World Economy

LatAm States’ CCT Program Reduces Poverty Line to 24%

LatAm States’ CCT Program Reduces Poverty Line to 24%LatAm States’ CCT Program Reduces Poverty Line to 24%

In the past generation, a mass exodus from poverty has transformed Latin America, the world’s most unequal region, spurred on by innovative welfare programs that now face an uncertain future.

The base of Latin America’s social pyramid has been flipped on its head in recent years, driven by a “golden decade” of economic growth in the 2000s and a novel kind of welfare program, “conditional cash transfers” (CCTs), that pay poor people to do things like send their kids to school and take them to the doctor, AFP reported Friday.

In a region where for decades roughly half the population lived in poverty (less than $4 a day), the number has been slashed to 24 percent; the middle class ($10 to $50 a day) has meanwhile grown from 20 percent to 34 percent, according to the World Bank.

But now the end of the economic boom is raising questions about the future of the homegrown welfare programs that amplified its reach.

  Revolutionary Change

Born in the 1990s, CCTs brought a simple but “revolutionary” change to social policy in Latin America, according to Ana De La O, a political scientist at Yale University who has just written a book on the programs.

CCTs pay poor families a small allowance – a baseline of $28 a month in Brazil’s “Bolsa Familia” program, for example – if they meet requirements such as sending their children to school, bringing them to the doctor for check-ups and buying them nutritious food.

The idea is to break the cycle of poverty by helping the current generation while investing in the next.

The programs have racked up a string of promising results on school enrollment, child nutrition, vaccine coverage and most importantly poverty: according to the United Nations, 56 million Latin Americans exited poverty from 2000 to 2012, thanks at least in part to CCTs.

The programs have now been rolled out in 17 Latin American and Caribbean countries – though policymakers disagree on which country came up with the idea first.

Their success is changing the way governments worldwide think about fighting poverty. CCTs have been adopted in Africa, Asia and even New York City.


  Quantity Vs Quality   

But with the end of the high commodities prices that fueled Latin America’s boom years, the region’s economic growth is expected to come in at just over one percent for 2014 and just over two percent for 2015.

The slowdown may make it harder for CCTs to take the crucial next step: matching quantity with quality.

With millions more poor children regularly attending schools and clinics across Latin America, the weaknesses of the public education and health systems have been on full display.

“The next big challenge is that these programs by themselves cannot end poverty,” De La O told AFP.


  Social Policy ‘Rethink’

With the first generation of beneficiaries now entering the labor market, CCTs, which are known for their sophisticated number crunching, must also deliver one more key result: show they are helping the next generation stay out of poverty.

The good news for post-boom Latin America is that CCTs are relatively inexpensive – they cost about one or two percent of gross domestic product.

The bad news is that the rest of the social policy equation is growing more costly.

“Now we have more of the population out of poverty, we need to rethink our whole social policy,” said Augusto de la Torre, the World Bank’s chief economist for the region.