Propuesta Tablero de Control

Some scholars have suggested that CCTs may impact the wider local economy in addition to the direct recipients, by injecting additional resources on a regular basis (Angelucci et al. 2006; Barrientos, 2012). While CCT budgets may be too small, at between 0.2 to 0.8% of GDP (The Economist, 2012), to influence national economic growth, “this does not rule out the possibility of impacts at the household and community level” (Kabeer et al, 2012: 4).³¹ In Mexico, the spill-over effects of Progresa-Oportunidades is particularly significant in those states or municipalities where poverty is widespread and recipient households represent a large percentage of their total population. In the poorest states (Chiapas, Oaxaca and Guerrero) the program reaches more than 50% of the population (Oportunidades, 2010a: 13); this number is even higher in the poorest municipalities. There are multiple ways in which the injection of resources through cash transfers can produce spill-over effects in the regional economy. Cash transfers have the potential to increase consumption, production and trade. Since 2001 cash transfers are increasingly being distributed by banking institutions, which injects capital into regional bank branches. Cash transfers might also allow recipient

31 As mentioned in chapter two, Levy stressed that “Progresa-Oportunidades will not directly increase economic growth, but indirectly by fostering a healthier and more educated labour force, which can lead to a higher potential productivity of labour (2006: 20).

households to save, invest and access credit; and may also provide incentives for creating income earning opportunities and businesses. Despite these potential indirect impacts on the regional economy, few studies have been conducted on this topic.

According to Levy, when Progresa-Oportunidades was being designed “it was expected that the additional monetary income in small rural communities would be an incentive for local producers, having a “multiplier effect” in the local economy” (2006:

69). In addition, “the higher spending by program households is a potential additional channel for creating income-generating opportunities for the poor” (2006: 70). At the same time, one of the concerns when the program was implemented was “whether the income transfers from Progresa-Oportunidades would generate inflationary pressures in small rural communities, where the supply of food could be inelastic” (Levy, 2006: 45 -46). Studies have found no evidence of such effects (Hoddinot, Skoufias and Washburn, 2000; Handa, Huerta, Pérez and Straffon, 2001; Angelucci and De Giorgi, 2009). Handa et al. (2001: 26-27) offered two possible reasons for this: 1) state subsided stores (known as Diconsa) may have played a role in maintaining fixed prices for basic items, and 2) program recipients tend to spend their cash transfers in the municipal head (known in Mexico as ‘cabecera municipal’) rather than in their own communities, particularly when program recipients need to travel to collect their payment.

Escobar and González de la Rocha (2005) found that the provision of cash transfers on a regular basis has allowed recipients, particularly women, to access formal and informal credit, which further increases their purchasing power. The regularity of transfers has provided certainty to merchants to extend credit to recipient households, and this is not limited to food items but on other goods (clothes, furniture and appliances) and services (electricity and gas bills). Cash transfers have stimulated local economies by extending the borrowing power of recipients. Similarly, Angelucci and De Giorgi (2006) found that ineligible households also increased their consumption, not because of increased production but from borrowing from eligible households. They found “that ineligible households living in treated villages receive more informal loans, more transfers from family and friends, and for every 100 pesos transferred by Progresa to the eligible households, the consumption of ineligible households increases by approximately 11 pesos (2006: 5-6).

Cash transfers have led to increased production for own consumption, but there is no evidence that these transfers provide incentives for generating income earning opportunities and businesses. A study by Arroyo (2008) found no conclusive evidence to indicate that Progresa-Oportunidades increased investment or helped create small businesses. Rodríguez and Pasilla (2008) examined the impacts of cash transfers on the local economy in rural areas, using data from the Household Assessment Survey (Encuesta de Evaluación de los Hogares- ENCEL) during the 1997-2007 period. They expected that the increased purchasing power of recipients would translate to higher volumes of sales for existing stores and provide incentives for the creation of small grocery stores (known as ‘abarrotes’). They concluded that the establishment of small stores could not be attributed to the presence of Progresa-Oportunidades, and was more likely determined by the size of the localities. And while it is possible that cash transfers increased the volume of sales in existing stores, they were not able to measure sale volumes with the available data. The authors argued that available data was insufficient to evaluate the impacts of Progresa-Oportunidades on the local economy and therefore, recommended the development of new evaluation instruments.

These studies have provided important insights into possible spill-over effects of cash transfers, but what is needed is more analysis on what, how and where recipients are spending, in order to obtain a better understanding of how cash transfers are impacting the regional economy. Researchers have studied the impacts of cash transfers on direct recipients, but not on regional markets. According to Creti (2010: 17) the analysis of multiplier effects “consists of following the steps through which cash passes from the hands of the project beneficiaries to other market actors. While project monitoring usually stops at the first round of expenditure - that is, ‘how beneficiaries spend money’- the multiplier analysis usually follows the cash up to the second and the third-round of expenditures. The analysis seeks to understand whether the cash remains in the local economy and whether additional goods and services are created to meet the additional demand”. While the economic spill-over effects of Progresa-Oportunidades may be positive for the regional economy, they could also have negative consequences if the cash transfers significantly leak into the non-poor population, thus, exacerbating or even increasing inequality.