Revisiting the Cases: Effects of Recent Ideological Shifts

The previous chapters demonstrated that left and nonleft presidents had different preferences regarding CCT design. In Brazil, successive left- wing governments transformed the programs they inherited into the

region’s first basic income CCT. In Argentina and Bolivia, left- wing presi-dents who enacted their own programs from scratch went further in the basic income direction than even Brazil. In contrast, nonleft governments in Mexico and later Costa Rica enacted and maintained human capital CCTs. This leaves two questions unanswered. Do other left- wing leaders who inherit human capital CCTs follow the Brazilian example in reforming them in a basic income direction? And, conversely, do centrist and right- wing presidents who inherit basic income CCTs reform them in a human capital direction? Recent changes in government ideology in four of the five countries discussed in detail in this book offer an opportunity to tackle these questions.

As Latin America’s economies deteriorated following the end of the global commodity boom, voters across the region began voting out incum-bent parties, leading to 180- degree shifts in government ideology.¹ In April 2014, Costa Ricans elected their first left- wing leader, Luis Guillermo Solís (2014– 18) of the center- left Citizens’ Action Party (PAC).² The following November, Argentines elected Mauricio Macri (2015– 19) of the center- right Republican Proposal, thus ending 12 years of center- left Kirchner presidencies. Facing impeachment proceedings amid what turned out to be the longest and deepest recession in Brazilian history (Biller and Shinohara 2017), center- left President Rousseff was replaced in May 2016 by her vice- president, Michel Temer (2016– 18), a center- right politician from the Movement for Brazilian Democracy, ending 13 years of center- left Workers’

Party governments.

In 2018, amid mounting frustration over weak economic perfor-mance, large- scale corruption scandals, and rampant crime and vio-lence, voters in the region’s two most populous countries elected popu-list leaders who promised major political transformations.³ In July, Mexicans overwhelmingly elected left- wing populist Andrés Manuel López Obrador (2018– present) of the National Regeneration Movement (MORENA), marking the first time since the transition to democracy in 2000 that the country has been governed by the left. And, in October, Brazilians elected Jair Bolsonaro (2019– present), a far- right populist former army captain.⁴

Brief and, in the cases of Mexico and Brazil under Bolsonaro, prelimi-nary overviews of the evolution of CCTs in the four countries discussed above largely support this book’s arguments. Following in the footsteps of Brazil’s Lula, Costa Rica’s left- wing governments reformed the human

capi-tal CCT they inherited in a basic income direction. In Mexico, AMLO, as López Obrador is commonly known, replaced Progresa/Oportunidades, the prototypical human capital CCT, with a series of broadly targeted unconditional transfers.

In contrast, right- wing governments in Argentina and Brazil did not reform the basic income programs they inherited in the human capital direc-tion. However, both governments, and Brazil’s in particular, gradually retrenched cash transfers, primarily via policy drift (Hacker 2004; Niedz-wiecki and Pribble 2017). In neither country did coverage keep up with big expansions in the poor population. It should, however, be noted that both countries faced deep economic crises that slashed the resources available to fight poverty precisely when they were most needed.⁵ Further research would be required to fully disentangle the effects of ideology and economic crises.

Finally, and more concerning, there is evidence that Mexico’s and Bra-zil’s populist leaders utilized cash transfer policy clientelistically during their first year in office. These were still new administrations at the time of writing and therefore any conclusions about their behavior are preliminary.

However, this is a deeply worrying trend, particularly given the outsized influence these countries played in the diffusion of CCTs across Latin America and the world.

Costa Rica. Since 2014, the country has been governed by two consecutive center- left administrations, those of Solís and Carlos Alvarado (2018– present). As in Brazil under the PT, left- wing governments have reformed the country’s Avancemos human capital CCT in a basic income direction. Solís moved to equalize the program’s stipends. More recently, Alvarado extended CCT coverage to low- income primary school students.

