Citizen's Income and Welfare Regimes in Latin America

From Cash Transfers to Rights

Kenneth A. Loparo, Kenneth A. Loparo, Rubén Lo Vuolo

• Publisher: Palgrave Macmillan
• Year: 2012
• Print ISBN: 9781349341207, 9780230338210
• eBook ISBN: 9781137077547
• Topic: Business
• Subtopic: Business General
• Index: Business

Social protection systems in Latin America developed in a fragmented manner, offering varying access to benefits and benefit levels to population groups. In the context of widespread informal and precarious work, social insurance institutions could only provide limited coverage. In this context, progress toward a Citizen's Income policy in Latin America depends on the possibility of reappraising its importance for an integrated institutional system which promotes the empowerment and economic independence of people. A Citizen's Income policy is not only a cash transfer to alleviate poverty or a basic income for food. It is a basic right to improve democracy and encourage a more autonomous development of people living in profoundly unequal societies.

P A R T I

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Citizen’s Income and Cash Transfers

C H A P T E R 1

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Brazil: The Lost Road to Citizen’s Income

Lena Lavinas

INTRODUCTION

This essay aims to reflect on some of the impasses in the implementation of Citizen’s Income (CI) in Brazil. While the country is an exception in the international scenario as the first in the world to adopt Citizen´s Income by law, its experience is riddled with paradoxes that raise doubts on the possibility of moving from conditional cash transfer programs (CCTs) to the unconditional, universal CI.

According to Law 10.835 of January 2004 (Lei de Renda Básica de Cidadania), which establishes a CI, every Brazilian citizen or foreigner residing in the country for more than five years is entitled to a basic income (BI) “regardless of socioeconomic condition.”¹ However, Brazil’s unprecedented initiative appears to be swept away by the law’s very design, which encompasses conditionalities and is required to target the poorest. The law recognizes that “the benefit should be paid with an equal amount for all, sufficient to meet each person’s minimum expenses with food, education, and health.” According to the law, the right to a CI is to be implemented “by stages, at the discretion of the executive branch, prioritizing the poorest segments of the population.” Finally, the law stipulates the budget outlay to ensure its provision is a prerogative of the federal executive branch. This means that the law is subject to the caveats of macroeconomic policy and that its financing may be jeopardized by budget constraints and immediate political and economic issues.

Two restrictions in the law itself undermine the principle of the right to an unconditional and universal CI: the policy of targeting the poorest and the law’s subordination to the federal government’s assessment to define the schedule and pace of its implementation, based on the balance in the public accounts. Its format thus combines mutually exclusive requirements, targeting the poorest and aiming for uniformity and universality. Therefore, the Brazilian CI was already born distorted. In practice, the right to a CI ended up being confused with the Bolsa Família (Family Grant, BF) program, the largest CCT in Latin America, enacted by Law 10.836 only 24 hours after the CI Law.

Both laws appeared at the end of the first year in the Luiz Inácio Lula da Silva Administration (2003–2010), but with two radically different trajectories. While Law 10.835 became empty rhetoric, BF has been consolidated at both domestic and international levels to create a social policy focused on the effective fight against poverty. Rather than the CI, what gained legitimacy was a conditional, targeted cash transfer program that was absent from the Brazilian social protection system until 1988.

In the misguided view of the Brazilian federal executive and legislative branches, the progressive expansion of BF would lead automatically to its metamorphosis into a universal CI. This shift was merely a matter of time and resources.² This official discourse serves as the counterargument to criticism aimed at the Brazilian state for failure to enforce Law 10.835.

Despite its huge scale, BF has not succeeded in fully meeting the demand for a minimum income to reduce the extent of destitution among the poorest. An important contingent of the targeted public has not been considered as having a right to a safety net, due to targeting criteria that restricted the program’s coverage (Lavinas, 2010).

Meanwhile, it is widely known that the CI law has not even moved beyond paper. What can explain this backslide in redistributive programs in a country that is so profoundly in need of them and whose strongest identity trait is inequality? Why does Brazilian society rule out unconditionality, preferring conditions and targeting to orient public policies? Why was CI left out of the recent political debate on how best to use the extraordinary resources from the royalties on the new pre-salt petroleum reserves? Could the pre-salt fields (discovered in the late 2000s and estimated at billions of dollars) be the long-awaited, secure, long-lasting financial solution for CI? Will Brazil learn from Alaska, which created the Permanent Fund with resources from the exploration of its natural riches, to share the fund equally among all its inhabitants? (Goldsmith, 2002).

In the first section “Introduction,” this chapter aims to demonstrate why targeting and conditionalities—already tested by BF—have little chance of paving the way to universal and unconditional CI in Brazil. The obstacles faced by universalization and unconditionality as values for all of Brazilian society are also examined. The chapter also discusses why such impediments end up inhibiting the materialization of CI and leading to its total ostracism after being legally enforced for eight years.

Following this introduction, the second section “Social Security: Universal Schemes and Their Paradoxes” briefly contextualizes the Brazilian social protection system, consecrated by the 1988 Constitution, in order to highlight how the universal dimensions of social security, which emerged with the country’s re-democratization process, are nowadays subject to challenges, tensions, and repeated attempts at de-constitutionalization. The third section “Bolsa Família: Conditionalities Make Their Appearance” provides an analysis of the BF program, drawing on empirical examples to elucidate the effects of conditionalities and targeting. The fourth section “The Ostracism of Citizen´s Income in Brazil” focuses on the recent debate on the use of the petroleum royalties to reflect on the reasons that prevent CI from entering the contemporary Brazilian debate on timely redistribution of the national wealth. The last section “Final Remarks”provides some final comments on the prospects for CI in Brazil.

