As governments struggle to respond to the COVID-19 crisis, the emergency social assistance programs demonstrate rapid and grave impacts on poverty, raising the discussion on social policies for the long run. Brazil’s known experience with cash transfer programs allows important takeaways.
Addressing the crisis
The Brazilian emergency cash transfer program, named Auxílio Emergencial (in Portuguese), was designed to address the rapid impact of job losses and income drop as a consequence of the COVID-19 crisis and the correspondent restrictions. It is a shock-responsive social assistance benefit, in the form of direct unconditional and non-contributory cash transfers. The benefit was established in April 2020, with a value of BRL 600 or USD 1101 per person (up to 2 people could receive it within the same household), or BRL 1200 to single mothers who run a household alone. The main targets of the program were the unemployed, individual microentrepreneurs, self-employed and informal workers with a per capita income equal or below 50 percent of the national minimum wage (BRL 522.50), or a household income up to 3 times the national minimum wage (BRL 3,135) (Decreto nº 10.316, de 7 de Abril da Presidência da República 2020).
More than a significant experience brought by decades of implementation of cash transfer programs – such as the well-known Bolsa Família, Brazil has a strong and reliable single registry system (Cadastro Único), which enabled agility to process data and delivery to grant the emergency benefit to the targeted population, as most people were already included in the government’s database. Therefore, the emergency benefit was a straightforward relief measure.
The implementation of the emergency benefit resulted in rapid and substantial impacts on poverty reduction, even with labor income declining with jobs losses and salary cuts. The number of people living in poverty (considering the population living with a per capita household income of up to half of the national minimum wage) dropped 23.7 percent from pre-pandemic levels, in 2019, to August 2020. That means that 15 million people rose out of poverty during this period, according to data collected by the Brazilian National Institute of Geography and Statistics (Instituto Brasileiro de Geografia e Estatística – IBGE, in Portuguese) (Neri 2020).
This rate of poverty reduction is superior even to previous peaks of social development in the country, representing the lowest levels of the population living in poverty in the historical series. The impact was greater in the Northeast and North regions of Brazil, which were the main targets of the Auxílio Emergencial, with poverty reduction rates of 30.4 percent and 27.5 percent, respectively. Up to August of 2021, the benefit had a peak of 67 million beneficiaries (Neri 2020).
Furthermore, the cash transfer's direct impact was perceived also on the levels of income inequality. During the same period poverty levels dropped, Brazil's GINI coefficient, which monitors the level of income inequality for a country with a scale from 0 to 1, with 1 being the more unequal: the country scored 0.47, the lowest value registered in the historical series (Lima Gerbeli 2021).
The Auxílio Emergencial program was created in March 2020, as an emergency response to the pandemic, to be paid in multiple installments that would decrease over time. Since the benefit acted as a lifeline for a substantial share of the population and Brazil was highly affected by the pandemic, a debate started on the severe impact that cuts on benefit levels and its imminent end would cause. Although smaller amounts of the benefit were still being paid for fewer beneficiaries by October 2021, by January 2021 2 million people fell back into poverty, with a total of 13 percent of the country's population living on a monthly income of only BRL 250 (Lima and Gerbeli 2021).
The current benefit value is not sufficient to maintain the improvements in poverty levels that the first version of the measure provided, sending more people into poverty than registered before the pandemic. Studies estimate that, in this scenario, 14.3 million Brazilians might soon be transitioning into extreme poverty, defined as people living with a monthly income of BRL 162 or less (Nassif-Pires, Cardoso and Matos de Oliveira 2021). Considering Brazil’s context before the COVID crisis was already of political and economic instability, the benefit fulfilled the role of preventing an even bigger crisis. The lack of revisions in the country’s social benefit structure can hamper the post-pandemic recovery, and even regress its past achievements on tackling poverty.