PAC governments made Avancemos stipends more uniform across grades. In 2015, the number of stipend categories was collapsed from six to two (one for grades 7– 9, another for grades 10– 12). Stipends were increased for grades 7– 8 and cut for the remaining grades. Whereas seventh grade stipends increased to 91% of their initial 2007 purchasing power, stipends for grades nine and 11, respectively, retained just 54% and 47% of their original purchasing power. Whereas grade 12 stipends were originally more than three times larger than grade seven ones, that difference shrunk to just 1.5 times (see fig. 7– 2).⁶ Alvarado, then Solís’s human development minis-ter, justified the decision in terms of both human capital and poverty reduc-tion. With regard to the former, Alvarado noted that desertion (leaving

school) peaks during the transitions from primary to secondary education (grades six to seven) and from lower to upper secondary school (grade nine to 10). It was thus unnecessary to increase stipends with each grade. With regard to reducing poverty, he promised that the stipend cuts would free up resources to seek out and enroll additional beneficiaries (Repretel Costa Rica 2014). True to his word, by the end of 2019, Avancemos covered 203,000 students— 9.7% more than during the years following the global financial crisis (IMAS 2020, 9).

As president, Alvarado moved to further expand CCTs and transform them into a right. In late 2018, the Costa Rican congress approved a government- drafted law making Avancemos permanent (rather than dependent on presidential decrees) and mandating that it receive at least 8% of the anti- poverty budget (IMAS 2018).⁷ In June 2019, the Education Ministry’s primary- school scholarships were replaced with Crecemos (Let’s Grow), a new CCT operated by the Mixed Institute for Social Assistance, the institution in charge of Avancemos (IMAS 2019).⁸ By the end of 2019, Crecemos covered 210,000 children (IMAS 2020, 9). Taken together, the two CCTs covered 8.3% of the country’s population. Thus, six years after the left assumed power, coverage was at peak levels, stipend amounts were closer to uniform, and CCTs had been extended to all grades.

Argentina. Although the center- right Macri administration did not conduct major reforms to the design of the country’s Asignación Universal por Hijo (AUH) basic income CCT, the program did undergo significant retrench-ment. The program’s eligible population and total number of beneficiaries increased slightly under Macri. However, this expansion did not keep pace with rising poverty levels. Purchasing power also declined significantly, particularly following changes to the rules for updating stipends (Sacco et al. 2019). Furthermore, Progresar, a program introduced in the final years of the Fernández administration that provided stipends for unemployed and out- of- school 18– 24 year olds to finish school or enroll in technical education, was largely dismantled (Letcher and Strada 2019).

Given AUH’s popularity, one full year before the election, Macri prom-ised to maintain the program, which he described as one of his predeces-sor’s few successes (La Nación 2014). During a presidential debate in late 2015, he even promised to extend coverage to the children of so- called monotributistas, self- employed workers subject to a simplified tax regime (Tarricone 2018). During Macri’s first month in office, AUH beneficiaries

received a Christmas bonus, a practice that was continued during the remainder of the administration.⁹ True to his word, in April 2016, Macri signed a decree extending eligibility to the children of monotributistas. By the end of his term, 462,000 were enrolled in the AUH, representing 11.0%

of beneficiaries. Later reforms simplified the eligibility requirements for temporary workers and scrapped rules excluding beneficiaries of provincial and municipal programs from AUH (Obarrio 2016).

However, tough economic times— the economy shrank during three of the administration’s four years and inflation averaged 41.6% a year— forced Macri to pursue retrenchment via stealth. Following successful midterm elections in October 2017, the administration pushed through a pension reform aimed at reducing the fiscal deficit and making the pension system more financially sustainable.¹⁰ Specifically, the reform altered the rules for indexing to inflation various government benefits including AUH. The highly controversial reform, which passed amid violent protests thanks to a last- minute deal between Macri and opposition governors (Cué 2017), steadily eroded the purchasing power of AUH stipends over the remainder of the administration (Lechter and Strada 2017; Slipczuk 2017; Quiroga and Juncos Castillo 2020; ODS- CTA- A 2019). Overall, the real value of sti-pends declined by roughly 12% between the end of Macri’s first and last year.¹¹ The government, however, did attempt to partially offset this decline through several ad hoc bonus payments during 2018 and 2019.¹²

Overall, by the time Macri stepped down, 4.12 million children benefited from AUH, an increase of 12.5%. However, this increase did not keep pace with rising poverty. The share of the population living in poverty and extreme poverty, respectively, increased by 24.6% (about 3.7 million) and 61.0%

(about 1.7 million) during Macri’s term.¹³ Under such circumstances, a mod-erate increase in coverage could be construed as retrenchment and a move away from the goal of ensuring a basic income for all those who need it.

