Mexico's poorest receiving less government funds under president who brought poor to the fore

President Andrés Manuel López Obrador swept into office nearly six years ago with a simple motto laying out his administration’s priorities: “For the good of all, first the poor.”

His administration scrapped a host of existing social programs and installed their own, quickly increasing overall social spending to unprecedented heights for senior citizens, unemployed youth, students, farmers and people with disabilities.

But less noticed was that the new roster of social programs dramatically shifted who was getting that money. Suddenly, Mexico’s poorest citizens were receiving a smaller portion of the spending and less money than under previous administrations.

Meanwhile, some of Mexico’s wealthiest started getting money they didn’t really need.

The shift owed largely to a massive “universal” pension benefit for seniors that López Obrador launched on a chilly January day outside Mexico City in 2019, just weeks after taking office. He announced he was more than doubling the existing federal pension — it has since doubled again — and expanding it regardless of income to people who previously didn’t qualify, like those who received another pension from their former employer.

If much more money isn't poured into the system, “universal programs spread benefits more thinly over the whole population with the result that the people who were most in need get worse,” said Robert Greenstein, a fellow at the Brookings Institution in Washington. “Poverty can go up. Inequality can be greater than it would be under a more targeted scheme.”

But López Obrador’s social programs have proven so popular that even the opposition candidates running to replace him in the June 2 election have promised to expand them. Some 28 million Mexicans will benefit from one of the programs this year. In Sunday night’s final presidential debate, candidate Xóchitl Gálvez said she would lower the minimum pension age to 60 from 65.

The pension is the largest social program by budget in López Obrador’s slate of handouts, far surpassing the also well known Youth Building the Future, which pays young adults who neither study nor work to apprentice, and Sowing Life, which pays farmers to plant fruit or lumber-producing trees on their land.

Combined with the elimination of predecessors’ more targeted programs that had focused on Mexico’s most in need, experts say the pension dramatically shifted the distribution of government funds.

Four months from the end of López Obrador’s six-year term, several million people have escaped poverty. But factors beyond the social programs are involved, including López Obrador's nearly tripling of the minimum wage and Mexicans abroad continuing to send home record amounts of money to relatives.

Curiously, there are about 400,000 more Mexicans in extreme poverty than at the beginning of his term, according to government data.

A government report published every two years that divides Mexico’s population into 10 segments by income says the very poorest segment in 2018 received about 19% of social spending. Just two years later, that poorest group was receiving only about 6%, said Manuel Martínez Espinoza, a researcher at Mexico’s National Council of the Humanities, Sciences and Technologies. For reasons unknown the government has not published the 2022 report.

CASH TO FAMILIES, BUT WITH A CATCH

At a counter in a central Mexico City market, Arturo García leaned over a steaming bowl of tripe stew on a recent morning. The 73-year-old retired cab driver said he stopped taking fares during the pandemic.

Now the $362 (6,000 pesos) he receives from his universal pension every two months and some money he gets renting out a storage space in his home to street vendors are his only sources of income.

“You have money or you don’t have money, they give it to you,” García said of the pension. “The government is trying to make us all equal.”

One of the programs López Obrador ended when he took office was called Prospera. It had targeted Mexico’s poorest families for some two decades under various names with what were known as conditional cash transfers. Poor families received money, but it was restricted by income level and recipients had to meet some requirements to get it, like taking their children for medical checkups.

The president said the program was clientelist and suffered from systematic corruption, though instances of corruption have also been found in López Obrador’s programs.

Targeted social programs like Prospera attempt to be more precise in steering public funds to specific segments of the population. For that reason they tend to be less expensive than universal programs.

Critics, however, say they stigmatize the poor; have less political support, which makes them vulnerable to being cut; require more administration to determine eligibility and fewer people enroll, said Greenstein, the fellow at the Brookings Institution, adding that those risks are not inherent in targeted programs.

Mexico’s Welfare Ministry did not respond to requests for comment.

Prospera’s funding was redirected to López Obrador’s programs, principally the universal pension, signaling an important shift from a means-tested program that largely benefitted poor children to one that provided cash to all senior citizens.

One of the more cynical criticisms of the shift is that children don’t vote, but seniors do.

PEOPLE WHO DON'T REALLY NEED IT ARE GETTING MORE

The other side of Mexico’s poorest receiving a smaller proportion of social spending under this administration is that people who don’t really need it are getting more.

One morning in late April, César Herrera brought his elderly mother to a branch of the Banco Bienestar, or Welfare Bank, in Mexico City to withdraw her pension payment. The bank was created by López Obrador as a vehicle to get payments from his administration’s programs directly into the hands of Mexicans.

Herrera said he and his mother had driven by in February when the last pension deposit was made and saw the line stretching down the street. But unlike many seniors who live payment to payment, Herrera said his mother didn’t need the money, so they left.

“However, it’s there,” he said when they returned a month and a half later. “Of course you have to take it.”

The ninth out of 10 income strata, or the second highest, analyzed by the government went from receiving about $4.40 of every $100 in social spending in 2018 to getting about $10 in 2020, said Martínez, the researcher at the humanities, sciences and technologies council.

Martínez said his field work in Chiapas, Mexico’s poorest state, found many people who were not receiving as much money as they had previously under Prospera, but who nevertheless fervently supported López Obrador.

“I’ve talked with a lot of people in my field work, they feel valued, they feel the president values them, which they didn’t feel before," Martínez said.

Martínez hypothesizes that the growth in extreme poverty during this administration was due in part to the elimination of Prospera but also the fact that people in extreme poverty tend to work in the informal sector — which would not have benefited equally from the increased minimum wage. Another factor was the COVID-19 pandemic forced a lot of families to exhaust their limited savings on health care.

Much of the back-and-forth between López Obrador’s anointed successor Claudia Sheinbaum and the opposition candidate Gálvez has been the president and Sheinbaum insisting that Gálvez will end the social programs if she wins — and Gálvez promising that she won’t. Much of that debate is unnecessary since the pension is now enshrined in the constitution.

Martínez said that even at the current 65 minimum age the program is burning through public funds too rapidly.

“In the short term, it’s a time bomb because it’s going to generate problems because it isn’t fiscally sustainable,” he said.