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Rafael Ruiz Velasco: Mexico's Poverty Relief Programs Are a Failure

Rafael Ruiz Velasco - PanAm Post
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April 25, 2016

The 2013 launch of the "Crusade against Hunger" was attended by Guatemala President Otto Fernando Pérez Molina (L), who congratulated Peña Nieto for his leadership. (EFE)

Mexico’s poverty is a problem. About 50 million Mexicans live on less than US $5 a day, and about 2.5 million are in extreme poverty, living on less than US $1.25 a day.

But the situation affects all of Mexico. On the one hand, poverty generates various types of anxiety, depression and insecurity in people who suffer it. On the other hand, it is the main engine for the rise of organized crime, suicide, family violence and addiction.

The Mexican government has been trying to address this issue with social programs. Year after year there are new initiatives, and millions of pesos are allocated to government resources intended to dignify and improve the living conditions of the neediest Mexicans.

Some of the most recent examples is the “Crusade against Hunger,” a milk subsidy and support for the transition to digital television.

But if the budget for such programs increases yearly, why is the number of people suffering in poverty continuing to rise? Here are some answers:

  • Increased tax burden: A higher level of social spending requires a higher level of tax collection. Mexico is not productive, and therefore there is no other way to finance such programs than by punishing those who themselves are productive.

  • Seed of corruption: thousands of contracts are held above market price, and are assigned to friends and or partners of officials in public office.

  • Lack of incentives: contrary to what happens in private entities, the government and its employees have no incentive to be effective when it comes to achieving goals. Whether they meet their goals or not, public servants continue to receive their pay each month.

  • Paternalism and politicization of support: rulers and politicians in general need the existence of the poor. They present themselves as social benefactors and generate greater dependence on their programs. This way they can easily profit from politically loyal citizens.

  • Inefficiency: for every 100 pesos we pay in taxes, only 40 are used correctly. The rest are lost along the redistributive process that is bureaucracy, corruption, price inflation and diversion of resources, among other things.

Today it is necessary to change the way we think about the roles of both government and citizens.

We need to understand and eventually make politicians understand that the country doesn’t need to redistribute wealth, but rather generate it. The only solution to poverty is productivity. Only through entrepreneurship, education, investment, work and savings can the country achieve a true citizen empowerment to enable those living in poverty a potential to succeed in a fair and sustainable manner.

If we call things as they are, then social programs are nothing more than hotbeds of corruption and, paradoxically, are also hotbeds of poverty. A freer economy with a simpler, even and thin tax system would contribute more to reducing poverty in Mexico (through foreign investment and the creation of new small and medium enterprises) than billions of pesos collected and redistributed by the government.

With these changes, everyone has a chance to get ahead and fight for their dreams.

Rafael Ruiz Velasco earned a degree in Business Admininistration from the University of Anáhuac in México. He's passionate about development, project management, soccer, economics, and comic books.

See the original at PanAm Post | Español

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