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THE VALUE OF BOLSA FAMILIA: ANOTHER BRAZILIAN ECONOMIC MIRACLE?
By Alison Moses
Abstract
The purpose of this short article is to highlight the general contours of a socio-economic program
implemented in Brazil, known as Bolsa Família Program (BFP), a conditional cash transfer program (CCT). Our goal is
to ponder the “miraculous” nature of this Program. While it is not a silver bullet to solve all of Brazil’s internal
problems, as vast and far-reaching as the size of the country itself, it is worth noting that in comparison to what
seems to be a distant past in Brazil, Bolsa Família has made miraculous inroads in a country whose reputation was
sullied with the worst deep-seated income inequalities in the world while wearing the face of persistent urban and
rural poverty across the land.
Reflecting widespread beliefs about society’s “debt to the poor”, the concept of CCTs first emerged in policy
debates in Brazil in the late 1980s and early 1990s. There were two lines of thought. The first, involved the concept
of providing minimum income to the poor; the second involved the realization that poverty reduction strategies had
to go beyond the visible surface symptoms and address the bedrock underlying the structural sources of poverty.
Education was a pillar of the Program, the basic premise for linking school attendance to cash assistance. The
implementation of Bolsa Família Program has been credited with reducing poverty and slashing income
inequality in Brazil.
If a miracle is defined as “an extremely outstanding or unusual event, thing, or accomplishment”,
did Brazil experience another “miracle”?
Do you believe in Miracles?
s there a miraculous socio-economic policy in our world that can end poverty and its attendant
ills? As recently as in 2013, almost half the world — over three billion people — lived on less
than $2.50 a day and in which for the 1.9 billion children from the developing world, there
were 640 million without adequate shelter (1 in 3); 400 million with no access to safe water (1 in 5) and 270
million with no access to health services (1 in 7)1? Is there a solution that can rebalance the egregious
chasm in the fact that the poorest 40 percent of the world’s population accounts for 5 percent of global
income and the richest 20 percent accounts for three-quarters of world income?2
1 http://www.globalissues.org/article/26/poverty-facts-and-stats
2 http://www.globalissues.org/article/26/poverty-facts-and-stats; 2007 Human Development Report (HDR), United Nations
Development Program, November 27, 2007, p.25.
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For Brazil, the 6th largest economy of the world with a population of some 200 million people and
now classified as a middle-income emerging economy, its own levels of poverty and inequalities beg the
question as to whether there are any miracles happening since over the last decades the richest 10 percent
of people in Brazil have had access to over 40 percent of the country’s income and the poorest 10 percent
have received about 1 percent of the income. If extreme poverty in Brazil remains widespread in this South
American country so well known for its captivating sights, multicultural sounds, rainbow colors and intriguing
fragrances, one wonders if the social and economic policies introduced since the early days of Brazil’s
democracy in the late XX century are slowly paying off and reducing poverty and inequality. Is there a socio-
economic miracle afoot in Brazil that is impacting poverty levels, mitigating income inequalities and thus,
holds a beacon to ending poverty and attendant inequality in Brazil and maybe even in the rest of the world?
The economic coined phrases, the “milagre brasileiro” or the “milagre econômico brasileiro” or in
English, the Brazilian economic miracle, is a name given to a time of exceptional economic growth from the
late 1960's to the late 1970's when Brazil lived through military regimes. The so-called Brazilian ''miracle'' -
the spurt of growth - became the economist's model of the way to manage the country’s expansion from
agrarian stagnation to the Valhalla of a new industrial stage, with big projects such as government-owned
power utilities building enough plants - hydroelectric, nuclear and coal - to produce more power than Brazil
was expected to need well beyond the year 2000. The construction of a huge mineral development project
called Carajas, was supposed to make Brazil the world's leading producer of bauxite and aluminum in the
vision of economic development and growth.3
These "anos de chumbo", literally “years of lead”, heavy-handed in their political delivery of “government”,
saw Brazil’s technocrats, under the aegis of military leadership, engage in economic policy preferences
that favored emphasis on the free market. In the wisdom of the military leaders one of the first things they
did was to diversify Brazil’s exports, encourage foreign investment, and implement tax incentives and
currency devaluations to encourage overseas trade. In an effort to rake in more income, the military
government also began a push to raise tax collection, which resulted in an eye-catching increase in tax
revenue as a portion of the country’s gross domestic product.
