Analysing the evolution of social welfare spending in Mexico since the mid-1990s, this paper argues that pressures brought about by increased electoral competition at the subnational level have led to an important restructuring of such spending. Thus, poverty alleviation funds and programmes that had traditionally been under the control of the Executive in a political system long dominated by one-party rule have been significantly reduced and welfare spending decentralised to the state and municipal levels. But has this made social welfare spending less subject to political manipulation and more responsive to the needs of the poor? Research findings suggest that, while the funds that are still controlled by the federal government have become considerably more responsive to poverty criteria and less overtly politicised, decentralised funds have thus far failed to live up to the expectations that they would be able to address the needs of the poor more efficiently and in a more accountable manner.