19 Nov 2015

Brazil’s Social Policy Trade-off

Monica writes*

Brazil’s latest social policy ‘La Bolsa Família’ aims at combating poverty and inequality in the country. In 2003 the poorest 60% accounted for merely 4% of the wealth (World Bank 2013). Since ten years, the policy has tried to combat this problem by offering conditional cash transfers (CCT). The CCT offer an extra income to families so they, in turn, send their children to school and health care visits. However, since the demand of these social services has increased, the supply side has decreased in quality.

Economic Growth
The CCT promotes economic inclusion. It empowers the poorest section of society. It ensures a steady monthly income, which provides for basic human needs and stimulates the nation’s economic growth. The government has stipulated a return of 1.78 reais to the economy for every 1 reais spent. The Guardian states the program is responsible for 33% in the reduction of extreme poverty from 8.8% to 3.6% between 2002 and 2012.

However, the Economic Commission for Latin America and the Caribbean argues that the reduction of extreme poverty is only short-term. Despite lifting households out of extreme poverty it does not address economic inequality. The safety net is generating immense inefficiency and dependency for older people to reductions in incentives to improve people’s skills and employability.

The program does have the long-term goal of improving the lives of future generations. The requirements have resulted in a reduction of school dropouts and an increase of school attendance. The Guardian states La Bolsa Família has also reduced malnutrition and infant mortality rates. The poorest region in Brazil has scored higher in the Human Development Index (HDI).

Despite an increase of school attendance and healthcare visits, the program has diverted the focus of development from quality to quantity. The table shows that as the spending in social assistance programs increases, the spending on social services decreases. This means that the quality of the education system and healthcare has decreased respectively. This has been evident in the OECD report (2009) that Brazilian students had one of the lowest performing results in school.

Bottom line: La Bolsa Familía has reduced extreme poverty of many households in Brazil. However, the incentive to increase school attendance and the use of healthcare services has undermined the quality of these services respectively. In reality, this is only undermining the process of sustainable poverty alleviation.

* Please comment on these posts from my growth & development economics students, to help them with unclear analysis, other perspectives, data sources, etc.