What Brazil can teach America about fighting poverty

Published: Wednesday, March 20 2013 8:00 p.m. MDT

Favela de Paraispolis (swimming pools). This favela (shanti town) on the left is ironically called Paraispolis (Paradise city). Photo: Tuca Vieira

Tuca Vieira

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Luxury condominiums with tennis courts and swimming pools border the white sands of Rio De Janeiro’s famous Ipanema Beach. Tourists note the striking resemblance to Miami or Southern California. But looking up, away from the ocean, to the homes perched on the cliffs above Ipanema, a very different Rio comes into focus. It is the neighborhood of Rocinha, the city’s largest slum, where precarious looking shacks are stacked one on top of the other.

The dichotomy between the posh apartment buildings on the beach and the shanty towns in the hills is a visual reminder of the income inequality that plagues Rio and other Brazilian cities. Brazil has the one of the highest levels of income inequality in the world.

But the chasm between rich and poor Brazilians is narrowing, according to the World Bank. Between 2003 and 2009, the income of the country's poor grew seven times as much as the income of Brazil's rich. The World Bank also reports that during this period the Brazilian poverty rate fell from 42.7 percent of the total population to 28.8 percent. Contrast this with the United States, where more than 80 percent of income growth in the last 10 years has gone to the top 1 percent of earners. Moreover, poverty rates in the United States have remained between 14 and 15 percent of the total population for the last 50 years, according to Census data.

While several factors contribute to Brazil’s impressive feat, and much of its growth has slowed, experts say that a major component is a 10-year-old anti-poverty program called “Bolsa Familia.” The idea behind the program is that poverty can be reduced in the short and long term by regularly paying low-income families cash for meeting certain socially desirable requirements, like sending their kids to school or going for regular medical checkups.

Brazil isn’t the only country that has had success fighting poverty with conditional cash transfer programs. Thirty-eight other countries in the developing world, including Bangladesh, Pakistan and Mexico, also use this model to improve the standard of living and job prospects for those on the lowest rungs of the economic ladder. Their success has generated interest among those concerned with poverty in America. Researchers are now experimenting with conditional cash transfers in this country. But will an anti-poverty measure from the the developing world work in an industrialized nation?

Results from Brazil

Bolsa Familia was introduced by President Luiz Inácio Lula da Silva in 2003. The program pays families a monthly stipend of $12 for each child that attends school. Participants also receive rewards for ensuring their children receive all their vaccinations by age 5.

An additional payments is made to any qualifying family below the poverty level, which in Brazil means those who earn less that $70 per month. Families living in extreme poverty, meaning their income is less than $35 per month, also receive $40 per month with no conditions.

Each month money is distributed, primarily to mothers, via a government issued debit card. The money can be withdrawn from most banks and can be used for any purpose the parent chooses. Analysis of Bolsa Familia by World Bank economists suggests that by putting money in the hands of mothers, the program contributes to women’s empowerment.

Many economists cite Bolsa Familia’s impressive returns on investment. Although the program only costs about .5 percent of GDP, it has been extremely effective at reducing poverty and economic inequality, according to analysis from the World Bank. A family living in extreme poverty more than doubles its income just from the basic benefit. Analysis of the conditional cash transfer programs by researchers at MIT’s Poverty Action Lab found that more than 70 percent of participating households spend their benefits on more and higher quality food for their families.

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