Brazil's Job Strength May Win Rousseff Reelection

Government spending on education has curbed joblessness

President Dilma Rousseff
Photograph by Bosco Martin/EPA/Corbis

Growing up on a Brazilian farm, Francisco Melo spent very little time inside a classroom. Now 48, he began working at age 7 to help feed his 10 brothers and sisters. His 17-year-old son, Jefferson, has never worked a day in his life and now attends technical school. Jefferson is one of 11 million Brazilians who over the past decade have gained access to higher education, thanks to government-funded programs. These programs helped push down the unemployment rate to a record low of 5.2 percent for the 12 months through April, even though new government data show that the economy slipped into recession in the first half of this year.

Programs offering free vocational training, scholarships, and subsidized student loans are buoying the campaign of President Dilma Rousseff as she runs for reelection in October. The popular programs have blunted attacks from rivals faulting her economic stewardship. “You can raise your kids in a much better situation,” says Melo, who works as a bricklayer in the northeastern state of Maranhão and plans to vote for Rousseff. “Everyone is better off now.”

Since Rousseff took office in January 2011, the number of people aged 15 to 24 in the workforce in six of Brazil’s biggest metropolitan regions has declined 9.6 percent, to 3.6 million, according to the national statistics agency. (As in the U.S., Brazilians who are in school and not looking for work aren’t counted as unemployed.) The annual pace of job creation has slowed to 536,565, from 2.1 million at the start of Rousseff’s term.

“We have an unheard-of situation, a dichotomy. The economy isn’t doing well, but income and jobs are,” says Carlos Thadeu de Freitas, a former central bank director and chief economist at the Rio de Janeiro-based National Commerce Confederation. Rousseff’s support among voters who earn no more than 1,448 reais ($648) a month is 31 percent; it drops to 22 percent among the wealthiest income group, which earns more than 7,240 reais ($3,237) a month, according to an Aug. 28-29 survey by polling firm Datafolha. A separate poll by the Brazilian Institute of Public Opinion and Statistics, published on Aug. 26, has Rousseff winning 34 percent of the vote in the first round of balloting, 5 percentage points more than former Environment Minister Marina Silva and 15 percentage points more than Senator Aécio Neves.

Rousseff and her predecessor, Luiz Inácio Lula da Silva, have provided 20 billion reais in subsidized loans to about 1.6 million students and scholarships for 1.4 million others. Rousseff has also spent 14 billion reais to fund post-high school technical education for families who are eligible for welfare programs. Eight million students—including Jefferson Melo—have enrolled in the program, known by the acronym Pronatec, since it kicked off in 2011.

Shares of companies that offer Pronatec courses and accept students studying on government scholarships have rallied. Kroton Educacional became the world’s biggest for-profit education company after buying competitor Anhanguera Educacional Participações for $3 billion in July. Kroton’s shares have gained 67 percent this year, the second-best performer in the BM&FBovespa stock index.

Economists disagree about the benefit of the government paying for people to get a postsecondary education. Luciano Rostagno, chief strategist at Banco Mizuho do Brasil, says the programs “could contribute to better worker productivity, which is a key factor to have the economy growing again.” Pedro Tuesta, senior economist for Latin America at 4Cast, a financial analysis firm, argues that in a weak economy the programs will eventually lead to higher unemployment, as students graduate and enter a job market that may not be able to absorb them.

While annual economic growth averaged 2.1 percent during the first three years of Rousseff’s term, it’s expected to drop to less than 1 percent this year, according to analysts surveyed by Bloomberg—below the Latin American average. “This contraction in the labor force cannot last,” Tuesta says. “More workers with lower demand definitely increases unemployment.”


    The bottom line: Unemployment in Brazil has dipped to a low of 5.2 percent, despite the onset of a recession.

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