Inequality fell because Brazil tripled Bolsa Família, not because it improved – 05/11/2023 – Market

The fall in income inequality in Brazil over the past year sounds like great news. But it only happened because Brazilians are increasingly dependent on social programs in an economy that grows slowly and delivers low-quality jobs.

Behind the lowest inequality in the series is the fact that the country has practically tripled its spending on Bolsa Família compared to what it spent before the pandemic. As a proportion of GDP, the value jumped from around 0.4% to over 1.5%.

Around R$ 175 billion will be spent on the program this year, which will serve almost 21 million families, half in the Northeast.

It is no wonder that the per capita household income of the poorest half of the population rose 18% last year, to R$537 per month – and that the fall in inequality was more prominent in the northeastern states.

In winning over voters in the 2022 presidential campaign, both Lula (PT) and Bolsonaro (PL) promised to keep the amount of R$ 600 paid to the poorest in the pandemic.

Lula went further, and added an additional R$150 per child up to six years old, and another R$50 per dependent between 7 and 18 years old or pregnant woman. As a result, the average amount paid to beneficiaries reached BRL 714.

Lula was elected with this platform in the social area, just as Bolsonaro had promised something similar. Politically, it is what a large part of the country, mostly poor, wanted.

But the fact that Brazil has tripled this type of social spending to provide a minimally dignified life for the population is still worrying.

In crisis for many years, neighboring Argentina has also been increasing, over time, expenditures of this type, which today also amount to around 1.5% of GDP.

In common, the neighbors maintain their GDP per capita and productivity levels stagnant for many years. And now they have ideological closeness between Lula and Alberto Fernández.

But both show that, without sustainable growth leveraged by pro-market reforms, using public money to combat social ills works for a while, but is not sustainable. Because it is from the taxes generated by the activity that the resources for these actions come.