Brazil’s Social Safety Net Under Lula

Aaron Ansell

A widely cited number of 20 million Brazilians were lifted out of poverty under the administration of Luiz Inácio Lula da Silva (2003–10). Overall, according to the Brazilian government, extreme poverty in Brazil decreased from 12% in 2003 to 4.8% in 2008.1 Much of the credit for this achievement should go to three key social policies of Lula’s administration: cash-transfer programs to the poor, aid to small farmers, and labor and pension reforms. Most prominent among these was the cash-grant program, Bolsa Família (Family Stipend), which expanded an already existing welfare system established by Lula’s predecessor. The Lula government also created stronger mechanisms for promoting transparency and accountability in the distribution of these grants in areas, such as the Northeast, where traditions of clientelism in the distribution of benefits were strong. By 2006, Bolsa Família had reached 11 million families (about one quarter of Brazil’s population), most of them in the Northeast.2

 

Without diminishing the importance of these programs to Brazil’s poor majority, we must nonetheless recognize that they function within the neoliberal framework established before Lula came to power. The cash-transfer programs, for example, embody the neoliberal values of efficiency, privatization, and individualization. Social policy experts classify them as “targeted” policies because they take aim at specific segments of the population. Lula’s policies targeted people living in extreme poverty, indigenous and rural Afro-Brazilian communities, farmers faced with drought, urban people who live by rifling through trash, and other afflicted groups. In this way they differ from policies that reach all citizens, like price controls on foods, national food production and distribution programs, universal health care, and so on. Targeting is “efficient” in the sense that it maximizes poverty reduction by excluding anyone who is not poor.

 

Cash-transfer programs also support privatization because they channel capital in its most liquid form (cash) and thus require far less bureaucracy than federal development institutions. These programs emphasize individual choice by increasing consumers’ buying power, rather than offering them cheap government-subsidized foods. In fact, even framing social justice in terms of “poverty alleviation,” rather than the achievement of economic equality, already takes a page from the playbooks of the most famous neoliberal thinkers of the 20th century. It is telling that in 2004, one quarter of Lula’s funding for his main cash-transfer program came from the World Bank and Inter-American Development Bank.3 Yet, even though his cash-transfer programs were paradigmatically neoliberal, they have succeeded in reducing poverty and inequality. He certainly did a better job with these policies than did his predecessor, Fernando Henrique Cardoso.

 

During Cardoso’s second term in office (1999–2002), he initiated several targeted cash grants. The Bolsa Escola (School Benefit) program was his most important; it promoted school attendance by sending parents about $8–$10 in 2000 each month for every child who attended school. This compensated parents for the loss of their children’s labor during the day. Three smaller cash grants aimed to subsidize food and gas purchases, and to increase the income of families hit hard by natural calamities. (By U.S. standards, Cardoso can hardly be called “right-wing.”) When Lula took office, he retained and supplemented these grants with a new cash program called Food Card, which his administration conceptualized as part of a broader food security initiative, Zero Hunger. The Food Card gave indigent families about $17 per month in 2003. This essentially doubled the amount of federal money that a family could have received from all of Cardoso’s grants combined. The following year, Lula merged all the cash grants into Bolsa Família, and then slowly increased the allowance throughout his two terms. By 2009, families in extreme poverty received up to about $116 each month.4

 

Bolsa Família reached many more people than any of Cardoso’s grants. When Cardoso left office in 2002, Bolsa Escola, his largest cash grant program, benefited 4.6 million families.5 The difference was due to two factors: First, Cardoso’s Bolsa Escola worked through a quota system, limiting the number of families that could receive the grant, whereas Bolsa Família went to all households with a combined income of less than $60 (90 reais) per month per resident. This technical distinction is important for understanding how cash grants are distributed at the municipal level (more on this below). Second, Bolsa Família targeted not only “extremely poor” families, but also “moderately poor” families (though the amount was adjusted). This meant that Lula’s cash grant included a broader swath of the working poor than those of his predecessor. As a result of these changes, by 2006, Bolsa Família had already reduced extreme poverty in Brazil by 19% and moderate poverty by 12%.6

 

