No 45: Contradictions from the left in Mexico

The residual social policy strategy of the new Mexican government

The government of López Obrador in Mexico is letting down the poor with its austerity and poorly crafted social policy.
Andrés Manuel López Obrador in a rally at the Angel of Independence, for the swearing of Enrique Peña Nieto, December 2012. (ProtoplasmaKid/Wikimedia Commons)

by Luis Huesca Reynoso and Ricardo Velázquez Leyer

In 2018, for the first time in Mexico’s history, a left-wing government was in a fair and competitive election, just when governments in other Latin American countries began to veer to the right. The leftist politician Andrés Manuel López Obrador won the presidency with a margin not seen since the election of 1982.

With unacceptable poverty and inequality rates for the country’s level of economic development, social policy has been put at the forefront of the agenda of the new Mexican government. However, some of the first proposals have raised alarms, like the cancellation of the conditional cash transfers programme, which was the first national programme of its type in the world; the phasing out of childcare services for poor families and cuts in health spending. Efforts to improve the livelihoods of the Mexican people are at risk if the erratic path undertaken so far is not corrected. A zero-sum game process may unfold, which would at best, leave many people in the same condition as before this government took office.

The recent history: social policy expansion with poverty and inequality

Never in history have so many Mexicans received social benefits from the state as they do now. The expansion began with conditional cash transfers in the late 1990s, but soon new healthcare, childcare and pension programmes followed, among others.

This is good news, indeed. These new programmes have certainly had a positive impact on many families. They were designed and implemented with much more transparency and efficiency, and less clientelism and political corruption, than previous anti-poverty initiatives. But there is bad news too: the expansion of social policies has not been accompanied by significant reductions in poverty and inequality.

One of the main problems has been that recent governments have opted to expand social policy with a targeted social assistance logic. They have chosen not to advance towards a universal welfare system, which could provide equal levels of social protection to all the population, with services and transfers of sufficient generosity and quality to successfully fight poverty and inequality.

Instead, a dual welfare system has been created, where relatively comprehensive social protection is offered only to formal sector employees and their families – less than 50 per cent of the population – through the traditional social insurance programmes created since the 1920s. For the rest, only if they are poor enough, are they eligible for the new targeted social assistance programmes, which offer lower quality and benefit levels.

Indeed, the expansion represents progress compared to the previous situation. Many poor families, that in the past were practically excluded from the social action of the state, began to receive new transfers and services. Yet, this progress has not been enough to improve the livelihoods of many poor Mexicans.

The residual expansion strategy that focuses only on people marginalised from markets has resulted in hard targeting, minimal benefits, poor quality and limited access to social programmes.

Many families that need support are not reached by the new social assistance programmes and those who do receive it are hardly lifted above poverty thresholds. Consequently, redistribution is so minimal that it does not generate any significant social mobility. On top of that, stagnant wages counteract any positive impacts of the new programmes.

The new social strategy: breaking with the past?

So far, the new government has announced the universalisation of non-contributory pensions and the doubling of their amount, new cash transfers for young people on job training, targeted non-contributory disability pensions and transfers for poor peasants to support agroforestry projects. These actions can be perceived as further expansion of social protection, but there is a hidden side that may harm efforts to improve living standards of the majority of the population.

The expansion will be accompanied by the substitution of conditional cash transfers with scholarships for children of families in extreme poverty. Coverage of the poor population will be lower because CCTs covered more than just the extreme poor. Scholarships will provide a lesser amount to what families were receiving in CCT, only one scholarship per family will be paid independently of the number of children, and transfers paid to families with no children in school will disappear. The government claims that other programmes will offset the dismantling of CCTs but it does not specify which ones or in which way.

Another worrisome proposal is the closure of childcare services for children of poor working women with no social insurance, delivered through small private providers, who received a fee for every registered child. The government claims that there was corruption in the network’s operation, but it has not provided evidence or details. The proposal is to substitute the network with a system of cash transfers for eligible women, although they will amount to less than the previous fee paid to provide, supply will not be guaranteed, and it will result in further privatisation with less regulation.

