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FEATURE STORY

Latin America: Are Social Safety Nets Really Protecting the Poor?

June 17, 2011


WASHINGTON D.C, June 17, 2011 - What would you say if you were told that a whole country the size of Chile, Ecuador or Guatemala has been saved from starvation at the stroke of a pen?

Difficult to grasp or picture in one fell swoop? That, however, is what stopping 16 million people from falling into extreme poverty amounts to, according to an independent report praising social safety nets (SSN) as effective mechanisms to shield the poor from economic shocks, especially during the recent global financial crisis.

A study by the Independent Evaluation Group shows that the majority of World Bank supported social safety nets—programs designed to protect the poor and contribute to reducing chronic poverty—achieved their objectives. In several Latin American countries, for example, conditional cash transfer programs provided much-needed funds to the poorest families and helped improve children's school attendance rates.

"Countries that had prepared themselves during stable times by building permanent social safety nets—such as Chile, Colombia or Georgia—were better positioned to respond than those that had not when the crises hit," said Vinod Thomas, Director-General, Evaluation, World Bank Group. "The World Bank was more effective in helping countries where it had been already engaged over the past decade through lending, advisory services or policy dialogue."

By way of example the report shows significant evidence of an uptick in consumption and, conversely, a drop in poverty in countries where socials safety nets are active.

"Data from five conditional cash transfer programs implemented in five countries (Nicaragua, Honduras, Paraguay, Colombia, and Mexico) shows increases in consumption by 9-18 percent and reductions in extreme poverty (head count ratio) by 10-17 percent among program beneficiaries", the study states. It goes on to argue that cash transfer programs in Colombia and Mexico helped increase the rate of secondary school completion among beneficiaries by 4 to 8 percentage points.

The World Bank provided $11.5 billion in lending and advisory services in the developing world during 2000-2010 for social safety nets. In the wake of the fuel, food and financial crises, the number of countries receiving support from the World Bank for these programs increased from 68 to 83, with over half of the new countries being low-income. The study also finds that few countries were prepared for the triple shocks that pushed 64 million additional people into extreme poverty by the end of 2010.

In middle-income countries, the safety net programs were generally geared to assisting the chronically poor rather than those who suffered job losses, yet these programs were not flexible enough to alter their targeting strategies. Low-income countries often lacked poverty data and systems to reach the poorest people, who would have benefited from, short-term employment and subsidies that SSNs can provide.

In Argentina, one of the region's largest middle income economies, the Bank supported Universal Child Allowance (AUH, in Spanish) currently benefiting 3.5 million children, has become a valuable tool for supplementing household incomes and overcoming extreme poverty, says expert Rafael Rofman.

"It has become one of the largest programs in terms of its impact on income distribution and on poverty and extreme poverty in Argentina," notes Rofman, a lead social protection specialist in the Bank's Buenos Aires office.

Global crises, persisting inequality, frequent natural disasters and unforeseen economic shocks have underscored the need for safety net programs in all countries, irrespective of their income levels. The World Bank is in a unique position to offer continuous support to clients in this area through its lending and advisory programs. As such, there is a crucial opportunity for the Bank to raise its impact further through improvements in strategy and delivery mechanisms.

"The World Bank needs to maintain its recent momentum and increase engagement in low-income countries, where safety nets are important to protect the poorest," said Jennie Litvack, the main author of the study. "It's encouraging to know that these issues are being addressed by the World Bank Management in the development of its new social protection strategy."

Going forward, the study recommends several improvements. First, it stresses the importance of engaging with countries during stable times to help develop SSN programs flexible enough to address systemic shocks. Second, it emphasizes the importance of building of SSN systems and institutional capacity, particularly in low-income countries. Third, it calls for results frameworks, which include improvements in program design, monitoring of results, as well as links with the countries' development goals.


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