A Neoliberal Initiative

In contrast to Brazil, where both Buarque and Suplicy initially struggled to convince first Cardoso and later Lula of the merits of CCTs, President Zedillo, himself a technocrat with a doctorate in economics from Yale, was both open to cash transfers and a proponent of human capital theory (Valencia and Aguirre 1998, 76). Zedillo (2009) insulated social policy technocrats from politics and granted them full autonomy to design, imple-ment, and evaluate what came to be known as the Education, Health and Nutrition Program (Progresa, To Progress). From his perch as undersecre-tary of finance for expenditures, Levy, a Boston University– trained econo-mist, worked closely with José Gómez de León, a Harvard- trained demog-rapher and general secretary of the National Population Council (CONAPO), to design Latin America’s first national- level CCT.⁴

Progresa was part of a broader transformation in Mexican social policy that began with the 1988 election of Carlos Salinas de Gortari (1988– 94). In the context of the 1980s debt crisis and subsequent market reforms, Mexi-can governments sought to create a safety net for the millions who fell into poverty while simultaneously reducing the size of the state. Anti- poverty policy under Salinas centered around the National Solidarity Program (PRONASOL), a social investment fund that provided communities with resources for infrastructure projects. Inaugurated in December 1988 to great fanfare, PRONASOL came to be widely criticized for being both inef-fective and clientelistic (Dresser 1994; Molinar and Weldon 1994; Bruhn 1996; Dion 2000; Díaz- Cayeros, Estévez, and Magaloni 2016).

Levy first presented the ideas that evolved into Progresa in a 1991 World Bank research paper. In line with evolving neoliberal thinking on poverty,

he accepted that growth alone would be insufficient to adequately tackle extreme poverty, which was concentrated in rural areas (Levy 1991, 30).

Traditionally, Mexican governments sought to prevent hunger through food price subsidies, which were expensive and regressive, and direct food distribution, which was prone to corruption and had trouble reaching the most remote, and thus poorest, communities. On a more fundamental level, Levy (1991, 4– 5) argued that fighting poverty indirectly through food policy was both inefficient and distorted economic incentives at a time when governments were working to impose market discipline. He pro-posed replacing generalized food policies with vouchers exclusively target-ing rural families in extreme poverty. Interesttarget-ingly, that proposal explicitly rejected using cash transfers for fear that they would disincentivize work and cause “welfare dependency” (Levy 1991, 52).

To promote human capital formation, the vouchers were to be condi-tional on children receiving regular medical checkups and parents attend-ing classes on hygiene, birth control, and food preparation (Levy 1991, 85).

Notably, at this time, benefits were not conceived as conditional on school attendance. Levy (1991, 64) was emphatic that the program’s purpose was to induce behavioral changes and, as such, that its success should be assessed in terms of its “ability to lower infant mortality, reduce undernutrition, decrease fertility, reduce morbidity, and improve elementary health and hygiene behavior. . . . The program should have no other objectives” (Levy 1991, 64).

With his appointment to the Finance Ministry in December 1994, Levy got the chance to implement the proposal. The need for an effective anti- poverty program further increased following the so- called Tequila Crisis, a severe balance of payments crisis inherited from the previous administra-tion that sent the economy into a deep recession and pushed 16 million Mexicans into poverty. Like the debt crisis before it, the new crisis simulta-neously increased the need for safety nets and constrained public finances.

Sidestepping the Social Development Ministry (SEDESOL), Zedillo tasked two teams of technocrats with designing a replacement for PRONASOL (Garay 2016, 232). While Levy’s team worked on turning his proposal into a reality, Gómez de León’s team worked on a program targeted at mothers aimed at increasing children’s access to education (Yaschine and Orozco 2010, 63; Garay 2016, 232).

There were immediate tensions between the technocrats and SEDE-SOL’s policy specialists led by Social Development Minister Carlos Rojas,

the “father of PRONASOL.” The two sides fundamentally disagreed on the very purpose of anti- poverty policy and who it should target. Whereas the former wanted to focus exclusively on extreme poverty, the latter also wor-ried about the moderately poor. As Valencia and Aguirre (1998, 70) explain,

“Under one logic it was stressed that the poor must be guaranteed, as a constitutional right, a basic floor; under the other, [it was argued] that the extreme poor need to satisfy certain minimums to be qualified to partici-pate in the market.”

Tensions were further heightened because Levy, who had been critical of PRONASOL’s subsidized credit component and arbitrary targeting, had final say over Rojas’s budgets. The ministry’s team considered it “heresy”

that a “technocrat’s” approach to fighting poverty would replace “one of the most ambitious anti- poverty programs” in the country’s history (Valencia and Aguirre 1998, 76). In the words of a high- ranking SEDESOL official at the time, “the technocrats have no field experience and try to directly apply their ‘desk theories’ without having any experience with development pro-grams” (cited in Valencia and Aguirre 1998, 76).

A pilot of Levy’s proposal covering 31,000 households launched in three cities in the southeastern state of Campeche in October 1995 and was expanded to select rural communities in nine poor states in June 1996.⁵ In lieu of subsidized milk and tortilla rations, participants received an electronic card exclusively for purchases of food at selected stores and tortilla shops.⁶ Benefits were conditional on children attending regular medical checkups. Additionally, malnourished children, pregnant and lactating mothers, and children under five were given in- kind nutritional supplements.

Although beneficiaries overwhelmingly preferred vouchers to subsi-dized food (Levy and Rodriguez 2004, 243), lack of infrastructure limited the electronic card’s usefulness in the most remote towns. As a result, vouchers were replaced with direct cash transfers (Hernández Franco 2008, 44; Cortés and Rubalcava 2012, 37). Scaling the program nationally required creating an objective targeting mechanism, a task Gómez de León spear-headed (Levy and Rodriguez 2004, 254; Lustig 2014, 109). And, most importantly, given education’s central role in human capital formation, it was deemed necessary for benefits to also be conditional on school atten-dance (Levy and Rodriguez 2004, 243). With that, Levy and Gómez de León’s proposals were merged into a single program covering education, health, and nutrition.