Resource

The Bono Solidario in Ecuador. An exercise in targeting

Extension of Social Security Series, ESS Paper 17

Velásquez Pinto, M.; ILO, Social Security Policy and Development Branch
International Labour Office
2003
92-2-113437-7
1020-9581
vi, 22
Download - 305 Kb
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Summary (English)

The goal of social protection systems is to promote equal opportunities by granting benefits to the vulnerable segments of society who lack access to basic goods and services. This is an ongoing function, since the risk of marginalization and exclusion is always present, and may even increase during economic crises. These systems must ensure that situations of temporary poverty do not become permanent, thereby avoiding losses of human and material capital. They must also guarantee a basic level of consumption to the poor and indigent, while at the same time ensuring that these segments of the population are targeted by programmes and policies aimed at changing their living conditions in the long term. In 1999, the budget items "Total Social Spending", "Solidarity Fund" and "Other Specific Programmes" together accounted for 6.2 per cent of the country's GDP. The social protection programme (excluding social security) accounted for 29 per cent of social spending in the same year. The Bono Solidario (the Programme), which absorbed two-thirds of the resources allocated to the country's social protection programme, is a vast social programme that provides direct cash transfers to the population and functions as a large-scale social spending mechanism. It is precisely because of the large volume of resources it commands - within the context of severe restrictions such as that found in Ecuador - that the design and effects of the Bono Solidario deserve attention. While it was initially conceived as a means to compensate for higher prices following the withdrawal of a number of subsidies, it has been maintained in order to offset the scarcity of resources that has accompanied the spread of poverty. This report has sought to identify the main problems presented by the Bono Solidario and some possible areas for its redesign. The results obtained, although preliminary and subject to empirical comparison, suggest that it is possible to improve efficiency by developing mechanisms to target those persons whom the Programme itself has defined as eligible. In effect, optimal targeting would bring current costs down by one-third. It would also be possible to link the payment of this cash transfer to complementary programmes specifically designed to assist current beneficiaries in developing productive activities. Through job training and the establishment of a microcredit arrangement, the idea would be to link short-term needs to the challenge of creating the necessary conditions for overcoming poverty in the medium term. In short, the exercise proposed in this report suggests that the foregoing may be possible, and that greater efficiency in targeting goes hand-in-hand with the implementation, over time, of measures aimed at supporting beneficiaries in efforts to overcome their current status of poverty. The possibility exists that both prongs of the proposal could imply costs no higher than the current ones, since ultimately they would involve reallocating existing resources. The first section of the report provides information on Ecuador's economic trends over the past few years. The second section presents background information describing the Bono Solidario, with particular attention to aspects of targeting. The proposed criteria for redesigning the Bono Solidario, as well as the estimated cost entailed by the application of these criteria, are presented in the third section. The final section sets forth the main conclusions of the report.

Related info

445

ESS Paper Series (ILO) 3699 Ecuador cash / in-kind benefits
10.02.2012