Brazil shows how to fight poverty

More than 20 percent people on Earth live in extreme poverty and are enduring inhuman sufferings, according to the World Bank. Combating extreme poverty is the aim of the entire development community, and the same goal has been embraced by many World Bank presidents.

The World Bank's new president, Jim Yong Kim, has spoken of the need to "bend the arc of history in order to eliminate extreme poverty and achieve shared prosperity". At a time when the World Bank's resources and the budgetary resources of governments around the world are more limited than Kim 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 poverty can be reduced in a very cost-effective way, that is, if the programs pursued are targeted well.

My home country (Brazil) has long been known for having one of the most unequal income distributions on the planet. And it has often been cast as a "country of the future", a place where the poor rarely saw the benefits of industrialization and economic growth. This changed when Lula da Silva was elected president in 2002. He ran on a platform not only to boost social and economic inclusion, and 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 at all aimed at doing the typical politician's thing - to spend more on social programs. Instead, as a man who had experienced poverty first-hand, he made the fight against poverty and inequality the central organizing principle of his entire presidency. In fact, all other government policymaking areas were of secondary importance, in the sense that they had to support his main policy plank.

Initially, the financial markets did not welcome Lula's program. They were worried that his commitment to what they perceived as a utopia would make him implement irresponsible, populist, and unsustainable policies. They were wrong.

There were plenty of doubters within Brazil as well. They were convinced that, after 500 years of exclusion and inequality in Brazil, 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 terms as president, Brazil's results were already impressive. Income inequality, measured by the Gini coefficient, had declined from 0.553 in 2002 to 0.500 in 2011. Household per capita income had increased by 27 percent from 2003 to 2011. And the unemployment rate had fallen from 9.1 percent in 2002 to 6.8 percent in 2011.

When President Dilma Roussef, Lula's former chief of staff, was elected as Lula's successor, 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 skepticism, if not cynicism. Considering the lofty speeches by endless number of politicians (usually without ever intending to meet them or coming 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 programs by ensuring that all poor households in the country were reached.

The two key programs are Bolsa Familia (a conditional cash transfer program that aims at raising the income of the poorest families while promoting health and education among them) and Brasil sem Misria (an extension of Bolsa Familia that targets people living in extreme poverty, with provisions for including them in the productive sector and giving them access to public services). The per capita transfer at present is 70 Brazilian real ($35) a month.

The two programs now cover all Brazilians listed in the national database that is used to manage and monitor the country's social programs. About 700,000 people, however, do not receive payment from either of the support programs and are still living under the poverty line, because they have not been included in the registry (Brazil is a continent-sized nation, with an area of 8.5 million of square kilometers, and some of the extreme poor live in isolated areas).

When it comes to development challenges, most people believe that despite being a moral obligation, poverty alleviation is an expensive proposition and, even if started, successfully, it may not be sustainable financially. Brazil's case shows it need not be so.

The cost of Bolsa Familia has been extremely low. In 2012, the program cost the Brazilian government less than 1 percent of its budget.

On the social front, the results are remarkable. 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 urban areas, ambitious programs have been launched to "pacify" areas previously associated with drug trafficking and violence.

A key part of the improved environment is that the urban poor now have a sense of destiny and direction. They welcome the government's focus on investment in families' future, especially the focus on the young and their education.

There is now a quiet confidence in the eyes of young children living in favelas (shanty towns). 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 in Brazil you have a rigorously implemented social program that has nothing to do with consumption and the usual instant-gratification handouts, which too many politicians over the world - and not just in poor countries - like to specialize in.

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

(China Daily 03/27/2013 page9)