Brazil’s economy seemed to take off during this 5-year period of miraculous growth between1968-
1973. A number of factors favored this burgeoning. By the middle of the 1960s, the post-1964 reforms and
other policies of the military government, together with the state of the world economy, created conditions
for very rapid growth. In that period, the average annual rate of growth of GDP jumped to 11.1%, led by
3
http://www.nytimes.com/1983/11/26/business/brazil-s-economic-miracle-and-its-collapse.html?pagewanted=all
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industry with a 13.1% average. Within industry, the leading sectors were consumer durables, transportation
equipment, and basic industries, such as steel, cement, and electricity generation.
As a result of the post-1964 policies, external trade expanded substantially faster than the economy
as a whole. There was a significant growth in exports, especially manufactured goods, but also
commodities. Yet, imports grew considerably faster, rapidly increasing the trade deficit. This did not present
a problem, however, because massive inflows of capital resulted in balance of payments surpluses.4
While reducing inflation and improving the balance of payments with trading partners earned some
accolades for Brazil, the fact remained that vast swathes of the population did not feel the benefits of these
“reforms” and indeed, suffered from uneven growth. In this regard, during this period, the wages of the
middle class and the rich rose faster than those of the lowest paid, widening an already broad gap in income
distribution. The years of “lead” appeared to only exacerbate the already heavy burden of economic
disaffection of the poor.
“Economists Lance Taylor and Edmar Bacha termed the economy in the aftermath of the 1960s
stabilization attempts “Belindia”—Belgium in India; a modicum of development alongside conjoined
twins of poverty and inequality. Brazil now had a top tier, 20 percent of its population or roughly 22
million, enjoying relatively high per capita income, while the rest, 85 million people, lived at or below
a subsistence level.”5
Over the course of the 1970s, the military government thought big, engaging in large-scale
development projects too. This “miraculous growth” of the Brazilian economy featured high rates of private
investment; infrastructural developments, the most massive and renowned of which was the Itaipu dam;
The economy enjoyed an absence of major upheavals. Such an approach continued throughout 1970s until
it hit rock bottom by the second oil shock in 1979. In the 1980s, recession hit the private sector, and the
government was the erstwhile engine of growth in the "boom" years. The impact on the poor was reflected
in the growing informality of the labor force with the proliferation of “camelôs” or street vendors alongside
negligible income growth at that time. Only after stark declines throughout the 1980s did economists call
that yester-year boom image into question, a truly miraculous time, since large swathes of Brazil’s
population in both urban and rural settings remained outside the spheres of full-fledged economic
participation. Disconnected from centers of political power and the infrastructural developments that had
been occurring, the favelados (urban slum-dwellers) remained economically marginalized and the rural
4 https://en.wikipedia.org/wiki/Economic_history_of_Brazil
5
https://library.brown.edu/fivecenturiesofchange/chapters/chapter-7/economic-miracle/
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poor in particular, continued to suffer illiteracy and health problems, with few economic or political means
of affecting change.
Bolsa FamÍlia: Latter day saints and economic miracles?
