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RR RUEHRG
DE RUEHBR #1098/01 2441910
ZNR UUUUU ZZH
R 011910Z SEP 09
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 4988
INFO RUEHSO/AMCONSUL SAO PAULO 4476
RUEHRG/AMCONSUL RECIFE 9871
RUEHRI/AMCONSUL RIO DE JANEIRO 8132
RUEHBU/AMEMBASSY BUENOS AIRES 6338
RUEHAC/AMEMBASSY ASUNCION 7641
RUEHMN/AMEMBASSY MONTEVIDEO 7818
RUEHSG/AMEMBASSY SANTIAGO 1014
RUEHLP/AMEMBASSY LA PAZ 6949
RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHDC

UNCLAS SECTION 01 OF 04 BRASILIA 001098 
 
SENSITIVE BUT UNCLASSIFIED 
SIPDIS 
 
STATE FOR WHA/BSC, EEB/IFD/ODF, INR/IAA, INR/R/AA 
STATE PASS USTR FOR KATE DUCKWORTH 
NSC FOR ROSSELLO 
TREASURY FOR KAZCMAREK 
USDOC FOR 4332/ITA/MAC/WH/OLAC 
USDOC ALSO FOR 3134/USFCS/OIO 
USAID FOR LAC/AA 
 
E.O. 12958: N/A 
TAGS: PGOV SOCI SCUL EFIN ECON PREL BR
SUBJECT: BRAZIL'S CONDITIONAL CASH TRANSFER PROGRAM FIVE YEARS IN 
 
REF: (A) 08 SAO PAULO 38; (B) 07 SAO PAULO 10; (C) BRASILIA 310 
 
¶1.  (SBU) SUMMARY: A little more than five years into its existence, 
Brazil's conditional cash transfer program Bolsa Familia (PBF) 
continues to stir debate over its effectiveness.  PBF aims to 
alleviate poverty both by providing for beneficiaries' short-run 
basic needs and by creating conditions for long-run upward mobility 
through incentives for education and investments in human capital. 
Some national and international studies claim PBF has reduced 
poverty.  While it has helped millions of poor Brazilians make ends 
meet on a month-to-month basis and inspires their fierce loyalty to 
both the program and to President Lula, its success in reducing 
poverty and promoting long-term social mobility remains less clear. 
Significant implementation challenges exist due to the decentralized 
structure of PBF as well as the danger of the program becoming a 
political electoral tool.  Some experts believe the PBF cannot 
succeed in breaking the cycle of poverty before other underlying 
issues are addressed, especially the need for deep educational 
reform.  While experts debate PBF's long-term benefits, the program 
remains politically popular, has become a virtual entitlement, and 
is unlikely to be questioned by any candidate for president in the 
run-up to next year's election.  END SUMMARY. 
 
---------- 
BACKGROUND 
---------- 
 
¶2.  (U) Bolsa Familia was established in 2004 when President Lula 
consolidated several cash transfer programs that had been introduced 
during the predecessor administration of President Fernando Henrique 
Cardoso.  Lula dramatically expanded PBF during his first term, and 
the program now reaches 11.5 million families -- about 46 million 
individuals -- at a total annual cost of R$12 billion (US$ 6.7 
billion).  PBF participants represent approximately 80 percent of 
Brazil's poor, and about one quarter of the country's population. 
Fifty percent of beneficiaries reside in Brazil's underdeveloped 
northeast.  Participation continues to increase as the government 
periodically raises the maximum income households can have and still 
be eligible and the program reaches more communities.  Official 
government projections estimate the number of recipient households 
will reach nearly 13 million by the beginning of 2010. 
 
¶3.  (U) Families with monthly per capita income of US$ 78 or less 
qualify for PBF.  Based on income and family size, scaled payments 
are dispersed via an ATM card issued by the Caixa Economica Federal 
(federally-owned bank).  On average families receive about US$ 47 
per month.  In order to receive PBF benefits, parents must 
theoretically send their children to school, have them immunized and 
adhere to pre- and post-natal care.  Literacy, professional and 
income-generating training programs are also made available to 
program beneficiaries.  Approximately 93 percent of the persons who 
register on behalf of their families are women.  The Ministry of 
Social Development and the Fight against Hunger (MDS) oversees PBF, 
but states and municipalities handle implementation. 
 
---------------------------- 
ADMINISTRATION AND OVERSIGHT 
---------------------------- 
 
¶4. (U) Bolsa Familia is a federally funded program that is 
implemented at the state and municipal level, with the bulk of the 
identification and registration of beneficiaries occurring at the 
municipal level.  With over 5,000 municipalities individually 
managing the delivery of funds and program compliance, federal 
oversight to monitor effectiveness is difficult.  On the other hand, 
many municipalities are small and it is relatively easy for these 
communities to accurately register poor families.  In the city of 
Sao Paulo, however, only two municipal officials manage the program 
for a population of about 11 million residents.  Given the large 
variation in local capacities and resources, it is not surprising 
that issues of fraud and lapses in beneficiaries' compliance with 
program conditionality have surfaced. 
 
 
BRASILIA 00001098  002 OF 004 
 
 
¶5.  (SBU) The Federal Audit Court (TCU) evaluates PBF's execution 
along with civil society organizations.  In 2009, the TCU found that 
about 1.2 million families who were not poor received PBF benefits 
illegitimately, and estimated that combating PBF fraud could save 
about US$ 177 million per year.  The TCU has relied on the 
cross-checking of major databases to uncover abuses.  For example, 
comparing PBF beneficiary lists with other available databases 
revealed that approximately 40,000 politicians; 300,000 deceased 
people; and 100,000 vehicle owners were fraudulently receiving 
benefits.  In 2009 in the State of Bahia, two officials stole US$ 1 
million in PBF funding through false contracts. 
 
