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Brazil Is Bridging the Gap Between the Rich and the Poorest

Poverty in Brazil

Brazil’s economy has grown, on average, 4.5% over the last for years. Per
capita income has grown 3.05%, exports rose around 22%, inflation has remained
under control, 3.9% last year, the benchmark interest rate has fallen from 16.5%
to 11.25%. These figures have reached the foreign market, bringing further
investment and a better image for Brazil among rating agencies.

But the fruits of these rosy numbers have also come to a place that is far from the financial market: the homes of the poorest Brazilians. The improvement of the economy helped reduce the social inequality, say specialists.


“The improvement of the economy answered to half of the reduction of poverty,” stated the researcher at the Institute of Applied Economic Research (Ipea), Paulo Mansur Levy, based on the institute’s National Survey by Household Sampling (PNAD 2006).


The direct influence of the economy is due mainly to the advance of unemployment rates and average income of the population, say the specialists. The remaining indices, however, also collaborate indirectly.


“That is what is behind it. It is only possible to generate jobs and improve income in a context of inflation under control,” stated Levy.


He recalled that in 2006, inflation was low, 3%, and average earnings grew 4%. Last year, however, income also grew, but at a lower rate, 3.2%, as inflation rates were greater, around 4%.


The chief economist at Tendências consultancy company, Ana Carla Abrão Costa, stated that social programs, the offer of credit and the access to banking systems by lower income families helped in the reduction of social inequality and in poverty in Brazil, but they are also a consequence of the economic growth, mainly in a more active labor market.


According to the executive secretary of the Ministry for Social Development and Hunger Alleviation, Arlete Sampaio, the factors that most collaborated for the reduction of poverty in Brazil in recent years were social assistance, the real growth of the Brazilian real against the dollar, the Bolsa Família (Family Voucher) and the BCP (Benefício de Prestação Continuada – Benefit of Continued Service).


Bolsa Família is the federal government income transfer program turned to the poorest share of the population, and the BCP is financial assistance to the elderly above 65 years of age, with income of up to one quarter of a minimum wage.


The PNAD shows that 38.1 million Brazilians had per capita family income equal or lower than 100 Brazilian reais (US$ 58) in 2001. This figure dropped to 30.76 million people in 2005. There was also a reduction in social inequality. The poorest fifth of the Brazilian population had a gain in per capita family income of 26.6% between 2001 and 2005, whereas the richest tenth of the population had an income reduction of 1.3%.


The Gini coefficient, which measures income inequality, declined 4.6% between 2001 and 2005, rising from 0.593 in 2001 to 0.566 in 2005. “In 2001, it was close to the average of the last 30 years, in 2005, it reached the lowest value registered in the period,” according to the research.


According to the Ipea research, among the 74 countries in which the Gini index was accompanied in the 90s, less than one quarter could reduce it at a rate greater than Brazil, which shows, according to the study, that the country has one of the fastest social inequality reduction rates in the world.


Arlete, from the Ministry, stated that both the economy helps in the reduction of poverty in the country, and the income transfer programs help in the improvement of the economy. That is, with more money in their pocket, the poorest help boost consumption. In fact, consumption, based on retail sales, has grown 10% over, for example, the last year.


The economists say that the improvement of the Brazilian economy is the result of actions that have been developed over the last few years.


“The Brazilian economy has been improving in structural terms for a decade. We are harvesting the fruit of the reforms from the 90s to date,” stated Costa, from Tendências.


“The more austere fiscal policy, the exchange regime whose rates reflect the free market and controlled inflation made it possible for the economy to improve, for there to be expansion of formal and informal employment, expansion of the GDP, greater consumption, investment of over 1% of the GDP. All of this results in a real improvement of the Brazilian economy,” stated the Ipea researcher.


Costa, from Tendências, stated that Brazil is now at a situation of lower foreign vulnerability, as the country has reserves to face an international crisis.


“Brazil has become more resistant to foreign crises like the current one in the US. Brazil is going to suffer, but less than it suffered in the past,” she said.


She believes that there is currently scenery of greater inflation boosted by greater consumption, but that the inflation targets are not threatened. “The government will have to make adjustments in the monetary policy, but the possibility of greater inflation does not have the power to make Brazil stop growing,” stated Costa.


Levy, from the Ipea, has a similar belief. “Part of this growth reflects the favorable foreign conditions. And for it to be sustainable some deceleration of growth is necessary, as are adjustments to demand and to the productive capacity,” stated the researcher.


The greater solidity of the Brazilian economy, however, is already reflected on the foreign market. “The stability generates greater trust and provides incentives to investment,” stated Costa.


Levy recalls that there has been improvement in the perception of management of the Brazilian economic policy abroad, making the economy more attractive.


Anba – www.anba.com.br

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