Given the faltering economy of the late 1970s and the less than rosy socio-economic picture of the
country in the early 1980s - when between 1981 and 1992, the GDP increased at an average annual rate
of only 2.9% and per capita income declined 6% - Brazilians saw fit to transition into a democracy with the
election of Tancredo Neves in 1985 and to craft a newly written Constitution, ratified in 1988. The new
Constitution reflected the country’s concerns about social injustice and economic malaise as it placed
emphasis on poverty reduction and the creation of a more just and equitable society as some of the pillars
of the “new Brazil”. In this regard, at the beginning of the document in article 3, indents I through IV, the
1988 Constitution states, “construir uma sociedade live, justa e solidária; garantir o desenvolvimento
nacional; eradicar a pobreza e a marginalização e reduzir as desigualdades sociais e regionais; promover
o bem de todos, sem preconceitos de origem, raça, sexo, cor, idade e quaisquer outras formas de
discriminação”6.
This is where Bolsa Família Program (BFP) or “Family Bonus Program” comes in. Simply put, the
Bolsa Família cash transfer program is similar to a government welfare program found in other countries.
Bearing in mind the objectives defined in Brazil’s Constitution, in 2003, the government of Luiz Ignacio Lula
da Silva launched a comprehensive program to address the economic and social ills that plagued Brazil for
decades. The idea of the Lula government was to stimulate growth and social progress. On the social side,
the cornerstone of the Bolsa Familia Program was an all-encompassing reform of Brazil’s social safety net
whose mechanisms integrated four cash transfer programs into a single program under the umbrella of a
new Ministry of Social Development. BFP’s formal objectives were to (a) alleviate current poverty and
inequality via direct monetary transfers to poor families; (b) break the inter-generational transmission of
poverty through incentives for investments in human capital; and (c) help empower beneficiary families by
linking them to complementary services.7 In sum, this meant a concerted attempt to reduce current poverty,
avoid future poverty-related problems and, quash inequity.
Economically speaking, the Bolsa Família Program is known as a CCT - conditional cash transfer
(CCT) program which typically transfers cash directly to recipients who pledge to fulfill certain criteria such
6
"Build a free, just and unified society to guarantee national development; eradicate poverty and marginalization and reduce social
and regional inequalities; promote the good of all, without prejudice as to origin, race, sex, color, age and any other forms of
discrimination”, translated informally by Alison Moses, author here.
7
file:///F:/BOLSA%20FAMILIA/WORLDBANK%20ANALYSIS.pdf
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as enrolling their children in school, finding regular medical care, vaccinations, and participating in other
programs. Families can use the program to escape their day-to-day survival mode which under dire
circumstances precludes making any significant investment in the future and stymies fulfilling family
dreams. Under the program in Brazil, low income families receive cash benefits of between R$15 to R$95
per month according to per capita income and the number of children of school age. In exchange, families
commit to keeping their children in school and following a basic health and vaccination program.8
At the time, naysayers met Bolsa Família with skepticism saying that the Lula government was
throwing good money after bad since Brazil traditionally was wont to spend 22 % of GDP spent on
education, health, social protection and social security but with a frustrating lack of visible results. In this
regard, in an article in the Rio Times online, published in 2012, it stated that according to the US Factbook,
estimates pointed to the “sixth largest economy in the world as having an average per capita GDP of
R$20,000 (US$11,600) in 2011, and ranking 100th in the world just ahead of Costa Rica and behind
countries like Iran, Romania and Venezuela. Even with a low unemployment rate of 6.1 percent, 26 percent
of the population lives below poverty line in Brazil. A glance at the figures from the IBGE (Brazil’s
government statistics bureau,) reveals that 16.2 million people (8.5 percent of the population,) still live on
less than R$70 per month – the equivalent of around US$1.30 per person per day – the limit set by President
Rousseff as the extreme poverty line. Of those 16.2 million people, 4.8 million survive on no income at all,
and the incomes of the remaining 11.4 million range between R$1 per month and R$70. Furthermore, the
minimum wage is just R$622 (US$361) per month, despite an increase of more than fourteen percent
decreed at the beginning of the year.”9
Despite skeptics, ten years after its inception and consolidation, by 2013, BFP appeared to be a
key in helping Brazil more than halve the country’s extreme poverty – from 9.7 to 4.3 percent of the
population. According to Deborah Wetzel for the World Bank, income inequality fell markedly to a Gini
coefficient10 of 0.527, an impressive 15 percent decrease. BFP now reached nearly 14 million households
– 50 million people or around a quarter of the population.11 Bolsa Família targeted households whose per
capita monthly income was less than 120 reais (a yearly income of $828 USD). According to Berk Özler, in
an online article entitled, Lessons From Brazil’s War on Poverty, “The government paid these households
between 20 to 182 reais per month (between $132 to $1,248 a year) if they met certain conditions: Children
under the age of 17 had to regularly attend school; pregnant women had to visit clinics for prenatal and
8 See more at: http://riotimesonline.com/brazil-news/rio-business/brazil-strives-for-economic-equality/#sthash.tFpuLTVV.dpuf
9 http://riotimesonline.com/brazil-news/rio-business/brazil-strives-for-economic-equality/#sthash.tFpuLTVV.dpuf
10
The most common measure of inequality. A Gini coefficient of 0 represents perfect equality where everyone earns the same income,
and 1 represents complete inequality where all the country’s income accrues to a single person. The Gini coefficient is useful in
describing changes in the distribution of incomes using a single number.
