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Mexico 2000-2002: Poverty reduction with stability and expansion of social programs By Miguel Székely Subsecretario de Prospectiva, Planeación y Evaluación.

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Presentation on theme: "Mexico 2000-2002: Poverty reduction with stability and expansion of social programs By Miguel Székely Subsecretario de Prospectiva, Planeación y Evaluación."— Presentation transcript:

1 Mexico 2000-2002: Poverty reduction with stability and expansion of social programs By Miguel Székely Subsecretario de Prospectiva, Planeación y Evaluación Secretaría de Desarrollo Social de México

2 Reasons for presenting this paper 1.1997-1998 IPES: Volatility (Hausmann, Gavin), Counter cyclical fiscal policy (Stein, etc.) 2. 1998-1999 IPES on Inequality (Londoño, Lora, Hausmann) 3. 2003 IPES on labor markets (Pagés, Duryea, etc.) 4. RES work on poverty and inequality (Londoño, Spilimbergo, Panizza)

3 Contents 1.Historical context of poverty: 5 periods in the past 20 years 2.The 2000-2002 period 3.Poverty decomposition & explanations 4.Conclusions

4 1. Historical context of poverty: 5 periods in the past 20 years

5 5 periods of crisis, growth and stagnation -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0 198419851986 19871988198919901991199219931994199519961997 1998 1999200020012002 0 2000 4000 6000 8000 10000 12000 14000 16000 18000 GPD growth rate Per capita GDP 112131415

6 5 periods of stability and instability 0 20 40 60 80 100 120 140 160 198419851986198719881989199019911992199319941995199619971998 1999200020012002 Real exchange rateInflationCetes % rate 12131415 1

7 5 periods of cyclical and counter-cyclical fiscal policy 0.0 10.0 20.0 30.0 40.0 50.0 60.0 19841985198619871988198919901991199219931994199519961997 1998 1999 200020012002 Debt 0 1 2 3 4 5 6 7 8 9 10 11 Social expenditures Externao debt as % of GDP Social expenditures as % of GDP 2 3 4 5 1

8 5 periods of structural reforms 0.1 0.15 0.2 0.25 0.3 0.35 0.4 0.45 0.5 0.55 1985198619871988198919901991199219931994199519961997 1998 1999200020012002 México LAC average 2345 1

9 5 periods of changes in income distribution I -2.237.7-22.312.214.6 II 1.831.0-20.017.06.9 III 3.431.3-20.320.75.5 IV 2.734.1-21.222.14.0 V 2.636.3-21.923.81.7 VI 1.338.9-23.224.5-0.3 VII 0.839.5-23.523.40.5 VIII 1.341.7-24.724.8-0.1 IX 3.944.3-25.625.0-1.7 X 21.739.7-29.033.7-12.0 1996-002000-02Decil1984-891989-941994-96

10 5 periods of changes in poverty 19.5 22.7 22.5 21.1 37.1 33.9 24.2 20.3 26.5 29.3 28.0 29.4 45.3 40.7 31.9 25.6 50.3 53.5 52.6 55.6 69.6 63.9 53.7 51.7 0 10 20 30 40 50 60 70 80 19841985198619871988 19891990199119921993199419951996 19971998 1999 200020012002 Year % of total polulation Food povertyModerate poverty 2345 1

11 5 periods, 5 stories 1984-89 Growth Recession Stability Social spending Reforms 2345 1 1989-941994-961996-002000-02 Instability Contraction Deepening Growth Stability Expansion Deepening Recession Instability Contraction Slow down Growth Stability Expansion Slow down Stagnation Stability Expansion Slow down Poverty Increase StableIncreaseDecline

12 2. The 2000-2002 period

13 2000-2002: the food poverty rate declines by 16% Type of poverty Population share% 20002002Change Food 24.220.3-16.1 Capabilities 31.926.5-16.9 Moderate 53.751.7-3.7 Fuente: Cálculos de la Secretaría de Desarrollo Social con base en la metodología oficial de medición de la pobreza aplicada a la ENIGH 2000 y a la ENIGH 2002 del INEGI. 3.4 million individuals “escape” food poverty

