The Political Economy of Pro-Poor Policies in Chile and Mexico

August 8, 1999

Marcus Kurtz
Department of Political Science
University of Miami
PO Box 248047
Coral Gables, FL 33124-6534 USA
305.284.1306
marcus.kurtz@miami.edu

Paper prepared for WDR 2001 meetings. August 16-17, Castle Donnington, United Kingdom.
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

I. INTRODUCTION

Under what political and economic conditions are public policies that materially benefit the

poorest stratum of society sustainable? More specifically, what types of pro-poor policies are

sustainable, and under what political and economic conditions? It is well known that lasting anti-

poverty efforts require supporting political coalitions that go beyond the very poor who are the

beneficiaries of these programs. This paper examines, in the cases of Mexico and Chile, the

factors that affect the emergence of such cross-class alliances. The answer depends both on the

type of policies pursued and the institutional and social environment (including the prevailing

developmental model, the structure of the state, the party system, and the prevailing levels of

organization among the poor in civil society).

To begin, policies that benefit the poor are disaggregated by target—are they oriented toward

the production process, or are they subsidies to consumption? The former is further

disaggregated into those that focus on the redistribution of assets and those that focus on the

correction of market failures. Consumption policies are divided into benefits of a highly targeted

(or ‘means tested’) variety, and those that are more universalistic in applicability. Politicians

construct policy from this broad menu of alternative (and not mutually exclusive) policies, but the

also face constraints given by the prevailing national strategy of development. While there are

elective affinities between particular models of development and patterns of poverty alleviation,

the former by no means cause the latter. Sustainable pro-poor policies are at their core political

outcomes.

It is the potentially controversial argument of this essay that sustained efforts at poverty

eradication are most likely in democratic political systems where administration and governance

are centralized, efforts are focused on the production side, consumption supports are

universalistic (or broadly distributed), and more than one reformist party is electorally viable.

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

While decentralization might in theory make anti-poverty programs more accountable and

efficient, in practice the absence of both local democracy and administrative capacity often make

decentralization institutional structures inauspicious for sustained and effective poverty relief.

Furthermore, regionalization necessarily introduces new political barriers to the redistribution of

public funds by superimposing territorial cleavages atop those of social class. Production-side

approaches are more easily implemented because precisely they obscure the distributional impact

inherent in anti-poverty spending and allow politicians to argue that the policies are both social

and developmental.

Where more than one reformist party competes electorally, politicians cannot take the poor

for granted as constituency, and face the possibility of a policy ‘bidding dynamic.’ This may also

lead to the provision of universalistic benefits that at once raise the economic costs of, and the

political support for, income support policies. From an economic point of view this is obviously

inefficient—it subsidizes those who do not need support—but it builds a broad social

constituency behind a set of policies (e.g., family allowances, health care, pensions) that can have

substantial poverty-mitigating effects in marginal communities. Finally and most critically,

without the accountability inherent in a highly competitive political arena, politicians will have a

tendency to use antipoverty projects to stave off moments of dissent, not to construct broad and

sustained bases of support.

II. P OLICY COMBINATIONS AND POLICY TRAJECTORIES IN CHILE AND MEXICO

What constitute ‘pro-poor’ policies, and which of them are most sustainable, given varying

constellations of political and economic conditions? In Chile and Mexico the battle against

poverty has historically been a two-front affair—efforts have been made to improve the insertion

of marginal groups in the process of production as well as the more obvious consumption-side

efforts to improve access to basic necessities for poor households. But the specific production

2
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

and consumption side policies employed have changed quite substantially over time.

On the production side, efforts have historically focused on either the redistribution of private

assets from economic elites into the hands of either the state or marginal sectors. Thus, for

example, nationalizations of productive enterprises have ostensibly been used to increase

employment, subsidize the cost of vital goods and services, provide services to communities

ignored under strict profit-maximizing criteria, and direct the character of the national economy

in a more ‘egalitarian’ direction. Especially in agriculture, efforts at the redistribution of land

from large-holdings to cooperatives or individual family farms have been conceived of as direct

attacks on historically inegalitarian sectors as well as efforts to improve output and productivity.

More recently efforts to improve living standards through policies toward the productive side of

the economy have focused on the correction of missing or failing markets, especially those that

affect marginal producers. Thus, instead of operating against capitalist agents through attacks on

prevailing property relations, the state makes efforts to broaden access to the market economy.

Prominent examples include the allocation of credit to entrepreneurs normally ignored by the

formal credit market, the provision of public goods like price information, technological research,

and agricultural extension, and the construction of physical infrastructure and human capital that

make linkages between marginal communities and national markets possible. In their way, all

production-side approaches seek to improve the ability of poorer citizens to insert themselves into

the national economy. They differ substantially, however, in terms of the social and political

coalitions that would support each policy approach.

The most obvious examples of pro-poor policies are those that in a very direct way transfer

resources aimed at improving the consumption standards of poorer citizens. Here the important

distinction is between those policies that are universalistic—whose beneficiaries include but are

not limited to the poorest strata of society—and those that are targeted strictly at the ‘truly poor.’

Examples of the former would include national health and pension schemes, family allowances,

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

subsidies on the prices of basic wage foods, and in important ways the minimum wage.1 On the

other hand there are policies that are strictly targeted at the poorest strata of society, including

means-tested direct transfer payments, minimum poverty-pensions, food programs (e.g., mothers

and children programs), and subsidies for the private acquisition of education and health-care.

Different combinations of production and consumption-side approaches have been attempted

at different points of time in Chile and Mexico (see Figure 1). In both Chile and Mexico during

the heyday of their respective import-substituting strategies of development, production side anti-

poverty efforts were part of a larger statist and redistributionist policy. The parastatal sector

expanded in industry, while serious agrarian reform was launched in Chile under Frei and

Allende (1967-73), and deepened in Mexico under Echeverría (1970-76). On the consumption

side in Chile, wages were increased across the board through rapid expansions of unionization

and permissive labor laws. In addition, strong efforts were made to bring formerly excluded

groups (informal sectors, peasants) into national pension and health-care schemes; they for the

first time became near universal. In Mexico, consumption side policies were universal, largely

taking the form of subsidies on the price of basic commodities through the CONASUPO program

1
The case of the minimum wage is not entirely clear cut. On the one hand it directly affects only the lower
end of income-earners. On the other, its effects tend to spread throughout the bottom end of the wage
scale—raising wages of earners near the minimum in conjunction with the level of the minimum wage. In
this way it affects a relatively broad stratum of society—and often individuals that are not members of poor
households. Whether this is an effective strategy to combat poverty is an entirely separate question, one
that requires consideration of broader labor market conditions and whether a minimum wage increase is
sufficiently great to generate unemployment or to push workers into the low-pay informal sector. These
empirical issues will be considered later.

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

Figure 1. Historical Typology of ‘Pro-Poor’ Policies

PRODUCTION ORIENTED

Asset Redistribution Market Failure Correction

CHILE MEXICO
1973-1989 1988-1999
Targeted

Abandonment of state-ownership
of productive assets.
CONSUMPTION ORIENTED

Social provision privatized. Public

provision only for most marginal
sectors.