Beyond AUH, Macri largely dismantled Progresar, which was envisioned as a “bridge” connecting AUH beneficiaries with the labor market and higher and technical education (Letcher and Strada 2019, 9). In early 2018, the administration transformed the program from a benefit available to all low- income young adults to a merit- based academic scholarship. This signifi-cantly reduced the number and altered socioeconomic profile of beneficia-ries with critics alleging that the academic requirements disproportionately hurt the very type of student the program was originally intended to help.

Overall, under Macri, the number of beneficiaries declined 42% (Letcher

and Strada 2019, 2) while the real value of transfers declined between 46%

and 62% depending on the type of benefit (Letcher and Strada 2019, 4).

Brazil. As in Argentina, the right turn in Brazilian politics following Rous-seff’s controversial impeachment did not lead to major changes to the design of the country’s Bolsa Família basic income CCT. Retrenchment under the right was more explicit in Brazil than in Argentina, however.

Upon taking office in May 2016, Temer launched Operação Pente Fino (Operation Fine- Tooth Comb), an aggressive monitoring of the program’s rolls aimed at weeding out families with higher incomes and outdated or incomplete personal information (Cortes da Costa 2019). This policy con-tinued under Bolsonaro. Worryingly, Bolsonaro’s government has been credibly accused of using the program to discriminate against the country’s Northeast, the PT’s heartland and the part of the country where he fared worst during his campaign for the presidency and polled worst during his first year in office (Ribeiro 2019).

Osmar Terra, who oversaw Bolsa Família during most of the Temer administration and the first 13 months of the Bolsonaro administration, was the architect of Pente Fino.¹⁴ Upon his initial appointment, Terra criti-cized the program’s reliance of self- reported incomes (Matos 2016) and estimated that at least 10% of beneficiaries were underreporting their incomes and should be expelled (Mariz 2016). In November 2016, Terra announced the blockage of 654,000 accounts (4.7% of beneficiaries) and the outright cancellation of a further 469,000 (3.3%) (MDSA 2016). Several large purges occurred during the remainder of the Temer presidency (Pren-gaman, DiLorenzo, and Trielli 2017; Madeiro 2017; Peduzzi 2018; Saka-moto 2018).

Overall, average monthly account blockages and cancellations during the Temer administration were, respectively, 34.5% and 33.8% higher than during the Rousseff administration’s final two and a half years.¹⁵ Terra openly presented the cuts as part of the administration’s broader austerity policies, which were centered on a December 2016 constitutional amend-ment freezing public spending in real terms for 20 years. Responding to opposition legislators concerned about the cuts, Terra went so far as to state that “in practice, the major tax reform taking place in the country is being carried out by the Ministry of Social Development” (MC 2017).

In contrast to other right- wing politicians discussed in this book, Bolso-naro had a long history, dating back to at least 2010, of openly criticizing

Bolsa Família. Bolsonaro’s attacks revolved around three claims: that it made beneficiaries idle, that they remained on the program indefinitely, and that the PT used it to buy votes, particularly in the Northeast (Grillo and Prado 2018). As late as August 2017, when he was already expected to run for president, Bolsonaro commented that “to be a candidate for presi-dent, you have to say that you will expand Bolsa Família. Then, vote for another candidate. I will not engage in demagogy and please anyone to seek a vote” (Toledo 2017).

