PUSHED BY HIGHER FOOD PRICES, POVERTY IS UP IN MEXICO

UNCLAS SECTION 01 OF 02 MEXICO 002205 SIPDIS SENSITIVE STATE FOR WHA, WHA/MEX, WHA/EPSC, EEB STATE FOR USTR (MELLE) FAS FOR OCRA/ZANIN USDOC FOR 4320/ITA/MAC/WH/ONAFTA/GWORD TREASURY FOR IA ENERGY FOR WARD, LOCKWOOD AND DAVIS E.O. 12958: N/A TAGS: ECON EAGR EAID SOCI PGOV MX SUBJECT: PUSHED BY HIGHER FOOD PRICES, POVERTY IS UP IN MEXICO SINCE 2006 ¶1. (U) SUMMARY. Rural and urban poverty have shown a significant uptick in Mexico since 2006, despite a general decline since 1992 and despite the economy's strong performance. According to semi-independent analysis based on official 2008 figures, poverty increased from 42.6% in 2006 to 47.4% in 2008 (asset-based poverty). Most observers point to the global increase in food prices as having pushed many Mexicans into poverty. Release of this politically sensitive information was reportedly delayed by agreement between the government and opposition parties until after the July 5th legislative elections. Other indicators are more positive, for example, the increased number of senior citizens covered by pensions or social security. Overall coverage of the population by the government's social programs has also increased. The topic has become part of a contentious political debate. However, as the GOM faces pressure to reduce spending in light of a decline in oil revenues, poverty programs could become a target -- even though Finance Secretary Carstens has publicly stressed that poverty programs would not suffer budget cuts, nor would security or health programs. END SUMMARY. RELEASE AFTER THE ELECTIONS -------------- ¶2. (SBU) Using GOM statistical agency INEGI's 2008 income survey's figures, CONEVAL, a semi-autonomous government agency that was established to review and evaluate the GOM's social development plans, released its 2008 study two weeks after the July 5 legislative elections. The analysis was performed with the assistance of the United Nations Development Program (UNDP). It is generally known that the political party officials agreed to postpone the release of the study until after the elections, a common practice in Mexico. Since then, the GOM, whose public finances have been squeezed, and the PRI, winners of the legislative elections, have been sparring about what steps to take regarding Mexico's fifty-odd social and anti-poverty programs. President Calderon and his Secretary for Social Development Ernesto Cordero have called for rationalizing the programs and evaluating their efficiency. ¶3. (U) Most observers point to the increase in global food prices and the increase in the value of the government's basic "food basket". Fluctuating global cereal and oilseed prices have largely contributed to a rise in domestic prices. Since NAFTA, Mexico's economy has been largely open to food imports, with grain and oilseed prices pegged to quotes on the Chicago Board of Trade (where corn futures spiked to $4.50 per bushel last month). More than a third of domestically-consumed corn, a basic staple of the lower-income Mexican diet, is imported, as is 80% of the rice. RECENT UPTICK BUT LONG-TERM TREND IS POSITIVE -------------- - ¶4. (U) CONEVAL released the 2008 poverty figures July 18, in which the main headline was that poverty had increased from 42.6% in 2006 to 47.4% in 2008 (asset-based poverty). This uptick occurred despite a downward trend for poverty since 1992, as well as the economy's strong performance, high oil prices and rising incomes. According to CONEVAL's analysis released every two years, poverty in Mexico has been in decline since 1992, when data collection began. The 2008 figures show that there are over 50.6 million Mexicans now living under the poverty line. In 1992, 53.1 percent of Mexicans were under the poverty line. These numbers got worse during the 1995-1996 financial crises, but returned to their overall downward trend in ¶1998. OTHER MEASUREMENTS -------------- ¶5. (U) Another measure of poverty that has shown an increase is what Mexicans call "nutritional poverty", (food-based poverty) a measurement of a family's ability to purchase the basic food basket. In the report, those in this category increased overall from 13.8% in 2006 to 18.9% in 2008. Of the 19.4 million Mexicans who fall into this category, 12.2 million reside in rural areas and 7.2 million live in urban areas. On the bright side, the report signaled a decline in the number of families living in homes with dirt floors, from 22.3% in 2006 to 18.9% in 2008. Truancy rates for children between ages 8 to 12 also continued to decline from 1992 to 2008, from 5.1% to 2.1%. Finally, coverage of the population by the government social programs has also increased from 49.9% to 55.9% from 2006 to 2008. MEXICO 00002205 002 OF 002 ¶6. (SBU) COMMENT. One of the government's main challenges is achieving achieve sustained growth so as to significantly reduce the existing social inequalities and poverty rates and reach its 2012 goal of reducing the number of Mexicans living in poverty. Unfortunately, figures such as these were destined to be election fodder and it is no surprise that the government delayed their release. Most analysts, including Secretary Cordero, point to the global increase in food prices (cereals, oil seeds) as having pushed many Mexicans into poverty. Cordero called on the Congress to increase funding for the government's social programs in the 2010 budget. But he and President Calderon have also talked publicly about rationalizing and refocusing Mexico's fifty plus anti-poverty programs, many of which have "political clients", such as the agricultural producer associations linked to the PRI. Current budget constraints may make these numbers even more of a political issue than anticipated. Given the positive impact of the government's star social program, Oportunidades, the PRI will fight hard to get state control over this transfer program to get more political support in the run-up to the 2012 presidential election. FEELEY