CHILE MEXICO CHILE

1964-1973 1934-1988 1990-1999
Expansion of production-oriented
Universalistic

Dramatic expansion of labor policies in technological/market

organization and public social
welfare provision (Chile).
Rapid and broad agrarian reform
(Chile)
Land reform and subsidized
wage foods (Mexico)
support and human capital
formation.
Increased spending on universal
social benefits, stagnation in highly
targeted social spending.

In both countries, the transition to a neo-liberal form of economic organization brought with

it substantial changes in the social policy regime. Under military rule in Chile, most formerly

public enterprises (except copper mines) were privatized, the pension system was transferred to

the private sector, and public anti-poverty aid was narrowed to highly targeted efforts. The

transition to democracy in 1990, however, brought some changes, as universalistic programs (the

minimum wage, family allowances, education vouchers) received funding increases while

targeted programs stagnated by comparison. On the production side, from 1973 onward, aid has

been concentrated on the correction of market forces. Nationalization and land reform have

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

explicitly been removed from the national political agenda by parties spanning the spectrum from

conservatives to socialists. Mexican policy, at least since the sexenio of Carlos Salinas, has

similarly abandoned the formerly large state-sector, launched the privatization of agrarian reform

cooperatives (ejidos), and reoriented spending around highly targeted consumption supports

(PRONASOL under Salinas, and under Zedillo, PROGRESA).

III. D EVELOPMENT MODELS AND THE LIMITS ON P RO-P OOR POLICY-MAKING

The types of policies described in Figure 1 outline the constellations of anti-poverty

approaches that have been attempted in contemporary Chile and Mexico. But at any particular

point in time political elites cannot reasonably select from this entire universe of policy options.

Historically, efforts are made to ensure that a particular social welfare regime is compatible with

the overall national developmental strategy. In this sense, the development model serves to

loosely bound approaches to poverty alleviation, independent of the effects of different political

coalitions.

In the post-depression era both Chile (1932-1973) and Mexico (1934-1988) pursued statist

and inward looking developmental models. While such models could in theory be compatible

with the gamut of anti-poverty strategies outlined in Figure 1 (and indeed with no strategy at all),

I make the case that they have an ‘elective affinity’ for asset-redistributive policies on the

production side, and universal social provision on the consumption side. Under import-

substitution, economic growth is heavily constrained by domestic market size. In economies with

substantially inegalitarian distributions of income, the size of the domestic market for many

manufactures is quite small (well below scale economies). One strategy for market expansion to

underwrite economic growth is thus quite coterminous with poverty alleviation—populist efforts

at broad-based income redistribution. The costs of this policy for domestic industrialists are

compensated for by the larger market that becomes available, and the oligopolistic position of

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

firms in local markets. On the production side, asset redistribution (most especially land) is a

way both to increase output and bring a sector of society previously marginalized from the

consumption of manufactured goods into the domestic market.

This is, however, only an affinity not a causal necessity. While such policy approaches were

pursued under the Christian Democratic government of Eduardo Frei and under the socialist

Salvador Allende in Chile, they were not characteristic of the Mexican period of ‘stabilizing

development’ under a succession of PRI governments. In the latter case, after 1940 land reform

slowed dramatically, and consistent anti-poverty programs were not central to public policy. The

difference in outcome highlights the centrality of politics—the different outcomes are accounted

for by the differential organization of the Mexican and Chilean political systems of the time.

Marginalized sectors in Chile had much greater independent organizational coherence, and a

more competitive political system made elites quite responsive to them.

IV. CHILE: DEMOCRATIZATION, P OLITICAL REFORM , AND THE SHIFT

TO P RODUCTION-ORIENTED AND QUASI -UNIVERSAL ANTI-POVERTY P OLICY

It is the argument of this paper that the character of anti-poverty policy in Chile changed in

important ways after the democratic transition of 1990. While most outside analysts would

concur that the level of spending increased substantially, the conventional wisdom is that

spending continued in the highly targeted vein that emerged during military rule alongside the

neo-liberal developmental model (e.g., Vergara 1994, 248). On the other hand, governmental

sources highlight the very substantial broadening of the target base of social welfare policies

(e.g., MIDEPLAN 1991, p. 17). This change is linked to the process of democratization. As

political decisions become subject to open competition, new dynamics came to govern the

construction of social policy. In Chile, this has resulted in the shift in focus to more universalistic

consumption side policies, and the emergence for the first time since 1973 of serious production-

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

side welfare efforts.

What does this tell us about the political coalitions that support comparatively sustained

efforts at poverty eradication? At the most general level in Chile, with the return of open political

competition, the construction of a governing coalition on the center-left—the Concertación—

produced a decline in the targeting of welfare efforts. After 17 years of military rule, the

organized constituencies of the Concertación sought to regain some of the (very substantial)

ground they had lost since the coup. But these organized sectors, while hardly privileged, were

by no means the poorest and most excluded elements of Chilean society. As a consequence,

however, welfare efforts have not excluded the poor, but rather included them but as part of

broader beneficiary coalitions. A further, and much-heralded innovation, was an emphasis on

production side anti-poverty relief. Here the political sustainability of more targeted forms of aid

is greater—these are after all policies aimed at ‘helping the poor help themselves.’ They are

certainly redistributive, but can be marketed as both strategies of economic growth and poverty

alleviation. Nor is the demarcation of winners and losers entirely clear.

Consumption Side Targeting and the Military Government

During the course of military rule, policy outcomes did not respond to political pressures in

the same ways that they had under democratic rule. And during this period, in conjunction with

the neo-liberal reorganization of the state and the economy, the system of social welfare was

restructured around highly targeted forms of aid. While the ‘technocrats’ of the military

government have contended this was simply a consequence of apoliticism and efficiency in the

new system of social provision, I contend that it was as political as any governmental decision.

The difference lies in the different character of politics that take place in authoritarian versus

democratic contexts. Under authoritarian rule, where the construction of strong positive political

and social coalitions may not be essential, aid can be targeted in a compensatory fashion at the

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

most disadvantaged (and potentially most oppositional) sectors of society. It takes on a short

term, ‘finger in the dike’ character. It need not be used to consolidate support, rather to

temporarily dampen opposition.

Data on public spending demonstrate the degree to which the universality of social provision

declined during the course of military rule, and the consequent increase in targeted forms of

welfare spending. In the aggregate social spending declined dramatically (once resources

transferred to the privatization of the pension system are removed), but spending on the poorest

sectors of society increased. Table 2 presents the value and scope of social welfare policy from

the military period through the democratic transition. Once the neo-liberal economic model had

become firmly entrenched with the social reforms (pensions and health privatization) of the early

1980s, we can see a massive expansion of targeted forms of social provision, both in terms of

beneficiaries and coverage. From 1983 through the end of military rule, the number of

individuals receiving welfare cash transfers expanded 67 percent (though the real value of the

transfers declined 41 percent). By contrast, the quasi-universal family allowance remained

constant in coverage while the real value of the payout declined 55.5 percent. Most notably, the

minimum wage (which ironically does not benefit the extremely poor, but rather the formal sector

workers at the lower end of the wage scale) declined 35.9 percent from its peak in 1981 to the end

of military rule in 1989.

