Advances in Development | Challenges | World Bank in Brazil | Project Achievements Advances in Development
An industrial power, ninth world GDP measured by purchasing power parity (PPP, 2006), with the largest population in Latin America and the Caribbean, in the past few years Brazil has reached important economic, social and environmental advances, including macroeconomic stability and significant reductions in poverty, income inequality and in deforestation rates in the Amazon. The country is also increasing its participation in the international community, assuming a leadership role in areas such as climate change, trade, biofuels, AIDS, biodiversity and social technology. The World Bank is a partner of Brazil in many of these achievements and initiatives.
For the first time in a generation, Brazilians are benefiting from stable economic growth, low inflation rates and improvements in social well-being. Since 2004, the Brazilian Government has coupled stable macroeconomic management with well-directed social policies. This double focus had good results. The economy achieved steady, though moderate, growth in 2004-2005, accelerating in 2006 and 2007. At the same time, inflation rates are around 4% a year, the balance of payments is registering record surpluses, the Country has accumulated large foreign exchange reserves and there was a great drop in public debt vulnerability. In this context, the main objective of the World Bank’s partnership with Brazil is to help the country achieve its growth potential.
Improvements in the macroeconomic foundations came together with equally important advances in the social indicators. Since the nineties, the Country has practically achieved universal basic education, with 97% enrollment of children 7 to 14 years old. In recent years, there was an impressive reduction in poverty and inequality rates, reaching historically low figures. The Gini coefficient, which measures income concentration, declined from 0.585 in 2003 to 0.566 in 2005, reaching its lowest point in three decades. Poverty, measured by the local minimum wage, declined from over 52% of the population, in the beginning of the nineties, to about 38% in 2005, meeting the Millennium Development Goal. Extreme poverty, defined as income of less that a dollar a day (in purchasing power parity), declined from 8.8% to 4.2% in the same period. Economic stability and conditional cash transfers under the efficient Bolsa Família Program explain a significant part of these results.
In the environmental area, the coordination of governmental efforts, together with favorable economic conditions, has caused Brazilian programs against Amazon deforestation to achieve considerable success. Deforestation rates declined from approximately 25,000 square kilometers in 2002/2003 to 14,000 in 2005/2006, a 52% reduction.
Brazil has achieved important results in the improvement of life conditions: Between 1990 and 2005, the percentage of Brazilians living in extreme poverty declined from 8.8% to 4.2% of the population.
• The Gini coefficient of income concentration went from 0.585 in 2003 to 0.566 in 2005.
• Infant mortality declined from around 50 per 1,000 live births in 1990 to 21.1 per 1000 in 2005.
• School enrollment in basic education rose from 85% in 1990 to 97% of the population between 7 and 14 years of age in 2005.
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Challenges
Sustained growth is the major challenge for the Brazilian economy. Macroeconomic stability has laid the foundations, but average growth has remained close to half of the global and Latin American averages. Despite some advances in microeconomic and institutional reforms, activity by the private sector remains stifled by various barriers and regulations that prevent the country from achieving its growth potential. Bottlenecks include inadequate infrastructure, poor business climate, high tax rates, high cost of credit and rigid labor markets. The size of the government and its distorting impacts are also an obstacle, and the quality of governmental services in relation to expenditures (which represent about 40% of the GDP) remain relatively low compared to other countries. Current expenditure and tax collection trends could be difficult to sustain. The government launched in 2007 a Growth Acceleration Plan to increase investment in infrastructure and provide tax incentives to encourage faster and more robust economic growth.
Despite expressive social progress, there are still major challenges in the area. Poverty and inequality remain at high levels, and there is still a large gap in access to pre-school and secondary education (especially among the poor). Although education indicators show that enrollments in basic education are nearing 100%, the frequency in pre-primary and secondary education remains low, if compared to other middle income countries. Despite improvements, the educational system still suffers from poor quality at the basic and secondary levels. Brazil also experiences extreme regional differences, especially regarding health, infant mortality and nutrition indicators. Other challenges include the combination of the benefits of agricultural growth, environmental protection and the sustainable development the Amazon and other biomes.
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Partnership with the World Bank
The World Bank works as a cooperative of countries, which supports its members with loans and knowledge. The Bank’s main objective is to help Brazil achieve sustainable growth and all the economic and social benefits associated with it. The Bank leverages its modest financial role (compared with Brazil’s economy) by being catalytic, and providing value added based on comparative advantages, focusing on helping Brazil achieve its own defined goals. The strategy adopts the pillars of equity, sustainability and competitiveness, based on solid macroeconomic foundations. In September 2007, there were 50 projects in activity in Brazil, for a total of US$ 4.1 billion in investments.
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World Bank Partnership with Brasil
The Partnership Strategy of the World Bank Group (including IFC) with Brazil aims to support the Country’s initiatives for sustainable growth, and to level conditions and development opportunities, both in relation to the developed world and inside Brazil. The Bank uses its global network to ensure that other countries benefit from Brazil’s knowledge in areas where Brazil is an acknowledged global leader (clean energy, including biofuels and hydropower; tropical agricultural research; conditional cash transfers; AIDS; community driven development.) In these instances the Bank plays a role “leveling the playing field” – ensuring that developing countries have an equal voice.
The Bank’s Partnership Strategy for 2008-2011 will increase the focus on direct work with states and municipalities, and on the Bank’s unique contributions to some of the main paradigmatic challenges faced by Brazil, where the World Bank’s value added may be most important for the development and growth of the Country in the long run:
• Fiscal and Public Sector Reform. Overcoming constrains to growth and combining short and long term actions which may cause immediate impact.
