Brazil's Antipoverty Breakthrough
Tepperman, Jonathan . Foreign Affairs ; New York Vol. 95, Iss. 1, (Jan/Feb 2016): 34-44.
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ABSTRACT (ENGLISH)
In recent years, as public anxiety over growing inequality has intensified, policymakers and academics have
started scrambling for some increasingly extreme solutions. Over the last dozen years or so, one country — Brazil —
has shown that there’s a far better, less provocative, and more market-friendly way to fight inequality. Rolled out a
few months after his election, Fome Zero (Zero Hunger) eventually featured more than 40 different programs run
by close to 20 government ministries. But one initiative stood at the campaign’s core: Bolsa Familia (Family Grant),
a poverty-fighting effort that was revolutionary in its size, ambition, and design. Rather than provide the poor with
goods or services, as most development programs did at the time, Bolsa Familia would do something far more
daring: simply hand out money. The program was also structured in such a way that it would ultimately benefit all
Brazilians, not just those at the bottom.
FULL TEXT
Headnote
The Surprising Success of Bolsa Família
In recent years, as public anxiety over growing inequality has intensified, policymakers and academics have
started scrambling for some increasingly extreme solutions. India, for example, has launched massive programs to
provide the poor with food and jobs, and the French economist Thomas Piketty has famously proposed a
redistributive global wealth tax.
But there are big problems with such efforts. Huge, heavily bureaucratic programs such as India’s have proved
inefficient and expensive. And the planet’s richest citizens are certain to use all their influence to block any
proposals along Piketty’s lines from being implemented.
The good news is that these and other radical solutions are also unnecessary. Over the last dozen years or so, one
country-Brazil-has shown that there’s a far better, less provocative, and more market-friendly way to fight
inequality.
Not long ago, the idea that Brazil might have something to teach the world about reducing inequality would have
sounded like a joke. Latin America’s largest nation had long been among the most unequal places on earth, a state
synonymous with savage social injustice. The country may have been blessed with a large, youthful population
and abundant natural resources, but for a long time, Brazil did as bad a job spreading its wealth as could be
imagined. Even tiny, benighted Haiti was more equal.
In the 1980s and 1990s, Brazil moved from dictatorship to democracy and embraced structural reforms that finally
brought hyperinflation under control. But the mass of the population remained trapped in rural penury or urban
favelas, while the fortunate few soared over the country’s ungovernable megacities in private helicopters. At the
turn of the millennium, about a third of Brazil’s population languished beneath the international poverty line
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(surviving on $2 a day), and about 15 percent was indigent (living on less than $1.25 a day).
Since then, however, a peaceful revolution has occurred. By 2011, the Brazilian economy was growing at a
respectable four percent a year and unemployment had hit a record low- and for once, the benefits were actually
being widely shared. In the first decade of the new century, some 40 million Brazilians moved from poverty into the
middle class, per capita household income shot up by 27 percent, and inequality dropped dramatically-unlike in
every other bric country (Russia, India, and China), where it rose. Today, Brazil still faces many challenges, from an
economic downturn to corruption scandals to the end of the commodity boom. But the country’s incredible
success in reducing poverty and inequality can and should light the way for further progress, both there and
abroad.
THE RISE OF THE REVOLUTIONARY
The urbane Fernando Henrique Cardoso, Brazil’s president from 1995 to 2003, started his career as a leftist
academic but governed the country as a centrist. So when, during the 2002 presidential campaign, it started to
look as though he would soon be succeeded by Luiz Inácio Lula da Silva, Brazil’s elites and markets panicked.
Lula, as he is universally known, has attained such iconic status today that it can be hard to remember just how
scary he seemed-at least to the rich-when he first burst onto Brazil’s political scene. A proud child of the country’s
destitute northeast, Lula had been born the seventh of eight children in the hardscrabble state of Pernambuco. His
family was so hard up that the future president was forced to drop out of school after the second grade in order to
make money shining shoes. At ten, he taught himself to read. At 14, Lula somehow worked his way into a factory,
where he eventu-ally lost his left pinky finger to a machine press. Then he got involved in Brazil’s powerful labor
movement and discov-ered his calling. Rising rapidly through the ranks of the São Bernardo do Campo
Metalworkers’ Union, Lula became the organization’s leader at age 30, and five years later-while the country was
still ruled by a military dictatorship-he helped found the leftist Workers’ Party (pt) in order to give the downtrodden
a voice on the national stage.
By 2002, Lula had already run for president-and lost-three times. Although he had never been a Marxist (unlike
many of his pt comrades), his earlier campaigns had featured calls to nationalize industry and default on the
country’s debt. When he finally started climbing in the polls, such talk, along with his rough roots and his campaign
promise to eradicate poverty within a generation, thoroughly spooked elites and investors at home and abroad. In
the United States, Henry Hyde, the Republican chair of the House International Relations Committee, denounced
him as a “pro-Castro radical.” Goldman Sachs began publishing a “Lulameter” that purported to track the risks to
investors should the pt win. Nervous foreign banks started cutting off credit. Brazil’s fragile economy, which was
just starting to pick up, went into a dive. The main stock index fell by 30 percent. Investors started dumping their
Brazilian holdings, yanking more than $12 billion in capital out of the country within a few months. And the value of
the real, Brazil’s currency, fell by 40 percent against the dollar, hitting an all-time low toward the end of 2002.
Yet enough Brazilians were sick of the country’s feudal social structure and the pain caused by Cardoso’s
necessary but unpopular structural reforms and austerity measures that Lula won anyway. As the unkempt union
man prepared to take office and the economy continued to crater, the country braced for the epic confrontation.
But the cataclysm never arrived.
Although Lula did enter office plotting a revolution, it was nothing like the one his conservative critics feared. His
earlier defeats and the vicious reaction to his eventual victory hadn’t weakened Lula’s commitment to social
change, but they had made him rethink how to produce that change. Between 1993 and 2001, he and José
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Graziano, an Americanborn agronomist who was one of Lula’s closest advisers, had gone on extensive listening
tours throughout the country, and the politician who emerged was far more moderate, conciliatory, and politically
canny than his earlier incarnation. Lula had realized that he would never get far if he tried to govern on behalf of
just part of Brazil. He needed to ensure that his revolution would benefit everyone.
And so the rabble-rouser metamorphosed into the Great Conciliator. Lula banished all talk of debt defaults and
wealth redistribution from his lexicon, recasting himself as what the Rio-based journalist Mac Margolis has called
“the ceo-whisperer, amigo to the middle class, [and] champion of a rules-based market democracy.” The move
caused grumbling within the pt, but Lula held firm. On taking office, he pledged to preserve Cardoso’s tight fiscal
and monetary policies. Shortly after his inauguration in January 2003, he picked Henrique Meirelles-a well-regarded
financial executive and Cardoso ally- to run Brazil’s central bank and Antonio Palocci, another sober centrist, as
finance minister. And then he started hacking away at Brazil’s bloated national budget, cutting spending by about
$4 billion in his first year and imposing an even stricter budget-surplus target than the International Monetary Fund
recommended.
The payoff was immediate. Many of the same antagonists who had attacked him during the campaign now
swooned. In March 2003, Mohamed El-Erian, then managing director of the bond giant pimco, declared that the
president’s initial moves had been “very good,” and the markets agreed. Within six months of Lula’s inauguration,
the value of Brazil’s bonds rose by 20 percent, and even Goldman Sachs sheepishly admitted that its warnings had
been wrong.
CASH AND CARRY
At the same time that Lula was wooing
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