There’s an interesting piece in this week’s Economist (see link) on a poverty-alleviation policy in Latin America called conditional cash transfers (known as “CCT’s”).

Last weekend many of us AID-ers gathered in New York City for the Young Global Leaders Summit on Realizing the Millennium Development Goals. We learned how increasing levels of foreign aid, ensuring smarter foreign aid and canceling debt are some of the key policies that we in developed nations can undertake to ensure development in the third world. Some attendees, including this one, also wondered what complementary policies within developing countries could best promote development.

Cash transfers certainly offer an interesting and new (or at least new to me) approach. Typically, they provide a financial incentive for poor mothers to promote certain activities on behalf of their children. For example, their conditionality would involve children’s attendance at school or vaccination against disease or mandatory visits to health clinics. Two of the most famous CCT programs are in Mexico, the home of first Progresa and now Oportunidades, and in Brazil, the home of Bolsa Família. These programs now exist in more than half a dozen Latin American countries under World Bank auspices (see link). And within those countries, CCT initiatives are popular and far-reaching. In Mexico, 5 million families receive cash transfers from the government, which is nearly a quarter of the total population.

So far, progress has been made, at least in Mexico. The Economist writes, “In Mexico, the poverty rate fell between 2000 and 2002 during a recession in which real income per head declined by some 3%. Studies suggest that children in the beneficiary families are less likely to be stunted by poor nourishment and less likely to drop out of school.” There’s much that seems optimistic about these programs, which get at some of the root causes of poverty by trying to raise human capital for the next generation.

Then again, the jury appears to still be out as to whether or not these programs will be successful in the fight against poverty. The Economist points out that successful CCT’s depend on a functioning government. Furthermore, cash transfers alone will not answer the call to make poverty history—both because not all families will take the incentive they provide and also because many of the pressing social and economic problems of poverty, inequality and hunger will not be alleviated even by higher attendance at schools and better health standards.

Still, this could be a good step forward. I’m looking forward to hearing more analyses of these policies in Mexico and Brazil and their potential transferability elsewhere.

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