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

Table 2. Changes in Social Welfare Targeting under Military Rule

Thousands, pesos of 1990, per Month

TARGETED ASSISTANCE UNIVERSAL ASSISTANCE

Real
Cash Trans- Poverty Family Minimum Civilian
fers (SUF) Pensions (PASIS) Allowance Wage Pensions
Index
Year Recipients Value Recipients Value Recipients Value (1970=100) Avg. Value

1970 n/d n/d 0 0 n/d 2429 100.0 31,354

1974 n/d n/d 0 0 n/d 2547 108.3 16,184
1977 n/d n/d 66,000 6989 n/d 2118 119.3 17,964
1981 n/d 2,031 156,200 9819 3,962,000 1987 138.7 24,528
1983 527,000 1,604 229,400 9901 3,929,000 1564 109.5 26,229
1986 1,086,000 1,246 324,700 9059 4,024,000 1119 85.8 26,072
1989 896,000 951 292,900 7840 3,817,000 696 88.9 27,724
1991 879,000 1155 289,100 9430 4,021,000 903 103.4 30,065
1996 766,082 1164 326,447 10,326 3,200,000 895* 128.0 n/d

*The average of three rates; subsidies are phased out at the highest income levels.

Sources: For Pensions, SUF recipients, Family Allowances from 1970-1991: Raczynski and
Romaguera (1995,297); for 1996, MIDEPLAN (1998, 12-20); for value of SUF, to 1991:
MIDEPLAN (1992, 246). Real minimum wage, all years, Bravo and Vial (1997, 151).

While obviously the Chilean government did not abandon targeted social spending after the

democratic transition, it also very obviously did not deepen the process of targeting. While the

value of cash welfare transfers was increased, the program’s size had been capped in 1986 and

coverage declined thereafter as recipients leaving the program were not replaced. Moreover, the

program is a complement to the family allowances scheme—which covers only those citizens

affiliated to a private or public pension system. Thus, it in essence makes universal the presently-

regressive family allowance program. The only area in which some targeting is evident is in the

value of the poverty pension, where its value expanded more rapidly than the average civilian

pension (though both experienced sustained increases in real value).

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

Production Side Spending: Investment in Human, Social, and Productive Capital

Production side investment with an anti-poverty component has taken principally two forms

in Chile. The most explicit is the social investment fund (FOSIS), aimed at encouraging human

capital formation, supporting micro-enterprises, and improving infrastructure in marginalized

areas. It also directly incorporates the goal of increasing the organizational capacity in civil

society. In addition, there are the decentralized regional and local development funds (FNDR and

ISAR). Here the aim is investment for development, but the infrastructural needs of marginal

areas are given substantial priority. It is in the latter category that post-transition spending has

increased most notably.

While the regional development funds (FNDR) have been in existence since 1976, they had

low and declining levels of support during the period of military rule. 2 Indeed Table 3 shows the

rise in both decentralized and overall public investment in Chile. Over the 1989 to 1994 period

the former increased 178 percent in real terms, while the latter rose 80.2 percent. Unlike the case

for demand side assistance, public investment funds have increasingly moved into channels that

incorporate anti-poverty criteria. FOSIS funding, as an experimental program, has been largely

constant at roughly US$50 million since program inceptions (Wurgaft 1993).

Table 3. Decentralized Social and Infrastructural Investment

(Thousands of pesos of 1986)

Source of funds 1989 1990 1991 1992 1993 1994

Decentralized 12,777 12,058 15,305 27,536 33,562 35,631

FNDR 12,777 12,058 15,305 17,177 21,483 21,922

ISAR 0 0 0 10,358 12,080 13,709

Overall Public Investment 101,132 95,399 118,641 147,980 164,216 182,287

Source: Serrano (1996, 69-79).

2
The exception has been the period after 1985, when funding through the Inter-American Development
Bank was obtained. This funding has continued until the present, and represents a large portion of total
spending.

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

IV. POLITICS, DECENTRALIZATION, AND THE EMERGENCE OF QUASI -

UNIVERSAL AND P RODUCTION-ORIENTED ANTI-P OVERTY STRATEGIES

I characterize the social policy of the governing Concertación alliance in Chile as one of

limited universalism. This has not marked a return to the politics of the 1960s of massive

increases in broad-based entitlements, but it has meant a broadening of the benefit structure to

incorporate large swaths of the middle and working classes. Not surprisingly, these are also the

voters most supportive of the ruling alliance and most politically articulated. Thus, while social

spending has increased dramatically, the vast majority of this new money has not been

specifically targeted at the ‘very poor.’ But why and how has this occurred? The shape of the

policy outcome depends on four critical politically-mediated factors: (1) party system dynamics,

(2) the level of administrative centralization, and (3) the issue area, and (4) the level of social

organization.

Party Competition. Since the democratic transition, Chile has been governed by a coalition

of Christian Democratic and Socialist parties (Concertación de Partidos por la Democracia, or

Concertación). This coalition was a product of the effort to defeat the referendum on

continuation of military rule held in 1988, and has since evolved into a governing alliance that

has elected two presidents (both Christian Democrats). Indeed, according to Agüero and Tironi

(1999), the new axis of Chilean politics is bipolar, and cast around this democat/authoritarian

divide, supplanting earlier class and religious cleavages. This cleavage is reinforced by an

electoral law that places a high premium on cross-party cooperation. 3 As a result, however,

changes in social policy are negotiated at the highest levels of the parties, supported by all

Concertación members, and not subject to substantial revision based on the demands of organized

3
The binomial electoral system consists in a series of two-member districts. In these districts the first and
second place finishers receive seats, unless the first place list receives double the votes of the second place
list (in the Chilean context, this is rare). Especially in Chile where the left is slightly weaker than the center
or right, this is a powerful incentive keeping the Socialists in the Concertación alliance. The fate of the

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social constituencies. The ‘bidding’ dynamic—the competitive expansion of the welfare state

driven by political conflict between center and left—that characterized the 1960s and early 1970s

has been replaced by a ‘responsible’ center-left alliance with an emphasis on fiscal probity in

competition with a neo-liberal right pushing minimalist government. In the process, the

organized social constituencies and competitive political dynamics that historically shaped policy

have declined substantially. In particular the Concertación alliance has moderated the policy

proposals of the socialist left.

Instead, the Concertación has brought moderate (and regressively financed through the VAT)

increases in social spending and targeted them to its constituencies in the middle and lower

classes.4 Thus, a large proportion of the increase in social spending after democratic transition

went to the broadly applied (though recently more progressive) family allowance, serving all but

the highest income categories. Thus social spending was in a sense ‘universalized’ to the

Concertación coalition. But the political dynamic that brought this about was anything but

‘bottom up.’ Instead the coalition made decided efforts to contain pent-up demands attendant

upon the democratic transition.

The comparatively austere approach taken by post-transition governments is evident in the

data on composition of income in Table 4. While poverty declined quite dramatically over the

period 1987-1996, this was not due to dramatic increases in the incidence of government transfer

payments in the incomes of the poor. Indeed, even for the poorest quintile, government transfers

as a percentage of total income declined by nearly 50 percent. Clearly, public payments (for all

quintiles) lagged well behind growth in earnings in the private sector. The earlier ‘bidding

dynamic’ of rising public payments and stagnant wages has decidedly not reemerged. Indeed, the

weight of beneficiaries in the political system is so limited that even under a center-left

Communist party—formerly electorally important, but now without any legislative representation—is a
stern reminder of costs of independence.
4
Agüero and Tironi (1999,161) show that in class terms, the Concertación wins overwhelmingly among the
lower classes, is competitive in the middle sectors, and decidedly unpopular among the upper class.

