Anti-Poverty Programs: Making Structural Adjustment More Palatable
Stahl, Karin
Social-investment funds have been implemented regionwide to combat the rising poverty associated with structural adjustment. These funds do little, however, to address the structural causes of...
...The FHIS, which is largely funded from international credits and loans, thus releases the Honduran government from fulfilling some of its basic responsibilities...
...In practice, however, spending tends to focus on short-term measures like emergency employment and aid programs...
...Consequently, the principal World Bank recipe for reducing poverty consists of stimulating economic growth...
...Many observers began to question the compatibility of neoliberal restructuring and its profound social costs with efforts to consolidate democratic rule in the region...
...This group includes fired workers, young people who cannot find employment, and pension holders...
...7 However, the FOSIS has retained the same application process as the traditional SIFs, so poorer groups with little project-writing experience are less likely to get funding than more organized groups or intermediaries like NGOs...
...The SIFs themselves do not carry out social programs or projects...
...The external funding of social policy takes the pressure off political elites and national governments to use social reforms and redistributive policies to reverse the growing inequalities in the region...
...Fuentes, "El Fondo Hondureho de Inversi6n Social: una nueva modalidad de gesti6n pOblica," in Fondos y Programas de Compensaci6n Social: Experiencias en America Latina y el Caribe (Washington, D.C.: PAHO, 1992), pp...
...Once economic growth resumes, the new poor will supposedly be reintegrated into the formal economy...
...3. Honduran Social-Investment Fund (FHIS), El rostro humano de la revoluci6n moral, 1994...
...The FOSIS has been more effective than many traditional SIFs in targeting the poorest sectors of society...
...Discussions of how these social-policy measures should be structured were interlaced with growing criticisms of the deficits of traditional state social-security systems in Latin America...
...Economic recovery, stimulated by economic stabilization and deregulation, is the basis of the poverty-alleviation strategy," according to a World Bank document discussing the establishment of a socialcompensation fund in Peru...
...As in Honduras, NGOs in Chile remain wary of the fund, afraid that receiving government funding from the FOSIS might jeopardize their autonomy...
...Training and technical assistance to small farmers and indigenous communities (16%) and capacity-building and training programs for young people (18%) have also been important components...
...Since then, SIFs have been established in nearly every Latin American country that has implemented structuraladjustment policies...
...Not only do the SIFs not contribute to a progressive redistribution of wealth, but they serve to legitimize neoliberal economic policies that have increased income concentration and polarization in Latin America...
...Nearly 40% of the projects funded by the FOSIS were carried out in these communities...
...These organizations have accused the government of using the FHIS to assert state control over NGOs and social movements...
...The FHIS, however, goes beyond just supplementing the work of the ministries...
...The SIFs are financed largely by multilateral lending institutions, UN agencies, and Northern governments and private aid agencies...
...As a result, these institutions began to emphasize the need to develop specific social policies to accompany the structuraladjustment programs...
...Of the 5,494 projects funded between 1990 and 1994, 70% were shortterm infrastructure projects, including the maintenance Vol XXIX, No 6 MAY/JUNE 1996 r r 33REPORT ON SOCIAL POLICY and construction of roads, bridges, schools, health clinics, water pipes, and sewerage...
...6, 9. 2. World Bank, Peru: Social Development and Compensation Fund (FONCODES) Project (Washington, D.C.: World Bank, 1993...
...The development banks are concerned with the new poor, who have been expelled from the formal economic system as a direct result of the structural-adjustment programs and the ensuing contraction of the economy...
...Anti-Poverty Programs 1. Inter-American Development Bank and the United Nations Development Program, Reforma Social y Pobreza (New York: IDB and UNDP, 1993), pp...
...However, in the short run, the poor are likely to be adversely affected by the structural-adjustment program...
...They are conceived of as temporary mechanisms to mitigate the most devastating effects of structural adjustment...
...While the SIFs presumably are aimed at helping the poorest, the application process actually favors local groups, professionals and NGOs that already have experience formulating and implementing projects...
...Traditional social-security systems, which provided coverage to wage earners, benefited only one segment of society and failed to reach the growing number of unemployed or those laboring in the informal economy...
...Compared with the social-investment fund in Honduras, for example, the FOSIS financed more projects in the poorest regions of the country...
