# **_Brazil and Mexico_**

Between 1990 and 2012, the number of people living in extreme poverty in Brazil fell from almost 31 million to less than 5 million. At $3.10 a day, poverty has been reduced from 54 million to 18 million. That millions are still living in abject poverty in a country that reached upper middle‐income levels almost 50 years ago is testament to an ineffective development strategy. But the progress during the last two decades has lessons for countries in Asia and Africa. It shows that for countries that have reduced poverty to low levels, a combination of macroeconomic stability with more effective social policies can help end extreme poverty. But it also shows that without higher growth rates, it is difficult to sustain this progress. What exactly has Brazil done well, and what will it have to do better?

First, between 1994 and 1997, Brazil stabilized its economy. Inflation had stayed above 100 percent annually since 1982 going up to 2,500 percent in 1993. It was brought down to less than 10 percent by 1998. Between 1993 and 2004, using the national poverty line, the share of people living in poverty dropped by a third, from 33 to 22 percent. Brazil’s experience with inflation is a reminder for others that poor macroeconomic management is one of the most anti‐poor things a government can do.

Second, Brazil invested in agriculture. Brazil’s support for agricultural research has helped both large and small farms. Despite the publicity that mega‐farms have received, more than 80 percent of rural Brazilians continue to till small farms. Their productivity has grown due to better seeds and farming techniques made available by EMBRAPA, Brazil’s agricultural research agency. But it is also clear that small farmers need more assistance than they have received and this has led to rural poverty remaining high, prompting an exodus to cities. Extreme poverty is evenly distributed between rural and urban areas in Brazil, unlike Asia and Africa where it is largely a rural phenomenon. While in China it was agriculture that led poverty reduction, in Brazil this role is played by services. Periods during which the service sector grows faster are associated with faster poverty reduction.

Third, Brazil has improved education and health services during the last two decades. Spending on education as a share of GDP doubled between 1994 and 1995, and has been maintained at about 5 percent ever since. Healthcare spending has averaged close to 9 percent of GDP, and coverage has been improving since the reforms in the early 1990s. Combined with social assistance programs that urged poor families to take advantage of these services, these investments have resulted in much better outcomes. Secondary school enrollment has increased from 50 percent to more than 80 percent in less than two decades. Life expectancy at birth is now 74 years, up five years since 1990. Maternal and infant mortality rates fell by about 4 percent every year between 2000 and 2009. These are impressive achievements, which have helped Brazil catch up with neighbors like Chile and Argentina.

The Brazilian government spends about 1 percent of GDP on non‐contributory pension schemes for the rural and urban elderly. But Brazil is better known for its social assistance program, _Bolsa Familia_ , a conditional cash transfer (CCT) program in which parents get a fixed monthly stipend of about $30 in exchange for enrolling their children in school and for health checkups. It covers 50 million low‐income Brazilians, a quarter of the total population, and costs about 0.5 percent of GDP. In its decade of implementation, _Bolsa Familia_ has helped to reduce the extreme poverty incidence from 12.7 to 4.9 percent—its contribution is estimated at about a quarter of the total reduction.

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