Jan. 13 (Bloomberg) -- Brazil’s President Luiz Inacio Lula da Silva may add 2 million poor families to a program that makes cash handouts as part of the government’s response to slowing economic growth, the official responsible for the program said.

The expansion, which requires Lula’s approval, would extend benefits to about 5 million more citizens at a cost of 1.2 billion reais ($515 million), and help foster consumer demand, Lucia Modesto, secretary for citizen income, said in an interview in Brasilia. The goal is to reach about 13 million families by yearend, up from 11.1 million families, she said.

Enlarging the so-called Bolsa Familia, Lula’s signature program, will help families that may fall into poverty as slower growth pushes up the unemployment rate, while also serving as an economic stimulus.

“It seems a bargain way to expand social protection,” Modesto said. “This money gets back into the economy since poor families spend it on food, clothing and school materials.”

Lower income Brazilian families may slip below the poverty line as Latin America’s biggest economy feels the effects of the global crisis, Sergei Soares, an economist at the government’s Institute of Applied Economics Research, said in a telephone interview from Brasilia.

Rising Unemployment

Labor Minister Carlos Lupi said unemployment will probably rise in the first quarter of the year, according to a Dec. 4 Folha S.Paulo report.

“If the government wants the Bolsa Familia to function as an efficient anti-crisis insurance it must boost the current limit of 11.1 million families under the program,” Soares said.

About a fourth of Brazil’s 190.5 million people live in families that already benefit from the so-called Bolsa Familia program. In exchange for an average 85 reais monthly stipend, families must keep children in school and make sure they get medical exams in public hospitals. The cash handouts account for about 40 percent of family income for those enrolled in the program, Modesto said.

“President Lula has always decided in favor of Bolsa Familia when there’s need to increase resources,” Patrus Ananias, 56, the social development minister, said in an interview from Brasilia.

Analysts covering Brazil forecast that economic growth will slow to 2 percent this year from 5.6 percent in 2008, according to the median forecast in a central bank survey published yesterday.

Modesto’s team is still working with the national statistics agency to map out the exact number of people who should be eligible for the program before presenting Lula with a final proposal.

To contact the reporter on this story: Andre Soliani in Brasilia at at asoliani@bloomberg.net; Iuri Dantas in Brasilia at idantas@bloomberg.net

Last Updated: January 13, 2009 18:00 EST