Weisbrot, Johnston & Lefebvre: The Brazilian Economy in Transition – Macroeconomic Policy, Labor and Inequality

From the Executive Summary:

The Brazilian economy has gone through a significant transformation during the past decade. Following nearly a quarter-century with very little growth in per capita GDP, there was a major change beginning in 2004. GDP per person (adjusted for inflation) grew at a rate of 2.5 percent annually from 2003-2014, more than three times faster than the 0.8 percent annual growth of the prior government (1995-2002). This growth rate was achieved in spite of the 2008-09 global financial crisis, which pushed Brazil into recession in 2009; and this comparison includes the slowdown of the past few years.

The past decade also saw new trends in the reduction of poverty and inequality. These pronounced positive changes were the result of the growth of income and employment, as well as the expansion of government social spending and programs. These factors along with large increases in the real minimum wage and in formal sector employment helped to increase the bargaining power of workers.

Since the Workers’ Party came to power with President Lula taking office in 2003, poverty has been reduced by over 55 percent, from 35.8 percent of the population to 15.9 percent in 2012. Extreme poverty has been reduced by 65 percent, from 15.2 percent to 5.3 percent over the same time period. Over the last decade, 31.5 million Brazilians were lifted out of poverty and, of that number, over 16 million out of extreme poverty.

There were also large changes in how the gains from economic growth were distributed, as compared with the prior decade. For example, the top 10 percent of households received more than half of all income gains between 1993-2002, but this fell to about one-third for 2003-2012. The biggest gainers were the 40 percent below the median: they nearly doubled their share of income gains from 11.3 to 21.1 percent.

Increased economic growth was the main contributor to Brazil’s reduction of poverty and inequality over the past decade. But government programs also played an important role.


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