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government, parity in the level of public assistance has not been maintained.

Table 4. Public Subsidies as a Percentage of Cash Income, by Income Quintile, Chile

1987 1990 1996

Income Quintile

1 22.6% 15.5 11.3

2 7.1 4.4 4.0
3 3.9 2.2 2.0
4 2.0 1.1 0.7
5 0.7 0.4 0.1

Source: 1987, 1990: calculated from MIDEPLAN (1992, 247); 1996: calculated from
MIDEPLAN (1998, 30).

Further evidence of the moderating effects of the present bipolar structure or political

competition can be found in the host of issues were explicitly removed from the political agenda

before President Aylwin took office, in the program of government of the Concertación—

including a commitment to the broad outlines of the neo-liberal model and the agrarian counter-

reform. Pension, health, and industrial privatizations not only would stand, they would be

expanded. While not all of these concessions were to the liking particularly of the socialist

fraction of the alliance, alternatives were limited. Without participation in the Concertación, the

Socialists would suffer serious political consequences. On the other hand, the risks attendant

upon making concessions were low—the constituencies whose demands were left unfulfilled

would have little political alternative, certainly not among the parties of the right.

Thus, what we see are broad but moderate policy reforms. Indicative of the fiscal

responsibility (that is, limited spending) is the fact that the largest sustained increases were in the

minimum wage. This is a policy that affects large swathes of income-earners in Chile, and costs

the treasury little. Direct transfers increased in value (though overall spending increased only

moderately as coverage declined), but by modest amounts. The entire increase in the welfare

family allowance (SUF) between 1989 and 1996 amounted to little more than US$1 per month.

This was in contrast to a long period of decline, but substantially less than the 44 percent real

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increase in the minimum wage over the same period. Indeed, a large portion of the new funds

raised at the time of the democratic transition were expended in raising the family allowance and

average pension levels. These programs are anything but targeted.

Decentralization. The relationship between the decentralization of public authority and the

sustainability of pro-poor policies is a complex and contradictory one. The present trend toward

decentralized administration has arisen in part because of dissatisfaction with the results of

centrally directed strategies that prevailed before the 1980s (Manor 1999, 34). But a positive case

has also been made on efficiency grounds, that decentralized administration allows better

opportunities for local participation in decision-making, is more flexible and responsive, and

allows for more efficient allocation of public resources (e.g., Serrano 1996, 28). To realize these

gains, however, it is important that local government institutions have the power autonomously to

define activities, obtain sufficient resources, have adequate administrative capacity, and be

politically accountable in a democratic fashion (Manor 1999, 55). Moreover, decentralization is

consonant with the neo-liberal maxim of subsidiarity—nothing should be done at a higher level of

government that can be done at a lower level.

But these are conditions for the more efficient implementation of policy, not necessarily for

the political sustainability of anti-poverty projects. Indeed, I contend that in many ways

processes of administrative decentralization work at cross-purposes with the goal of sustaining

anti-poverty efforts. First, in real world conditions in underdeveloped countries, the level of

democratization and responsiveness of the political system may not be constant across levels of

government. Localities in fact are often the bastions of quasi-authoritarian forms of clientelism

and caciquismo.5 Second, long-underfunded and politically irrelevant municipal governments

may lack the administrative capacity to effectively manage important anti-poverty programs—

making them likely to fail and become discredited. Third, responsiveness at the local level and

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the targeting of resources via local elites requires a densely organized civil society capable of

pressing demands. But those in most need are likely to be those most unable to project their

voices; and their interests may well be better-represented at the national than at the local level. At

the national level areas of organizational strength for popular sector actors in one region can be

used to press for reforms that benefit the sector as a whole. Finally, since virtually all anti-

poverty programs require politically costly redistributions of resources, adding a territorial

dimension increases the difficulty in constructing majority coalitions. Decentralized political

systems tend to keep resources at the local level, but given the spatial segregation of poverty they

impede the inter-regional income shifts required to address poverty. And in the process class

cleavages are superimposed on regional cleavages, making efforts to combat poverty an attack on

both class privilege and ‘local autonomy.’ In the end this fragmentation of authority reduces the

ability of pro-poor actors to establish cross-class alliances. Divisions are heightened and the

gains for the more well-to-do from such cooperation are reduced.

The process of decentralization in Chile began in the 1970s with the redesignation of regional

and municipal boundaries, and the conferral upon the municipalities of a developmental role. In

the process, municipal boundaries were redefined to increase internal class homogeneity. In the

1980s, the responsibilities of municipal government were expanded dramatically, to include

education, health, and some welfare services. With the democratic transition in the 1990s,

municipal authority was constituted as an independently elected body and regional governments

with a planning role were interposed between national and local authorities (Serrano 1996, 32-3).

While by the 1990s this reflected a form of ‘democratic decentralization’ and a further

consolidation of the process of democratization, its implications for pro-poor policies were

decidedly more ambiguous. On the one hand strengthening municipalities and making them

responsible for much social provision has heightened inequality. While some effort at leveling

5
Examples abound, from the rural clientelism of northeastern Brazil (see Weyland 1996), to the dominance

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the resource differences are made via the common municipal fund (FCM), a substantial portion of

local taxes remain in the municipality of origin (including 40 percent of the property tax, and 50

percent of license and permit fees) (Miranda and Meneses 1993, 67-8). And since the value of

real property varies dramatically by location, decentralized funding makes wealthier localities

more able to support the social services most needed elsewhere. Increases in inter-municipal

transfers could ameliorate this, but would come at a substantial political cost. Moreover, they

would undermine the notion of decentralization by removing tax resources from local control.

Perhaps most telling is that the bulk of local resources dedicated to the amelioration of

poverty come through the regional development funds. The FNDR has for a large component of

its production-side spending criteria that prioritize marginal areas, including rates of extreme

poverty, and rural character (Irarrázaval and Joannnon 1993, 124). Interestingly, this

development fund is composed of tax resources and a separate component continuously financed

by the Inter-American Development Bank (IDB) since 1985. The former (traditional FNDR)

carries none of the poverty-targeting restrictions that are linked to the FNDR-IDB funds.

Politically, where tax revenues are implicated, regional development funds do not incorporate an

anti-poverty component. It is only where the funds are external and come with conditions that

anti-poverty components are prominent (Serrano 1996, 39-40). Where funds might be otherwise

employed, the decentralized municipal authorities do not necessarily prioritize the most marginal

sectors. And even in programs locally administered, but where discretion is almost non-existent,

for example the SUF income subsidy, there are concerns that the funds are used to replace

existing anti-poverty resources, which are then reallocated to other areas. Instead, territorial

concerns tend to concentrate funds in areas outside the Central Valley (where the bulk of the

population resides), reflecting the representational biases of the political system.

Social Organization and Civil Society. Finally, those policies that generate multi-class

of traditional elites in the rural south of Mexico (Fox 1994), to the historical domination of the Chilean

17
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

support, particularly the support of organized constituencies of the Concertación are those most

likely to survive and receive high levels of funding. Indeed, the most successful anti-poverty

strategy may be one that involves a fairly comprehensive welfare state at a relatively centralized

level. This serves both to hide the real distributional impact of transfers and to build large

political constituencies behind policies that help society’s marginalized sectors (though at the cost

of subsidizing those less needy). From the Chilean evidence, the focus on highly-targeted aid

may be difficult to sustain in a democratic context. Indeed, linkage to powerful organized interest

groups may be the only way in which anti-poverty programs survive at all.