Raising discussion for the long run
The impacts from the benefit demonstrated the high efficiency a comprehensible direct cash transfer program can have in tackling poverty and reducing income inequality, even for a large country such as Brazil. These results also raise the debate on the future of the social protection structure in Brazil, and the use of social benefits as a method to manage inequality and reduce poverty in the long run. During the post-pandemic recovery, this is a crucial discussion to determine the path of social and economic development.
Since the Bolsa Família benefit is not indexed to the minimum wage value, it is currently outdated (Derviche, 2021) with an average of BRL 190 per household. The initial Auxílio Emergencial was able to make a more prominent impact as its value was considerably higher, even if still not pared with the national minimum wage - a feature made possible by the momentum created by the emergency scenario, which allocated social protection to the global spotlight (Brasil, Capella and Ferreira 2021).
At the moment, the Brazilian government is preparing to implement a new social protection program to update and substitute both the Bolsa Família and the Auxílio Emergencial , which will need to address the lasting social effects of the pandemic and also those from the economic crisis Brazil is currently going through. The Auxílio Brasil program, due to start this November, is set to integrate other benefits and guarantee a basic income to vulnerable families (Governo Federal 2021). As the government has been implementing budget cuts in the last few years, the form of the new program is still uncertain, and the viability of a new value is still under discussion.
On the whole, the quick organization and implementation of the pandemic emergency assistance were made possible by the infrastructure and databases already in place in Brazil, used for the Bolsa Família program, which has been running since 2003 and presents significant positive results as a method to alleviate poverty.
Auxílio Emergencial payments achieved a higher value than the ones of Bolsa Família, due to the commotion during a crisis, and thus provided more substantial impacts in inequality than the previous flagship program. These results gained momentum for a broader discussion on the potential of cash transfer social protection programs to address inequality in Brazil. Consequently, the public expectation around the new social protection program to be developed by the government is high, considering the proven potential it has to impact the livelihoods of many in such a direct manner.
- Brasil, F. G., Capella, A. C., Ferreira, L. T. (2021). Eventos focalizadores e a pandemia da COVID-19: a renda básica emergencial na agenda governamental brasileira. Revista de Administração Pública. Rio de Janeiro. Retrieved from: https://doi.org/10.1590/0034-761220200619
- Derviche, A. (2021). Pandemia fomenta novos debates sobre renda básica no Brasil. Jornal da USP. São Paulo. Retrieved from: https://jornal.usp.br/?p=419523
- Decreto nº 10.316, de 7 de Abril de 2020 da Presidência da República (2020). Retrieved from: http://www.planalto.gov.br/ccivil_03/_ato2019-2022/2020/decreto/d10316.htm
- Governo Federal (2021). Auxílio Brasil. Ministério da Cidadania. Retrieved from: https://www.gov.br/cidadania/pt-br/auxilio-brasil
- Lima, B., Gerbeli, L. G. (February, 2021). Com fim do Auxílio Emergencial, Brasil tem 2 milhões de novos pobres só em janeiro. G1. Retrieved from: https://g1.globo.com/economia/noticia/2021/02/06/com-fim-do-auxilio-emergencial-brasil-tem-2-milhoes-de-novos-pobres-so-em-janeiro.ghtml
- Nassif-Pires, L.; Cardoso, L., Matos de Oliveira, A. L. (2021). Gênero e raça em evidência durante a pandemia no Brasil: o impacto do Auxílio Emergencial na pobreza e extrema pobreza. Made centro de pesquisa em macroeconomia das desigualdades FEA/USP. São Paulo. Retrieved from: https://madeusp.com.br/wp-content/uploads/2021/04/NPE-010-VF.pdf
- Neri, M. C. (2020). Covid, Classes Econômicas e o Caminho do Meio: Crônica da Crise até Agosto de 2020. FGV Social. Rio de Janeiro. Retrieved from: https://www.cps.fgv.br/cps/bd/docs/CovidEAsClassesEconomicas_FGV_Social_Neri-OUT-2020.pdf