However, by August 2018 Bolsonaro was saying that Bolsa Família had to be continued for “humanitarian reasons” and claiming that reports of his opposition to the program were “fake news” (Fortuna 2019). Even so, he maintained that 30% of beneficiaries were committing fraud by underre-porting their incomes (Fernandes 2018). The transformation was complete following his first place showing in the first round of the presidential elec-tion in October.¹⁶ The day after the vote, Bolsonaro uploaded a video directed at Northeastern voters announcing his plan to enact a Christmas bonus— a thirteenth payment in December. Bolsonaro won the second round by a comfortable margin.¹⁷

At an event commemorating his first 100 days in office in March 2019, Bolsonaro officially announced the bonus. Said payment would be in lieu of an adjustment to program stipends (Brant 2019). Beneficiaries would still come out ahead as the extra payment, which amounted to an 8.3% increase, was more than twice the rate of inflation since the previous adjustment.

However, the administration did not budget the expansion’s cost. Terra instead maintained that the ongoing fight against fraud would save enough money to cover the bonus (Pereira 2019).

Indeed, Pente Fino continued apace under Bolsonaro with an additional 972,000 families (6.9%) being removed from the program during the administration’s first year. Regardless, the crackdown did not generate nearly enough savings. At least five times during 2019, Terra requested additional funds but was rebuffed by the economic team (Resende 2020c).

In the absence of fresh funds, Terra further retrenched the program.

Going well beyond Pente Fino, the administration drastically reduced the number of families admitted into the program each month from an average of 250,000 during January– May to just 5,400 a month during June– October (Menna Barreto 2019; Zylberkan 2020). This resulted in a waiting list to join the program that, by the end of 2019, extended to 1.5 million families or 3.5 million individuals (Valfré and Fernandes 2020). Similarly, readmission

requests from beneficiaries that had previously “graduated” from or been kicked out of the program dropped by 75% in 2019 compared to the previ-ous year and none were incorporated between June and October (Madeiro 2020a). Ultimately, the additional funds for the bonus were secured by delaying the approval of new pension applications (Resende 2020a).

Retrenchment was set to continue in 2020. The administration’s original budget called for an 8% cut in spending, did not foresee the incorporation of any additional beneficiaries, and did not set aside funds for a bonus pay-ment (Menna Barretto 2019).

Overall, despite the absence of explicit reforms to its design, Bolsa Família under the right has, in practice, moved in the human capital direc-tion with regard to targeting. Between April 2017, well into the Pente Fino era, and February 2020, families living in extreme poverty increased as a share of total beneficiaries from 77.1% to 83.1%. Similarly, the share of poor families declined from 17.5% to 12.5%. Pente Fino marked a shift in con-cern to errors of inclusion relative to the concon-cern over errors of exclusion of the PT era.

Bolsa Família’s evolution under the right offers an example of the poli-tics of welfare retrenchment (Pierson 1996) via policy drift (Hacker 2004).

Despite repeated claims by the right that the program’s rolls were inflated, total coverage at the end of Bolsonaro’s first year was only 5.19% lower than when Rousseff was forced to step down (1.39 versus 1.32 million). However, despite two adjustments under Temer, stipend purchasing power in 2020 was 18.8% lower than in 2014.¹⁸ Furthermore, given Brazil’s recent eco-nomic context, keeping the program’s size constant, let alone shrinking it slightly, constitutes retrenchment and a move away from the goal of ensur-ing a basic income for all those who need it. The share of Brazilians livensur-ing in extreme poverty increased by 67.1% (3.6 million) from 2014 to 2018. Pov-erty increased by 31.8% (6.5 million) during that period (FGV Social 2020).

Worryingly, Bolsa Família’s management took a discretionary turn dur-ing Bolsonaro’s first year with admission and expulsions bedur-ing used to dis-criminate against the politically hostile Northeast. An investigation pub-lished by the daily newspaper Folha de S. Paulo in February 2020 revealed that the cuts and delays during the second half of 2019 disproportionally affected the poorest parts of the country. Between January and May, an average of 26 families from the country’s 200 poorest municipalities were incorporated each month. Between June and October, however, only one family was incorporated in 37 of those municipalities and none were