Brazil shows the way to end extreme poverty sustainably

By Time of article published Mar 14, 2013

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Extreme poverty causes enormous human suffering and still afflicts over one in every five people on earth, according to figures from the World Bank.

The goal of combating extreme poverty is the bedrock of the entire development community and has been embraced by legions of World Bank presidents. The institution’s new president, Jim Yong Kim, speaks of the need to “bend the arc of history in order to eliminate extreme poverty and achieve shared prosperity”.

At a time when his bank’s resources, as well as the budgetary resources of governments around the world, are more limited than he might wish for, Brazil offers important lessons on how to eliminate extreme poverty and reduce inequality.

Perhaps the biggest lesson to be learned from Brazil is that real progress on reducing poverty levels can be achieved in a very cost-effective manner – if the programmes pursued are well-targeted.

Brazil is an unlikely success story in that regard. My home country has long been known for having one of the most unequal levels of income distribution on the planet. And it had often been cast as the “country of the future” – a place where the poor rarely saw the benefits of the industrialisation and economic growth.

This changed when former president Luiz Inácio Lula da Silva was elected in 2002. He ran on a platform not only to boost social and economic inclusion and to fight poverty and inequality, but also to achieve that goal within a single generation.

Building on the economic basis established under his predecessor, Fernando Henrique Cardoso, Lula’s strategy was not aimed at doing the typical politician’s thing – to spend more on social programmes. Instead Lula, a man who had experienced long bouts of poverty first-hand, made the fight against poverty and inequality the central organising principle for his entire presidency.

In fact, all other of the government’s policymaking areas were of secondary importance, in the sense that they had to support his main policy plank. At long last, the fight against poverty was not just an add-on, as it so often is, even in very poor countries around the globe.

It is well-known that Lula’s programme initially did not receive a warm welcome from the financial markets. They were concerned that his commitment to what they perceived as a utopia would lead him to implement irresponsible, populist and unsustainable policies. They were wrong.

But there were plenty of doubters within Brazil as well. They were convinced that, after 500 years of a national history marred by exclusion and inequality, bending the arc of history would certainly take far more than a single generation. They, too, were wrong.

By the end of Lula’s two-term mandate, Brazil’s results were already impressive. Income inequality, measured by the Gini coefficient, had declined sharply, from 0.553 in 2002 to 0.5 in 2011. Household per capita income had increased by 27 percent between 2003 and 2011. And unemployment rates reached a record low, falling from 9.1 percent in 2002 to 6.8 percent in 2011.

When President Dilma Rousseff, Lula’s former chief of staff, was elected as his successor from January 1, 2011, she upped the ante, running on a platform to eliminate extreme poverty not in a generation, but in just five years.

The world of politics is full of scepticism, if not cynicism. Considering the lofty speeches by endless reams of politicians declaring big goals (usually without ever intending to meet or come close to meeting them), there is good reason for doubt.

And yet, in Brazil’s case, the target of eliminating extreme poverty is surprisingly close to being achieved. The reform agenda’s cornerstone was a determined expansion of the social protection programmes by making sure that all poor households would be reached.

The two key programmes are, first, the Bolsa Familia (a conditional cash transfer programme that aims at increasing income for the poorest families while promoting health and education) and, second, the Brasil sem Miséria (an extension of the former aimed at people living in extreme poverty, with elements for inclusion in the productive sector and access to public services).

The two programmes now reach 100 percent of all Brazilians that are listed in the national database used to manage and monitor the social programmes of the country. At this moment, there still are 700 000 people that live under the poverty line, who do not yet receive payments from either of the support programmes because they have not been included in the registry. It must be noted that Brazil is a continent-sized nation, with a landmass of 8.5 million square kilometres, very close to that of the US, and some of the extremely poor live in completely isolated areas.

Most people, when they look at the development challenges, believe that poverty alleviation may well be a moral obligation, but that it is expensive and, even if started successfully, may not be sustainable financially. Brazil’s case shows that this does not need to be so. The cost of Bolsa Familia has been extremely low. In 2012, the programme cost the Brazilian government less than 1 percent of its Budget.

On the social front, the results are solid. While much more needs to be done, Brazil has seen a marked decline in violence and an increase in political activism and cultural movements. In many of the urban areas, ambitious programmes were launched to “pacify” areas previously associated with drug trafficking and violence.

A key part of the improved urban environment is that the urban poor now have a sense of destiny and direction. They welcome the government’s focus on investment in families’ futures and especially the smart focus on the young and their education. There is a quiet confidence in the eyes of young children living in the favelas that has never been there before. Without knowing it, they can sense that their government is giving them a true head start.

The real fruits to be harvested from the Bolsa Familia may still be a generation away. But here you have a rigorously implemented social programme that has nothing to do with consumption and the usual instant-gratification handouts that too many politicians over the world like to specialise in – and not just in poor countries.

As the World Bank’s new president visits Brazil this month, he can obtain plenty of inspiration for what can be done on the poverty front globally, even in budgetarily lean times.

Rogério Studart is the alternate executive director for Brazil, Colombia, the Dominican Republic, Ecuador, Haiti, Panama, the Philippines, Suriname and Trinidad and Tobago in the World Bank Group and a contributor to The Globalist.com. The opinions expressed are those of the author, and therefore do not necessarily represent those of the Brazilian authorities or the senior management of the World Bank Group.

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