MEXICO CITY (AP) — President Andrés Manuel López Obrador took office nearly six years ago with a simple motto that outlined his administration's priorities: “For the good of all, starting with the poor.”
His administration abolished many of the existing social security programs, introduced its own, and rapidly increased overall social security spending for the elderly, the unemployed, students, farmers, and the disabled to unprecedented levels.
What went unnoticed, however, was that the new social welfare system dramatically changed who received its funds: Suddenly, Mexico's poorest people were receiving a smaller share of spending and less funding than they had received under the previous administration.
Meanwhile, some of Mexico's wealthy people have begun accepting money they don't actually need.
The shift was driven largely by President Lopez Obrador's launch of a massive “universal” pension rollout to seniors on a chilly January day in 2019 on the outskirts of Mexico City just weeks after taking office. He announced he would more than double existing federal pensions, which have since been doubled again and expanded the benefit to people who were previously ineligible, such as those who received other pensions from previous employers, regardless of income.
Without more money pumped into the system, “universal programs will spread benefits thinly across the population, making those who need it most worse off,” said Robert Greenstein, a research fellow at the Brookings Institution in Washington. “Poverty will likely increase. Inequality will likely increase more than would be the case if a more targeted system were in place.”
But Lopez Obrador's social security program has been so popular that opposition candidates vying to replace him in the June 2 election have pledged to expand it. Some 28 million Mexicans will benefit from it this year. During the final presidential debate on Sunday night, Xochitl Gálvez said she would lower the minimum pension age from 65 to 60.
The pension is the largest budgeted social welfare program in President Lopez Obrador's suite of transfers, far surpassing the better-known “Youth for the Future” (which pays young people who are not studying or working to serve as apprentices) and “Sowing the Seeds of Life,” which pays farmers to plant fruit- and timber-producing trees on their land.
Experts say the pension system, combined with the elimination of his predecessor's more targeted programs that focused on Mexico's neediest people, has dramatically altered the allocation of government funds.
With four months to go until the end of President Lopez Obrador's six-year term, millions have been lifted out of poverty, but it's not just the social welfare system that's at work, either: Lopez Obrador has nearly tripled the minimum wage and Mexicans abroad continue to send record amounts of remittances home.
Interestingly, the number of Mexicans living in extreme poverty has increased by about 400,000 since the start of his presidency, according to government data.
According to a biennial government report that divides Mexico's population into 10 income brackets, the poorest people received about 19% of social security contributions in 2018. Just two years later, they received just 6%, said Manuel Martínez Espinosa, a researcher at Mexico's National Council of Science, Culture, and Technology. For unclear reasons, the government has not released the 2022 report.
Cash payments to families, but with conditions
At a counter in a market in central Mexico City, Arturo Garcia leaned over a steaming bowl of tripe stew on a recent morning, the 73-year-old former taxi driver said he had stopped accepting customers during the pandemic.
His only sources of income now are the $362 (6,000 pesos) he receives every two months from his national pension and money he earns from renting out a warehouse in his home to street vendors.
“Whether you have money or not, the government gives you a pension,” Garcia said of pensions. “The government is trying to make us all equal.”
One of the programs Lopez Obrador ended when he took office was called Prospera. This program, known as conditional cash transfers, had been targeted to Mexico's poorest families under various names for about two decades. Poor families received cash, but the amount was limited by income level, and recipients had to meet several conditions in order to receive it, such as taking their children for a medical checkup.
The president said the program was plagued by clientelism and systemic corruption, but cases of corruption have also been found in Lopez Obrador's programs.
Targeted social programs like Prospera aim to allocate public funds precisely to specific segments of the population, and as such tend to be less costly than universal programs.
But critics say such programs stigmatize the poor, are more vulnerable to cuts because they have less political support, require more oversight to determine eligibility and enroll fewer people, said Greenstein, the Brookings Institution researcher, adding that these risks are not unique to targeted programs.
Mexico's Welfare Ministry did not respond to a request for comment.
Prospera's funds were channeled into Lopez Obrador's programs, primarily universal pensions, marking a significant shift from means-tested programs that primarily benefited poor children to one that provides cash transfers to all seniors.
One of the most cynical criticisms of this change is that children don't vote, but older people do.
People who don't really need it are getting more.
Another aspect of the decline in the share of social security spending going to Mexico's poorest people under this administration is that more social security benefits are being received by people who don't actually need them.
One morning in late April, César Herrera took his elderly mother to a Mexico City branch of Banco Bienestar, or Welfare Bank, to withdraw her pension payment, a bank set up by López Obrador as a way to get his administration's payouts directly into the hands of Mexicans.
Herrera said she was driving by with her mother when her last pension payment was deposited in February and saw a long line in the street, but unlike many seniors who live paycheck to paycheck, her mother didn't need the money so she walked away, Herrera said.
“But it's there,” he said when they returned a month and a half later. “Of course we have to take it.”
Social Security benefits for the ninth, or second-highest, tier of 10 the government analyzed fell from about $4.40 per $100 in 2018 to about $10 in 2020, said Martinez, the researcher at the Council for Humanities and Technology.
Martinez said his field work in Chiapas, Mexico's poorest state, found many people there who are fervent supporters of Lopez Obrador, even though he has not received as much funding as he used to under the Prospera government.
“I've spoken to a lot of people on the ground and they feel cared for. They feel the president cares about them. They've never felt that way before,” Martinez said.
Martínez speculates that extreme poverty has risen under the administration partly because of the abolition of Prospera, but also because the extremely poor tend to work in the informal sector and therefore did not benefit equally from the increase in the minimum wage. Another factor is that the COVID-19 pandemic has forced many families to dip into their limited savings to pay for health care.
Much of the back-and-forth between Lopez Obrador's designated successor, Claudia Sheinbaum, and the opposition candidate, Galvez, has involved the president and Sheinbaum insisting that Galvez would abolish Social Security if he wins, while Galvez promises not to abolish it. With pensions now enshrined in the constitution, much of this debate is unnecessary.
Martinez said even with the current minimum age of 65, the system is quickly draining public funds.
“In the short term, it's a time bomb because it's going to cause problems because it's not financially sustainable,” he said.
