Although Brazil appears to be moving in the right direction with respect to poverty reduction, there are still more than 50 million Brazilians living in impoverished conditions. The situation seems to reinforce the popular Brazilian phrase that Brazil is not a poor country but rather a country with a lot of poor. While most economists would argue that sustained economic growth is critical to eliminating poverty, it has become increasingly evident that growth must be equitable. Equitable growth, in turn, means a broader-based growth structure that energizes market forces not only at the top, but also at the base of the economic pyramid.

Increasing the share of micro businesses and small businesses would not only provide for more equitable economic growth, but would also allow for a greater measure of local employment and commerce. The unskilled and the semi-skilled poor must both share in the benefits of growth. Today, however, it is the richest tenth of Brazilians that reportedly take in 47 percent of all earnings. Though the southeastern states of São Paulo, Rio de Janeiro, and Minas Gerais drive the national economy, they are also magnets for the poor and unemployed, with over 80 percent of all Brazilians now living in towns and cities. The often unsustainable growth of these urban centers, coupled with a weak and ineffective law enforcement system, has resulted in the marginalization of large portions of Brazilian society, perhaps best exemplified by the slum-dwellers of the infamous favelas (“shantytowns”) of São Paulo and Rio de Janeiro. Lacking economic opportunity, the marginalized often become victims of crime networks or turn to crime themselves, frequently entering the exploitive world of sex trafficking or working for drug trafficking organizations. The absence of the rule of law in many poor areas of the country, a bureaucracy suffocating from over-regulation, and an unyielding tax system that creates incentives for informality and illegality—in addition to uneven access to education and the unspoken discrimination against Afro-Brazilians—are all present-day challenges in Brazil. Brazil must maintain its current, sound macroeconomic and financial policies and address these challenges; if not, the socioeconomic situation could deteriorate, prompting a return to the misguided policy choices of the past.

Favelas, like the one pictured above, are abundant in Brazil, and are characterized by the vast number of impoverished people living within them.

Sustained and equitable economic growth can lift Brazilians out of poverty but will take time to achieve. In the short-to-medium-term, marginalized segments of society need to continue receiving government support until new jobs can be created; a social safety net is essential. For that reason, a cash transfer program was organized by President Luiz Inácio “Lula” da Silva’s government in 2003. The flagship social initiative, first called Zero Hunger, has subsequently been named “the Bolsa Familia Program.” The government of Brazil instituted this program to combat hunger, to provide incentives for families to take their children for health checkups and immunizations, and to make sure that children attend school regularly. In 2005 the Bolsa Familia Program provided 5.3 million poor families with critical support and proved to be an appropriate conduit for a social safety net.

The Bolsa Familia Program is multi-faceted and aims to address the underlying causes of hunger and poverty. Chronic hunger afflicts a relatively small portion of Brazil’s population, most notably when drought strikes in the semi-arid regions of the Northeast interior. There is, however, a far larger proportion of the population that, while not starving, lacks regular access to a decent diet in reliable quantities and in dignified conditions. In view of this situation, the priorities of the Bolsa Familia Program are not confined to alleviating acute hunger. Rather, by targeting long-term food and nutritional security, the program hopes to gradually help the broader poor segment of the population. To address poverty, the aim should be to give general society, particularly at-risk youth, improved access to the health, education, and family support that is required to participate economically and socially. Such support will hopefully create a more vibrant, democratic, and egalitarian Brazil. Despite the important steps taken by the national government in executing a program in resource transfers, it is the Brazilian and international NGO communities that have taken the lead. They are assisting marginalized communities through local self-help and income generation interventions that foster sustainable livelihoods and link communities to productive market access.

Realities and Challenges

Poverty exacts an intolerably large human toll. It threatens stability, security, democratic institutions and legitimacy, as well as collective efforts to fight crime, corruption, terrorism, and trafficking in drugs and persons. For all of these reasons, poverty reduction must not only be a domestic priority; it must also be a shared foreign policy priority.

In response to the pressing need of decreasing poverty, the government of Brazil has instituted the following measures over the past three and a half years to improve the situation of the poor: inflation control measures, a simplified tax to help Brazilian micro and small businesses,, promotion of the Bolsa Familia Program as a social safety net, improvements to basic education through teacher training, and mobilization of the private sector through social responsibility programs.

Brazil is reaping the benefits of over a decade of market-oriented economic reforms, which have tamed hyper-inflation and put most of the economy in private sector hands. These reforms are delivering predictable and sustainable economic growth. Yet two major deficiencies remain: reforms have not gone far enough to substantially increase the level of growth and have not allowed the fruits of economic growth to be equitably shared. Effective economic reform alone would demand greater trade liberalization, better judicial enforcement of contracts, effective competition policies, deregulation and reduction of barriers to setting up and running a business, broad-based tax reform, and a better-educated work force.

Growth and opportunity do not reach the poor in much of Brazil because the poor are often cut off from markets. They lack the human capital that would make their labor marketable, and there are large tax and regulatory barriers to hiring semi-skilled workers in the formal sector that artificially raise the cost of doing business and thwart small business opportunity. Businesses also lack access to capital markets, face enormous barriers to starting and growing a business, and lack infrastructure and links to markets. Businesses encounter additional difficulties in protecting their property rights or extracting returns from their assets. They simply cannot enforce their contract rights.