Fostering Inclusion in Mexico

IMF News, January 24, 2022

Source details

About 42 percent of the Mexican population lived in poverty in 2018, with large variation across states (CONEVAL).
Forty percent of households with children or adolescents did not have access to social protection prior to the pandemic, a share above the Latin American average.
Public spending on health and education is below the OECD average.

The government introduced important changes to social programs in 2019, focusing on universal coverage and social (non-contributory) pensions, as well as support to indigenous people, the elderly, and people with special needs.
Overall social assistance spending increased from 1.8 percent of GDP in 2018 to 2.1 percent of GDP in 2019.
Social pensions related to the Pensión para el Bienestar de las Personas Adultas Mayores program increased more than three-fold between 2018 and 2020, motivated by the prevalence of old-age poverty and limited pension coverage.
Education programs were restructured into three programs by education level. Programa de Becas de Educación Básica para el Bienestar Benito Juárez targets families living in poverty with children under 15 years of age; payments are now per family and are not conditional on regular student health checks.
The change from conditional cash transfers (Prospera) to per-family, non-conditional payments requires monitoring to ensure school dropout rates do not increase and student health and nutrition are not negatively affected.

The government had budgeted increases in social program spending in 2020 before the pandemic.
The government increased health spending and direct budget support to households and firms by 0.7 percent of GDP in response to the pandemic.
State-level analysis suggests social program spending increases in 2020 mitigated, to some extent, the pandemic’s negative impact on employment, retail sales, and labor poverty (the percent of population with labor income lower than the cost of the food basket).
The poverty rate increased from 41.9 percent to 43.9 percent between 2018 and 2020.
Those lacking access to health services shot up by 12 percentage points of the population.
CONEVAL finds that absent social transfers, poverty indicators would have worsened to 45.9 percent; social transfers prevented a further 2.5 million people from falling into poverty.
Poor families are likely to be more affected by prospective economic scarring from the pandemic (for example, learning losses due to large gaps in internet access across income groups).

Higher and more efficient social spending is essential to narrow socioeconomic gaps, mitigate economic scarring from the pandemic, and foster an inclusive recovery—especially if coupled with reforms that improve employment and reduce informality.
Close coverage gaps and limit fragmentation in social assistance programs:
- Create a single registry of beneficiaries.
- Strengthen administrative capacity to reduce overlaps and improve targeting of spending.
Prioritize increased access to education and health programs in poorer states and among disadvantaged populations.
In education, invest in equipment, facilities, information technology, and modern infrastructure to keep up with evolving labor demands.
To alleviate fiscal concerns, support higher social spending with higher tax collections over the medium term to ensure public debt declines over time.
In the medium term, tax reforms could finance spending of around 2 percent of GDP on social programs, education, and health, and 1 percent of GDP on infrastructure and other public investment.

Swarnali Ahmed Hannan, IMF Western Hemisphere Department, January 24, 2022.

1. Recent Price Pressures in Mexico Appear Mostly Transitory
- 1. Recent Price Pressures in Mexico Appear Mostly Transitory (Markdown version)
- 1. Recent Price Pressures in Mexico Appear Mostly Transitory (PDF)