Panama spends substantial amounts of resources on the social sectors in general, and in the SP in particular, but the results obtained are not commensurable with this spending. Indeed, not only has poverty failed to decline in recent years but it remains extremely high and severe in indigenous areas. Moreover, malnutrition in children increased between 1997 and 2003. A considerable number of infants, pregnant and lactating women, school age children, and senior are still facing multiple risks, which condemn them to a life of poverty and exclusion. At the root of this weak performance is the lack of clearly defined strategic objectives, weak targeting, and low cost-effectiveness of the country’s social protection system.
Panama has a large program of subsidies, which accounts for almost two-thirds of spending in SA, but these subsidies mostly benefit the non-poor. Poor infant and mothers and poor seniors are clearly at disadvantage. Consequently, there is a need to develop a clear Social Protection strategy with specific targets which should drive the process of resource allocation in the sector. These targets should be consistent with the Government’s commitment under the Millennium Development Goals. A more comprehensive and in depth review of existing programs should be undertaken, cost ineffective practices eliminated, and available resources targeted at the most needed and vulnerable groups as shown in the preliminary exercise above.
Other more program specific recommendations follow:
Nutrition Programs
Increase substantially the coverage of MINSA’s Complementary Feeding program to reach the majority of the poor children and pregnant and lactating women at risk.
Introduce targeting of MEDUCA snack program.37
Replace milk with a more cost-effective alternative in MEDUCA snack program. 38
If the SIF school lunch program is maintained, decentralize the purchase of foodstuffs to the communities to avoid costly logistical problems in delivering and storing foodstuffs and promote local economies.
Design and pilot comprehensive nutrition interventions which, in addition to food distribution activities, also include behavioral modification and educational interventions targeted to mothers and pregnant women.
Education
Continue to expand the coverage of cost effective programs as the Initial Education and CEFACEIs.
Reorient the sizable student assistance program (scholarship, loan and other assistance) to benefit the poor student.
Eliminate the duplication of scholarships/ education assistance programs.
Housing, Water and Energy Subsidies
Reduce the number and amount of subsidies and target the remaining ones on the poor. Before defining which subsidies are to be cut or revised, it would be useful to prepare a social impact analysis to advert any potentially adverse impact on the poor.
Pensions
Promote CSS coverage of seasonable workers and those in the informal sector.
Consider, when the fiscal situation permits, the creation of a non-contributive systems to cover poor seniors that do not have pensions or other source of income.
Monitoring and Evaluation
Strengthen the M&E systems in all institutions. These systems are necessary tools to ensure that the benefits of the programs are received by the groups at risk and not by other groups, that the benefits delivered have the desired impact, that the administrative costs of the programs are reasonable, and that the unit costs of the programs can be calculated in order to determine the most cost-effective modalities. The Social Cabinet needs this information to make strategic decisions on resource allocation.
InstitutionalArrangements
Consider making one Minister responsible for the Social Cabinet agenda and results. Set as a priority in the SC agenda the in depth review of existing programs, the elimination of cost ineffective practices, the development of Social Protection Strategy, and the reorientation of resources towards the established strategic objectives.
The proposed conditional cash transfer program being piloted by MIDES seems to be a step in the right direction for developing a clear social protection strategy in Panama. As several other countries have done in LAC, Panama is starting to move away from untargeted subsidies towards conditional transfers targeted to the poor. Robust international evidence has shown that these CCT programs are considerably more effective than untargeted subsidies in fighting poverty, malnutrition and inequality.
Combining Proxy Means Testing (PMT) and geographic targeting techniques seems to be the best approach to ensure that the transfers reach the neediest. As the analysis above indicates, the targeting method selected by MIDES should ensure that at least 75 percent of the extreme poor would be reached if the program currently being piloted were to be expanded to the country as a whole. More importantly, the simulation results show that 88 percent of the poorest 10 percent of the population, and 95 percent of the poorest 5 percent, would be included in such a nation wide program. While approximately 30 percent of the program budget would not reach the extreme poor, 80 percent of such leakage would go to the moderate poor, and only 5 percent would go to the non poor. These targeting outcomes, while favorably compare to the international experience, could be improved even further if measures were undertaken to increase the self exclusion of the non-poor. For instance, imposing conditionality for adults, as demanding attendance to periodic health and nutrition classes for instance, may increase the level of self exclusion of the non poor, as they tend to exhibit a higher opportunity cost of personal time.
The preceding analysis also indicates that a national CCT program that follows the current pilot design of the Sistema de Proteccion Social being implemented by MIDES should reduce the headcount index of extreme poverty by approximately 10 percent in 6 years, and 13 percent in 12 years. But as discussed above, because of the high depth and severity of poverty in Panama, the headcount index should not be the metrics through which such transfer program is evaluated. It is more important to measure its long run impact on the extreme poverty gap and the severity of poverty. Also, as currently designed, a national CCT program would reduce the national extreme poverty gap by approximately 20 percent, from B.\104 to B.\83 million, and the severity of poverty index by 25 percent. More importantly, for each B.\1 spent annually in the program, there would be a B.\0.61 reduction in the annual extreme poverty gap. Narrowing the focus of the program to those even more likely to be extreme poor would increase this ratio to a maximum of B.\0.73 per B.\1. But such a narrowly targeted program would imply in excluding many of the extreme poor, which would be politically hard to sustain.
The simulation analysis above also indicates that, with the same budget currently available to MIDES, higher benefit amounts per beneficiary family would enhance the impact of the program. Nevertheless, given that it is always politically easier to increase rather than decrease benefit amounts, we conclude that the design currently adopted by MIDES is indeed the most advantageous. The decision of whether or to not increase benefit amounts should await the results of the pilot evaluation. Also, if the budget envelope available for the RdO were to be substantially increased to levels above B.\30 million per year, our simulations indicate that he GoP should substantially increase the amounts to those who are already being targeted by the program, instead of relaxing targeting criteria and expanding coverage to the less poor.