Ultimately, the sustainability of pro-poor policies is a political question. When important

organized constituencies align to support and extend such programs, they can overcome the

disadvantages posed by decentralized administrative systems and less competitive national

political arenas. But this requires the representation of popular sector interests by powerful

intermediaries that are valuable to middle class actors as allies, and are capable of punishing

politicians who fail to implement their promises. Unfortunately, the most disadvantaged sectors

of society—the informal sectors in the peri-urban areas and the peasantry—are also those least

likely to have strong organizational intermediation. In Chile, they clearly lack political

connections to the right, and have only weakly-defined organizational linkages to the left. As a

consequence, these groups are largely captive constituencies of the Concertación.

Why is this the case, and what can be done about it? Much of the organizational weakness of

the popular sectors can be attributed to the social effects of the neo-liberal developmental model

pursued since the late 1970s. Indeed, one of the key aims of many of the reforms of the military

era—particularly in social provision, labor law, and the pension system—was the disarticulation

of what had formerly been exceedingly powerful beneficiary coalitions (see Piñera 1991).

Individualization was the watchword, as the state largely ceased to have direct responsibility for

countryside by local land-owners (Loveman 1976).

18
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

levels of benefit or the terms of labor agreements. In addition, systematic political repression

coupled with extremely ‘flexible’ labor markets coupled (and two waves of severe unemployment

and recession) served to undermine most organized actors in civil society (see Garretón 1983).

But this atomization disproportionately affected the poorest elements of society, as organization

in the countryside all but disappeared.6 Even the briefly hopeful signs of organization among the

urban popular sectors in the mid-1980s quickly evaporated (Oxhorn 1995).

Thus while the national peasant (CNC) and labor (CUT) confederations are directly tied to

the governing parties of the Concertación alliance, their ability to affect policy decisions is

notably weak (in marked contrast to the situation that prevailed in the 1960s and early 1970s).

Indeed, the peasant sector has had virtually none of its key demands addressed, despite ten years

of governance by political allies. The labor movement has been slightly more successful, but has

obtained only minor changes in the labor code and has been marginalized from discussions over

the minimum wage.7

The production side investments of the post-transition governments have some potential to

mitigate this problem. Particularly the FOSIS program has had as one of its several goals the

reconstruction of a more vibrant associational life among marginalized sectors—it thus represents

an effort at both human and social capital formation. Undertaken on a sufficiently ambitious

scale, this has the potential to produce a virtuous cycle of expanding organization and ever more

solid political bases for further and deeper anti-poverty efforts.

Politically the program is structured around a cross-class alliance, and this underlines its

stability across time. First, it deliberately involves the private sector in its project structure. The

fund undertakes no projects directly, operating instead through private firms or organized social

6
On the sector-specific aspects of social and political disarticulation, see Kurtz (1999).
7
Initially, the Concertación saw the minimum wage as an issue for corporatist bargaining between the
Chamber of Commerce (CPC) and the labor confederation (CUT). The CPC quickly withdrew from the
process, and recently the government has preferred to unilaterally impose minimum wage increases without
coming to an agreement with the CUT. The government has shown little flexibility, and it has not been
punished for this stance.

19
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

groups. On the one hand it provides micro-enterprise funding, especially for peasants and

indigenous groups. But it does this largely by offering credit indirectly through the private

financial system (by subsidizing banks, savings and loan institutions, and NGOs). Second, its

community development (social) aspect operates through and promotes the creation of local

development committees. It is explicitly hoped that these will survive after the initial seed money

by FOSIS disappears, leading to improvements in local governance and increased capacity to

articulate and promote interests.

Unfortunately, the program is quite small and has remained so. Since its inception, it has

been funded at a level around US$50 million, making it more of an experimental project than a

focus of public policy (Wurgaft 1993, 59). And some of its goals have worked at cross purposes.

For example, by routing micro-enterprise credit through the formal financial system, resources

have been targeted at the largest “micro” enterprises, as these are the most profitable sites for

lending. Similarly, the project assignment system tends to reward already well-organized areas,

routing funds away from those areas most in need of social capital formation, but least able to

present a coherent proposal for support. While this is obviously an interesting policy because of

its multi-class character, focus on human and social capital, and lack of a transparently

redistributive side, higher levels of funding and direct effort aimed at stimulating local

development committees will be essential if it is to initiate such a virtuous cycle.

VI. MEXICO: RISING P OLITICAL COMPETITIVENESS , ECONOMIC LIBERALIZATION ,

AND THE SHIFT TO P RODUCTION-ORIENTED AND TARGETED P OVERTY ALLEVIATION

In the 1970s and 1980s Mexico also experienced dramatic shifts in its strategy toward the

alleviation of poverty. These shifts coincided with sea changes in both the political and economic

arenas. In the wake of the debt crisis, the formerly highly-protected Mexican economy was

rapidly and radically liberalized, culminating in economic integration with North America via

20
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

NAFTA. Politically, fifty years of hegemony by the Institutional Revolutionary Party (PRI) was

coming to a close, heralding the rise of a competitive (but well short of democratic) regime. This

had important implications for the character and sustainability of pro-poor policies. Initially

efforts at asset redistribution and nationalization were expanded (1970-82), but after the onset of

the outward oriented developmental strategies, these reforms were entirely abandoned. Instead,

an expansive but highly targeted form of consumption support was launched, coupled with large

social investments in infrastructure and human capital. While economic crisis and the emergence

of strengthened political opposition compelled a state response to poverty, and while economic

liberalization removed some options from the agenda, it was the political dynamics and

institutional arrangements that dictated the final outcome during the sexenios of Salinas and

Zedillo.

One-party hegemony in Mexico had long been the backdrop for the absence of sustained

efforts to combat poverty. Only after the legitimacy of the political system came into question

with the guerrilla uprising of the late 1960s and the massacre of student demonstrators in

Tlatelolco in 1968 was an effort to reconstruct political support for the PRI launched, using the

vehicle of populist redistribution. By 1987, however, wrenching economic crisis and internal

division led to an end to PRI hegemony and Carlos Salinas’ near loss of the presidency in 1988. 8

In the wake of this challenge to PRI dominance, a massive but now targeted effort to combat

poverty (and opposition victories) was undertaken under the rubric of the National Solidarity

Program (PRONASOL). Many of the basic outlines of this program have been sustained under

Zedillo’s PROGRESA project.

The characteristic feature of antipoverty policy in Mexico has been its instability across

presidential terms. This underlines the less competitive aspect of Mexican politics and the

reactive character of pro-poor policies. Until marginal—particularly rural—actors achieve

21
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

effective and sustained independent organization, the outlook for long-term poverty alleviation

policies is indeed bleak. The organizational basis for a broad cross-class alliance to support them

is not yet present.

Anti-Poverty Policies in Mexico in the Era of PRI hegemony (1934-82)

During the period of PRI hegemony in Mexico, policies designed to combat poverty

generally took a backseat to goals of economic development. The notable exception to this was

periods in which the dominance of the PRI was under threat, and the legitimacy of its rule was

widely questioned. In this context, efforts to combat poverty were undertaken, but not generally

sustained beyond the time of the immediate threat to the PRI’s power. Indeed, until the 1980s, it

difficult to directly identify pro-poor policies, since the latter were often constructed in

developmentalist (and political) rather than social terms.

