Challenging poverty the Brazilian way

An amazing revolution has been taking place in Brazil over the last decade – one that could save the world. This revolution was done against the advice of experts from leading institutions such as the World Bank and leading academics.

This revolution, named Bolsa Família has had a huge transformational shift in the fight against inequality and poverty across Brazil. It was based on a simple premise that if you place cash in the hands of the extremely poor and have faith that they will do the right thing, then good things will happen and transform their lives and fortunes.

It was rolled out by a President, Luiz Inacio Lua da Silva (or Lula), who was of the poor and understood what it meant to be poor and therefore had the belief that the Bolsa Família scheme will shape the life of millions.

There is a fantastic article written about it in the Foreign Affairs magazine (by J. Tepperman) for those who want to find out more (this post was inspired by the article). Below are some key highlights about how the Bolsa Família works, how it helped move millions out of poverty, reduce income inequality and radically transform a society.

First – the situation in Brazil before the Bolsa Família

  • In 2000, a third of Brazil’s population of 175 million people lived below the poverty line (under US$2 a day) and 15% were deemed to be indigent (living under US$1.25 a day)
  • By 2010, over 40 million people had moved from below the poverty line to the middle class.
  • Income inequality has also dropped significantly in that time

What led to the birth of the Bolsa Família?

In 2003, a man who was born into an extremely poor family and started his professional life as a shoeshiner became the President of Brazil. This was the time of Luiz Inácio Lua da Silva, or Lula for short.lula-bolsa

When Lula was campaigning for Presidency, he was reviled by the business community and foreign banks. Foreign investors were backing off and international banks were cutting credit.

Goldman Sachs even came up with the ‘Lulameter’ – a meter that predicted an inverse relationship between Lula’s popularity and Brazil’s economic future.

Lula was committed to social policies that benefited all of Brazil rather than just the elite and launched a far-reaching social programme called Fome Zero (“Zero Hunger”) and at the centre of this campaign was the Bolsa Família or Family Grant.

This was a revolutionary and ground-breaking anti-poverty effort that transformed a society and has inspired many similar programmes.

How does the Bolsa Família work?

Rather than provide the poor with perks and benefits which sometimes has the effect of increasing the layers of corruption and bureaucracy, the idea was to simply give the poor money.bolsa_familia_foto_felipe_gesteira_0067

In most developing countries, the poor are given subsidies or physical items such as food or basic tools and equipment which tended to be a largely inefficient process that only engendered a culture of patronage.

The Bolsa Familía was a programme which was easy to qualify for.

If a family proved that it lived in extreme poverty and earned less than 50 Brazilian reais ($42) or 100 reais ($84) per person per month, they will be eligible for the scheme.

An average family gets $65 cash and the benefits tops off at $200. To obtain the cash, families needed to go to a bank and draw the money from their own accounts There were no middleman handing them the cash and they had full control over the receipt and expenditure of the cash.

Whilst getting into the programme itself was easy, staying in required that the beneficiaries signed up to a range of conditions or contrapartidas (counterpart responsibility). Some of these included:

  • Ensuring all the children between six and fifteen years old attended school at least 85% of the time
  • All children got immunisation
  • Both mothers and children got regular medical check-ups
  • Pregnant women needed to get prenatal care and breastfeed their children.

President Lula was determined to break the intergenerational trap – and ensure that parents gave their children a better head start and advantages which they themselves may not have enjoyed.

This social contract between the government and the beneficiaries meant broadly there was a greater adherence to the conditions.

There were also strict penalties for those who did not comply and non-compliance meant being first suspended from the programme before being completely struck-off for continued transgressions.

 

The initial sceptics

When Lula launched the programme, he faced very highly qualified cynics and naysayers, economists and development agency experts who thought the notion of giving cash directly to the poor will be misspent and be ineffective as they felt it created a culture of dependency and that the poor will spend the money on alcohol and other demerit goods.

However, the visionary Lula had the right idea when he mentioned to J. Tepperman:

“The number one teacher in my life was a woman who born and died illiterate: my mother. With all due respect to experts and academics, they knew very little about the poor. They know a lot about statistics, but that’s different, sabe?

To an intellectual, putting $50 into the hands of a poor person is charity, an academic has no idea about what a poor person can do with it. But that’s because at university, they don’t teach you how to care for the poor. And it’s because most experts have never experienced what the poor go through every day. They’ve had to work without breakfast. They’ve never lived in a flooded house, or had to wait three hours at a bus stop. To experts, a social problem like inequality is only numbers.”

 

A policy that favours the poor favours all

Whilst Lula and the policy’s opponents and economists were convinced this hugely controversial policy was going to be a terrible idea, Lula was convinced in his belief that this was the right thing to do. He also had a strong notion that putting cash into the hands of the poor will help them participate in market economics and help the economy grow.

Lula remarked: “When millions can go to the supermarket to buy milk, to buy break, the economy will work better. The miserable will become consumers.”

The premise was simple: If the poor start spending, businesses benefit, social ills go down and society as a whole improves.

 

The fantastic outcomes that transformed a society

  • Bolsa Familía now supports 14 million families (or 55 million Brazilians)
  • It has reached a quarter of Brazil’s population and 85% of the poor.
  • The small payments have helped double the incomes of Brazil’s most destitute.
  • In the first three years of the programme, extreme poverty was cut by 15%.
  • Income inequality has also reduced by a third as a result of the Bolsa Familía. The poorest 20% saw their incomes rise by 6.2% while the richest 20% saw growth of only 2.6%. (In contract, in the US, the richest 10% grew their wealth by 2.6% while the poorest 10% actually saw their wealth decrease by 8.6%).
  • Vaccination rate has increased to 99% of the population.
  • Malnutrition amongst children has reduced by 16%. Infant mortality dropped by 40% over the last decade, with deaths from malnutrition dropping by almost two-thirds – the sharpest decline anywhere in the world.
  • Children of Bolsa Familía recipients have graduation rates that are double that of poor Brazilian children who are not in the programme.
  • The number of children forced to work has reduced by 14%.

When the Bolsa Familía was originally launched, opponents of the programme were of the view that it was going to drain the national coffers and be a huge drain on public finances. However, the entire programme has cost the government less than half a percent of Brazil’s annual GDP. In 2011, a study by the British Government also demonstrated that cash-transfer programmes like the Bolsa Famiía cost 30% less per person than traditional aid programs.

Further evidence has also shown that for every real disbursed by the government towards the Bolsa Familía programme, it has increased Brazil’s GDP by 1.7 reais!

Where next?

Ultimately the recipients of the Bolsa Familía have said that rather than feel stigmatised and shamed, they have felt pride in being enrolled into the programme. The programme has allowed parents to give their children a good life and in the process given them greater autonomy, independence and above all, dignity.

This is an important facet of development which sometimes gets lost when viewed through the lens of economic analysis and statistics – that people need a sense of dignity and a programme that recognises this will ultimately be successful and be a driver of societal benefits.

The Bolsa Familía has become a pioneering programme that is inspiring many more countries and cities around the world – indeed Brazilian government officials responsible for the Bolsa Familía delivery are providing training and seminars for others seeking to emulate them. It is not just the emerging economies of the world learning from Brazil, but even major American cities like New York, which only goes to show that addressing poverty and inequality is THE policy issue that needs to be urgently addressed.

Social mobility and breaking intergenerational poverty and illiteracy traps are fundamental areas that need to be addressed by leaders and policymakers, in countries rich and poor.

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