The mere thought of Brazil invades us with a sense of exotic and colorful imaginary. My visit to Brazil has triggered a great curiosity in studying this beautiful country with a monstrous scale and exciting diversity. As a BRIC and MIC country Brazil has the potential to produce innovative solutions to poverty reduction of great interest to the development agenda. Indeed Brazil has attracted the attention of the international community with several unique initiatives that have proven to be of great success. The Bolsa Família (Family Grant) conditional cash transfer program launched in recent years had a great contribution to poverty reduction in the country. The Cadastro Único registering mechanism was also a major step forward because it has compiled in an unique registering process all programs associated to each beneficiary, reducing duplication and administrative costs and improving considerably the efficiency of social programs targeting. This was a very important administrative breakthrough in terms of data collection. Cash transfer programs were not new in the country, initially idealized by the sociologist and human rights activist Herbert José de Sousa, also named o Betinho, the pioneer idea of cash transfers was first materialized as a project of direct support called Projecto de Ajuda Direta, so rather than brand new ideas it was an ongoing improved package which main added value (namely of Cadastro Único) was undoubtedly the integrating effect of all programs in a unique registering card.
Along with these specific mechanisms we also witness a flourishing production of best practices in Brasil compiled in the Learning Initiative for a World without Poverty (WWP) a partnership among the United Nations, the World Bank, and the Brazilian government to promote knowledge exchange about social protection policies and initiatives to fight poverty This platform has been crucial to monitor and evaluate social programs and has contributed with innovative solutions on best practices disseminated in various languages, it also serves as an archive of documented programs and in country tested solutions that are expected to influence the social protection policies around the world.
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The implementation of these initiatives has resulted in a staggering decline in the number of Brazilians living below the national poverty line (of R$170 in 2016). According to the World Bank, between 2003 and 2014, more than 29 million people were dragged out of poverty. Inequality also dropped significantly, around 6.6 % as the Gini Coeficient fell from 58.1 down to 51.1. The income level of the poorest 40% of the population has also rose, on average, 7.1% (in real terms) between 2003 and 2014, much higher than the 4.4% income growth for the whole population, reinforcing the inequality decrease in the country.
However despite these remarkable results part of Brazil`s fascination is how erratically unpredictable it can become. Indeed since 2015 the rate of reduction of poverty and inequality appears to have stagnated. The country is now going through a deep recession as the country`s growth rate has decelerated continuously from an average annual growth of 4,5% between 2006 and 2010 to 2,1% between 2011 and 2014. Following the same trend the GDP contracted by 3,8% in 2005 and is expected to fall at least 3% in the future. The economic crisis was triggered by the fall in commodity of prices but also caused by the continuous political instability that ultimately led to President`s Dilam Roussef impeachment on the 31st of August 2016. It was alleged that albeit the so satisfying poverty reduction outcomes it was done at the cost of fiscal imbalances so when the former Vice President Michel Temer took office as the new President of Brazil his main priority was to proceed with several fiscal consolidation measures and a reform agenda to re-establish confidence and restore a favorable investment environment. However Mr. Temer`s mission is a difficult one. Fiscal adjustments are undermined by constitutional budget rigidities as less than 15% of expenditure in Brazil is discretionary, in other words, cannot legally be reduced. Simultaneously we have seen in 2016 and 2017 the unpopular measures of fiscal consolidation of freezing of public service salaries and reduction of social benefits has triggered an ongoing wave of violent social unrest in Brazilia, Rio de Janeiro and São Paulo. Simultaneously the zero corruption campaign led by Sergio Moro based on delação premiada confronts the Brazilian society with an endemic corruption that systematically compromises confidence of consumers and investors, dampens government credibility and creates an explosive environment as fiscal adjustments sacrifice a still emerging and struggling middle while the scandalous corruption cases, such as the one of Petrobras are ongoing. In Conferências do Estoril 2017 I could witness personally the inspiring courage and determination of Sergio Moro that is trying to promote one of the most challenging structural reforms to put in place: curb corruption.
If adventure is what Mr. Temer was casting about he will not be disappointed. While people protest in the streets he also faces strong opposition in Congress undermining even more the implementation of the reform program. However he has successfully accomplished some reform achievements. In July 2017, despite his own corruption charges he was able to pass a reform a labour law that was long hampering growth. He is also trying to simplify the tax code to reduce the 2,038 staff-hours a year that companies take to compliance. But the great hope of robust recovery lies in the reduction of public spending. He persuaded congress to agree to a 20-year real-terms spending freeze, but he will have to reform pensions that allows Brazilians to retire at 58 years. Pensions cost 13% of GDP and if not come to an halt can reach 25% of GDP. Mr Temer hopes pension reform may help salvage his reputation and known to be a deal-maker markets hope that he will gather support for his fiscal reform program. It is also good news that the Congress is attempting to reform campaign-finance laws.
Economically, In 20015 inflation got to a peak of 10,7% far exceeding the upper limit of government`s target band (4,5+/- 2%) caused by realignment of regulated prices and transmission effect of exchange rate depreciation and despite a tight monetary policy and high interest rates. The crisis also led to the current account deficit to drop 1.6% of GDP mainly due to the contraction of the GDP and moderate devaluation in the real exchange rate. Foreign direct investment accounted for 4.2% of the GDP 2015, financing 132% of the current account deficit. Brazil had an ample level of reserves of US$ 358 billion – or 18 months of imports – at the end of 2015.
Brazil’s medium-term outlook will depend on the capacity to endure current adjustments and to promote growth-enhancing reforms. Raising productivity and competitiveness are the main priority and challenge for the country to achieve higher growth in the medium-term. While growth drivers of the past decade were credit-fueled consumption, labor expansion and the commodity boom growth will now need to be based on higher investment and productivity gains.
Despite the poverty achievements of the last decade, reducing inequality remains the key to reduce the strong social disparity that characterizes this country. Universal coverage in primary education was already accomplished, the challenge is now the quality and outcomes of the educational system.
What about Tomorrow? What the Museum tells us.
A journey to Brazil, is to face contradiction, contrast and unexpected surprise. One of these moments happened when I visited the Museum of Tomorrow, Museu of Amanhã. After passing through the Rio`s city centre in a taxi, we have the experience of a multi-screen voyage of multiple distinct landscapes: there are glorious buildings, followed by squalid spots, colonial libraries, dodgy corners, fancy bistros, and picturesque botiquim. After this carousel of distinct impressions I finally arrive to the Museu do Amanhã, transported back again to the sophistication of the first world, the Museum is a futuristic architecture building launched from land into the ocean that demonstrates the creative energy of this country.
At the Museum of Tomorrow not only we witness to one of the largest capital of this country: its creativity, but also the great role it has in the leadership in the climate change agenda, conservation and ecosystem preservation. Indeed Brazil played a key role in formulating the climate framework for the 2015 COP 21 and has ratified the Paris Agreement. The country has reiterated its leadership role in international negotiations on climate change, by giving significant contributions to climate change mitigation within its borders. Brazil has voluntarily committed to reducing its greenhouse gas emissions between 36.1% and 38.9% by 2020 – and it will likely reach that objective sooner. Great progress has also been achieved in reducing deforestation in the rainforest and other sensitive biomes. However, the country still faces major development challenges – especially in finding ways to combine the benefits of agricultural growth, environmental protection and sustainable development.
While I was in the Museu do Amanhã I thought what would be the amanhã of this giant country. No one knows what the future holds, some once said that Brazil was unmanageable by nature, I sincerely hope that this extraordinary country also “bonito por natureza” as the samba sings, will serve the expectations of all its population and continue to find new ways to promote welfare to all.