Chronic poverty and inequality reduction in Brazil: where next?

Written by Pedro Telles.

As has already been widely reported, Brazil has achieved notable progress on income poverty and inequality reduction in recent years. Between 2003 and 2009, poverty levels fell from 26.4% to 14.7%, extreme poverty from 10.1% to 5.2%, and the Gini inequality index from 0.583 to 0.543. Importantly, poverty and inequality are being reduced in all regions, races and both rural and urban areas.

Three main factors explain Brazil’s progress in the last decade. The first is two successful cash transfer programmes, Bolsa Família (focused on people living below the poverty line) and Benefício de Prestação Continuada (focused on the elderly and people with disabilities). The second factor is contributory and non-contributory pensions, which in recent years have been readjusted to bring the benefits of the poorest closer to those of the richest.

The third and most important factor for reducing poverty and inequality are changes in labour income, driven mostly by systematic increases in the minimum wage and changes in the regulations for micro-enterprises, which allowed many entrepreneurs and informal workers to enter the formal economy (besides a favourable international economic environment).

All of these factors owe much to the federal government’s commitment to poverty eradication since the Workers’ Party (PT) came to power with the election of Lula in 2003, leading to the implementation of programmes such as Fome Zero and Brasil Sem Miséria. Evidently, this is related to strong efforts from civil society groups who directly or indirectly contributed to Lula’s election, and who have since sustained firm demands either through pressure or collaboration via several mechanisms for dialogue and participation. Furthermore, Brazil’s recent progress is also associated with the maturing of its democracy and the political and economic stability achieved during President Fernando Henrique Cardoso’s mandate, besides being strongly grounded in the progressive Constitution that marked the transition from two decades of military dictatorship in 1988.

But Brazil still has a long way to go. Poverty rates remain high despite the progress observed, and in 2009 the 20% richest held 58.6% of total income while the 20% poorest held 2.9% - with no substantial change from 62.4% and 2.3% in 2003.

Improvements in laws, regulations and programmes to raise employment opportunities for the poorest and address the needs of those in the informal economy are needed.

Inequalities in the level of employment are worse today than two decades ago: when comparing income differences by race and gender of workers with the same level of education, it becomes clear that women and racial minorities receive significantly lower salaries and experience higher levels of unemployment. The burden of unpaid work still falls heavily on women, with little change being observed over the last decade. Much could be done to tackle these inequalities through programmes for economic empowerment, quotas in the labour market, stronger mechanisms for monitoring and addressing discrimination, and initiatives to reduce the burden of unpaid work.

Brazil also needs to implement much delayed structural reforms in two areas that have been crucial for poverty and inequality reduction in other countries: land distribution and taxation. As the government prioritises big agribusiness, small farmers remain uncompetitive and historically high land concentration levels keep increasing – by 2008, the 10% largest land-owners held 78% of the total occupied area. At the same time, indirect taxation is three times higher than direct taxation. In 2004 the tax load for those who earned more than 30 times the minimum wage each month amounted to 26.3% of the family income compared to 48.8% for those who received less than twice the minimum wage.

Evidently, Brazil must keep working on the policies that have achieved very successful results in recent years to push them further. But it is clear that they have their limits, and changes in other areas – related and not related to income – are needed to go further in terms of structural change. The recent surge of protests in the country showed how strongly the population can demand such changes, and considering that presidential elections will happen next year, the debates should remain heated for some time to come.

Photo credit: Roberto Stuckert Filho/PR