The dismantling of CCTs and the childcare network reflect the impulse of the current government to break with previous governments. But, without adequate formulation of the costs or benefits to families, there is a high risk of worsening the situation for many people.

The rush to break with the past is affecting transparency and efficiency, as policy changes have been undertaken without proper legal and institutional frameworks, opening the door for improvisation and clientelistic practices.

Indeed, in the past, anti-poverty initiatives were characterised by their political use, as the delivery of services and benefits was frequently conditioned to support for the political regime. The reforms that began in the 1990s managed to reduce clientelism levels, but the features of the design and implementation of the initiatives introduced by the new leftist government could undo this achievement. Large numbers of poor people could be left vulnerable to being taken advantage of for electoral purposes.

The disregard of universalism

In spite of the official rhetoric, in practice, the leftist government has chosen to continue along the dual route traced by previous governments. No efforts can be discerned of breaking with the welfare system’s fragmentation and inequality. Instead, the new programmes apply the same residual and targeted logic of the recent past.

The only move towards universalism may be the expansion of non-contributory old age pensions. However, this decision only hides the failure of social insurance pensions, which due to their privatisation two decades ago will have an even more meagre coverage and lower replacement rates than the previous pay-as-you-go system. The problem is that non-contributory pension amounts are so low that it is difficult to imagine that they will offer any real protection against old-age poverty.

There have not been any proposals addressing the many problems of the disastrous public healthcare system either, which consists of separate services, infrastructure and illness coverage for different social groups. Even worse, services have been affected by draconian spending cuts. Poor quality and access and fragmented provision reproduces inequalities and pushes families of all income levels into unregulated private services.

Any attempt at advancing towards universalism would have to be attached to progressive fiscal reform, but in what seems to be another contradictory decision of a left-wing government, it has been announced that taxes will not be raised for anyone.

So far, budget increases for the new programmes have been funded by austerity measures. Spending cuts, which unfortunately have resulted in the sacking of thousands of civil servants without a justified cause, risk affecting the operation of many areas of the federal government, including health and education. The tax-benefit system already had virtually no effect on the reduction of inequality; there are huge loopholes and low progressivity in both direct and indirect taxes, problems that so far do not seem to be in the agenda of the government.

The government claims that austerity is also needed to fight corruption. In order to reduce this problem, spending has been halted, departments have been downsized and programmes have been cancelled across the government. However, this decision not only does not solve the problem but in fact represents the neoliberal recipe of reducing government to a minimum in order to address social problems.

With its strategy, the government claims to be prioritising the poor, yet, in practice, it is deepening the residual features of the welfare system. The government’s disregard of universalism repeats the mistakes of the past and will produce further social divisions. The government of López Obrador does not seem to understand that the best way of helping the poor is by building a strong welfare system for everyone.

With fragmented and unequal social policies, it is difficult to expect that social demands for transfers and services of higher levels will emerge. The window of opportunity for positive changes will not stay open for long since the political capital that the government still has has begun to diminish.

Mexico is one of the most influential Latin-American countries. The arrival of a leftist government represented a source of hope in the midst of a right-wing turn in the rest of the region. If corrective measures to amend the path chosen by the new government are not undertaken fast, its failures will echo across Latin America and beyond.

Luis Huesca Reynoso has a PhD in Economics and is full-time Professor at the Research Center for Nutrition and Regional Development (CIAD) of Hermosillo, Sonora, and visiting scholar at the Université Laval of Canada. He is also President of the Mexican Social Policy Network (REMIPSO) and a member of the National Researchers’ System (SNI) of Mexico. He tweets @lhuesca.

Ricardo Velázquez Leyer has a PhD in Social Policy and is Research-Professor and Head of Postgraduate Studies at the Department of Social and Political Sciences of the Universidad Iberoamericana (Ibero) of Mexico City and a Visiting Fellow of the University of Bath. He is a member of the National Researchers’ System (SNI) of Mexico. Click here to learn more about his research.

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