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Mexico 2000-2002: Poverty reduction with stability and expansion of social programs By

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. Reasons for presenting this paper.

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Mexico 2000-2002: Poverty reduction with stability and expansion of social programs By

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  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 • 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 • Historical context of poverty: 5 periods in the past 20 years • The 2000-2002 period • Poverty decomposition & explanations • Conclusions

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

  5. 5 periods of crisis, growth and stagnation 8.0 18000 GPD growth rate Per capita GDP 16000 6.0 14000 4.0 12000 2.0 10000 0.0 8000 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1984 1985 1986 1999 2000 2001 2002 -2.0 6000 -4.0 4000 -6.0 2000 1 1 2 1 3 1 4 1 5 -8.0 0

  6. 5 periods of stability and instability Cetes % rate Inflation Real exchange rate 160 140 120 100 80 60 40 20 0 1999 2000 2001 2002 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1 1 2 1 3 1 4 5 1

  7. 5 periods of cyclical and counter-cyclical fiscal policy 11 Social expenditures as % of GDP Externao debt as % of GDP 60.0 10 9 50.0 8 7 40.0 6 Social expenditures Debt 30.0 5 4 20.0 3 2 10.0 1 4 3 5 2 1 0.0 0 1998 2000 2001 2002 1999 1989 1990 1991 1994 1995 1996 1997 1984 1985 1986 1987 1988 1992 1993

  8. 5 periods of structural reforms México LAC average 0.55 0.5 0.45 0.4 0.35 0.3 0.25 0.2 1 2 3 4 5 0.15 0.1 1999 2000 2001 2002 1998 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

  9. 5 periods of changes in income distribution Decil 1984-89 1989-94 1994-96 1996-00 2000-02 I -2.2 37.7 -22.3 12.2 14.6 II 1.8 31.0 -20.0 17.0 6.9 III 3.4 31.3 -20.3 20.7 5.5 IV 2.7 34.1 -21.2 22.1 4.0 V 2.6 36.3 -21.9 23.8 1.7 VI 1.3 38.9 -23.2 24.5 -0.3 VII 0.8 39.5 -23.5 23.4 0.5 VIII 1.3 41.7 -24.7 24.8 -0.1 IX 3.9 44.3 -25.6 25.0 -1.7 X 21.7 39.7 -29.0 33.7 -12.0

  10. 5 periods of changes in poverty 80 69.6 70 63.9 60 55.6 53.7 53.5 52.6 51.7 50.3 50 45.3 % of total polulation 40.7 40 31.9 29.3 29.4 37.1 28.0 30 26.5 33.9 25.6 20 24.2 22.7 22.5 21.1 20.3 19.5 10 1 2 3 4 5 0 1989 1990 1991 1992 1993 1994 1995 1996 2000 2001 2002 1999 1984 1985 1986 1987 1988 1997 1998 Year Food poverty Moderate poverty

  11. 5 periods, 5 stories 1 2 3 4 5 1984-89 1989-94 1994-96 1996-00 2000-02 Growth Growth Recession Growth Stagnation Recession Stability Stability Instability Stability Stability Instability Social spending Expansion Contraction Expansion Expansion Contraction Reforms Deepening Slow down Slow down Slow down Deepening Poverty Stable Increase Decline Decline Increase

  12. 2. The 2000-2002 period

  13. 2000-2002: the food poverty rate declines by 16% Population share % Type of poverty 2000 2002 Change 24.2 20.3 -16.1 Food 31.9 26.5 -16.9 Capabilities 53.7 51.7 -3.7 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. Decomposition of changes in poverty 3.50 28% Relative prices 36% 4% 3.00 Other 4% 2% Procampo 6% 2% Remittances 2.50 33% 2.00 Oportunidades 48% 14% 1.50 2% 10% 12% 1.00 40% 0.50 72% 44% Wages 0.00 3% -10% 5% Capital rents -0.50 -40% -1.00 Capabilities poverty (5.4 points) Moderate poverty (2 points) Food poverty (3.9 points)

  16. a) Social spending • Oportunidades expands by 1.75 million hounseholds (70% expansion, reaching 4.2 million houeseholds = 22 million people). • 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 • Relative prices of items of food poverty basket • Increases in real wages

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

  19. About one half of the items in the food porverty basket lower their price relative to the CPI Relative change in consumer price index by item Legumbres -12% secas excepto 2500 frijol arroz y cereales -8% preparados 2000 -1% Pescados y Mariscos en -3% conserva % Increase 1500 aceites y grasas -6% comestibles trigo y derivados 1000 -4% carne y visceras -2% 500 de cerdo -11% carne de ave 0 1994 1996 1998 2000 2002 arroz Periodo

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

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

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

  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 7.0% 6.5% 6.0% 6.0% 5.0% 5.2% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Food poverty Moderate poverty Fuente: Cálculos propios con base en la ENIGH 2000 2002

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

  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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