The socialists in Brazil thought they’d figured it out. The high price of exported raw materials would pay for the welfare state. It’s a similar equation to the one Chavez figured in Venezuela. But it was not taken to the same extreme by Brasilia.
Not only would the welfare state expand with proletarian and peasant voters secured, the political class, a crony class led by the once lauded Lula and then by his protege Dilma, would become rich by working the political system. And it kind of worked for a little bit while prices for commodities remained high. But once materials tanked, so too did the Brazilian economy and political system.
(From The AP)
Between 2004 and 2014, tens of millions of Brazilians emerged from poverty and the country was often cited as an example for the world. High prices for the country’s raw materials and newly developed oil resources helped finance social welfare programs that put money into the pockets of the poorest.
But that trend has been reversed over the last two years due to the deepest recession in Brazil’s history and cuts to the subsidy programs, raising the specter that this continent-sized nation has lost its way in addressing wide inequalities that go back to colonial times.
“Many people who had risen out of poverty, and even those who had risen into the middle class, have fallen back,” said Monica de Bolle, a senior fellow at the Washington-based Peterson Institute for International Economics.
The World Bank estimates about 28.6 million Brazilians moved out of poverty between 2004 and 2014. But the bank estimates that from the start of 2016 to the end of this year, 2.5 million to 3.6 million will have fallen back below the poverty line of 140 Brazilian reais per month, about $44 at current exchange rates.
Those figures are likely underestimates, de Bolle said, and they don’t capture the fact that many lower-middle class Brazilians who gained ground during the boom years have since slid back closer to poverty.