The World Bank | 19/06/2023

Brazil’s economy is slowly coming back from the economic havoc brought by the COVID-19 pandemic. After the historical crash of 3.3 percent in 2020, real GDP was higher in 2021 than in 2019. In 2022, GDP grew 2.9 percent. Labor market indicators reflect the economic recovery as well. While labor force participation is still slightly below its pre-pandemic level (62.1 percent), those who participate are more likely to find jobs: the unemployment rate was 7.9 percent in 2022Q4, 3.2 percentage points lower than a year earlier and 6.2 percentage points below 2020Q4.

The vulnerable population was protected by large changes in the social protection system, but there is increased dependency on government transfers.  Despite the covid-19 induced crisis, the poverty rate measured at US$6.85 per day (PPP2017) decreased from 26.2 percent in 2019 to 18.7 percent in 2020 largely thanks to the cash transfers of Auxilio Emergencial program– in which the government spent 3.9 percent of the GDP. However, the promoted monetary gains were not fiscally sustainable, the government payments shrunk, and poverty bounced back to 28.4 in 2021 partly explained by the halving of AE’s coverage. In 2022, households’ real labor income is projected to finally have surpassed 2019 levels. Coupled with extra upward revision of Bolsa Familia’s benefits, poverty rate is expected to go back to a seemingly pre-pandemic trajectory at 24.3 percent (World Bank, 2023). The slow economic growth forecast will likely translate into low income growth among the less wealthy, and maintain the high correlation between poverty and state transfers.

Besides poverty, other deprivations call for urgent policy response: 30.7 percent of the population suffered from moderate or severe food insecurity (FI) in 2022. The recent years decreasing role of employment labor income in reducing poverty among Brazilians (World Bank, 2022a) has made the reliance on non-labor income be accompanied by income volatility (Neri and Hecksher, 2022) and contributed to the rise of food insecurity. At least since 2014, Brazil was considered to have won over hunger (FAO, 2014). The rate of moderate and severe food insecurity was measured at 7.8 percent (PNAD 2013), compared to 16.8 approximately one decade earlier (PNAD 2003)[1]. However, the most recent surveys identified 20.5 percent of the population that experienced moderate or severe food insecurity in December 2020 (PENSANN, 2021) and 28.4 percent between November 2021 and April 2022 (PENSANN, 2022). Moreover, FI in rural areas is 1.2 times higher than that in urban areas.

Constant high food inflation may also have fueled the rise of FI in recent years. Brazil is a leading agricultural producer in the world (i.e., it is top one soybeans and sugar exporter[2]). But the agricultural economy of Brazil is largely connected to global supply chains and exportations, thus limiting its buffer capabilities to protect local consumers when global commodities prices go up. At the end, while the overall prices index to Brazilian consumers went up by 21.7 percent between the end of 2019 and the end of 2022, food prices were raised at 37.5 percent.

Even more troubling is that typically poorer states have experienced the worse effects of inflation and insecurity. Food prices, an item representing between a fifth and a quarter of poorest households’ expenditures, have thus had an enormous negative impact on households’ purchasing power. Not without reason, some of the poorest states in the country present the highest food insecurity indicators. In the poorer states of the Northeast and North regions, food prices showed as high variations as in the richer states of the South and Southeast. But having a lower capacity to cope with the soaring prices, families in the most underprivileged states (e.g.: Maranhão, Alagoas, Ceará and Pará) are experiencing a worrisome degree of food insecurity.

Looking forward, it is important the state have policies specifically devoted to supporting the minimal nutritional needs of the poor while it does not lose sight of the synergy with other programs geared to raise income and productive insertion Since the new government took command in January, fostering the hunger fight sounded as a priority in the agenda. The government reestablished the Council of Food Security that had been closed in the past government’s mandate, overhauled the national Food Procurement Program (PAA), and increased in about 37 percent the resources earmarked for the National Program of School Food (PNAE). In another front geared to poverty fight, the government redesigned the Bolsa Familia (BF) cash transfer program and increased its benefits. Poverty and food insecurity measurement capture different dimensions of material deprivations (World Bank, 2022b). It is thus welcome that the government focus on food security came alongside a revision of the flagship cash transfer program. Still, a major integration of the most vulnerable in improved productive chains is indispensable to warranty sustainable maintenance of families’ minimal living standards. Evidence from a phone survey suggests that, among BF beneficiaries, families estimated needing on average of BRL 737 per capita each month to cover their basic needs (World Bank 2022c). With an average BF benefit of R$ 714 per family in 2023, stronger labor market opportunities are a crucial part of this group’s sustainable economic development.

[1] Results available in IBGE (2020).

[2] Sources: World Trade Organization (Brazil Trade Profile) and the Observatory of Economic Complexity.

+This note was prepared by Gabriel Lara Ibarra and Ricardo Campante C. Vale.

References

FAO (2014). “FAO Hunger Map”. Food and Agriculture Organization of the United Nations, produced by the Statistics Division.

IBGE (2020). Pesquisa de orçamentos familiares 2017-2018: análise da segurança alimentar no Brasil / IBGE, Coordenação de Trabalho e Rendimento. – Rio de Janeiro : IBGE.

Neri, M. and Hecksher, M. (2022).  “A Montanha-Russa da Pobreza”,  – 15 págs., Rio de Janeiro, RJ – junho/2022 – FGV Social. https://cps.fgv.br/PobrezaMensal

PENSSAN (2021). I Inquérito Nacional sobre Insegurança Alimentar no Contexto da Pandemia da COVID 19 no Brasil [livro eletrônico]: I VIGISAN : relatório final/Rede Brasileira de Pesquisa em Soberania e Segurança Alimentar – PENSSAN. — São Paulo, SP : Fundação Friedrich Ebert.

PENSSAN (2022). II Inquérito Nacional sobre Insegurança Alimentar no Contexto da Pandemia da COVID-19 no Brasil [livro eletrônico]: II VIGISAN : relatório final/Rede Brasileira de Pesquisa em Soberania e Segurança Alimentar – PENSSAN. — São Paulo, SP : Fundação Friedrich Ebert.

World Bank (2022a). Brazil Poverty and Equity Assessment: Looking Ahead of Two Crises. © Washington, DC : World Bank. https://openknowledge.worldbank.org/entities/publication/5c9a5af4-1960-5986-ab4f-bfd51436be6d License: CC BY 3.0 IGO.

World Bank (2022b). Poverty and Food Security in Brazil During the Pandemic. Poverty and Equity Notes, April 2022. Prepared by Gabriel Lara Ibarra and Ricardo Campante C. Vale.

World Bank (2022c). The 2021 Brazil COVID-19 Phone Survey. Poverty and Equity Notes, April 2022. Prepared by Anna Luisa Paffhausen, Ricardo Campante C. Vale, Carlos Alberto Castaneda Castrillon, and Gabriel Lara Ibarra.