The New Trend in Social Policies. Conditional Cash Transfer Programs

A Comparative Analysis of Peru and Ecuador

Term Paper, 2013

20 Pages, Grade: 1.4


Table of Content

1. Introduction

2. Justification of case selection

3. Comparing CCTs: Juntos, Peru and Bono de Desarollo Humano, Ecuador
3.1 Targeting methods
3.2 Benefit scheme
3.3 Conditionality
3.4 Program's administration
3.5 Outcome on poverty, health and education

4. Explaining the differences
4.1 Political regime
4.2 Historical legacy of social provision and current social policies
4.3 Structural factors: economic conditions and supply side

5. Conclusion



1. Introduction

Initiated by the Millennium Development Goals (MDGs), an enormous scholarly discussion has evolved in the last decade on how to tackle poverty and reduce inequality. Social protection programs, especially social assistance programs, have played a crucial role in helping the poor. In this context, the Latin America region presents a highly interesting case to analyze, as levels of poverty and inequality were high for decades, but have only dropped in the last decade. Many experts make the introduction of a new form of social policies accountable for this change, Conditional Cash Transfer (CCT) Programs. CCTs were introduced in the 1990s with Progresa and Bolsa Escola with the first such programs implemented in Mexico and Brazil. As the first CCT programs have proven successful, seventeen Latin American countries, amongst others Honduras (1998), Colombia (2000), Peru (2005) and Ecuador (2003), have implemented this new form of social assistance programs between 1990 and 2011. CCTs provide financial funds to poor families; given the condition that beneficiaries, mostly children and mothers, fulfill certain conditions on schooling and health visits (Adato & Hoddinott, 2010). Conducted in such a way, CCTs have dual objectives. As a short-term goal, CCTs seek to alleviate poverty at the household level. As a long-term goal, CCTs aim at developing human capital by focusing on education and health issues accountable for the vicious cycle of poverty (Handa & Davis, 2006). Today, CCTs are an integral part of almost every country's social policy in Latin America. Although many scholars and policy experts agree that CCTs are powerful tools in balancing inequality, many argue that CCTs are not the "magic bullets" of social policy as often praised (Janvry & Sadoulet, 2004). In fact, positive effects on education and health issues cannot to be solely accounted to CCTs but also depend on many other factors.

After a justification of the selected cases, Peru and Ecuador, this paper will provide a descriptive comparison of Juntos in Peru and Bono de Desarollo Humano (BDH) in Ecuador by contrasting their targeting methods, benefit scheme, conditions associated with the benefits, program's administration as well as the outcome on health and education issues. The main part of the paper analyzes to which extent political regime, the historical legacy of social policy and current social policies as well as structural conditions, such as a country's economic situation and supply side conditions, account for the differences in CCT designs and outcomes. The paper concludes with the main findings of the comparative analysis and advice for policy-makers and analysts.

2. Justification of case selection

Why does this paper discuss CCTs in Peru and Ecuador and not any other Latin American country? This is a legitimate question, which needs to be answered to fully understand the following analysis. Peru and Ecuador as well as their CCTs hold significant similarities and differences, making these two countries interesting cases to study.

Regarding size and population, Peru and Ecuador are the most similar compared to other Latin American countries. Both countries have consolidated their democratic regimes in the last decade, however, still encounter major issues such as elite capturing of political institutions or corruption. Furthermore, both countries have experienced a decent economic growth. Nevertheless, inequality, extreme poverty as well as non-extreme poverty are major concerns in Peru and Ecuador. Especially, the latter presents a challenge for CCT programs in both countries. Levels of GINI coefficient are very similar as well as the percentage of GDP spent on social policies today, focusing first of all on education and secondly on health (ECLAC, 2012).

Despite the similarities, Peru and Ecuador are quite different countries. While Ecuador's government under Rafael Correa is very leftist, Peru's government under Alejandro Toledo as well as Alan García is positioned in the political center. Moreover, historical legacies of social policies in both countries are very different just as their current social policies due to the elected government. This mix of similarities and differences are reflected in the design and outcome of the CCT programs of the respective countries. Lastly, Peru's and Ecuador's background of CCT is quite distinctive: while Peru has not worked with cash transfers before, Ecuador has extensive experience with conditional and non-conditional cash transfer programs. The similarities of both countries and their respective CCT programs build a good basis to compare these countries; the differences allow for promising findings in the comparative analysis.

3. Comparing CCTs: Juntos, Peru and Bono de Desarollo Humano, Ecuador

3.1 Targeting methods

Both CCT programs focus on children: Juntos focuses on children under the age of 14, BDH targets children under the age of 16. Additional to that, BDH provides financial help to elderly and disabled people, which presents an interesting novelty to CCTs, as CCTs used to focus only on children. Furthermore, both CCTs tackle poor households, however Juntos is a lot more restrictive on defining a poor household. In Peru, targeting is done geographically, supported by proxy means testing and community validation. Instead, in Ecuador, the two poorest quintiles of the population participate in BDH, determined only by the poverty index Selben. This accounts for a very different coverage of Juntos and BDH: according to data available by ECLAC (2012), Juntos covered 7.6% of Peru's population in 2010, while BDH covered 44.3% of Ecuador's populations in 2010 (World Bank, 2011a; World Bank, 2011b; Ministerio de Inclusión Económica y Social, 2013; Gobierno del Peru, 2012).