...Urban areas were also favored, even though the poverty rate is much higher in rural areas...
...3 These public-works projects, which had been neglected in recent years due to government budget cuts, have been implemented in close cooperation with the corresponding government ministries...
...The banks do not deal with structural poverty, which refers to those sectors of society who remain outside or are excluded NALIA REPORT ON THE AMERICAS Karin Stahl is a political scientist who teaches at the University of Heidelberg in Germany...
...This growing dependency on foreign resources is contributing to the "denationalization" of social policy in many Latin American countries...
...Social policies that directly targeted the most marginalized groups of society, it was argued, would make the best use of scarce financial resources...
...At the same time, financing social policy with foreign loans will increase Latin America's large and looming debt burden, even if the World Bank lends money at relatively low interest rates for social programs...
...Hand-inhand with this growing pauperization is the concentration of income in the wealthiest 10% of the population...
...The funds' stated priorities are emergency employment programs (building or repairing infrastructure projects like bridges, schools or roads, which provides short-term employment), socialassistance programs (such as food aid), and promoting productivity (credits, assisting small enterprises, and worker training...
...The experience of the social-investment funds in Latin America has revealed that creating temporary institutions to deal with growing poverty is inadequate...
...During the 1980s and 1990s, structural-adjustment programs crafted by the International Monetary Fund (IMF) and the World Bank had dire social consequences...
...With rare exceptions, little emphasis is given to creating productive employment or attacking the roots of structural poverty...
...185-225...
...The external funding of the SIFs is also problematic...
...Trade liberalization and policies favoring exports led to the ruin of many small farmers, feeding migration to the cities and the swelling of already bloated shantytowns...
...In most cases, only a small percentage of the total budget of the SIFs comes from local governments...
...4 The poorest of the poor did not benefit from the FHIS in part because of their relative lack of experience in formulating projects, administering resources, and organizing in general...
...rather, they considered poverty-alleviation programs to be a necessary complement to them...
...NGOs often become mediators between the state and the target groups, and derive financial benefits from the funds...
...Social-assistance programs comprised 19% of the funded projects, while productive projects accounted for only 7% of total spending...
...5 Perhaps most significantly, the FOSIS was established as a permanent feature of state social policy, rather than an institution that would become obsolete once neoliberal policies took root...
...They adversely affected not only low-income groups but the middle class as well...
...The FOSIS was founded in 1990 to combat poverty-which, despite the much-touted "success" of the Chilean neoliberal economic model, had nearly doubled between 1970 and 1990, from 17% to 34% of the urban population...
...The SIFs were designed to be autonomous institutions subordinate only to the president...
...Social-compensation programs, such as employment generation and food aid, can complement the two main elements of a poverty-alleviation strategy-the promotion of broad-based growth, and improved and more equitably distributed social services...
...Thus, the continuity of these programs depends on securing international funding in the future...
...Resources are distributed according to an application process in which local groups and organizations solicit funding for a specific project within the funds' established guidelines...
...6. Solidarity and Social investment Fund (FOSIS), Memoria FOSIS 1994, 1994...
...Indeed, the demand-driven model of the SIFs leads to competition among the poor for scarce resources, fomenting fragmentation among the poor instead of social solidarity...
...he Honduran Social Investment Fund (FHIS) is a typical example of how the SIFs operate on the ground...
...Sustainable, permanent social-security nets are considered superfluous...
...2 Social-investment funds (SIFs) are a centerpiece of the World Bank's new social policy...
...Finally, it was conceived as a complement to, rather than a substitute for, other socialpolicy measures...
...Budget cuts over the past decade undermined these public welfare systems, as did corrupt government management in many countries...
...Government budget cuts and price increases of basic foodstuffs led to a dramatic decline in purchasing power...
...The case of Honduras reveals the tendency for governments to use the SIFs to supplant traditional government ministries, releasing the state of its most basic obligations to society...
...While the SIFs vary somewhat depending on the specific national context in which they operate, they are structured according to a common mold...
...As the case of Chile suggests, the SIFs can be more effective if they are conceived of as longterm programs that address the structural problems of poverty...
...In general, howevereven in Chile-the poorest of the poor do in a not benefit from the SIFs...
