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Brazil’s Economic Recession and Poverty

Brazil’s Economic Recession
Brazil began the 21st century on an almost exclusively positive note. Before Brazil’s economic recession, people included it in the same conversation as Russia, India, China and South Africa, leaders of the developing world and countries poised to make considerable economic gains in the decades to come. The first years of the 2000s reinforced that perception, as Brazil’s economy continued to grow and expand. This prompted a bid for both the 2014 FIFA World Cup soccer tournament and the 2016 Olympic Games. In 2007, FIFA granted Brazil the event, and in 2009, the International Olympic Committee announced Rio de Janeiro as the host for the 2016 Games.

Economic Depression

These highly visible international events combined with the emergence of Brazil in the international arena seemed to legitimize the country’s efforts. However, after Dilma Rousseff took over for the highly popular Luiz Inácio Lula da Silva, government spending ballooned, partly due to the infrastructure required to host international sporting events. Under her direction, Brazil suffered its worst economic depression on record.  The government’s spending, combined with mismanagement of inflation, a decrease in consumer spending and the sharp decline in oil prices in 2015, produced a two-year slide that embodied Brazil’s economic recession, and poverty naturally increased as a result of all of these factors.

 This sharply contrasts with the efforts that Lula da Silva undertook to mitigate poverty and economic hardship as the leader of Brazil’s Workers’ Party, lifting 36 million people out of poverty. In a resounding success for him and Rousseff, by 2014, unemployment reached its record low, the U.N. removed Brazil from its Hunger Map, and the number of people living during Brazil’s Economic Recession in poverty dropped to 5.2 million. In 2017, however, more than 14 million people found themselves homeless and in extreme poverty, according to the World Bank’s definition of less than $1.90 U.S. a day. The situation was more grave than just poverty and homelessness, as a study conducted between 2012 and 2017 intimately linked the effects of Brazil’s economic recession and poverty with adult mortality. It found that there was an uncanny correlation between the state unemployment rate and the mean municipal mortality rate.

Reasons for Brazil’s Economic Recession

How did a country with such promise and success completely reverse course and regress so quickly, resulting in Brazil’s economic recession and poverty? Dilma Rousseff increased public spending upon entering office in 2011, raising the minimum wage and promoting expanded lending by the state’s banks. Simultaneously, the central bank’s discount rate dropped, sparking inflation which Rousseff exacerbated by cutting sales tax and lowering prices on food, gasoline and bus fares. One entity hurt most by this was Petrobras, the Brazilian state-run oil company, as investments stalled. Rousseff boosted wages to combat inflation, but this did not work. Inflation outpaced wages and resulted in inhibited consumer spending. When oil prices fell in 2015, the dollar strengthened and companies cut production and jobs as the currency-the real-collapsed, increasing the expense of imports and further raising inflation. To make matters even worse, Brazil experienced a political crisis in the midst of this, as the government impeached Dilma Rousseff for improperly moving government funds between budgets, and threw Lula da Silva in jail for corruption.

Looking Forward

The peak of the crisis came in 2017, and the economy recovered to its 2014 level, but experts caution against optimism. A BBC article in May 2019 identified four things wrong with the Brazilian economy, recession and poverty. It said that no economic recovery lies on the horizon, unemployment still runs rampant at 12.7 percent, the election of Jair Bolsonaro did not bring the anticipated market rally and the fiscal deficit still grows. It looked in May like the worst would occur, as the country’s Gross Domestic Product shrank by 0.2 percent during the first quarter of 2019, even though it aligned with the forecasted 0.5 percent annual growth.

 Much to the relief of many, the second quarter provided a rebound of 0.4 percent, a surprise to those most knowledgeable in Brazil. Little consolation came to President Bolsonaro, though, as his reform agenda did not produce the immediate results he had hoped. Still, his administration intends to focus on reforms to pensions and the government’s overall structure, to the praise of the International Monetary Fund. The IMF said that these reforms could boost the Brazilian GDP by 2.4 percent in 2020 and that Brazil could make more improvements with an opening of the country’s tariff and non-tariff barriers and a commitment to closing the infrastructure gap. Reuters agrees that the future of Brazil as an economy and emerging market hinges on fiscal reforms, that will hopefully put the last five years of Brazil’s economic recession and poverty behind them and return to the pace that Lula and Rousseff set.

– Alex Myers
Photo: Flickr

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Brazil Replaces Poverty With Culture

Vale_Cultura_Brazil_poverty_culture
For decades, Brazil has been considered an underdeveloped nation with inequality, crime and dirty slums. Yet Bolsa-Familia, the country’s largest welfare program, has in recent years transformed Brazil’s poverty predicament for the better. Launched in 2003 by former President Luiz Inacio Lula da Silva, the program has benefited almost 50 million Brazilians and become a guide for numerous similar programs worldwide.

According to the World Bank, Bolsa-Familia is a primary reason for Brazil’s most contemporary social improvements. On the condition of sending their children to school and to regular medical exams, underprivileged Brazilian families receive an equivalent of about $35 each month withdrawn from a state-run bank by each family’s mother. Not only does this promote investment in children, it also empowers women to take financial responsibility for their households.

Bolsa-Familia is responsible for about 28% of Brazil’s poverty reduction. In the decade between 2002 and 2012, the proportion of Brazilians living with less than the $32 equivalent decreased from 8.8% to 3.6%.

Yet even with such extreme improvement in the lives of Brazilians, there is still more work to be done. When asked what they like to do for fun, a shocking 85% of Brazilians answered, “watch television.”

In an innovative effort to develop cultural expansion within the country, Brazil has developed a program known in Portuguese as Vale Cultura. The program constitutes a rechargeable coupon worth around $20 per month, available to Brazilians who make at most $300 per month.

While some may argue that both Bolsa-Familia and this new Vale Cultura program drain state funds and promote a dependency on welfare, various reports have noted otherwise. Of those on Bolsa-Familia, 12% have been able to give up the benefit, which accounts for less than 0.5% of Brazil’s gross domestic product. Such extensive success at such a low cost gives reason to believe that Vale Cultura may be an exciting opportunity with little risk.

Brazilians, according to a study conducted in Sao Paolo in 2013, on average only pick up four books per year and finish only two. The country is relatively isolated, despite its recent economic successes, and the poorest Brazilians are disproportionately underprivileged when it comes to cultural sophistication. Vale Cultura is an attempt to remedy this conundrum.

It will take time, of course, for Brazilians to develop a taste for this newly available culture. But culture minister Marta Suplicy is not disillusioned by the time it will take for this program to see success. The purpose is for people to try new things and to attain access to the cultural attractions many Brazilians previously ignored.

– Jaclyn Stutz

Photo: The Guardian
Sources: The Washington Post, The World Bank, The Guardian, BBC