Conditional cash transfers in Mexico and Colombia

Challenge

Describe the key sector/thematic issues at the regional or global level and examine how the strategy is linked to the overall macro work of the Bank. Provide background/contextual information (historical, geographical, crisis, MDGs, etc). Use past tense and dates to place the challenges in time. Maximum 250 words.

The financial crisis of the 1990s affected deeply Mexico and Colombia.  In 1994, the Tequila Crisis hit Mexico. The economy contracted by more than 6%, unemployment rates more than doubled, and poverty rates increased from 52 to 69 percent. Soon after, Colombia found itself in a severe economic crisis: GDP growth declined by 4% - the only negative growth rate in 60 years - unemployment rates reached 40% among families in the bottom income quintile (from 21% in 1996), urban poverty rates increased from 42.8% to 51% and rural extreme poverty increased from 40.3% to 43.4%. Both countries lacked social safety nets, leaving its population in a particularly vulnerable situation.

Solution

In 1999, the World Bank started working with the Government of Colombia (GoC). After the Bank organized a visit of the GoC to Mexico to learn about a new type of program (Conditional Cash Transfers), Colombia asked the World Bank (WB) and the Inter-American Development Bank (IDB) to help them design and launch Familias en Acción. Responding to this request in 1999 was a challenge. According to Bank policy, loan money could not be destined for consumption, especially if the spending could not be monitored. The technical and legal teams worked together to design a results-based financing model, the first CCT loan by the Bank.

The model has been used by Bank teams in over 35 countries that are implementing CCT programs. Over the next 13 years, the Bank offered a series of  knowledge, financial and convening services in response to government needs, including impact evaluations, a number of Development Policy Loans (DPLs) and Specific Investment Loans (SILs) to support education, training, and health system expansion and quality improvements (financial services), Programmatic Knowledge Services (PKSs), and study tours from other countries implementing similar programs.

The Bank’s engagement with the Mexican Oportunidades program went through a similar process; initiated by convening services. At the time of Mexico’s crisis, the country launched the first national CCT program, based on a city-design in Brazil. The program expanded rapidly and, by 2004, Mexico was the world leader in the program. Again, specific requests resulted in a bundle of services provided to the Government of Mexico (GoM) (first bi-annual CCT Conference in Cuernavaca, a client-to-client community of practice, a series of technical papers to strengthen design elements of the program, and in 2008 a loan).

Results

The results have been significant. From the perspective of beneficiaries, over 5 million Mexican and Colombian families benefit from the program. Rigorous impact evaluations show that the children of these families eat more, eat healthier, are taller and weight more, have higher birth weights, have greater educational attainment rates, and work less, as compared to their non-beneficiary (comparative) peers. 

For governments, these programs have become the Flagship Social Protection programs for the extreme poor. After years of external funding, the Colombian government in 2012 announced it would fund the program with national resources and it passed a law to make the program national policy. The Oportunidades program will enter its third administration by January 2013.  These programs are world knowledge leaders; by 2012 Colombia and Mexico had received over 100 study tours from visiting countries and the Program has been replicated in more than 35 countries.

For the World Bank, this way of working has led to new development solutions in financial services, knowledge, and convening services that are being replicated across the world.  
 
Bank Group Contribution

Short list of costs of various interventions and size/nature of Bank contribution (financial and TA). Differentiate between IDA, IBRD, Trust Funds, IFC and MIGA. For each trust fund, mention the name of the countries financing it. Maximum 250 words.

During fiscal years 1999-2012, the Interantional Bank for Reconstruction and Development (IBRD) helped develop, implement, and strengthen Colombia’s Familias en Acción program. The direct lending program consisted of four operations valued at nearly US$1 billion. Additionally, the IBRD approved more than US$1.5 billion in policy lending in the health and education sectors and $500 million in investment lending in education to support the quality and reach of the programs that Familias en Acción beneficiaries utilize.

Over the 13 years, the lending program was accompanied by an intensive analytical, technical cooperation, and convening services program, valued at more than US$700,000. In the year 2008, the IBRD approved US$1.5 billion for Mexico’s Oportunidades program – 40 percent of total IBRD safety net lending – which was topped up by an additional US$1.25 million in additional financing.  The direct lending was accompanied by more than $500 million in lending for the education sector and US$1.25 billion to support a health insurance program that Oportunidades beneficiaries access to comply with the health co-responsibilities of the project. This program has been accompanied by technical cooperation and analytical work, as well as active convening services, largely financed by visiting delegations.

Partners

List partners and their contributions and other relevant information (joint missions, etc) on Paris/Accra harmonization efforts.  If applicable, describe the role the Bank played in leveraging funds, developing partnerships, and promoting country ownership. Maximum 250 words.

The Interantional Bank for Reconstruction and Development (IBRD) has work closely with the Inter-American Development Bank in the design and implementation of the Colombian Familias en Acción program and the implementation of the Mexican Oportunidades program. The partnership is in both financial and the technical cooperation activities. At the country level, the IBRD has partnered with the Secretary of Social Development in Mexico, and the Presidential Office for Social Action, the Ministry of Social Protection, and the Department for Social Prosperity in Colombia, providing lending and technical assistance to support CCT programs.

Moving Forward

In 2012, the Colombian government made the Familias en Acción program a formal part of their government strategy, which included moving the program to a permanent governmental Ministry and allocating annual budget to this purpose. The program was also expanded to reach new groups of people, and it was renamed Mas Familias en Acción. The IBRD continues its technical cooperation with the program. 

The Mexican government considers Oportunidades its flagship poverty reduction program and has invited the IBRD to support its efforts to redesign the program; the work is in progress. To date, the programs have created a wealth of knowledge on the impacts of cash transfers on poverty and human development outcomes, have inspired similar programs in more than 25 countries, and have hosted more than 100 visiting delegations from developed and developing countries to learn about the program design. The introduction and success of the conditional cash transfer model is the greatest revolution in social protection systems in the past generation.

Beneficiaries

The stories of the Oportunidades beneficiaries are captured in the book Oportunidades: Stories of Success. For example, Renata was seven years old when her family enrolled in Oportunidades.  Her older sister had dropped out of school to care for Renata and her siblings, who lived in a poor, indigenous speaking region in rural Mexico. Seventeen years later, Renata had completed her bachelor’s degree in economics and she is the first woman in her community to have received a professional degree. Renata works at Oportunidades as a social promoter helping the Tsotsil-speaking members of her community. Oscar, also from an indigenous family, was six years old when his family registered in Oportunidades.  He is now 26 years old, and a college graduate with a degree in History.  Using his native language, Oscar works as a translator for researchers.