reducing levels of inequality not just to fight poverty, but also to spur growth. He added that social policy has emerged from the sidelines of economic policy to occupy a central role.

Patrus Ananias highlighted Brazil’s plans to expand Bolsa Familia to include 11 million persons, and noted his country’s efforts to consolidate a unified system of social assistance based in different levels of government and carried out with federal authority with the participation of society. He added that the importance of evaluating and monitoring the programs has led to the creation of a Secretariat of Evaluation in his ministry.

IDB-supported programs

Thirteen countries in the region have implemented cash transfer programs, in most cases with Bank support. They include Argentina (Plan Familias), Brazil (Bolsa Família), Chile (Chile Solidario),Colombia (Familias en Acción), Costa Rica (Superémonos), the Dominican Republic (Solidaridad), Ecuador (Bono de Desarrollo Humano), El Salvador (Red Solidaria), Honduras (PRAF), Jamaica (PATH), Mexico (Progresa/Oportunidades), Nicaragua (Red de Protección Social) and Peru (Juntos).

Bank support for cash transfer programs between 2000 and 2005 totaled $4.5 billion. In 2005 alone, the IDB approved loans of $1.2 billion for Mexico’s Oportunidades Program, $700 million for Argentina’s Plan Familias and $57 million for El Salvador’s Red Solidaria.

The biggest programs, Plan Familias in Argentina, Bolsa Família in Brazil and Oportunidades in Mexico, are helping a total of 16.7 million families living in extreme poverty.

The Bolsa Familia program was launched in 2003 with the fusion of existing cash transfer programs, and today stands as Brazil’s the most important anti-poverty initiative. The present objective is to extend coverage to all eligible families.

The Oportunidades project in Mexico was a particularly noteworthy social investment project. By targeting resources to indigent families and implementing measures to continuously monitor key project components—incentives to encourage children to remain in school and for parents to make better use of health care and nutrition services—the operation will build on success already achieved by the government of Mexico in the social sectors, while looking for ways to repeat the successes elsewhere and better evaluate expenditures in these vital sectors.

Social programs

The IDB targeted $3.4 billion, almost half of its lending in 2005, to poverty reduction and social equity programs in Latin America and the Caribbean.

The IDB last year continued to be the primary source of multilateral development funding for the region for the 12th consecutive year and the funds committed followed guidelines set by the Board of Governors for favoring the poor and less developed countries.

The IDB’s Social Development Strategy sets four lines of activity to help countries in the region accelerate social progress and achieve the Millennium Development Goals: implement reforms in health, education and housing; promote life-long human development; promote social inclusion and prevent social ills; and deliver integrated social services geographically targeted to reduce poverty.

Most of the loans in this area were for safeguarding the environment and prevention of natural disasters, followed by urban development, education, health, water and sanitation and social investment.     

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