11
http://www.worldbank.org/en/news/opinion/2013/11/04/bolsa-familia-Brazil-quiet-revolution
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antenatal care; and parents needed to make sure their children were fully immunized by age 5 and received
growth check-ups until age 6. It also provided a small allocation to extremely poor households with no
strings attached.”12
Not only did Bolsa Família reach a quarter of the overall population and 85% of the poor, the
payments made were able to double the income of destitute families. According to Teresa Campello, the
country’s minister of social development, in its first three years, the Program slashed extreme poverty by
15 percent, and by 2014, the percentage of Brazilians living in indigence was whittled down to less than 3
percent – a level the World Bank considers equivalent to eradication.13 As Lula himself explained when he
first introduced it, “When millions can go to the supermarket to buy milk, to buy bread, the economy will
work better. The miserable will become consumers.” Thus, by giving people money that they could spend
based on their own discretion, Lula created what welfare economist Lena Lavinas called a “pro-market
approach to combating poverty”.
Had the ultimate goal of the CCT program simply been poverty reduction, there would have been
no need for the creation of contrapartidas, or counterpart responsibilities, as this goal would have been be
achieved simply through cash transfers. True to its second formal objective, the Bolsa Família Program not
only aimed at immediately improving income levels, it also aimed at impacting overall family conditions by
developing (a) strategies to break the persistent health-education cycles that involve generations of poor
families and (b) strategies that invest in the human capital of the children of these families. By helping to
increase vaccination rates to 99 percent of the population, by decreasing malnutrition among children in
Brazil’s poorest regions by 16 percent, and by increasing the chances of having a healthy weight-to-age
ratio by 26 percent, intergenerational cycles of poverty can be stemmed over time. Similarly, Bolsa Família
is credited with improving school attendance by 14 percent in the country’s poorest regions and generally
discouraging dropping out of school.
