This thesis explores one type of public anti-poverty policy that has become predominant in Latin America – conditional cash-transfer (CCT) programs. Further, it discusses if and how a school of thought called the capability approach can contribute to the improvement of this type of policy. CCTs are programs aimed at alleviating poverty by building human capital through education, health and nutrition. Cash is given directly to program beneficiaries in exchange for them meeting certain conditions, such as sending their children to school, visiting health stations, and consuming nutritional supplements. I have chosen to study Mexico’s CCT program Oportunidades, or ‘Program for the Development of Human Opportunities’ as its full name reads, which is the longest running national program of its type, and which has been hailed as a success by both the Mexican Government and the Inter-American Development Bank (IDB). It is the principal anti-poverty program of the Mexican government, and represents over 45 percent of the country’s annual anti-poverty budget. The capability approach is a theoretical perspective within economics and development theory that focuses on people’s capabilities when measuring welfare, rather than focusing on mere income or utility (both playing an important role throughout the literature on development economics). The approach builds on ideas developed by Professor Amartya K. Sen from the 1970s onwards, and has gained considerable attention, as well as fierce criticism, that has helped to keep up its vitality as an important contribution in the debate on human development. As an increasing number of scholars have discussed and applied the capability perspective within different contexts throughout the last decade, it is becoming evident that certain aspects need further clarification. So far few studies have explored the capability approach in relation to poverty, and more work is needed if the approach is to confirm its relevance as a development paradigm. Due to the approach’s somewhat complex concepts and diffuse applicability, this thesis contributes to the debate by analyzing the approach in the empirical context of anti-poverty policy implementation. The overall aim of the thesis is to explore how Oportunidades functions, and whether the capability approach can contribute to its improvement. This is done through a two-folded study where implementation theory is utilized in order to explore Oportunidades. Based on data gathered during fieldwork in the Mexican state of Oaxaca, certain of the program’s key features are sorted out and applied in an analysis of the capability approach. Key capability literature, both that of Sen and his critics is discussed and explored in relation to these features. In order to study Oportunidades’ key features, a combination of top-down and bottom-up implementation theory is applied. One the basis of this theoretical framework, the program’s general features, daily operations, and performance is explored as depicted by its implementers, beneficiaries and official evaluations. By bypassing local authorities, the program deviates from earlier attempts at poverty reduction in Mexico, and combined with features like transparency and regular evaluations, represents a policy that is non-corrupt and economically effective. The utilization of local expertise and participation characterizes the program’s effective implementation process, but it is based on a top-down administrative structure that makes for central decision-making, and thus, leaves little space for local influence on policy design. Oportunidades’ strong focus on women’s participation makes for a policy that is progressive with regards to gender issues, and as such, constitute an important step towards gender equality. In addition, the program has managed to reach its goal of five million beneficiary-families well ahead of schedule. Nevertheless, the study concludes that certain of the program’s features might have potential for improvement. The fundamental notion of poverty is treated with ambiguity within the program’s framework. Official statements’ rhetoric reflects a multi-faceted view on poverty that is in line with progressive ideas on the issue. Still, applied definitions and techniques represent more traditional views on poverty as an income/consumption-based problem. Further, the process of targeting has created distortions in some culturally sensitive communities, where local traditions have proven vulnerable when the population is divided into beneficiaries and non-beneficiaries. In addition, the program does not pay sufficient attention to structural conditions within the economic environment. Increased globalization and regionalization in North America has benefited certain areas in central and northern Mexico, while Oaxaca and its neighboring states in the south have been left behind. Employment opportunities are scarce, and Oportunidades does not address this issue. One of the major features of Oportunidades is the ongoing evaluation process, which has generated a lot of support in favor of the program. External evaluators have proved the program’s efficiency, and President Fox’s political opponents have been forced to accept its success as a poverty reducing policy. In chapter four I discuss the capability approach in relation to the findings of the implementation analysis. One of the research questions asked whether Oportunidades is influenced by the capability approach, and I find that there are similarities, especially with regards to official policy rhetoric. In addition, both Oportunidades and the capability approach are centered on the individual, although Oportunidades focuses on the family to a larger extent. Nevertheless, it can be argued that the program, although inspired by the certain ideas within the capability approach, is largely designed on the basis of ideas on human capital accumulation. Subsequently, it is explored whether the capability approach might contain suggestions on how to improve a CCT program like Oportunidades. The approach’s basic understanding of poverty is used as a foundation, and it is found that an expansion from the program’s income/consumption based utilization of the concept towards that of the capability approach could lead to a more complex but fair poverty line. Further, an expansion from basic towards more complex capabilities might lead to a policy that is more culturally sensitive and pays greater attention towards social forces. With regards to global economic forces, where Oportunidades fails to compensate for the ongoing regionalization process that affects Oaxaca and its neighboring states, the capability approach does not contain suggestions for improvement. Scholars that have criticized the approach for a lack of attention towards such forces are in agreement with the findings in this analysis. However, this does not imply that the capability approach is incapable of addressing these issues. Rather, it shows that in relation to certain issues and contexts, there is a need for supplementary theories in order to allow for comprehensive analyses. Finally, evaluative exercises are discussed, and it is concluded that there are certain aspects within Oportunidades that resembles the suggestions made by the capability approach. The program’s evaluative assessments focus on achieved functionings of nutrition, health and education, and these are factors that are of importance within a capability perspective. However, a move from achieved functionings to the assessment of individual capabilities might enhance the understanding of policy performance, as it would also include the measurement of other freedoms that are of intrinsic importance to beneficiaries. This leads to an attempt at answering whether the capability approach can be operationalized in the context of anti-poverty policy. Although an ambiguous issue, with no clear solutions yet, it is argued that a procedure based on local participation might make for more accurate evaluative criteria than that of Oportunidades’ technocratic decision-making at central levels. This could imply a continued measurement of functionings levels, with an additional qualitative part that is based on beneficiaries’ formulation of valuable capabilities. Albeit a complex and costly move, it would involve possibilities of a policy that might be more sensitive towards both cultural and structural conditions. Although the discussion points towards the possibility of operationalizing the capability approach, no solution on how to go about that task exists. In this regard, the approach’s ambiguity involves both limitations and possibilities. Limitations in as much as researchers and policy makers will refrain from applying an approach that does not include any clear recipe on how to go about. Possibilities to the extent that the approach can be adapted to local contexts where those affected by policies get to play a more decisive role. The capability approach to human development constitutes an alternative development lens, wherein freedom represents the ultimate goal. This individual freedom indicates that the beneficiaries of social policies like Oportunidades become more active agents of their own development. Such an approach contradicts the somewhat top-down implementation structure that is predominant within the context of Mexico and IDB. Instead, it encourages the implementation of policies that more appropriately reflect local contexts, rather than implementing policies based on vague understandings of reality. Hopefully, this thesis and its findings contribute to a greater understanding of the capability approach and its possibilities for anti-poverty policy. However, as the study shows, supplementary theories and analysis of local contexts are needed in order to fully grasp the potential of the capability perspective. At this point, the approach can function as a basic tool of guidance for policy makers.