Lula’s initial cash program, Food Card, quickly came under fire from both the political right and left because it initially required its beneficiaries to spend the grant exclusively on food. Right-wing neo-liberals claimed that enforcing this measure required wasteful administrative costs, while left-wing advocates within the food security movement claimed the measure was a form of state paternalism that denied poor people the right to spend their money as they chose. When Lula merged all of the grants into Bolsa Família he replaced spending restrictions with grant conditions, such as mandatory school attendance, child vaccinations, child health exams, and perinatal medical exams for expecting mothers. These conditions more closely mirrored the Cardoso government’s policy requirements. But Cardoso’s followers from the Brazilian Social Democratic Party accused the Lula government of not enforcing requirements that grant recipients comply with these conditions. After a rocky start involving a reorganization of the social welfare ministries (and the replacement of the head minister overseeing social policy), the Lula government redoubled its enforcement. By 2007, Lula’s enforcement of school attendance outpaced that of Cardoso, and beneficiary compliance with the health conditions has been consistently high and nutritional studies indicate that malnutrition among beneficiaries was reduced from 14% to 7% between 2004 and 2006.7

 

In addition to improving the economic and educational standing of poor families, Bolsa Família has improved the transparency and accountability of local democracy in Brazil—a relevant criterion for evaluating policy in a country still reeling from military dictatorship (1964–85). One of the biggest problems with decentralized cash-transfer programs is that municipal politicians often co-opt them for their own political interests. They gain control over the distribution circuits, channel funds to their friends and electors, and withhold the stipends from the local opposition. Under Cardoso, mayors had full authority to appoint the members of the local councils that controlled the dispensation of the cash grants.8 Frequent manipulation of these councils and general confusion about the process of beneficiary selection led to a resource “leakage” rate of up to 36% (in the case of Bolsa Escola), i.e. 36% of the people who received the grant did not really qualify.9 Moreover, Cardoso’s quota system all but presumed that some eligible families could not possibly receive Bolsa Escola. This made political favoritism practically inevitable, especially in small rural towns.

 

Lula rearranged the municipal procedure for “targeting” the poor. He initially short-circuited the mayors’ offices by creating openly elected municipal committees to select the beneficiaries.10 But his move against the (mostly conservative) mayors was costly. Without the mayors’ support, the new elected committees had no place to work, no computer to use, and no transportation to do the groundwork. When Lula launched Bolsa Família to synthesize the existing cash grants in 2004, he returned control over the enrollment to the mayors’ offices, but he created fraud hotlines and “social control” committees to monitor the municipal government.11 Studies suggest that these procedural changes made Bolsa Família better at avoiding mayoral interference than the preceding programs.12 There is little doubt among analysts that Bolsa Família shored up Lula’s reelection in 2006 by winning him the support of many poor people who previously voted conservatively.13

 

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Lula announced his creation of the Zero Hunger program during his campaign in 2002. His cash grants would initially comprise only one component of the more comprehensive Zero Hunger, which would also include initiatives in land reform, housing, health, nutrition, sanitation, water resources, education, and other areas of development. But these development-oriented initiatives received less media attention than the cash grants, and poor Brazilians seemed to prefer cash to these other initiatives. While Lula quickly stopped talking about Zero Hunger, he continued to expand many of those unpublicized initiatives, including those that supported food production on Brazil’s poorest family farms.

 

Before the 1990s, Brazilian agricultural policy focused on improving the production of an already privileged class of industrial farmers. Cardoso lifted restrictions on foreign agribusiness, and thus accelerated the concentration of rural landownership to the detriment of small family agriculture. Yet Cardoso deserves some credit for initiating the National Aid to Family Agriculture Program (PRONAF), which channels rural credit to the poorer strata of small farmers. At its peak under Cardoso, PRONAF benefited 953,000 families, but much of its resources never reached the poorest farmers.14

 

By 2005, Lula had nearly doubled the number of beneficiaries receiving PRONAF credit and tripled the overall federal investment in PRONAF.15 He also redirected credit to the poorest segments of the rural population. After 2005, the Lula government reconceptualized the objectives to rural development, moving away from the straightforward increase in cash income and towards the more complex goal of food security, which includes factors such as economic diversification and environmental sustainability.16 These measures increased subsistence farmers’ food production, though their effect on rural income remains unclear. Even under Lula, PRONAF had real shortcomings that pointed to some of the fundamental problems with neoliberal restructuring. In 1990, the Collor administration extinguished the parastate Rural Extension and Technical Assistance Company (EMBRATER), which funded and coordinated rural development of small family agriculture in all 27 states. Nearly overnight, the state-level technical assistance companies lost roughly 40% of their resources, reducing government assistance to small farmers.17 President Cardoso exacerbated the problem by extinguishing the Superintendency for the Development of the Northeast (SUDENE), the main federal institution that had implemented many large-scale development projects (e.g., dam construction) in the northeastern countryside. Lacking labor opportunities on big projects and technical assistance with various small-scale economic projects, small farmers often find themselves unable to pay back the microfinance loans.18 Lula has partially tried to address this issue by resurrecting SUDENE, but it is not yet clear what role it will play in promoting rural development in the Northeast, Brazil’s poorest region.