What miraculous role did Bolsa Família play in the decline of poverty and inequality in Brazil? With
such a large transfer of money from taxpayers to Brazil’s poorest, you would imagine there must have been
some impact, but how much of one? While it is difficult for economists to try to understand changes in
income inequality by quantifying all the elements that affect the distribution of income, there are some
studies that will hold true the definition of another “miracle” in Brazil. In two separate studies, one a 2010
paper on Brazil by Ricardo Barros and co-authors from Brazil’s IPEA (the Institute of Applied Economic
Research) and another, a 2013 paper on a number of countries in Latin America including Brazil (by the
12 http://fivethirtyeight.com/features/lessons-from-brazils-war-on-poverty/
13
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World Bank’s João Pedro Azevedo and co-authors), they separately found “that government transfers
accounted for about 40 percent of the decline in inequality in Brazil, with expansions in pensions and Bolsa
Família (and a related program for people with disabilities) contributing roughly equally to the decline in
income inequality. Of these government transfers, Bolsa Família was by far the most important component
in raising the income levels of Brazil’s poorest households”.14
While there may be no miraculous silver bullet to eradicating poverty worldwide, in the absolute,
the literature suggests that Bolsa Família contributed about 15 to 20 percent of the decline in income
inequality in Brazil during the decade starting in 2000. These effects were most likely achieved by putting
money directly into the pockets of poor households and particularly in the hands of women in the
households. Advocates of the benefits of BFP hope that the cash transfers will not only reduce poverty but
also keep the next generation out of poverty as well, since the money is tied to parents’ investing more in
their children’s education and health. According to Paul Glewwe of the University of Minnesota and Ana
Lucia Kassouf of the University of São Paulo, they found in 2012, that “the program has led to
improvements in children’s school enrollment and advancement, which could translate into higher incomes
for them as adults and further reductions in poverty and inequality.”15
Can Bolsa Família eradicate poverty across the board in Brazil or if emulated, eliminate it in other
parts of the world? Probably not but such is the fascination and in that regard, the success of Bolsa Família,
that Brazil is now being consulted for advice on income transfer programs by countries across Africa
(Ghana, Angola, Mozambique), the Middle East (Egypt, Turkey) and Asia (including India). Even New York
City has implemented a version of the program.16
CONCLUSION
CCTs such as Bolsa Família have two main objectives: (i) alleviation of poverty today; and (ii)
higher investment in the human capital of poor children so as to increase their well-being tomorrow, when
they are adults. The first objective is met when poor families receive program payments. The second is
achieved by conditioning those payments on certain behaviors, mainly enrolling children in school. Bolsa
Família fulfilled these two objectives and is at the very least miraculous in that it has helped many of the
poor to get out of their precariousness. Bolsa Família is one of the largest existing instruments of income
transfer, having benefitted some 13.8 million families (almost 50 million people). It means that
approximately one in four Brazilians have received the benefit in a total population of approximately 200
14 http://fivethirtyeight.com/features/lessons-from-brazils-war-on-poverty/
15 Ibid
16
http://www.theguardian.com/global-development-professionals-network/2013/nov/05/bolsa-familia-brazil-cash-transfer-system
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million people over the course of at least ten years. Considering the scope of the program, it has had a
major impact on the Brazilian economy and on people's lives becaus the average citizen feels more
economically empowered and the conditionalities have set up future generations to be better off than their
parents.
Undoubtedly there are still numerous issues to tackle in Brazil such as the struggle to create a
society that has less dependency on social welfare in the first instance by creating real alternatives of
income generation and decent employment for all citizens; more equal access to social security and even
better access for students from lower classes to enter and complete university studies. That said, Bolsa
Família is touted as being one of the biggest changes in recent times in Brazil’s economic and social
structure for poor people and thus, for all of society.
Miracles, if they happen at all, do not happen overnight. For Francisco Menezes, a prominent
Brazilian researcher on Bolsa-Família and food security, who works for the Brazilian Institute for Social and
Economic Analyses, he points out: "Today, hunger is almost nonexistent in Brazil and many people have
left poverty. That is undeniable. But there are still many deprivations imposed on the poor. Bolsa-Familia
won't solve this. We need other social investments."17
If the Brazilian government will continue to commit to and then manage to further bridge the time-
worn gap between the bottom poor and the richer top, such steps and their subsequent policy measures
against poverty and inequity will be part of something far-reaching we might be dignified to call a “milagre
brasileiro”. Whether new or already established programs, everything depends on whether these programs
are well-implemented and their impact measured over time. What’s more, to boost their impact, they should
be coupled with a well-structured strategic plan to generate sustainable growth in the future with social and
economic inclusion fitting of miracles.
Alison Moses
soualison282@gmail.com
February 2016
17
http://www.theguardian.com/global-development-professionals-network/2013/nov/05/bolsa-familia-brazil-cash-transfer-system
