Millions Return to Poverty in Brazil, Eroding ‘Boom’ Decade

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Between 2004 and 2014, tens of millions of Brazilians emerged from poverty and the country was often cited as an example for the world. High prices for the country’s raw materials and newly developed oil resources helped finance social welfare programs that put money into the pockets of the poorest.

But that trend has been reversed over the last two years due to the deepest recession in Brazil’s history and cuts to the subsidy programs, raising the specter that this continent-sized nation has lost its way in addressing wide inequalities that go back to colonial times.

“Many people who had risen out of poverty, and even those who had risen into the middle class, have fallen back,” said Monica de Bolle, a senior fellow at the Washington-based Peterson Institute for International Economics.

The World Bank estimates about 28.6 million Brazilians moved out of poverty between 2004 and 2014. But the bank estimates that from the start of 2016 to the end of this year, 2.5 million to 3.6 million will have fallen back below the poverty line of 140 Brazilian reais per month, about $44 at current exchange rates.

Those figures are likely underestimates, de Bolle said, and they don’t capture the fact that many lower-middle class Brazilians who gained ground during the boom years have since slid back closer to poverty.

Economists say high unemployment and cuts to key social welfare programs could exacerbate the problems. In July, the last month for which data is available, unemployment was close to 13 percent, a huge increase from 4 percent at the end of 2004.

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Meanwhile, budgetary pressures and the conservative policies of President Michel Temer are translating into cuts in social services. Among those hit is the Bolsa Familia — Family Allowance — program that gives small subsidies each month to qualifying low-income people. It’s credited with much of the poverty reduction during Brazil’s boom decade.

Non-labor income, including social programs like Bolsa Familia, accounted for nearly 60 percent of the reduction in the number of people living in extreme poverty during the boom decade, said Emmanuel Skoufias, a World Bank economist and one of the authors of the report on Brazil’s “new poor.”

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