VZCZCXRO7452
RR RUEHCD RUEHGD RUEHHO RUEHMC RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHME #2205/01 2081820
ZNR UUUUU ZZH
R 271820Z JUL 09
FM AMEMBASSY MEXICO
TO RUEHC/SECSTATE WASHDC 7621
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHMFISS/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHRC/USDA FAS WASHDC
RHEHAAA/NSC WASHINGTON DC
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE



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