Since coming to office in 2018, Mexican president Andrés Manuel López Obrador has made tackling inequality a key tenet of his Fourth Transformation. Millions have been lifted out of poverty, and the divide between rich and poor is shrinking.
President Andrés Manuel López Obrador acknowledges his supporters during the fifth-year celebration of the victory in the 2018 presidential election on July 1, 2023 in Mexico City, Mexico. (Hector Vivas / Getty Images)
On August 10, Mexico’s National Council for the Evaluation of Social Development Policy (CONEVAL), an independent federal agency, released its much-awaited poverty measurements for 2022. Its findings outstripped the most optimistic forecasts: the multidimensional poverty rate in Mexico — a measurement of income plus a series of social rights such as food, housing, and education — fell 5.6 percent from 2018 to 2022, translating to some 5.1 million people. When compared to the height of the pandemic, the numbers are even more dramatic, with 8.9 million being lifted out of poverty over the last two years.
Other statistics from the report, together with findings from the National Institute of Statistics and Geography (INEGI), were equally promising. The income gap between the top and lowest 10 percent of incomes is down from twenty-one times (2016) to fifteen times (2022), while the Gini coefficient has dropped from 0.448 to 0.402 over the same period.
The divide between the lowest- and highest-income states has been squeezed by 20 percent, an important indicator in a country with a historic north/south divide. Another crucial divide, rural/urban, has also been ameliorated by a 17 percent rise in household incomes in the countryside. What is more, the highest income gains have come among women and those in the most precarious employment, such as agriculture and the informal sector in general.
Deficiencies in food, housing, and “social security” (defined as the ability to cope with contingencies such as accidents, sickness, or old age) have also declined. In overall terms, the poverty level, now 36.3 percent, is at its lowest point in a generation. Despite years of industrial-strength scoffing from the usual suspects, domestic and international, Mexico’s Fourth Transformation is doing exactly what it said it would do: for the good of all, put the poor first.
Explaining It Away
Faced with the unmistakable data in the report, the usual suspects took one of two tacks: ignore it or, more amusingly, cast about for any explanation that didn’t give credit to governmental policy. According to the Associated Press, “It was unclear what was behind the reduction in poverty,” as if the case were simply too mysterious and inscrutable to be fathomed.
Because President Andrés Manuel López Obrador (AMLO)’s social programs are universal rather than means-tested, argued the wire service, there was simply no way of telling whether they have helped the poor. Others pointed to the increase in remittances from migrants living in the United States, although as economists Gerardo Esquivel and Mario Campa both pointed out, these cross-border flows are simply too small a percentage of income to account for the phenomenon (one further complicated by the strong performance of the Mexican peso, which has been equally explained away by high interest rates and the nearshoring of foreign companies).
Social media accounts, meanwhile, called out the New York Times for a splashy 2022 piece penned by then bureau chief Maria Abi-Habib — neither retracted nor updated as of this writing — that the president’s policies have “hurt the poor.” The piece, though, was very much in line with conservative sentiment online in Mexico, which, when it acknowledged the poverty statistics at all, grumblingly contended that giving people handouts in the form of social programs wasn’t really lifting them out of poverty.
In fact, as the analysis shows, these social programs — including old-age pensions, stay-in-school scholarships, farm supports, and a rural tree-planting program — represent only one factor and not necessarily the most important. Also fueling the drop in poverty are wage increases, fueled by annual 20 percent hikes in the minimum wage that have had spillover effects in certain union contracts, together with a tightening of the nation’s outsourcing laws (liberalized in 2012) that has nudged some three million workers into formal employment and increased the number of people eligible for mandatory profit sharing. The lesson is clear: in the absence of upward pressure on wages and more favorable labor legislation, transfer programs on their own are not enough.
The Heath Care Headache
Not everything in the CONEVAL report was uniformly rosy, however. Multidimensional extreme poverty remained steady and even showed a slight uptick (although when only income is taken into account, it fell to 12.1 percent, its lowest level in history). On the most basic level, this is a reflection — in a nation as geographically and linguistically diverse as Mexico — of the sheer logistical difficulty of reaching people who live in the remotest areas, far from enforceable contracts, the reach of labor laws, and non-predatory banking services (the public banking option known as the Banco de Bienestar or Bank of Well-Being, which is opening branches in rural areas, is designed to address at least this part).
But it is also a reflection of another factor: access to health care, which, according to the report, saw a noticeable decline. On the face of it, the conclusion is unfair. The survey measured people who were “affiliated” or “registered” with a particular health service just as the AMLO administration is transitioning to a model where anyone can be attended to in public hospitals, regardless of affiliation status (the report also found that 99.6 percent who sought access to care were able to get it). Many people, then, likely answered no to the question without even being aware of their ability to access the same — or better — services as before.
But this is not to let the administration off the hook, either. After rushing to cancel the (admittedly flawed) Seguro Popular health program for the uninsured, it squandered a precious pre-pandemic year botching the rollout of its replacement, INSABI, before having to spend 2020–2021 channeling health budgets into hospital beds and vaccines.
Late in the game, it appears to have found its footing with IMSS-Bienestar, which federalizes health services that had been conveniently decentralized by conservative governments of the past. But in addition to confusing survey respondents, all of this alphabet soup constitutes a series of clumsy, often poorly communicated workarounds designed to cope with those left out of the current system instead of creating a genuinely universal program that includes everyone.
In Mexico, health care is the starkest reminder of the country’s class system: while the wealthy jet off to Miami or Madrid to visit sparkling clinics, those in the middle use (affiliation-based) public plans available to government and salaried workers, supplementing them to a greater or lesser degree with private sector doctors and hospitals. As for the self-employed and the poor, they are often left to attend low-cost “medical orientation” consultations at pharmacies — in effect, little more than pill-promotion sessions by doctors on the pharmacy payroll.
In an op-ed in the newspaper El Universal, Treasury subsecretary Gabriel Yorio argued that, if a sense of urgency is maintained and the current strategy continued with any necessary adjustments, “we can aspire to a goal of ‘zero poverty’ over the next ten years.” In light of these findings, an assertion that may have sounded both grandiose and farfetched a few years ago seems less so today. But it will not, to say the least, be easy.
Despite the impressive gains of recent years, Mexico remains a country with forty-seven million poor and eighty-five million with deficits in at least one of the multidimensional categories. In a sense, the floor being as low as it was, the “easiest” part is behind Mexico’s Fourth Transformation and its party, MORENA. Ahead of it now is a road of continuing to increase wages and labor rights while attacking intransigent structural problems such as health care: something that will be virtually impossible without a progressive tax reform, something that has been a third rail for MORENA up to now.
None of this, however, should be construed as minimizing the successes of the last five years. In the face of a pandemic, worldwide inflation, and supply chain shocks, Mexico is reducing poverty. The New York Times was wrong; AMLO was right.Original post