Brazil has been historically marked by social, economic and cultural inequalities. Poverty witnessed a downward trend in the 1960s and 1970s, however during the 1980’s; poverty began to rise again thanks to debt crises and rising inflation.
Before 1980, Brazil was one of the world’s most flagrant examples of inequitable growth. Despite the progress on poverty that Brazil has made in the last decade, there are still a very large number of poor people in the country. Even though Brazil has a number of poor people, as a whole it is not a poor country. It still has to overcome social injustice and inequality. To reduce poverty, the most important single action the government could take would be to find a way to reach a higher and more sustainable growth rate.
Brazil performed remarkably well in terms of poverty reduction in the post 1993 period. Through a combination of de-indexation of labor contracts and an exchange-rate based stabilization policy (known as the Real Plan), the government finally managed to control inflation in 1994. Beyond attaining higher growth, a number of things would help to make growth more favorable to the poor. Even more money and attention must be paid to education and health.
Numerous policies have been put into place to reduce poverty directly. It is divided into:
1.Asset redistribution policies – These policies seek to augment the stock of assets available to the poor.
2.Price control policies – These policies seek to affect relative prices in favor of poorer people.
3.Income redistribution policies – These policies seeks to make direct transfers, in cash or kind, to alleviate immediate poverty.
During the 1990s, Brazil has made an impressive effort to reduce poverty and inequality through the implementation or expansion of a wide range of targeted social programs. This is one of the principal reasons that poverty has declined more than one might have expected, given the slowdown in the overall growth rate.
Rural Social Security
Rural social security is far and away the biggest of the targeted social programs. The Rural Social Security system was established by the military after 1964 and paid a benefit of one-half of the minimum wage to family heads over 65. The intention was for the state to provide a basic safety net and protect the family farm. The expanded system lowered the retirement age to 60 for men and 55 for women.
By 2001, the rural system was paying R$1.2 billion per month or about $5 billion per year to 6.6 million individuals 98 percent of whom were in the non-contributory system and received one minimum wage per month.
Social Assistance Programs
In addition to the rural social security system, Brazil has implemented a means-tested system of social assistance for the aged and disabled living in both the rural and urban sectors. The first such program, the Renda Mensal Vitalicia (RMV) implemented by the military regime in the mid 1970s, was limited to those over 70 years of age without income or any other means of support that had made at least 12 contributions to the social security system during their lifetimes.
Other Social Assistance Programs
There are a large number of other social assistance programs, some targeted to children in poor families, others to low income workers, others to the agricultural sector, others for housing, for subsidized credit or for nutrition. In this section, we describe the biggest and most significant of these programs.
Bolsa Escola has caused economic inequality to drop faster than in any other country. As per this program, poor families are given a give a fixed amount of electronic cash that is directly deposited into their bank accounts. It gives R$15 ($6) per month per child up to a maximum of three children per family or R$45.
The Bolsa Familia serves more than 12 million households nationwide. It is the largest conditional cash transfer program in the world. Begun in 2001, it grew out of a number of successful local programs and a small national program.
The Government of Brazil has played a crucial role in reducing inequality. Through a combination of de-indexation of labor contracts and an exchange-rate based stabilization policy (known as the Real Plan), the government finally managed to control inflation in 1994.
Despite the progress on poverty that Brazil has made in the last decade, there are still a very large number of poor people in the country. To reduce poverty further, the most important single action the government could take would be to find a way to reach a higher and sustainable growth rate.