...In 1991, only 10% of the approved projects in Honduras were located in the six poorest departments of the country, while nearly 58% were concentrated in the wealthiest five departments...
...For political stability and democratic consolidation, it is imperative to build up the conditions that will expand and deepen the relationship of solidarity and social responsibility...
...In many cases, the existence of the SIFs leads to the deterioration of existing state social agencies...
...32REPORT ON SOCIAL POLICY Children in their home in Barrial, Honduras...
...It is doubtful whether the FHIS benefited the most vulnerable groups in society--those purportedly targeted by the fund...
...Faithful to its neoliberal underpinnings, the World Bank conceptualizes poverty as a temporary phenomenon...
...Neoliberal policy makers did not question the viability of the structural-adjustment programs...
...In general, however, there are no guarantees of funding in the medium term, leading the SIFs to focus on short-term emergency programs...
...he Chilean Solidarity and Social Investment Fund (FOSIS) is an example of an alternative way of structuring poverty-alleviation programs that is more effective in terms of reaching the intended A worker from a non-governmental organization teaches residents Santiago shantytown how to care for a vegetable garden...
...These funds do little, however, to address the structural causes of poverty...
...from the formal economic system, and have minimal access to formal employment and education...
...This neglect was also due, however, to the political manipulation of the FHIS by the ruling National Party, which channeled government spending to the well-populated urban areas, where most voters live, in anticipation of the 1993 elections...
...As a result, the FOSIS has given priority to the funding of credit, training and marketing programs for small enterprises (33%) and self-help capacitybuilding in poor communities (33...
...Privatization and the deregulation of labor markets resulted in rising un- and underemployment rates and the growth of the informal economy...
...6 The FOSIS was embedded in a wider government anti-poverty program which targeted 71 communities that suffered extreme poverty...
...5. Economic Commission on Latin America, Gasto piblico corriente y gasto piblico de capital en servicios sociales: un andlisis cuantitativo de los paises sudamericanos en los ochenta, LC/R, 962 (Santiago: CEPAL, 1990...
...Many of the funds are highly dependent on grants or loans from Northern governments, private aid agencies, and multilateral lending institutions like the World Bank and the IDB...
...By the year 2000, it is estimated that seven out of every ten Latin Americans will live below the poverty line...
...Only in an environment of social and political stability is it possible to attract long-term oriented investment...
...4. L.A...
...The first SIF was created in 1985 in Bolivia as part of the World Bank-sponsored adjustment program...
...A crucial distinction must be made, however, between "structural poverty" and "new poverty...
...Multilateral lending institutions such as the World Bank and the Inter-American Development Bank (IDB), as well as United Nations development agencies, have also become increasingly concerned about the politically destabilizing effects of increasing poverty...
...The highly centralized control of the FHIS by the president, and the lack of grassroots and NGO participation in administering the fund, have also given rise to charges of corruption within the FHIS...
...The funds operate more as development banks that finance projects implemented by groups in civil society...
...They operate independently of the state bureaucracy, which ostensibly gives them greater flexibility, efficiency and transparency in the handling of resources...
...While most SIFs in Latin America emphasize short-term strategies of emergency employment and assistance programs, the FOSIS has adopted a long-term perspective to address the structural causes of poverty...
...By concentrating resources on infrastructure development, the funds are in effect financing a component of state social spending that had deteriorated dramatically due to severe budget cuts in the 1980s...
...it is increasingly being used to substitute for functions and duties that the government ministries used to perform...
...Moreover, it was subordinated to the Ministry of Planning and Cooperation rather than under the direct control of the president...
...Social reform, instead of a residuum, is an indispensable condition of economic efficiency and viability," reads one report by the IDB and the UN Development Program (UNDP...
...The FOSIS is different from other SIFs in its program priorities as well...
...It was created by the UNDP in 1990 to alleviate the social costs of the structural-adjustment program implemented that same year...
...This clientelistic manipulation of the FHIS has alienated many NGOs that initially collaborated with the fund...
...Even though funding is predominantly international, the strict control exercised by the executive permits governments to use the SIFs as tools of political patronage, especially around election time...
...The FOSIS in Chile, which has become largely independent of these external funding sources, is a notable exception...
...target-groups...
...7. FOSIS, Memoria FOSIS 1994...
Vol. 29 • May 1996 • No. 6