3.2 Benefit scheme

Both programs pay their benefits per family and on a (bi-) monthly basis. Peru's government gives $70 to each family participating in Juntos every two months. Ecuador's government has steadily increased the benefits, from $15 (2006) to $35 (2009) per family, plus currently $35 per disabled or elderly person. Since the beginning of 2013, families even receive $50 (Lizarzaburo, 2013) via BDH. Moreover, in Juntos as well as in BDH funds are given to women as mothers spend the money more carefully and more for their children than men would do. Concerning payment method, funds in Peru are paid via bank accounts or associated debit cards, while funds in Ecuador have to be collected by women at the banks directly. Although both programs seem to be rather similar on the benefits scheme, one major difference remains: Peru's Juntos only provides funds for four years. Participation of the program can be expanded to another four years, however only after close review. In contrast, Ecuador's BDH benefits are given as long as children, disabled and elderly people are eligible for receiving funds (World Bank, 2011a; World Bank, 2011b; Ministerio de Inclusión Económica y Social, 2013; Gobierno del Peru, 2012).

3.3 Conditionality

Concerning health, Juntos asks for regular health visits for children under the age of 5 as well as for pregnant women. BDH has specific requirements for the same age group of children (age 0 to 5), however BDH requests a doctor's visit twice a month to check up on growth, bodily development and immunization. With regards to education, Peru's CCT asks for 85% attendance for elementary school. Ecuador requirements are harsher: BDH asks for 90% attendance for children between 6 years and 15 years. As an additional requirement, Juntos asks participating families with young adults older than 18 years for participation in the program Mi Nombre. This requires them to obtain their birth certificate or an identification card. This is extremely important for job applications, receiving state funds, etc. One crucial part when making financial funds conditional is checking if conditions are actually fulfilled by payment receivers. For a long time, Ecuador did not make any effort in verifying compliance with the conditions. Only recently, methods are about to be established to prove beneficiaries' compliance. In contrast, Peru has used check ups from the beginning of program introduction, every three months. Results showed, however, that a great majority of beneficiaries complies with the given conditions anyway. Only a small amount had to be suspended (World Bank, 2011a; World Bank, 2011b; Ministerio de Inclusión Económica y Social, 2013; Gobierno del Peru, 2012).

3.4 Program's administration

In Peru, an independent body called the Roundtable for Poverty Reduction administers the program to ensure transparency, neutrality and participation of key actors. Program costs are at $400 million in 2012 which accounts for 0.23% of Peru's GDP. As benefits have increased over the years, program costs in Ecuador have risen from $400 million in 2008 to $767 million in 2012, presenting 1.07% of Ecuador's GDP in 2012. BDH is part of a wide range of social protection programs whose administration lies at the Ministry of Economic and Social Inclusion (Nehring, 2012; Ministerio de Inclusión Económica y Social, 2013; Gobierno del Peru, 2012; Francke & Mendoza, 2006; Jones et al., 2007).

3.5 Outcome on poverty, health and education

General data on poverty shows that poverty reduced and inequality balanced during the last decade. The number of people living in poverty in Peru was reduced by half: from 54.7% in 2002 to 27.8% in 2011. Results of Ecuador are not as positively surprising as in Peru, however, the number of people living in poverty decreased as well from 49% in 2002 to 32.4% in 2011 (ECLAC, 2012).

National GINI coefficient (income distribution) in Peru improved from 0.53 (2003) to 0.45 (2011). Similar advances can be seen for Ecuador: here, the GINI coefficient decreased from 0.513 (2004) to 0.46 (2011). Considering that CCTs in both countries mostly tackled poverty in rural areas, comparing GINIs in rural and urban areas is notable. In Ecuador, the GINI coefficient decreased in urban areas from 0.498 in 2004 to 0.434 in 2011 and in rural areas GINI very slightly increased from 0.431 in 2004 to 0.437 in 2011. In Peru, GINI coefficient decreased in urban areas from 0.487 in 2003 to 0.406 in 2011 and increased in rural areas rom 0.371 in 2003 to 0.432 in 2011. This proves that other factors must have been influential as GINI rose in rural areas, especially from 2010 to 2011 but continuously decreased nationally as well as in urban areas, which is not necessarily a focus of CCTs. A detailed course of the GINI coefficient (national, urban, rural) between 2003/2004 to 2011 can be seen in the tables below.


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The New Trend in Social Policies. Conditional Cash Transfer Programs
A Comparative Analysis of Peru and Ecuador
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trend, social, policies, conditional, cash, transfer, programs, comparative, analysis, peru, ecuador
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Magdalena Zettl (Author), 2013, The New Trend in Social Policies. Conditional Cash Transfer Programs, Munich, GRIN Verlag,


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