14 3. Poverty decomposition and explanations

15 44% 40% 72% 48% 33% 2% 12% 6% 4% 10% -40% 3% -10% 4% 5% 2% -0.50 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 Food poverty (3.9 points) Capital rents Procampo Remittances Oportunidades Wages Other 36% Relative prices 14% Capabilities poverty (5.4 points) Decomposition of changes in poverty 28% Moderate poverty (2 points)

16 a) Social spending 1.Oportunidades expands by 1.75 million hounseholds (70% expansion, reaching 4.2 million houeseholds = 22 million people). 2. Cash benefits increase by 85% (7,600 to 14,206 billion $) –representing 30% of income of poorest 20%

17 b) 2 transmission mechanisms by which stability reduces poverty 1.Relative prices of items of food poverty basket 2.Increases in real wages

18 Significant reductions in inflation rates… Inflation Rate 1996-2002 0.00 10.00 20.00 30.00 40.00 50.00 60.00 Ene-96 May-96 Sep-96Ene-97 May-97 Sep-97Ene-98 May-98 Sep-98Ene-99 May-99 Sep-99Ene-00 May-00 Sep-00Ene-01 May-01 Sep-01 Ene-02 May-02 Sep-02 Fuente:Banxico

19 Relative change in consumer price index by item About one half of the items in the food porverty basket lower their price relative to the CPI 0 500 1000 1500 2000 2500 19941996199820002002 Periodo % Increase Legumbres secas excepto frijol arroz y cereales preparados Pescados y Mariscos en conserva aceites y grasas comestibles trigo y derivados carne y visceras de cerdo carne de ave arroz -12% -8% -1% -3% -6% -4% -2% -11%

20 -10 -8 -6 -4 -2 0 2 4 6 8 10 Ene-97 Abr-97 Jul-97 Oct-97 Ene-98 Abr-98 Jul-98 Oct-98 Ene-99 Abr-99 Jul-99 Oct-99 Ene-00 Abr-00 Jul-00 Oct-00 Ene-01 Abr-01 Jul-01 Oct-01 Ene-02 Abr-02 Jul-02 Oct-02 Average 5.16 Real increases by 5.16% in contractual wages

21 Fuente: ENE 2000-2002, INEGI Average wages in the mexican economy 2000-2002 0 500 1000 1500 2000 2500 3000 3500 4000 4500 RURALURBANATOTAL 2000 2002 2.3% 3.7% 3.4% Lower inflation lead to higher real wages

22 Fuente: ENE 2000-2002, INEGI Wage bill expands by 5.7% Wage bill, 2000-2002 0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 RURALUrbanTOTAL 2000 2002 4.2% 6.0% 5.7% Miles

23 c) More remittances for the moderately poor Remittances grow from $840 million to 1 billion between 2000 and 2002

24 The share of remittances in total income, grows between 2000 and 2002 Fuente: Cálculos propios con base en la ENIGH 5.0% 5.2% 6.0% 6.5% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% Food povertyModerate poverty 20002002

25 Because of improvements in commissions and access to the formal financial system… Evolución del costo total para enviar $USD 300 de EUA a México en las ciudades con mayor presencia de migrantes mexicanos $31.76 $32.99 $26.08 $29.83 $32.43 $39.03 $15.83 $15.48 $14.61 $17.26 $19.19 $17.90 $- $5 $10 $15 $20 $25 $30 $35 $40 ChicagoLos ÁngelesNueva YorkDallasMiamiHouston Fuente: PROFECO, 2002. Ago-99Ene-02

26 … and because of better exchange rates

27 4. Conclusion

28 Conclusion Stability and counter-cyclical social spending pay for poverty reduction


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