Brazil’s once-richest man, Eike Batista, is watching his empire crumble. The São Paulo stock exchange has plunged almost 16 percent this year, wiping out billions in investor wealth. Yet Luzia Souza is doing better than ever.
The mother of two is one of 22 million Brazilians who have emerged from extreme poverty during President Dilma Rousseff’s three years in office. Under the auspices of a resettlement program financed by the government and the World Bank, Souza, 29, moved from a shack surrounded by open sewage and prone to flooding to a house with running water on the outskirts of Teresina, the capital of Piaui state in northeast Brazil.
Voters like Souza may help Rousseff win reelection in October, even though the economy has grown at half the pace it did under her predecessor and inflation has exceeded the official target throughout her tenure. While investors fret about Brazil’s widening budget deficit, there’s little question that Rousseff’s expansion of social programs has shored up support among her political base. “Everything is getting more expensive, but certainly I’m doing better than two or three years ago,” says Souza, who receives 134 reais ($57) a month in cash aid from the government and got a 2,500-real low-interest federal loan in 2013 to open a clothing store. “Unless a new, much better candidate comes along, I’ll vote for Dilma again.”
Rousseff is tantalizingly close to making good on her 2010 campaign pledge to eradicate extreme poverty. The government’s most recent population survey, due early in 2014, is expected to show that the share of the population with incomes lower than 70 reais a month, the Social Development Ministry’s definition of extreme poverty, has fallen below 3 percent—a level the World Bank considers equivalent to eradication.
Since taking office on Jan. 1, 2011, Rousseff has broadened many of the social programs created by her predecessor and mentor, Luiz Inácio Lula da Silva, and added new ones. She has increased spending on professional training, child care, and low-cost loans. More than 6,000 doctors, most of them Cuban, have been deployed to bolster health services in the countryside and other underserved areas. A public housing drive that has built 1.4 million homes since 2009 has an additional 1.6 million under construction.
The centerpiece of the government’s war on poverty is Bolsa Familia, a 10-year-old program that gives poor families a cash payment of at least 70 reais per month if they keep their children healthy and in school. Under Rousseff, the number of households enrolled in Bolsa Familia has grown by 1 million, to 13.8 million—equal to about one-quarter of the Brazilian population. And by early 2014, the government expects to add 700,000 families, according to Tiago Falcão Silva, the official who leads the Brazil Without Misery program in the Social Development Ministry. “We created mechanisms to overcome extreme poverty from a monetary standpoint,” says Silva. “Other, often more challenging tasks remain—you can’t provide health care and education with a debit card.”
Thanks to efforts such as these, Brazil was the only country in the group known as the BRICS, which also includes Russia, India, China, and South Africa, to achieve a reduction in inequality in the decade through 2009. The Gini coefficient, a statistical measure of income distribution, fell 5.08 points in Brazil during that period, while in Russia and China it increased 2.62 points and 2.86 points, respectively, according to World Bank data.
Those gains have come at a cost. Lula, and now Rousseff, made “a very deliberate policy choice” to focus on inequality rather than tackling Brazil’s complex tax code, poor infrastructure, and other obstacles to economic growth, says Deborah Wetzel, the World Bank director for Brazil. As a result, Brazil’s economy has proved less resilient in the face of the global slowdown. Gross domestic product expanded 1.9 percent a year during Rousseff’s first two years in office, less than half the 4 percent annual average during Lula’s two terms. Economists surveyed by the central bank estimate growth reached 2.3 percent in 2013. “Growth has been more volatile, but the progress in reducing inequality has just been amazing,” says Wetzel.
The president’s strategy may pay off in October. Rousseff’s approval rating was 52 percent among those who earned less than 1,356 reais per month and zero among those with more than 33,900 reais in monthly income, according to a late November survey by Datafolha, a São Paulo polling firm. The poll also showed that if the presidential election had been held then, Rousseff would have won 42 percent of the vote, compared with 26 percent for her closest rival, former Environment Minister Marina Silva. “Recipients of social welfare overwhelmingly support the Rousseff administration,” says Mauro Paulino, executive director at Datafolha. “It’s enough votes to make the difference in an election.”
At a community center in a gritty neighborhood in Teresina, local youth receive academic tutoring, participate in cultural activities, and have access to computers and the Internet, all partially financed by the Rousseff administration. Across the street at a public nursery, toddlers dig into a free lunch. Public health agents regularly check on children’s vaccinations, weight, and personal hygiene. “When I went to school, some kids were too hungry to study,” says Katia Maria Viera, head of the nursery school. “Today I don’t have a single case of malnutrition.”
Not all Teresina residents are fans of Rousseff’s policies. Afonso Noronha, a farm equipment salesman, complains that shoddy infrastructure and high labor costs are strangling business. Says Noronha: “If she did as much to help create wealth as she does to distribute it, this country would be doing better.”