 

Along with increased investment to PRONAF, Lula also created a new rural food policy: the Food Acquisition Program. Through this program the state purchases crops from poor farmers at near-market prices. It then redistributes the crops to local schools and private charities in order to improve local nutrition. Studies of this program’s effects on local production, nutrition, and social mobilization have been generally positive.19 But while the program steadily increased its beneficiaries throughout Lula’s second term, by 2009 it still only reached 98,340 rural families.20 It will need to expand its scope in order to truly transform the countryside. Moreover, in the absence of a comprehensive land reform that ensures a decent quantity of arable land to farmers, one wonders how effective crop purchases and microloans can ever be.

 

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Brazil’s population is about 86% urban, and most adults living in urban areas are unemployed, underemployed, or informally employed, according to the CIA World Factbook. Formal employment declined considerably during the 1990s, as did the strength of organized labor. Cardoso aided this decline. He increased “flexibility” to labor contracts (i.e., lower benefits and easier terminations), broke a major strike at the state oil company (Petrobras), and proposed legislation that would allow agreements reached through collective bargaining (with weakened unions) to prevail over legislation that ensured baseline rights and benefits to workers. In the face of longer hours and less job stability, labor activism declined during the 1990s. Even Brazil’s left-wing labor conglomerate, the Unified Workers’ Central (CUT), which has been intimately tied to the Workers’ Party, split, and a more conciliatory conglomerate emerged that supported Cardoso’s reforms.

 

Lula, who once led Brazil’s labor movement, passed legislation that enshrined some protections for the CUT, curtailed the power of the labor courts to declare strikes illegal, and squashed Cardoso’s proposal to allow collective bargaining to undermine the protections enshrined in labor legislation. He also raised the monthly minimum wage (used to calculate all salaries) from 200 to 540 reais throughout his two terms in office.21 (Inflation during that same period has generally remained less than 10%.)But his legislation created barriers to collective bargaining for small unions, angering a combative sector of the workforce that previously supported him. Moreover, Lula did not reverse Carodoso’s basic flexibilization measures.22 Thus, many in both the working class and the professional middle class blame Lula for their heightened experience of job insecurity.

 

Together with these largely conservative labor policies, Lula implemented pension reforms that generally continued Cardoso’s cutbacks, and that turned a specific segment of the government workforce against him. Brazil’s pension system is organized into two main branches, the government-run “public” branch that covers all state employees and most workers in the formal private sector, and the “private” branch that covers mostly high-salaried private-sector workers. Cardoso created new investment opportunities for private pension funds that grew very lucrative under his administration. He reduced the pensions of the public system, which by 1997 was operating at a $2.8 billion deficit because of Brazil’s aging population, fraud, and other problems with employee contributions.23

 

Lula continued to roll back the public pension system. In 2003, he passed social security reforms that taxed the pensions of retired bureaucrats at the high end of the pay scale. This group of privileged retirees then mobilized opposition among other government workers who aspired to high pensions. Lula also phased in reforms that would readjust the formula for calculating pensions to the detriment of all formal workers. In 2007, however, Lula pushed through legislation that extended pension benefits to informal laborers who make up more than half of Brazil’s workforce. Thus, while many formal workers had their pensions reduced, 28 million informal laborers who previously had no social security will now be entitled to pensions, which will be largely subsidized by the contributions of their formally employed counterparts.24

 

Enough of the unionized workforce continued to oppose these measures for President Dilma Rousseff to announce in November, before taking office, that she would not implement any further pension reform.25 It seems that solidarity with high-paid workers outweighed the workforce’s solidarity with the informal laborers—most of whom have little job security, wage protection, or benefits. This question points to a broader problem in interpreting Lula’s administration: Lula’s policies were guided by principles of social justice other than those of traditional working-class leaders or socialist parties. Instead of nationalizing industries, reducing interest rates, and ensuring job protections, Lula fought hunger and poverty, decreased patronage-based interference in welfare, and extended pensions to unorganized informal workers.

 

Just how progressive were Lula’s social policies? Did they differ substantially from those of his predecessor? For the most part, it seems Lula’s policies successfully responded to the challenges presented by Brazil’s neoliberal political economy. He did not try to upset the neoliberal foundation itself, and Lula proved himself to be a genuinely left-wing neoliberal. That position may seem like a contradiction in terms. But it may be described as a qualified form of progressivism.