• Private Sector Development. Creating a favorable environment for investment and private sector-lead growth.
• Infra-structure for Development and Poverty Reduction. Increasing the institutional framework and investment in priority infra-structure within the country’s fiscal constraints.
• Human Development. Strengthening human capital and labor force, with higher impact of social services and efficiency in public expenditures.
• Rural and Agriculture Development. Reducing the disparity between agribusiness and family agriculture in Brazil.
• The Amazon: Economic Development and Environmental Sustainability. Coordinating infra-structure, energy, agriculture and the environment.
A More Competitive Brazil: Stimulating Sustainable Growth
The Bank’s partnership with Brazil is based on assistance from the IBRD for sustained, broad-based growth, in parallel with backing from the IFC to the private sector. The Bank’s support for increased productivity and investments focuses on more efficient infrastructure and competition regulation, strengthening the financial sector, achieving a modern innovation policy, and a more favorable environment for business development, especially for small and medium-size enterprises. The Bank also supports fiscal and social security reform efforts as a basis for better social, fiscal and macroeconomic performance in Brazil.
At a sub-national level, the World Bank has been a partner to several results-based management programs, helping to increase public sector effectiveness in states such as Minas Gerais and Ceará.
A More Equitable Brazil: Investing in People
The World Bank partnership strategy for a more equitable Brazil closely mirrors the priorities of the Brazilian Government, which has made social progress with economic stability the cornerstone of its program. The Bank’s support in the social sectors focuses on reaching the poorest and achieving higher levels of quality and efficiency in social services. Support to social protection was expanded through technical and financial assistance to national programs such as Bolsa Família, which provides monthly cash payments to more than 11 million families who keep their children in school and under regular medical supervision.
Complex challenges in education and health in Brazil, especially concerning the improvement and expansion of secondary and early childhood education, as well as strengthening the Unified Health System and state systems, are also areas in which the knowledge and experience of the World Bank may play an important role.
A More Sustainable Brazil: Supplying Local Services and Managing Natural Assets for Better Quality of Life
The World Bank’s support for a sustainable Brazil is directed at improving the quality of life through better local services in urban and rural areas, and for efficient management of Brazil’s abundant natural assets.
Indicators show progress on protection and sustained development of the large biomes. In addition, legal allocation of water rights has increased in many important hydrographic basins, facilitating greater sustainability in water use and resource management. On the other hand, sanitation and pollution control haven’t showed significant advances.
In recent years, Brazil has improved its housing and rural electricity programs, as well as its environmental legislation. The World Bank played a modest but catalytic role in these achievements, with loans and technical assistance.
The Bank has also been responding to the demand for more support to governmental initiatives which ally environmental protection to sustainable development for local populations in the Amazon.
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Project Achievements
Poverty Reduction
The Bolsa Família Program, which has technical and financial support from the World Bank, is considered one of the main reasons behind the significant social results achieved by Brazil in the last years. For decades, the poorer 60 percent of the population earned only 4 percent of the national income. With Bolsa Família and its predecessors, income inequality measured between 1995 and 2004 dropped almost 4.6%. Although inequality is still very high, Bolsa Família seems to help Brazil advance in a sustained reduction process. The Program reaches over 11 million families, more than 46 million people, a large part of the country’s low income population.
Health
The Family Health Program provides medical attention to vulnerable groups, which do not have easy access to the hospital system. Studies link the 13 percent child mortality rate decrease between 1999 and 2004 to the expansion of the Program. Vaccination coverage and child nutrition has also improved under the program.
Brazil developed one of the most encompassing and efficient strategies in the world to slow the rate of HIV/Aids infection and to care for those already affected. The program has stabilized the advance of the epidemics through free distribution of drugs and focused educational and awareness campaigns.
Rural Development
Rural poverty reduction projects developed along 30 years in Brazil now benefit over 53 percent of the low income rural population in the Northeast, the country’s poorest region. Resources go directly to the communities, which choose how to invest them and implement the projects directly. Using this methodology, projects are up to 50 percent less expensive than similar actions done through the traditional model.
The Crédito Fundiário (Land Loans) project offers financing and donations so that communities may identify and purchase land that they consider most adequate for their production. The communities also define themselves the investments and technical assistance necessary to make it sustainable and productive. The average income of families settled by the program increased by 181% between 1998 and 2003, and 145% between 2003 and 2005. Agricultural production in settled areas increased by about 350% between 1998 and 2000 and almost 100% between 2000 and 2003.
Education
The Fund for School Development (Fundescola) has decisively contributed for the marked decrease in the percentage of children between 7 and 14 not attending school. In 1995, 15 percent of the school age students were not studying. In 2005, this fell to 3 percent.
Natural Resources
The World Bank supports a new generation of projects which focus on local and regional aptitudes for environmentally sustainable income generation. Pará Rural, for instance, will use already degraded areas for production, thus decreasing the pressure on the forest. The Amazon Protected Areas Program is well on its way to preserve biodiversity in 50 million hectares of the Amazon region by 2013. In partnership with the international community, the Pilot Program to Conserve the Brazilian Rain Forest has already demarcated over 45.5 million hectares of indigenous land, and sponsored more than 200 projects that experiment with new models of rain forest conservation.
For more information on World Bank partnership with Brazil, including lending breakdown and project reports see:
Proposed Projects
All Projects
For information in Portuguese, visit the Brazil country office web site at: http://www.bancomundial.org.br
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Contacts Mauro Azeredo, Communications Officer (in Brazil)
E-mail: mazeredo@worldbank.org Gabriela Aguliar Martinez, Communications Officer (in Washington)
E-mail: gaguilar2@worldbank.org Updated in October, 2007
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