On the production side, efforts at asset redistribution formed a core element of Mexican anti-

poverty strategy. In this vein, the redistribution of agricultural land from large private haciendas

to collectively farmed and state-administered ejidos formed the initial core of the developmental

and social effort. But this form of asset redistribution was central only in two periods, the

administrations of Lázaro Cárdenas (1935-40), and Luís Echeverría (1971-76). While land was

distributed throughout all of the post-revolutionary presidencies, it was only during these two

sexenios that high quality arable lands were seized in large quantity and over the strenuous

objections of powerful elites (see Table 5).

8
While the official results show Salinas the winner with a bare majority, many observers believe that the
election was actually won by the center-left opposition led by Cuauhtémoc Cárdenas, with fraud as the root
of Salinas’ victory.

22
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

Table 5. Land Redistribution during the Mexican Agrarian Reform

(Hectares)

President Period Real Redistribution

Lázaro Cárdenas 1935-40 20,074,704

Manuel Avila C. 1941-46 5,286,636
Miguel Alemán 1947-52 3,129,285
Adolfo Ruíz C. 1953-58 3,469,958
Adolfo López Mateos 1959-64 3,162,796
Gustovo Díaz Ordaz 1965-70 4,120,530
Luís Echeverría A. 1971-76 6,516,262
José López Portillo 1977-79* 753,689

Source: Adapted from Goodman, et al. (1985, Table 8).

*Data for first three years of this administration only.

By the late 1970s José López Portillo changed direction, declaring that the agrarian reform was

effectively over, though final abolition would await constitutional reforms implemented by Carlos

Salinas (1988-94).

Poverty in Mexico is very substantially rural, and there were a variety of other production-

side interventions in the ISI period that supported rural producers. The degree to which these can

accurately be labeled ‘pro-poor’ policies is questionable, given that the poor by no means always

captured the majority of the resources transferred. These were developmentalist policies that as a

by-product sometimes worked to support peasant production. Critical here were crop price

supports, publicly provided crop-insurance, input provision and technical assistance, irrigation

projects and public distribution channels. Until the 1980s, Mexican agriculture was characterized

by a bewildering array of state policies, controlled prices, and contradictory cross-subsidies.

Unfortunately, as the CONASUPO price-fixing system faced fiscal crises in the 1970s, its price-

floors became price-ceilings. And the benefits of the other production supports tended to

differentially benefit the capitalist and already well-off areas of the north, rather than rain-fed

peasant producers of the south (Sanderson 1986, 251). Indeed, there are substantial indicators

that for much of the period of stabilizing development (1940s-1960s) net resource transfers

flowed out of the countryside, worsening the plight of all farmers, but particularly the poor

23
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

(Goodman et al., 1985, 12).

Consumption side policy worked in direct contradiction to production policy. It was the goal

of the Mexican state to promote domestic industrialization through a cheap food / low wages

nexus. Thus, the CONASUPO program sought at once to purchase crops at relatively high prices

to maintain agricultural dynamism, but then to provide these to urban workers at prices rising

more slowly than the general price level. This approach would change in degree, but not

character until after the crisis of the early 1980s. Indeed, even when food security re-emerged as

an important priority, and the Mexican Food System (SAM) was launched (1980) in an effort to

create simultaneously national food self-sufficiency and improve the level and quality of food

consumption of the nation, little effort at targeting resources was possible. Instead, price

incentives and controls, public distribution, and input provision provided cheap food to the nation

as a whole, but not necessarily the poorest within it. Indeed, the cheap foods provided by

CONASUPO were open to all, but their concentration in wealthy and urban zones gave them a

regressive bias (Sanderson 1986, 266). And such an ambitious and universalist effort could not

survive the fiscal crisis initiated with the debt crisis in 1981-82.

Anti-Poverty Policy in Times of Crisis (1982-1999)

When the debt crisis detonated in 1982, it rendered inviable both the statist developmental

model and the prevailing system of social provision. As moves were made toward the

liberalization of markets—they would culminate in a dramatic trade opening and privatization—

social services were slashed across the board. Critically, the universalist aspect of the old system

of social welfare embodied in the price controls and subsidies on domestic wage foods could not

survive in the face of an enormous fiscal crisis. Indeed, austerity was the watchword of the first

post-crisis sexenio (1983-88), and social development spending—which contracted by 6.2 percent

per year—fell more rapidly than general expenditures (Friedmann, et al. 1995, 344-6).

24
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

It would not be until the election of Carlos Salinas that an altogether new strategy of poverty

relief would be adopted in Mexico. This new strategy, embodied in the National Solidarity

Program (PRONASOL), was explicitly designed to make social spending compatible with neo-

liberal adjustment strategies, target social programs directly at those most in need, and bypass

central corporatist and clientelist institutions (Consejo Consultivo del Programa Nacional de

Solidaridad 1994, 11-12). This very ambitious program reoriented Mexican anti-poverty policy

into highly targeted forms on the consumption side, and market-failure corrections (including

human and social capital formation) on the production side. Table 6 presents a breakdown of the

very considerable resources allocated to this program.

Table 6. Production and Consumption Oriented PRONASOL Spending, 1989-1994

(Thousands of new pesos of 1989)

1989 1990 1991 1992 1993 1994

Consumption-Side Supports 1,266,919 1,953,475 2,526,213 3,431,617 3,817,502 2,683,053

(includes education, health,
housing, and food aid)

Production-Side Supports 1,050,668 1,772,892 2,343,264 2,672,277 2,729,020 1,998,801

Regional Development
Infrastructure (613,314) (893,854) (1,488,259) (1,520,684) (1,474,748) (1,197,045)
Direct Aids to Production (437,354) (879,038) (853,062) (1,153,594) (1,254,271) (801,766)

Source: Data from SEDESOL (1994a, 176-190) adjusted by the December to December variation in
consumer prices as reported by the Bank of Mexico.

At least officially, this marked a fundamental change in Mexican social policy. In addition

to a strong emphasis on the targeting of resources, PRONASOL actively sought the participation

of local social groups in both the design of the projects to be funded and in their execution. The

basic mode of operation was through the local solidarity committees, of which during the six year

life of the program some 250,000 were operational (SEDESOL 1994b, 23). The political

independence and ‘bottom up’ character of these committees varied a great deal, but the principle

of using social welfare funds to alleviate poverty and create the basis of local social capital

25
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

simultaneously was a core innovation of the program (see Fox 1994). Importantly, unlike earlier

efforts, PRONASOL was market friendly, involving neither price controls nor direct competition

with the private sector (as CONASUPO had entailed) (Cornelius et al., 1994, 10-11).

Like so many grand projects in Mexico, the life of PRONASOL ended with economic crisis

and the election of a new president—Ernesto Zedillo—in 1994. While much of the orientation of

PRONASOL was retained by president Zedillo, the administration of social welfare funds was

restructured dramatically. Instead of using the solidarity committees—directly linked to the

central government—to allocate funds, the bulk of social spending was reorganized through the

federal structure. States and municipalities were for the first time given an important role in the

conduct of national anti-poverty policy, with the federal government officially relegated only to

the definition of broad goals (see Poder Ejecutivo Federal 1995, 124).

