UNDP Poverty Report 2000

According to the estimates of a government research institute, about 15% of Brazilians are extremely poor, based on a $1-a-day poverty line. The results from other studies suggest that the incidence of extreme poverty is higher among blacks and higher still among the rural population. Regional variations are pronounced: the northeast has about 30% of the country's population, but 62% of the poor.

Most remarkable is that the incidence of poverty is still almost as high as it was in the late 1970s - despite a reduction from about 21% in 1994 to 15% in 1997. The main reason is the persistence of very high inequality.

New policies are needed to reduce inequality and spur faster growth. The unequal distribution of social spending is no doubt a major factor in maintaining inequality and thus poverty.

Spending on education, health, social security, social assistance and labour accounts for almost two-thirds of the government budget and about a fifth of GDP, the highest shares in Latin America. But the bulk of the benefits go to the middle classes and the rich.

Take education. Close to a third of the poorest fifth of the population does not attend primary school. But the sharpest differences show up in secondary and tertiary education. More than 90% of the poorest four-fifths of the population do not attend secondary school, and practically none make it to universities.

Only primary schools end up being relatively targeted to the poor, not because the government succeeds in targeting resources, but because richer households send their children to private schools. Public expenditures on secondary and tertiary education are very badly targeted to the poor. For scholarships - chiefly to graduate students - four-fifths of the money goes to the richest fifth of the population.

For health care the poor have to resort to lower-quality public hospitals and clinics, while the better-off tend to go to private facilities -many funded with public resources. Of the government's transfer programmes, only the distribution of milk, school lunches and books tends to be targeted to the poor. Unemployment benefits do benefit the poor to some degree, but contrary to popular perceptions, they are heavily concentrated among the better-off workers laid off from formal sector jobs. Government expenditures on pensions are much more concentrated - especially those for the legislative and judicial branches - with two-thirds going to the richest fifth of the population.

So while the persistence of poverty in Brazil over the past 20 years is undoubtedly due in part to mediocre growth, the most important explanation is the highly concentrated distribution of income, worsened by inequitable social spending.

The entire structure of social expenditures should be overhauled, with cutbacks needed most for tertiary education, publicly subsidized private hospitals and the highly inequitable system of government pensions. New programmes targeting the poor should be launched - such as the universal minimum wage pensions for agricultural workers and the Bolsa-Escola Programme, which transfers income to families on the condition that their children stay in school.