Pandemic payouts cut poverty in Brazil
● Brazil, which has suffered one of the world’s worst pandemic tolls, has responded to the crisis by distributing so much cash directly to citizens that poverty and inequality are approaching national historic lows.
About 66-million people, 30% of the population, have been receiving 600 reais (about R1,850) a month, making it the most ambitious social programme ever undertaken in Brazil, a shocking shift under President Jair Bolsonaro, who railed against welfare, dismissed the virus — and now finds himself newly popular.
The government hasn’t published its own figures yet, but data from the Getulio Vargas Foundation, one of Brazil’s top universities, shows that those living on less than $1.9 (about R32) a day fell to 3.3% in June from 8% last year, and those below the poverty line were at 21.7% compared with 25.6%. Both represent 16-year lows.
Economist Daniel Duque, the main investigator, said poverty has, in fact, hit the lowest rate since data collection began 40 years ago, but a shift in definitions in 2004 makes direct comparison before then slightly complicated.
He added that unpublished measurements from July and August show that inequality calculated by the so-called Gini coefficient fell below 0.5 for the first time yet.
In other words, as Covid-19 has killed about 122,000 Brazilians, it has paradoxically driven down poverty and inequality, at least in the short term, and also placed government welfare at the heart of political debate, like a decade ago with the “Bolsa Familia” programme that lifted millions. The issue will reverberate in November’s local elections, a dry run for the presidency in 2022.
Duque said it’s as if Brazil had suddenly created a massive basic-income programme. He believes it won’t be possible to end it soon.
“The population will surely demand more types of programmes like this, and we can’t run the risk of a massive drop-off.”
In fact, the government has begun paring it back. On Tuesday, Bolsonaro announced that handouts would be halved for the remainder of the year. And while he promised to make some form of stipend permanent, he hasn’t indicated how he will pay for it.
Economists say the approach is unsustainable. Brazil is headed to its largest primary deficit yet of more than 11% of GDP, and “the challenge is how do you unwind from this?” said Christopher Garman, MD for the Americas at Eurasia Group. “There is no free lunch.”
Markets agree. Last week, investors engaged in a massive sell-off of Brazilian assets after Bolsonaro suggested he might be willing to exceed constitutional spending caps to finance permanent stipends.
This is due to the astronomical price of the programme known as the “coronavoucher” — $9.3bn a month to end-August. It cost in five months what Bolsa Familia — created by former president Luiz Inacio Da Silva, or “Lula” — spent in eight years. That plan gives out $35 a month, reaching 14-million families this year.
The coronavoucher, which accounts for nearly half of Bolsonaro’s recovery package, has driven up his popularity, especially with the poor. Jose Carlos Alves, 56, who sells souvenirs on the outskirts of Brazil’s capital, Brasilia, said the monthly coronavoucher has shifted his politics as he faces more months without tourists or sales.
Once loyal to Lula’s long-ruling Workers’ Party, he said the aid “shows Bolsonaro cares and now has my vote in 2022”.
Monica de Bolle, a senior fellow at the Peterson Institute for InternPaRtional Economics, who advised legislators on the legislation for emergency aid, said this is a wider phenomenon.
“Bolsonaro has realised the obvious: Brazil is a poor country with lots of poor people, and if you give them cash transfers you’ll get their votes.”
Shocking shift on welfare boosts Bolsonaro’s popularity