SOCIAL SECURITY: UNIVERSAL SCHEMES AND THEIR PARADOXES

Brazil’s 1988 Constitution established social security in the country with its own budget and “an integrated set of actions at the initiative of the Public Powers and society, dedicated to ensuring the rights to health, pension benefits, and social assistance” (Brasil, 1988: art. 194).³ This tripod ended up shaping a new system of rights in which health is universal and unconditional, social insurance is guaranteed to those who contribute according to uniform rules, and social assistance is targeted for those who can prove an income deficit and unmet basic needs (Abrahão Castro and Ribeiro, 2009).

The two characteristics—universal coverage and uniform benefits—should promote a more comprehensive and redistributive system thus making redundant the previous one, which was class-based, fragmented, incomplete, and therefore exclusionary. However, universality and uniformity are not always achieved in practice (as in the case of health) and are sometimes even rejected as illegitimate and pernicious principles (as in the case of rural pensions and other benefits). In what follows, I will examine some evidence of “de-constitutionalization” of universal social security rights, in light of each of the three sectors—health, basic pensions, and social assistance—in order to understand why universality is still a work in progress in the Brazilian society.

Health

Under the 1988 Constitution, health became a right for all citizens and the duty of the state, through the Unified National Health System. Theoretically, participation by the private sector was expected to be merely complementary.⁴ As a result, the health sector required increasing amounts of resources to meet the exponentially growing demand for universal coverage and diversification of services, ranging from primary care to high-complexity therapies. Since the creation of the Unified National Health System, numerous programs have been progressively incorporated with an emphasis on prevention. This favored the expansion of the healthcare network throughout the country (Piola et al., 2009; Alvim, 2011). Universal immunization was achieved for all age groups; free distribution of a wide range of medicines was maintained, including those classified as strategic in cases of sexually transmitted diseases and HIV/AIDS; and medical consultations and hospitalizations in the public sector increased steadily.

However, underfinancing jeopardizes the universal dimension of the health system. Underfinancing “restricts the public system’s action and supply capacity and the organization of a case-resolving network. The result is a burden on families, who have to devote an important share of the family budget to health expenses” (Alvim, 2011). Expenditures on health goods and services for families reached 56.3 percent of all expenditures in the health sector, considering the amounts allocated by the three levels of government (IBGE, 2011). Thus, private health expenditures in Brazil reached 5.3 percent of the GDP in 2009, much higher than public expenditures, which was 3.5 percent. This belies the claims of a free and universal health system.

This is partially due to the fact that billions of Reais are granted in subsidies for private expenditures. The federal government uses income tax deductions to reimburse up to 27.5 percent of what the very wealthy spend on private health plans and doctors; there is no limit on deducting private health expenditures from personal income tax.⁵ In 2006, “the Federal government failed to levy for health nearly a third of what the Ministry of Health spent that year” (Ocké-Reis and Santos, 2011). In a national survey conducted in 2012, although 61 percent of the interviewees disapproved of the current public health system, and 95 percent felt that it needed more investments; 96 percent were against recreating a tax to finance the sector in order to ensure universal public provision.⁶

President Dilma Rouseff (in office since 2010) signed the constitutional amendment 29/2000 in 2012. The bill defined mandatory expenditures for the public health system at all levels of government, and threatened to impose sanctions against states and municipalities that failed to comply with the rules. Even so, the sector remains underfinanced. Although the terms of a universal system are laid out in the legislation, the new middle class is willing to consume more private health insurance plans: “The deepening segmentation of the Brazilian health system will be accompanied by more injustice and discrimination, because the private plans targeting new contingents of consumers suffer from reduced coverage and low-quality care” (Bahia, 12011).

Despite concrete arguments based on economics (not only on social justice, Barr, 2003) justifying public and universal health provision, the magnitude of underfinancing of the health sector in Brazil reinforces its segmented meritocratic profile and condemns programs and policies inspired by universal principles and values. Brazil thus runs the overt risk of a dual health system, contradicting the principles of the universalistic model that both inspired the creation of the National Health System and its regulation. Though private care subsidized indirectly by the government, funded by money from taxes, seems to be the best choice (for the more fortunate), it leaves the poorer sections of society at the mercy of second-class public healthcare. The Unified National Health System’s inability to ensure universal and unconditional provision exposes the challenge of building and defending the universal and unconditional principle of CI.

Basic Pensions for the Rural

Health is not the only area in which the principle of universalism is challenged in Brazil. Rural basic pensions, another important achievement of the 1988 Constitution, are systematically brought into question by conservative groups who interpellate its constitutionality.⁷

One of the new features of the 1988 Constitution was to equalize and standardize social benefits for rural and urban workers (Delgado and Cardoso, 1999; Musse, 2008). Rural workers and small family farmers were now entitled to receive a retirement pension identical to the minimum benefit for urban workers, namely one month’s minimum wage. The rural pensioners do not contribute in full to a social insurance scheme, thus creating another category of “special rural pensioners” entitled to retirement based on age. Rural women occupied in subsistence family farming can now retire at 55 years of age and receive one monthly minimum wage, while for rural men the age is 60 years.⁸

Delgado and Cardoso (1999) have shown how...

Table of contents

• Cover
• Title Page
• Copyright
• Epigraph
• Contents
• List of Illustrations
• Introduction
• Part I   Citizen’s Income and Cash Transfers
• Part II   Citizen’s Income and the Latin American Public Agenda
• Epilogue
• Notes on Contributors
• Index