Event ReportsPublished on Oct 25, 2013
In Brazil, extreme poverty has reduced from 15% to 5%, poverty from 34% to 22% and Gini index from 69% to 54% in the period of 1999-2009. So, knowledge sharing between Brazil and India in matters related to public policy and welfare programmes is of high merit.
India can learn from Brazil's experiences in poverty alleviation
Though Brazil has always been a very unequal society where 34% of population were under the poverty line (in 2000), the democratic governments there could achieve remarkable results in poverty alleviation in the last one decade or so, according to Dr Jérôme Sgard, Research Professor at the Centre d’Etudes et de Recherches Internationales (CERI), France. Giving a talk on "Locating Brazil within South America: The Evolving Political and Economic Trajectory of Brazil" at Observer Research Foundation, Delhi, on 25 October, Dr Sgard said extreme poverty in Brazil has reduced from 15% to 5%, poverty from 34% to 22% and Gini index from 69% to 54% in the period of 1999-2009. Drawing comparisons between strategies of China, Brazil and India in eliminating poverty, he reviewed that while China reduced its poverty drastically through economic growth; Brazil made use of active social policies. He added that India used a mixture of both China’s and Brazil’s strategies. Dr Sgard explained that poverty reduction in Brazil started with the democratic transition (after 1985) and new federal constitution (1998) which saw the implementation of a large pension system and increased investment in education. These two policies resulted in the older generations being offered better protection than the youth. He said that the second stage of policy reforms marked the entry of Conditional Cash Transfers, targeting education. Lastly, he said that the election of Lula (2003) is monumental in poverty reduction through a federal programme called Bolsa Familia. Explaining the mechanism of Bolsa Familia, he said that municipalities established the initial list of families eligible for benefits followed by participation from NGOs and Civil Societies to validate the compiled list. He highlighted the point that the list was made public thereby increasing public participation and transparency. He explained that a cash subsidy is then sent to the validated families through electronic payment or plastic cards, given the basic conditions are met. Talking about the economic trajectory of Brazil, Dr Sgard said Brazil is not a high growth country but it is picking up slowly in the recent times and heading towards a sustained growth. He explained that the crisis of 1930 was extremely hard on all Latin American Countries which were trying to develop their export markets by exporting primary goods to North America and Europe. The crisis cut off their access to these markets and put a pause on their economic prosperity, he noted. He said following the crisis, many mitigation practices came into force, like adoption of import substitution strategies and authoritarian regimes like Vargas Brazil (1930-45, 51-54) and Military Regime (1964-85). Dr Sgard said the debt crisis of 1980s, called ’the lost decade’, resulted in all the Latin American countries becoming over-indebted. He recalled that during this period, Brazil had very high inflation rates of around 50%, calling the scenario as a "rock and roll" experience for Brazil. He reiterated that Brazil was a late stabilizer, compared to other countries. Dr Sgard said Brazil entered democratic regime in 1988, after the crisis. In the period of 1988-2013, Brazil saw many institutional reforms and economic policies like Democratic and Federal Constitution (1988), Plano Real and Monetary Stabilization (1994), a rule of fiscal stability following near-catastrophic devaluation of the Real (1999), election (2002) and re-election of Lula (2005). Drawing comparisons between Brazil and Korea in terms of growth, he pointed out that their relative growths converged during early 1970s and then diverged thereafter with Korea heading towards rapid growth rate while Brazil saw a sustained growth rate. Though Brazil is part of the BRICS, with growing importance in international sphere, he reiterated that Brazil is not a high growth country. Dr Sgard said that the election of Lula is remarkable in the economic growth of Brazil as his regime marked opening of political system to middle class population. Though Brazil is basking in the light of international popularity, he opined that the fact whether Brazil is locked forever in the "middle-income trap" is debatable. In spite of having good macro policy, stabilized democracy, reasonable good public institutions and technology, lot of ’friends’ in the world, Brazil is not able to achieve projected growth rate due to a number of economic conflicts, he noted. He remarked that investment is very low compared to GDP (Investment to GDP ratio of Brazil is 20% while India has 35% and China 48%) and that since Brazil is a high tax country, private investment is lacking. Dr Sgard said that Brazil is still a closed economy with exports accounting for a small proportion of GDP; and capital and credit market is dysfunctional with interest rates being extremely high. He added that human capital is comparatively low recalling that Brazil used to be major importer of African slaves up to 1988. Responding to Ms Jayshree Sengupta’s comment on whether programmes like Bolsa Familia would be successful in India, Dr Sgard explained that the programme was a success in Brazil due to its urban population, capacity of civil societies to take part in the programme and more importantly availability of infrastructure and technology. He opined that India can manage the same if it addresses the said issues. Mr. B.S. Prakash, sharing his insights of being an Indian Ambassador in Brazil, opined that not being able to utilize UID is still a prevailing problem in India remarking high per cent of leakage (40%) in the programme as one of the critical issues. Commenting on Mr Vivan Sharan’s request to share his insights on public protests in Brazil, Dr Sgard said that the people are currently demanding for public rights, like better transportation and less corruption and hence the rise of conflicts. The participants agreed that knowledge sharing between Brazil and India in matters related to public policy and welfare programmes is of high merit. (This report is prepared by Susmitha Gunda, Research Intern, Observer Research Foundation, Delhi)
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