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BRAZIL: Trillion-Dollar Social Debt

Mario Osava

RIO DE JANEIRO, Feb 10 2005 (IPS) - Brazil would have to invest close to 7.2 trillion reals (2.7 trillion dollars), the equivalent of over four years of its gross domestic product (GDP), in order to attain a standard of living comparable to the developed nations by the year 2020.

This was the conclusion reached in a recent study, the "Atlas of Social Exclusion", carried out by 17 researchers from a number of different Brazilian universities and fields.

Reaching this goal, the study added, would also require the creation of 56 million new jobs over the next 15 years, or 3.5 million each year, in this country of around 180 million.

It may sound like an impossible task, but economist Marcio Pochmann, the coordinator of the study, believes it could be achieved through greater social spending and better integrated and more effective public policies.

The researchers estimated Brazil’s "social debt" at 2.7 trillion dollars, based on an assessment of the current situation in the country’s 26 states and calculating the investments needed to attain objectives established for nine social areas, including education, health care, housing, culture and "decent employment".

With regard to education, for example, only one-third of Brazilians between the ages of 15 and 20 are enrolled in secondary education, compared to 80 percent in Chile. The researchers calculated the cost of raising secondary school coverage in Brazil over the next 15 years to the current levels in Chile, Pochmann told IPS.

But in order to match the living standards of wealthy nations like Japan or the most developed European countries by 2020, Brazil would need to dedicate 27.6 percent of its GDP to social spending every year. With 14.5 percent, it could attain the current living conditions in "intermediate" countries like Greece.

Given the enormous size of the social debt, it is crucial for the government to define social goals, just as it currently sets economic targets.

Moreover, these goals must be integrated, to ensure that the pursuit of economic objectives does not work to the detriment of social concerns, as is the case today, according to Pochmann, a professor at the University of Campinas, located 100 kilometres from Sao Paulo.

As an illustration, Pochmann pointed to the growing emphasis placed on exports of raw materials, and said the need to remain competitive leads to continuous cost-cutting, which in turn leads to increasingly lower salaries that further weaken the domestic economy.

This highlights the need for a "drastic change" in the Brazilian government’s current policies, argued Pochmann.

Without significant growth in social investment, Brazil runs the risk of facing even worse socio-economic conditions 15 years from now than it does today, and this could pose serious difficulties in terms of governability, he warned.

Pochmann – whose academic credentials are backed by his practical experience as the municipal secretary of labour in Sao Paulo (one of the world’s biggest cities), a position he held until December – noted that better coordination is needed among the different ministries and other government bodies.

These currently operate in relative isolation, as independent entities with no intercommunication, a fact that seriously limits the effectiveness of investments and policies, he said.

The researchers who worked on the "Atlas of Social Exclusion" want to promote a national debate on the social debt and the need to define comprehensive objectives and policies for the social sphere, which continues to take a back seat to macroeconomic goals.

They plan to present their conclusions at the next Economic and Social Development Council, a consultative body created by leftist President Luiz Inácio Lula da Silva, comprising representatives of civil society and the business community. According to Pochmann, however, the recommendations that emerge from the Council have had little influence on the government so far.

Brazil assumed less ambitious commitments in the eight Millennium Development Goals (MDGs) adopted by a United Nations summit of world leaders in September 2000.

The MDG targets for 2015 include cutting the proportion of people suffering from hunger and extreme poverty in half, as well as goals involving health, education, employment, gender equality and the environment.

According to a report released by the Economic Commission for Latin America and the Caribbean (ECLAC) in 2003, Brazil was among seven countries in the region that have steadily reduced the proportion of people living in extreme poverty, although it is doing so at a rate that is too slow to meet the 2015 target.

Pochmann maintained that developing countries in general are characterised by the "disorganisation of society and government." Economic growth cannot be sustained without advances in social development, and these demand heavy investment, particularly in education and health care.

According to the Atlas, however, the key to development is job creation. In order to reach the current living standards in Greece by the year 2020, Brazil would need to create 50.4 million new jobs, which would require annual economic growth of at least five percent. Over the last two decades, the country has only managed an average of two percent a year.

Nevertheless, the study, which was published in late January, notes that even if this many jobs are created, there will still be 14.7 million unemployed workers in 2020. Official statistics from 2002 placed the number of unemployed or underemployed Brazilians at 22 million.

The greatest problem facing Brazil, according to Pochmann, is a "lack of decent employment." Millions of people classified as employed work in the informal economy, where they earn extremely low wages and have no rights or protection.

The experience in Sao Paulo over the last four years shows that even with limited investment, a great deal can be achieved, Pochmann said. Up until the year 2000, seven out of every 10 jobs were concentrated in the city centre, with only three offered in poor neighbourhoods on the outskirts, a situation that exacerbated social inequalities.

But last year, of the 200,000 new jobs created, 60 percent corresponded to the outlying areas of the city, he noted. One of the social effects of this shift, he believes, was a marked reduction in the city’s murder rates.