Peru gives its poor more money, but there's a catch

Alfonso Velasquez is leading a new antipoverty initiative that turns the adage "if you teach a man to fish ..." on its head.

The government program in Peru known as Juntos (Together) will give $30 a month in cash to the poorest families - often doubling their income, but only if they meet certain criteria, including enrolling their children in school and providing basic healthcare.

Juntos is the latest in a wave of "conditional cash transfer" programs (CCTs) sweeping Latin America as a new model for addressing the needs of the continent's downtrodden. "Traditional programs could offer schooling or healthcare, but there was no incentive to the beneficiaries to use the programs. In a CCT program, education or maternal health, for example, are not only offered but required," says Cesar Bouillon of the Inter-American Development Bank's Poverty and Inequality Unit.

Peru's Juntos was formally launched in mid-September in the district of Chuschi, in the central highlands, and by the end of the year should reach 98,000 families, or 400,000 people, in 60 other districts. The goal is to double the program's reach in the coming year and continue expanding until it is implemented in rural districts and some inner-city neighborhoods nationwide.

To be eligible for Juntos, a family must have children under the age of 14 and live in a community where at least two basic needs - running water, electricity, schools, health services - are unmet. Families receiving the cash in Peru must enroll their children in schools and ensure that they are vaccinated. Pregnant mothers must take part in pre-natal care programs and post-natal controls. In addition, the adults must have national identification cards and make sure that their children have birth certificates.

As long as they meet the conditions, families will be eligible for the stipend for up to eight years. They can receive the full $30 a month for the first four years and will be slowly weaned off the program over the final four years.

"While $30 does not seem like much, we are basically doubling the income of families in these districts. Many of women who received the money had never held $30 in their hands at one time," said Mr. Velasquez.

The first recipients of Juntos had a number of plans for the cash. Some said they would buy food, while others had their attention focused on clothes or purchasing farm animals to start a business.

"I am going to use this money to buy food and jackets for my children," announced Angelina Tomaylla, a young mother of two. She was the first woman in Chuschi to receive the stipend from Velasquez at the Sept. 17 inaugural ceremony. Women, whether married or single mothers, sign the contracts with the government, because they tend to remain in communities while men move for work. Plus, research has found that women are more likely to invest the money in the family's well-being and children's education.

If implemented as planned, the program should cover about half of the estimated 2.5 million living in absolute poverty, which the government defines as a family of four getting by on $1 or less daily. But Velasquez says the stipend is just a means to getting Peru out of the poor-nation category by 2021, when the country celebrates its bicentennial.

"This program means that we are feeding, educating, clothing, and keeping healthy the next generation. It is the best thing we could do," says Velasquez. "We are injecting economic resources into the sectors that live in extreme poverty to bring them into the society."

Juntos draws heavily on similar efforts undertaken in Brazil (Bolsa Familia) and Mexico (Opportunidades), both of which are credited with reducing poverty rates. Other plans are underway in Chile, Colombia, Jamaica, and Nicaragua, and Uruguay.

"These so-called third generation programs that transfer economic resources have produced extremely satisfactory results where they have been implemented. We are confident that we will see results here," said Mr. Velasquez.

The basic structure of Juntos is similar to nearly all of the CCTs currently operating in Latin America. But unlike most other programs, it is operating in areas that have also no basic services and where, with only fleeting exceptions, the state does not exist.

Some critics charge that President Toledo's government has not spent enough time designing Juntos, implementing a program that looks very similar to Mexico's Oportunidades.

"I do not believe this program will be effective. It was designed in a few months and based on what the government wants and not the needs of people...." said Ismael Munoz, an economics professor at Catholic University in Lima. Munoz said that the government has modeled its program on Oportunidades in its current state, without bothering to look at all the modifications that have been made to the program. [Editor's note: The original version misidentified the professor's university.]

Despite billions of dollars spent by the Peruvian government and international donors to reduce poverty in the past two decades, there are proportionately more people living in poverty today than in 1985. While poverty levels have dropped from 60 percent in the mid-1980s to slightly less than 50 percent today, the population has increased by 10 million people.

Oscar Ugarteche, principal researcher at the National Autonomous University of Mexico's Economic Research Institute, cautioned that the CCTs cannot be seen as a solution to multiple problems. "Cash transfers of $30 or $50 are not going to have an impact if they are not accompanied by quality education and structural changes that make it easier for people to set up micro-enterprises or small businesses. It these problems simply give out cash, they will create the same kind of poverty trap that the welfare system created in the United States," said Mr. Ugarteche.

There are also fears that the program could have a short life because of the change in national leadership in just a few months. The Rev. Gaston Garatea, a Catholic priest who is part of an independent oversight board for Juntos, said the worst thing that could happen is for the program to die after Mr. Toledo, who cannot seek re-election, leaves office in July 2006.

"The one thing that is clear is that this program cannot last a year or two, but must remain in place for at least a decade if we hope to see results," said Rev. Garatea.

Mr. Velasquez said that while he welcomes criticism because it will help refine the program as it develops, many of the concerns are overblown.

"Juntos is a program of the Peruvian state and not the Toledo administration," he said. "This is a dynamic program, but it will be under constant review make changes as necessary."