Pablo de la Peña Sánchez: Growth, public investment and poverty

Pablo de la Peña Sánchez.Pablo de la Peña Sánchez Source: Courtesy

One of the great concerns derived from economic crisis triggered by the COVID-19 pandemic this year, is the increase in poverty in the country.

Although the identification of the factors that explain the reality of poverty may be highly debatable, in this context of crisis I do not think there is much doubt in accepting that poverty Loss of work and the lack of resources, both monetary and basic services, are factors that clearly contribute to increasing poverty in any country.

On other occasions we have talked about the economic contraction that we will have this year, almost 10 percent, we have talked about the loss of formal jobs, the increased informality, the lack of fixed capital investment, and of course the lack of effective programs to counteract all its effects; but we haven’t talked much about the consequences of all that.

Some analysts have calculated that the average annual growth throughout the presidential term of President Andrés Manuel López Obrador could be less than one percent, this if we maintain a constant growth rate of at least 3.5 percent for the next four years.

This implies that there is a high probability that the percentage of Mexicans living in poverty increases in the following years. Despite the cash transfers from the current administration’s flagship programs, this will not be enough to solve structural problems that make poverty a persistent issue.

According to the page of the CONEVAL The poverty rate from 2008 to 2018 only dropped 2.5 percentage points, from 44.4 to 41.9 percent, but in reality, the population in poverty grew from 49.5 million to 52.4 million Mexicans. Clearly the difference is due to the growth in the total population in the country in the same period of time.

Among the different characteristics on the poverty measurement, ands to draw attention to the percentage of the population that lives with social deprivation. In 2008 there were 36 million Mexicans living under this condition of poverty (32.3 percent of the population) and in 2018 there were 36.7 million (29.3 percent). The social deficiencies are: educational backwardness, health services, social security, food, quality and housing spaces and access to basic services.

Of all of them, it is important to note that the population with lack of health services In 2008 it went from 42.8 million (38.4 percent) to 20.2 million (16.2 percent). I think that the Seguro Popular very probably had an important influence on this reduction. However, although all the other elements had reductions relative to the total population, in some cases, such as access to food, they had marginal increases in the population with this deficiency (24.3 million in 2008 to 25.5 in 2018) .

What is really worrying is that, apparently, the most effective strategy to reduce the percentage of the Mexican population with some social deprivation, including poverty in its global measurement, has been the population increase, which has nothing to do with any policy or deliberately designed social program as a government strategy. In short, it seems that we have not been able to find actions that substantially reduce the Mexican population living in poverty.

In 2015, Mexico signed the agreement to achieve the sustainable development goals promoted by the United Nations. There are 17 different development objectives, and the first has to do precisely with Poverty and in general terms the objective is to halve the percentage of poverty in the country by 2030. In 2015, the percentage of poverty in Mexico was 43.5 percent, the commitment is to cut it in half by 2030.

The big question is whether we can really reduce 21 percentage points in the next 10 years, if we take as an example that from 2008 to 2018 we could only reduce 2.5 points.

The challenge is truly substantial and is so great that the public sector will not be able to solve it alone, and if one of the key factors to reduce poverty is the creation of jobs, it is essential that there is a coordinated work between the government and the private initiative to create more sources of employment, but also to invest in infrastructure necessary to solve the social deficiencies of the population, having a job and having a monetary income are essential, but they are not enough. Public investment is essential and it is urgent.

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The author is Associate Dean of Continuing Education of the School of Social Sciences and Government, Tec de Monterrey.

This is an opinion column. The expressions used here are the sole responsibility of the person signing them and do not necessarily reflect the editorial position of El Financiero.