Table 7 outlines the spending patterns for social welfare and infrastructure under Zedillo. In

inflation adjusted terms actual spending has declined since the heydey of PRONASOL—in part

due to the peso crisis of 1995 and the subsequent fiscal tightening in 1997-8, also partly due to a

decline in funds derived from privatization. More importantly, however, by 1999 more than 77

percent will be managed by state and local governments.

Table 7. Anti-Poverty Spending under Zedillo, 1995-1998

(Millions of pesos)

1995 1996 1997 1999*

Federal Spending
10,002 12,114 13,313 4,078

Decentralized Spending
FSM, FDSM, FAIS** 5,612 7,150 8,223 13,934

TOTAL 15,614 19,264 21,536 18,012

*These represent funds budgeted, but not actually spent.

**For 1995, this represents the Municipal Solidarity Fund (FSM), for
1996-7, the Municipal Social Development Fund (FDSM), and for
1999 the Fund to Support Social Infrastructure (FAIS).

Sources: For 1995-97 Federal Spending, SEDESOL (1999a); for 1999, SEDESOL (1999b). For

26
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

decentralized spending, SEDESOL (1999c).

VII. SUSTAINING AN ANTI-P OVERTY AGENDA IN MEXICO

What is apparent in the Mexican context is the constraining character of the national

developmental model for the shape of any set of anti-poverty policies. When the strategy was

inward looking and highly statist, the government looked to programs of asset redistribution (land

reform, nationalization) and broad based producer and consumer subsidies. The idea was to

increase investment and broaden the scope of markets (by raising the consumption capacity of the

poor) simultaneously. Quite often in this context, markets were distorted through price controls

and subsidies and public agencies competed directly with private actors (for example through

marketing boards and parastatal firms).

When the painful choice was made in the 1980s to reorient the economy along free market

lines, the available options for social policy shifted dramatically. External opening and price

liberalization precluded most of the policies of the past, while requiring that any new policies be

‘market friendly,’ neither distorting prices nor competing with the private sector. Thus

consumption subsidies were targeted at the very poor—typically not highly involved in market

transactions in any event—and the operated through private intermediaries (the private financial

system, cash transfers to individuals, etc.).

But economic strategy does not determine the scope or character of anti-poverty policy.

During the statist era, activist and redistributionist policies characterized the governments of

Cárdenas in the 1930s and Echeverría in the 1970s, but poverty was largely ignored in the

intervening years. Similarly, during the neo-liberal turn anti-poverty programs suffered massive

cutbacks under de la Madrid in the 1980s, only to return in a new and extensive form under

Salinas (and to a lesser extent Zedillo) in the 1990s. These changing outcomes—both type and

27
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

scope of pro-poor policies—have fundamentally political explanations.

Political Competitiveness and Democratization. In Chile, except for the authoritarian

interlude, politics has always been a highly competitive affair with all tendencies having a

meaningful chance of assuming national executive power. The dynamic in Mexico, while not

involving the brutal authoritarianism of the Pinochet dictatorship, has been quite different. Since

the revolution, politics has been dominated by a single political force—the PRI. While since the

1988 presidential elections party politics have become substantially more competitive (with the

left (PRD) and right (PAN) oppositions winning gubernatorial elections), no alternation of

national executive power has ever occurred.

This places the Mexican governing party in a somewhat different position than its Chilean

counterparts. With the effective blending of state and party resources, its task has been to

respond to incipient dissatisfaction instead of creating and maintaining a majoritarian political

constituency. With corporatist institutions (labor unions, peasant confederations, and popular

sector organizations) that still reach deeply into civil society, its position is secure by default in

the absence of a powerful, autonomous, and organized opposition. And social welfare policy has

historically responded directly to such autonomous pressures from below. In the 1930s when

Cárdenas faced the difficult task of stabilizing politics and building a lasting institutional base,

policy became very responsive to peasant and worker interests. But once control was solidified in

the corporatist institutions he created, support for these sectors declined dramatically. Indeed, as

a consequence of political stability, anti-poverty efforts were permitted to take a back seat to

economic development for more than two decades. Only in the early 1970s, in the wake of

serious peasant mobilizations and urban unrest that rocked the foundations of the corporatist

system, did a return to ‘populism’ and pro-poor policies emerge under Echeverría.

A similar dynamic is apparent in the 1980s. When Miguel de la Madrid came to power at the

onset of the economic catastrophe of the debt crisis, he did so in the context of very limited

28
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

opposition. As a consequence of this he was able to focus government policy strictly on an effort

to stabilize the economy, ignoring altogether the social consequences of this turn toward

austerity. Pro-poor policies suffered dramatic reductions, real wages collapsed between 7.7 and

10.5 percent per year between 1983 and 1988, and implicit unemployment reached 20.3 percent

by 1985 (Friedman et al., 1995, 334-41).

The consequences of this catastrophe were left to the next president—Carlos Salinas. Elected

with the narrowest margin in Mexican history, 50.3 percent, amid very plausible charges of fraud,

Salinas clearly faced a powerful and organized political threat in the form of Cuauhtémoc

Cárdenas and the PRD. His response was to launch a massive new program of poverty relief that

was also very centrally a political strategy. Resources were to be targeted not simply by degree

of poverty, but also to areas of opposition strength. In this fashion he sought to relegitimate the

government and turn back the opposition threat (see Horcasitas and Weldon 1994). Indeed, by

the 1991midterm elections PRI supported had rebounded to 61 percent of the vote. This was a

remarkable feat indeed, especially given the scope of the economic catastrophe of the 1980s.

Unfortunately, the only partially-democratized character of the Mexican political arena

renders the formation of broad based pro-poor alliance difficult. The ruling party still responds to

opposition in a reactive fashion, and the prospect of left victory9 is not realistic enough to

provoke more serious ‘bidding’ over the scope and character of social policy.

Decentralization. An important aspect of the politics of Mexican social policy since 1988 has

been an emphasis on the local level planning and implementation of anti-poverty efforts. But

decentralization in the Mexican context begs important questions. During the Salinas sexenio

local participation was essential for access to PRONASOL funding, and at least 250,000 local

solidarity committees were created. Interestingly, these directly bypassed the already extant

municipal governments. Two logics appear to be at work here—first, this maintained

29
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

discretionary central control over the funding, and second it complicated the ability of local

bosses to gain control of the spending (Bailey 1994, 116-17). Beyond this spending, the

resources that were channeled through municipal authorities were largely paid for with centrally

controlled funds. Autonomously controlled funds accounted for only 36.9 percent of municipal

budgets in 1989, rising only slightly to 39.2 by 1993 (Cabrero Mendoza 1998, 133). Politically,

the solidarity approach allowed President Salinas to bypass both traditional political bosses and

opposition mayors, by directly linking local solidarity committees to the central government (Fox

1994, 168-69). This represented a deconcentration of authority, but not a decentralization of

authority.

Zedillo’s approach has departed markedly from this centralist strategy and can be considered

a real effort at decentralization, not simply administrative deconcentration. The peso crisis

which buffeted president Zedillo almost immediately upon taking office forced a return to serious

austerity policies. The consequence was a 12.7 percent decline in the social development budget

and a 16 percent decline in funding for programs to combat extreme poverty (García-Junco

Machado 1997, 22). Moreover, PRONASOL, which was directly linked with the now-discredited

Carlos Salinas, was eliminated. Many of its axes of action were, however, simply moved into the

“Ramo 26” area of the national budget.

