Increased business deregulation and labor market reform will help encourage new business, foster job growth, and support labor mobilization. The simplification and effective streamlining of the tax system needs to go further to help businesses focus their energies on growing rather than on tax avoidance and to create more incentives for people to operate in the formal economy. Additionally, reform of the financial system to expand access to capital should help spur investment and lower interest rates.

Tools to Increase Opportunities

Bank loans can mean the difference between success and failure for a small business that is looking to expand and upgrade. Extending financing to small and medium businesses that now lack access to the formal financial sector would greatly improve their chances for success and assist in creating new employment opportunities. A reorganization of the fragmented and underperforming private sector would be a first step.

Trade is another important tool for increasing economic opportunities. The reduction of tariffs stimulates growth and directly benefits the poor by reducing the costs of food and clothing—two areas currently subject to the highest tariffs in developing countries. Trade also provides developing countries with access to new markets. When access to new markets is combined with the tools needed to seize opportunities—such as education, infrastructure, and credit—it creates jobs for the semi-skilled. In this way, the poor can and do potentially benefit from trade. The World Bank estimates that a successful Doha round, involving negotiations to lower trade barriers around the world, could lift 300 million people out of poverty.

The World Bank has also noted that a pro-growth, poverty reduction strategy should aim to improve the quality of education, expand coverage at all levels, boost investment in infrastructure in laggard regions, and increase access of the poor to business skills. In addition, such a strategy needs to extend credit and financial knowledge to the disenfranchised so that they can learn the fundamentals of accessing and responsibly using credit. Likewise, implementing effective social policies, such as directed educational programs, would support communities in helping themselves to pursue sustainable livelihoods and productive activities.

Perhaps the greatest tool of all for promoting long-term involvement of the poor in development is to emphasize fundamental life skills and business skill education. By improving the quality of education in the more impoverished areas of Brazil, improved levels productivity and employability can be reached.

Conclusions

Brazil has made important strides through the ongoing development of the Bolsa Familia Program. Such cash transfer programs are important to placing resources in the hands of families that desperately need them, but they are not a substitute for economic growth and opportunity. The poor must also be involved in sustainable economic endeavors that connect them to markets for goods and services. Business deregulation, labor market reform, reform of the financial system, and reform of the education system to prepare the poor to seize market-generated opportunities are primary steps in fostering community-based opportunities and equitable growth. The state along with the private sector must promote equality through programs that redistribute resources and jumpstart productive activity.