Brazil’s Bolsa Familia

The Economist covers the Brazilian bolsa familia anti-poverty program which has been copied elsewhere, and may have lead to some development of an emerging markets middle class.

“Brazil has made huge strides in poverty reduction and the programme has played a big part. According to the Fundaçao Getulio Vargas (FGV), a university, the number of Brazilians with incomes below 800 reais ($440) a month has fallen more than 8% every year since 2003. The Gini index, a measure of income inequality, fell from 0.58 to 0.54, a large fall by this measure. The main reason for the improvement is the rise in bottom-level wages. But according to FGV, about one-sixth of the poverty reduction can be attributed to Bolsa Família, the same share as attributed to the increase in state pensions— but at far lower cost. Bolsa Família payments are tiny, around 22 reais ($12) per month per child, with a maximum payment of 200 reais. The programme costs just 0.5% of gdp. But the story of the Teixeiras and others like them should sound a warning to those who see Bolsa Família as a panacea. There is some evidence the programme is not working as well in cities as in rural areas—and the giant conurbations of developing countries are where the problems of poverty will grow in future. This concern differs from the usual complaints about the programme in Brazil. There, critics think it erodes incentives to work and sometimes goes to the wrong people. On the whole, though, studies have not borne out these complaints. A recent report for the United Nations Development Programme found the programme did not lead to dependence and that its impact on the labour market was slight. According to World Bank researchers, Bolsa Família’s record in reaching its target audience is better than most CCTs. Worries about the imbalance between rural and urban benefits may be harder to brush away. Bolsa Família does seem to have a rural bias. Rural poverty is great in Brazil but even so, the programme’s incidence in rural areas is high: 41% of rural households were enrolled in 2006, against 17% of urban ones. In the two largest cities, São Paulo and Rio de Janeiro, fewer than 10% of households are in the programme. Yet these cities contain some of the worst poverty in the country. Brazil’s success in cutting poverty seems to have been greater in rural areas than in urban ones. Bolsa Família does not publish figures on urban and rural poverty but the official report on the United Nations’ millennium development goals does.”