Beyond budget cutting, however, was the effort to decentralize poverty alleviation programs.

Here we see a distinctive change from the administration of Salinas, as Zedillo moved to

reallocate two thirds of the poverty alleviation budget and the entirety of the physical

infrastructure budget to state and local governments (Trejo and Jones 1998, 93). The problem is

that this process assumed that the municipalities are entities capable of effectively utilizing these

funds. Unfortunately, municipal democratization is far from complete, and compared even to the

low standards of the federal government, administrative capacity is underdeveloped. The

9
Obviously, the prospect of victory by the right opposition is unlikely to initiate such a competitive

30
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

implications of this are quite severe for both the sustainability and efficacy of anti-poverty efforts.

In a less than fully democratized context, real decentralization is highly problematic. While

some Mexican municipalities have experience with political competition (and the evidence

suggests that these have greater administrative capacity), the traditional operation of local

government have been patrimonial and clientelistic (Cabrera Mendoza 1999, 5). To decentralize

authority and responsibility to localities often characterized by such undemocratic practices will

likely serve to reinforce rather than undermine them. Moreover, those areas that are most in need

of poverty-alleviating policies are typically rural; unfortunately, these are precisely the

municipalities with the weakest history of democratic governance. Thus, municipal

decentralization, while efficient and flexible in theory, in a partially democratized context like

Mexico can at once introduce a strengthening of authoritarian practices and regressive

manipulation of what resources are available (see Trejo and Jones, 1998, 91-92). In this way it is

likely to increase the control of local clientelistic elites and reduce the ability of autonomous

representatives of popular interests to emerge. Without them, however, political competition over

the scope of pro-poor policies is likely to remain muted.

On the other hand, the fact that the overwhelming majority of funds for poverty alleviation

result from central government transfers to the localities lessens one of the pitfalls of

decentralization experienced in the Chilean case. At least the inter-regional transfer of resources

is made less complicated, but this is a consequence of the lack of municipal authority over its own

funding sources. This further highlights the tension between decentralization and poverty

alleviation. The latter requires inter-regional transfers of resources, the former is predicated on

their absence.

Civil Society. It is widely recognized that neo-liberal economic strategies can have a socially

atomizing effect on civil society. But if pro-poor policies are to be sustained, organized actors in

dynamic.

31
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

civil society must exist to articulate and press demands. And they must do so in ways that move

beyond the periodic outbursts of rural and urban protest that have characterized post-

revolutionary Mexican history. Addressing this organizational weakness in civil society was a

stated goal of the PRONASOL strategy. By targeting its resources through local solidarity

committees that often included independent local organizations, it was hoped that local

instantiations of citizen participation would emerge to take advantage of available funds, and

would persist after this period of ‘seed money’ ended. It was of course also designed to build

support for the PRI and coopt more radical forms of opposition.

Unfortunately, the solidarity committees and the effort at social recapitalization they in part

represented, did not survive the end of the PRONASOL program. By the Zedillo administration,

most of the over 200,000 committees had ceased to have a meaningful existence. And it is

precisely this civil society component that is missing from the Zedillo approach to poverty

alleviation. Without extensive efforts to support popular organization, it is unlikely to occur.

First, one must remember that many of the effects of free-market transformation have been

decidedly atomizing and demobilizing, just as in Chile. This is further complicated by the fact

that much of the political space for popular representation is already occupied by the PRI

controlled corporatist peasant and labor confederations. Unlike Chile, where the advent of

democratization led directly to the reemergence of authentic (if dramatically weakened)

intermediaries for peasant and worker interests, in Mexico this political terrain is already

occupied. Any actors in civil society seeking to represent these interests must overcome the dual

barriers of an atomized society and competition from the corporatist entities (and the resources

they can bring to bear).

The profound weakness of particularly rural civil society may help to explain the

discontinuities in Mexican anti-poverty policy. Unlike Chile there has been no sustained

alleviation of poverty, nor has there been a sustained strategy for its alleviation. This is in part

32
 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

due to the comparatively lower level of political competition, making such efforts less important,

and in part due to the absence of organized intermediaries connected to political parties that might

press social demands. If the Chilean efforts at poverty alleviation have been cautious and

broadly targeted, the Mexican efforts have been intermittent and tightly politically targeted.

While neither represents the best of all possible worlds, at least in Chile by universalizing policy

outputs sustained and increased spending has been possible.

VIII. CONCLUSIONS

What do the experiences of Chile and Mexico tell us about the conditions that undergird

sustained and effective programs of poverty eradication? Perhaps the most important lesson is

that democratization is critical, but should be thought of in terms of degrees. In comparatively

undemocratic contexts, states may well engage in poverty relief, but it has tended to take the form

of highly targeted (and politically motivated) efforts to combat short-run problems and reduce the

potential for dissent. In Chile under the military, and Mexico in the era of PRI hegemony, when

poverty-relief was implemented, it was generally in response to political threats from below—and

it generally did not survive long past the decline of those very threats. On the other hand, the

establishment of open democratic competition by itself is insufficient to drive an anti-poverty

agenda, even where the impoverished population is quite large. Rather, party system dynamics

and the level of competitiveness (the quality of democratic practice) are crucial mediators of

policy outcomes. Where several reformist parties compete with each other, the capture of poor

voters as a captive constituency is impossible, and anti-poverty efforts and political accountability

are likely to be highest. Where only one political party has as part of its goals serious anti-

poverty efforts, the latter can more easily be subordinated to other goals and responsiveness to

actors in civil society is reduced—they have few other political options.

In a paradoxical way, administrative decentralization may represent an advance in terms of

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

democratization (by bringing decision-making down to a level closer to individual citizens), but

also a barrier to the sustainability of an anti-poverty agenda. Since administrative capacity is not

equally distributed at the national and municipal level, decentralization of pro-poor policies

increases their risk of mismanagement and raises the likelihood they will be discredited.

Similarly, municipalities are often the bastion of undemocratic and clientelistic local elites,

raising the odds that anti-poverty funds will be used to construct patronage machines, leak away

from their intended beneficiaries, and work directly against the formation of autonomous actors in

civil society that are crucial to their sustainability. Finally, if resources are also decentralized

then issues of distribution across class become conflated with issues of inter-regional distribution,

further raising the bar to significant anti-poverty relief.

Finally, it has also been recognized that the recent shift toward more free-market forms of

economic organization have an atomizing effect on civil society, indeed disproportionately on the

more marginalized sectors of civil society. But if the formation of coalitions supporting a pro-

poor agenda is to occur, the popular sectors must generate autonomous representative

organizations. Thus, anti-poverty programs that support the organization of the poorer sectors of

civil society—i.e., those that support social capital formation, especially on the productive side—

will have a greater likelihood of sparking a virtuous cycle. If an initial effort results in the

generation of more powerful representatives of the poor in national politics, these very same

social actors become increasingly attractive as coalition partners and will be more able to sustain

the anti-poverty efforts that gave birth to them.

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 The Political Economy of Pro-Poor Policies in Chile and Mexico Kurtz

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