Pocketbook Poverty Alleviation

Over the last two decades, Latin American governments have expanded the social benefits packages available to their people. The classic universal model of social welfare policies paid for public services such as health and education, and provided social insurance money transfers that covered risk through contributory payments for items such as retirement and unemployment insurance.

Today the array of options is greater. The newest development in the field of poverty alleviation is targeted monetary transfers, which are redistributive and non-contributory. Such allowances can be designed as income transfers to special groups in need of assistance, such as the elderly, the uninsured and the handicapped. Or they can be crafted as so-called “conditional cash transfers” (CCT), an innovation that has already been adopted by at least 14 countries in the region (Figure 1).

The aim of CCT programs is to break the vicious cycle of intergenerational poverty by promoting human capital accumulation. They are targeted programs, with qualification rules defined by chronic poverty, vulnerability to economic shocks or transitory poverty. The conditionalities of these transfers are intended to enhance investments in children—mainly in education but also in health and nutrition.

CCT programs target the chronic poor. The determination of who qualifies varies by country. The Brazilian Bolsa Família program relies on a voluntary registration file (cadastro único) and self-reported family income for their means testing...