Human Capital and the Fight Against Poverty in Mexico

David García Junco Machado currently serves as the Chief Financial Officer for the National Council for Science and Technology in Mexico. Before this, García-Junco was in charge of the National Commission of Social Protection in Health, which oversees an insurance system program known as Seguro Popular. García-Junco has also worked as an advisor at the World Bank and a consultant at McKinsey & Company. García-Junco earned a bachelors degree in public administration from El Colegio de Mexico and a master of arts from the University of Chicago Harris School of Public Policy.

After a long career of combating poverty in Mexico you are now the CFO for CONACYT (The National Council of Science and Technology), responsible for developing Mexico’s human capital as well as its scientific and technology knowledge base. Why is human capital important to fighting poverty in Mexico?

Let’s put it in two parts. I want to say something that we all probably agree upon. Knowledge and human capital are the main forces of progress in any modern society. You cannot expect a modern society with good living standards if there is not some minimum access to education for everybody. It’s also our point of view that education – if you want to see it as human capital – is also a basic right that everyone has to have access to, up to a certain level, guaranteed by the state. In this case, CONACYT aims for a higher level of science as a basic education level that all Mexicans should be allowed to have. We want to make a society of knowledge and information, so the mission of CONACYT is to create the conditions to foster the development of knowledge and the exchange of knowledge.

What led you to take this position?

Mainly because I was invited, and I thought it was an intellectual challenge in terms of the policies we have to design to foster knowledge. Many people say, “Let’s link basic applied science and innovation.” But science and knowledge are very messy processes, so we have to design many different policies to foster the environment and increase the probability of more knowledge, and part of that is linked to economic development of the country. That is why I took it, because it was a challenge, and a challenge of public policy is not just giving money to anything, it’s asking, “Where do we want to direct the money?”

As you know, the United States is unrolling the Affordable Care Act, and Seguro Popular is relatively recent, dating only to 2003. How was it created? What were the challenges involved? What would be informative about the Mexican experience for the US as it engages in a similar process of expanding healthcare coverage?

I think we have a small advantage in Mexico with regards to the health system. We Mexicans believe that health is a human right that all Mexicans have to have access to, and that it needs to be financed by the government. This is a fundamental agreement, which it is not clear exists in the United States. In Mexico, most people – there is some debate – think that public funding for healthcare should be guaranteed, like education. We have public education and the government pays. Health has to be in that same dimension.

The challenge was that we have three systems in Mexico right now. First, the Instituto Mexicano del Seguro Social (IMSS) (Mexican Institute of Social Security), which covers all the workers formally employed in the private sector. By law, they have to have IMSS coverage. Second, all public workers have coverage through the Instituto de Seguridad y Servicios Sociales de los Trabajadores del Estado (ISSSTE) (Institute of Security and Social Services for State Workers). Between the two systems there is a population of 50 million.

We realized that the other half of Mexicans couldn’t be in those institutions because they are each linked with labor status. If you work for a company, you go to IMSS. If you work for the government, you go to ISSSTE. If you work by yourself, there is nothing. The ministry of health had a network of hospitals all over, and it was like a charity. People went, there was a socioeconomic study, and staff told patients, “Well, we can treat you, and you are poor so you have to pay this or you don’t have to pay,” but that system was completely underfunded. Even if it was found that you couldn’t pay and it was free, they don’t have the equipment, medicine, or infrastructure to offer services. In real terms, we didn’t have the infrastructure to meet the needs of the half of Mexicans who didn’t have insurance.

The Seguro Popular is a financial system. The way to put money into that system was to give a link to the people. In the beginning it was per family, for example one state had 100,000 families that were not in the other systems. For each family, the Seguro Popular gave the state some amount of money (at that stage it was $800 per family). The state had to use that money to operate and invest in the system, and it began to grow. But the problem was that half of Mexicans didn’t have healthcare, and the difference of investment in healthcare was very big. Richer states were investing more than poorer states in health. This system equalizes that.

In terms of financing, let me give you some dimensions. In 2004, 5,000 people participated. In 2006, we had five or six million, and this year 53 million people are affiliated with Seguro Popular. The system costs 220 dollars per person – about 12 billion total. This is not much in the United States but is a huge amount in Mexico. This budget is there every year, and is not negotiated in Congress. That was the great thing about Seguro Popular, the states do not negotiate the money; they negotiate how many people are going to be affiliated and then you do the math.

I think the direction for the health system in Mexico is toward one big financial office and many different providers. At this point, the infrastructure is mainly public. If you used all the private sector infrastructure, it only accounts for five percent of the supply. We should make all the systems compete; they do not right now as they are linked to individuals’ labor status, but at least we have universal coverage.

Let me give you a caveat. Probably some skeptics are going to say, “That sounds great, but I know that in many cases people don’t have health service or insurance policy”, which is true. Not all Mexicans have policies because they have to ask for it. When you have a population of 53 million to attend to, the supply is inelastic. We cannot build enough hospitals in three years for everybody. Many people will not have the quality we wish, but we are headed in that direction.

You’ve devoted your whole career to fighting poverty, one way or the other in different sectors, private, public, academic.

Even at Harris, my main focus of research was on poverty and distribution of resources. I love Jon Elster (who used to be a professor at The University of Chicago). Local Justice is a great book.

If you could snap your fingers and achieve three policies overnight to help eradicate poverty in Mexico, what would they be?

Well, we’ve been trained better. We cannot eradicate poverty, not in that sense. I wish we could. We just have to always move in the right direction to make a better state of things, and move towards improvements for everybody in terms of all the basic needs and also in terms knowledge.

Are there three main things that you would want to achieve to help reduce poverty significantly?

Yes, but I think there are different ways to do that. Some advocacy groups do a great job. I’m going to say what everybody says, but poverty is a multi-dimensional problem. There are so many ways to approach it, and there is no way to solve poverty. Also, poverty is a relative term. The line of poverty in the United States belongs to the eighth percentile in Mexico, or more. If you earn 20,000 dollars a year in Mexico, you’re not poor. What we have to talk about is deprivation and social isolation. We have to work on those things, and it means a good living standard, but also to be in the mainstream of knowledge and what society is doing.

Feature Photo: cc/(Dëni Fotografía)