Pre-Crisis Conditions and Government Policy Responses

Chile and Mexico experienced extraordinary economic and social improvements over the first decade of the twenty-first century. Nonetheless, the 2008–2009 international crisis dramatically affected these two economies via real channels. Both countries reacted to the external shock by implementing several measures. However – thanks to the policies implemented during the period before the crisis – the Chilean government enjoyed more fiscal space and was able to introduce a stimulus package twice as large the Mexican one. In particular, Chile supported families with children via the expansion of the main social protection programme, additional cash transfers to the poorest families with children and passive labour market measures. In contrast, the worsening of fiscal conditions pushed Mexico into a fiscal consolidation process since 2010. As a result, child poverty dropped in Chile while it rose sharply in Mexico.