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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 : 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 IPES: Volatility (Hausmann, Gavin), Counter cyclical fiscal policy (Stein, etc.) IPES on Inequality (Londoño, Lora, Hausmann) 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 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 GPD growth rate Per capita GDP

6 5 periods of stability and instability Real exchange rateInflationCetes % rate

7 5 periods of cyclical and counter-cyclical fiscal policy Debt Social expenditures Externao debt as % of GDP Social expenditures as % of GDP

8 5 periods of structural reforms México LAC average

9 5 periods of changes in income distribution I II III IV V VI VII VIII IX X Decil

10 5 periods of changes in poverty Year % of total polulation Food povertyModerate poverty

11 5 periods, 5 stories Growth Recession Stability Social spending Reforms 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 period

13 : the food poverty rate declines by 16% Type of poverty Population share% Change Food Capabilities Moderate 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% 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 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 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 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 , INEGI Average wages in the mexican economy RURALURBANATOTAL % 3.7% 3.4% Lower inflation lead to higher real wages

22 Fuente: ENE , INEGI Wage bill expands by 5.7% Wage bill, ,000 40,000 60,000 80, , , ,000 RURALUrbanTOTAL % 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

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, 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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