Alexandre Marinis: Brazil's cash transfer scheme leaks like a sieve

Brazil’s lauded Bolsa Familia anti- poverty program is suffering as charges of bureaucratic corruption and political abuse multiply. That’s jeopardising recent gains in lowering the poverty rate in Latin America’s most-populous nation.

In 2009 the global economic crisis will push 2.7 million people in Latin America and the Caribbean back into extreme poverty, which the World Bank defines as living for less than $1.25 daily. This reverses more than a third of the region’s poverty reduction gains since 2005, according to the World Bank. The proportional increase of poor people there will be seven times greater than that expected for sub-Saharan Africa.

Bolsa Familia, which loosely translates as ‘family grant,’ is a government-run cash transfer benefit and Brazil’s main tool to combat poverty. The state doles out about 12 billion reais ($5.7 billion) to 46 million people, a quarter of the country’s population. The World Bank hails it as “a silent revolution” that’s “among the world’s best targeted programmes.” The International Labour Organisation says the initiative is “the largest income distribution programme in the world.” It’s been copied throughout Latin America and some developed nations.

Its goals are unassailable. How it’s being managed is another story. Consider the case of Billy da Silva Rosa. Billy received 20 reais from the government every month and each of his two brothers got 62 reais. The payments stopped after seven months, when a health inspector discovered Billy was a cat owned by the government employee responsible for running Bolsa Familia in the remote town of Antonio Joao, in Mato Grosso do Sul state.

BREAKING THE CYCLE
One of Bolsa Familia’s key goals is to break a family’s poverty cycle by requiring parents to keep their children at school and vaccinated in exchange for the payment. But the Brazilian government doesn’t know if as many as 1 million children in the program are attending school, O Estado de Sao Paulo newspaper reported in September. In Goiania, a state capital not far from the Federal District of Brasilia, 33 per cent of the children receiving money from Bolsa Familia aren’t enrolled in school. In Pelotas, a large city in the rich southern state of Rio Grande do Sul, the comparable figure is 32 per cent.

Most of Bolsa Familia’s missing children are in small towns in Brazil’s interior, where local politicians control the programme’s list of beneficiaries with keen interest and where audits are rare. In places like these, lack of supervision isn’t the only problem. In small, isolated communities, sympathetic teachers know which students’ families receive the aid and can easily report absent children as present so they won’t lose their Bolsa Familia benefits. If officials can’t even locate enrolment records for 1 million students, imagine them attempting to check the school attendance records.

Missing students are hardly the only problem. Bolsa Familia pays benefits to 39,937 politicians, 299,832 dead people, 106,329 vehicle owners and 1.2 million families (about 4.4 million individuals) who don’t live in poverty, according to a recent report by the Federal Audit Court.

Bolsa Familia was introduced during the presidency of Fernando Henrique Cardoso and gained critical mass under President Luiz Inacio Lula da Silva, who grew up in a poor family similar to those now receiving the benefit.In 2006 the programme played a key role in Lula’s re- election. Every 10 percentage-point increase in a state’s population receiving the benefit raised Lula’s voting share by more than seven percentage points, according to my calculations.

The Brazilian Constitution prohibits Lula from running for a third term. Nevertheless, last month he signed a decree that will add another 7.2 million people to Bolsa Familia until 2010. The new decree is a gift from Lula to his party’s next presidential candidate. And it will help other politicians retain power. Yet it won’t prevent a rise in the proportion of Brazilians living in extreme poverty. As a 2006 study by the United Nations International Poverty Centre concluded, Bolsa Familia alleviates the intensity of poverty but “contributes little to alter the proportion of poor in the population.”

Choosing to expand the programme before fixing it to make sure the funds reach the right people shows Lula cares more about winning elections than reducing poverty.

Alexandre Marinis, political economist and founding partner of Mosaico Economia Politica, is a Bloomberg News columnist