 


 

Aaron Ansell is an Assistant Professor of Anthropology at Monmouth University in New Jersey. His scholarly work addresses issues of social development policy, hunger, monetization, and patron-client politics in rural northeast Brazil.

 


 

1. Instituto de Pesquisa Econômica Aplicada (IPEA), Objetivos de Desenvolvimento do Milênio—Relatório Nacional de Acompanhamento (Brasília, March 2010).

 

2. Berta Rivera Castiñera, Luis Currais Nunes, and Paolo Rungo, “Impacto de los programas de transferencia condicionada de renta sobre el estado de salud: el programa Bolsa Família de Brasil,” Revista Española de Salud Pública 83, no. 1 (2009): 87.

 

3. Anthony Hall, “From Zero Hunger to Bolsa Família: Social Policies and Poverty Alleviation Under Lula,” Journal of Latin American Studies 38 (2006): 698.

 

4. Rivera Castiñera et al., “Impacto de Los Programas,” 87; CIA World Factbook online.

 

5. Bénédicte de la Brière and Kathy Lindert, “Reforming Brazil’s Cadastro Único to Improve the Targeting of the Bolsa Família Program,” Social Protection Discussion Paper Series no. 0527 (The World Bank, June 2005): 9.

 

6. Eduardo Zepeda, “Do CCTs Reduce Poverty?” International Poverty Centre, September 2006.

 

7. Kathy Lindert, Anja Linder, Jason Hobbs, and Bénédicte de la Brière, “The Nuts and Bolts of Brazil’s Bolsa Família Program: Implementing Conditional Cash Transfers in a Decentralized Context,” Social Protection Discussion Paper Series no. 0709 (The World Bank, May 2007): 68.

 

8. Alain de Janvry, Frederico Finan, Elisabeth Sadoulet, Donald Nelson, Kathy Lindert, Bénédicte de la Brière, and Peter Lanjouw, “Brazil’s Bolsa Escola Program: The Role of Local Governance in Decentralized Implementation,” Social Protection Discussion Paper Series no. 0542 (The World Bank, December 2005), 26.

 

9. Lindert et al., “The Nuts and Bolts of Brazil’s Bolsa Família Program,” 46.

 

10. Hall, “From Zero Hunger to Bolsa Família,” 695.

 

11. Lindert et al., “The Nuts and Bolts of Brazil’s Bolsa Família Program,” 129–33.

 

12. Ibid., 74–91.

 

13. Hall, “From Zero Hunger to Bolsa Família,” 705.

 

14. Carlos Guanziroli, “PRONAF dez anos depois: resultados e perspectivas para o desenvolvimento rural,” Revista de Economia e Sociologia Rural 45, no. 2 (2007): 305.

 

15. Ibid., 304.

 

16. Remy Corrêa de Adrade Junior, “O Programa de Aquisição de Alimentos da Agricultura Familiar (PAA) no plano norte do estado de Santa Catarina: o caso Cooperativa Agropecuária Regional de Pequenos Produtores de Mafra (COOARPA),” Cadernos do CEOM 22, no. 30 (2009): 89.

 

17. José Hermeto Hoffman, “O ‘Lobby’ agrícola e os primeiros sinais do governo Collor,” Indicadores Econômicos FEE 18, no. 1 (1990): 59.

 

18. Guanziroli, “PRONAF Dez Anos Depois,” 321–2.

 

19. See, for example, Corrêa de Andrade Júnior, “O Programa de Aquisição de Alimentos da Agricultura Familiar (PAA),” 96–8.

 

20. Dannyel Travinski, “Evolução do Programa de Aquisição de Alimentos, operacionalizado pelo CONAB,” final project, Escola Superior de Agricultura, “Luiz de Queroiz,” Universidade de São Paulo, 2010, 19.

 

21. Rosa Maria Marques, Áquilas Mendes, and Camila Kimie Ugino, “A Previdência social em Pauta: notas para reflexão,” Argumentum 2, no. 1 (January–June 2010): 9.

 

22. Michael Hall, “The Labor Policies of Lula Government,” in Joseph Love and Werner Baer, eds., Brazil Under Lula: Economy, Politics, and Society Under the Worker-President (Palgrave Macmillan, 2009), 161.

 

23. Maria Antonieta P. Leopoldi, “Reforming Social Security under Lula: Continuities With Cardoso’s Policies,” in Ibid., 226.

 

24. Ibid., 236.

 

25. Mac Margolis, “Brazil’s New Day Feels Old,” Newsweek online, November 14, 2010.

 

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