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Reforms urged for income transfer programs

Experts on social programs argue that it is necessary to reform direct income transfer programs in Brazil, such as Bolsa Escola, which provides funding to low-income families as long as they can keep their children in school.

This is part of an intense debate about income transfer programs, through which governments pay resources directly to beneficiaries contingent upon certain conditions.  Most agree with governments’ decisions to provide monetary incentives to keep a child in school or provide better nourishment for a poor family.  These income transfer programs are increasingly being used in developing countries, and the debate has intensified because social sector indices targeted by these programs have shown little improvement.

Brazil currently has such programs as Bolsa Escola, Bolsa Alimentação, Fome Zero, Programa de Erradicação do Trabalho Infantil (PETI), Auxílio Gas e Agente Jovem, and has recently spent a significant amount of money implementing them.  However, Brazil still has not shown much improvement in reducing the level of social inequality.  According to the Pesquisa Nacional por Amostra de Domicílios (PNAD), in 1989 Brazil registered 0.64 on the Gini index—used to measure inequality in income distribution by country—and in 1999, it registered 0.576.  According to the Gini index, zero indicates perfect equality and 1, perfect inequality.  One possible explanation for such a slight improvement is that the greatest challenge lies in making such reforms effective.

The effectiveness of reforms was the central argument of the seminar, “Brazil:  Elements of an Effective Social Agenda,” held on July 28 at the IDB in Washington.  During this event, two papers examined possible changes in Brazil’s existing programs, and presented empirical data showing the direction these ideas could ultimately take.  In addition to explaining current obstacles to Brazilian social programs, debates like these are essential for helping the IDB design strategies for new social projects in conjunction with the Brazilian government.

The first seminar paper, “Social Policy Reform in Brazil:  A Debate,” by World Bank economist Francisco Ferreira, proposes combining the above-mentioned social programs.  This would minimize political vulnerability and make the programs work better with one another.  Ferreira emphasized the importance of tailoring income transfers not only to the beneficiaries’ situation—number of children per family, unemployment of parents, etc.—but also to the way beneficiaries respond after receiving them.  For instance, financial assistance should be measured in terms of regular school attendance and periodic medical checkups.

The second paper, “The Impact of Income Transfers on Child Labor and School Attendance in Brazil,” presented by Eliana Cardoso of the Universidade de São Paulo, also demonstrated the need for reforms.  Convincing data showed that in the case of Bolsa Escola, although school attendance increased among the children of families benefiting from income transfers, child labor did not decrease.  Cardoso warned that income transfer programs were inadequate for transforming the lives of their beneficiaries.

Finally, Carlos Herrán of the IDB argued that the emerging data increasingly shows that income transfer programs must be supplemented by programs aimed at fundamental structures, such as improving education.  Such improvement applies particularly to schools that are attended by beneficiaries of Bolsa Escola, who need an incentive to stay in school.  The viability of these programs will ultimately depend on the adoption of mechanisms that can make them efficient.

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