----------------- 
REDUCING POVERTY? 
----------------- 
 
¶6.  (U) Brazil's poverty rate -- as measured by per capita income of 
half the local minimum wage -- dropped from 39.4 percent of the 
population in 2003 to 30.3 percent in 2007, according to the World 
Bank.  Recent data from Brazil's official government economic 
statistics office (IPEA) indicate that Brazilians are continuing to 
pull themselves out of poverty.  IPEA reports that despite the 
current economic crisis, another 500,000 Brazilians have risen above 
the poverty line over the past year.  With respect to PBF, questions 
remain as to how much of the drop in poverty can be attributed to 
PBF or to a combination of other cash transfer programs, most 
notably social security cash transfers to some 30 million retired 
rural workers, and Brazil's sustained economic growth over the last 
five years.  Some academic research has suggested that PBF has 
played a partial role in Brazil's improving Gini coefficient 
(measure of income distribution equality), which has fallen from 53 
to 49 since 2002.  The World Bank continues to back PBF with 
technical and financial assistance, giving it credit for positive 
social outcomes in Brazil. 
 
--------------------------- 
PULLING IN THE MARGINALIZED 
--------------------------- 
 
¶7.  (U) Aside from cash transfers, PBF has a number of positive 
secondary effects that help to integrate the poor into society 
according to economist Andre Portela Souza and social worker Paula 
Galeano, both based in Sao Paulo.  By registering for PBF, 
vulnerable populations become visible to both national and local 
level governments because participants must acquire and present 
documents they might have never had before: a birth certificate, ID 
card or proof of residence.  Potentially, this evidence could help 
the GOB tailor programs to specific needy groups (the handicapped, 
those suffering from mental illness, the unemployed, etc.).  In this 
way, PBF has put a human face on the formerly marginalized, bringing 
them in from the shadows and making their plight potentially more 
measurable. 
 
¶8.  (U) In addition to identification, PBF also integrates 
recipients into Brazil's growing consumer and banking cultures. 
Even families living in relatively remote areas can enroll in the 
program and in a matter of months receive an ATM card that allows 
for modern and direct access to PBF funds.  With this card, the same 
families can then open a small checking account and apply for 
microloans.  Anecdotal evidence suggests that, in addition to 
subsistence, PBF enables poor families to make small capital 
investments.  For example, PBF authorities in Sao Paulo cited the 
example of a female PBF recipient who used the cash transfer to buy 
a washing machine to sell laundry services in her community. 
 
---------------------------------------- 
MINIMAL IMPACT ON CHILD LABOR AND HEALTH 
---------------------------------------- 
 
¶9.  (U) Studies conflict on Bolsa Familia's impact on reducing child 
labor, indicating only a small long-term impact on reducing 
children's presence in the workforce.  PBF is not incentive enough 
for children from poor families to abandon the labor market and the 
 
BRASILIA 00001098  003 OF 004 
 
 
short school day encourages families to have their children perform 
wage work outside of class.  Children who work full-time receive an 
average wage that is higher than the sum of the average wage 
received by children working part-time with added program benefits. 
Studies show no difference in the rate of immunization, as the same 
numbers of children are being vaccinated with Bolsa Familia as 
without. Studies have yet to show the impact on pre- and post-natal 
care of PBF recipients. 
 
¶10.  (SBU) Interestingly, some employers may be encountering 
difficulties finding workers willing to give up their Bolsa Familia 
eligibility to join the workforce.  Consulate Recife has heard of 
complaints raised from sugarcane growers from the states of Alagoas 
and Pernambuco that PBF has made it more difficult to find workers 
to cut the cane, saying that some of the men who normally performed 
this seasonal labor are opting not to because of Bolsa Familia 
stipends. 
 
-------------------------------------- 
LACK OF COMPLIANCE AMONG BENEFICIARIES 
-------------------------------------- 
 
¶11.  (SBU) Another concern for officials is the failure of 
legitimate recipients to fulfill PBF requirements.  Though school 
attendance is up overall thanks to PBF, in some key areas it lags 
badly, indicating a lack of high quality nationwide supervision and 
follow-up.  According to Alexandre Marinis, a political economist 
and writer for Bloomberg, in the state of Goias 33 percent of 
children in families receiving PBF benefits were not enrolled in 
school.  The same figure for Rio Grande do Sul was 32 percent, 
according to Marinis. 
 
¶12.  (U) Social workers in Sao Paulo tended to dismiss 
non-compliance violations.  They stated that non-compliant PBF 
families were often the most marginalized, and that they needed more 
help, not less.  A Sao Paulo-based social worker said, "The people 
whose kids are missing school or are not getting proper medical 
treatment, those are the most needy.  They should not be kicked out 
of the program." 
 
--------------------------------------------- --- 
SCHOOL: ATTENDANCE UP, BUT QUALITY BLUNTS BENEFIT 
--------------------------------------------- --- 
 
¶13.  (SBU) Ironically, school enrollment non-compliance may not be a 
significant factor as long as Brazil's public school system 
continues to underperform.  Bolsa Familia was designed to encourage 
long-run upward mobility by setting conditions that children of 
beneficiary families attend school.  Professor Andre Souza cites 
studies indicating that PBF has raised school enrollment by two 
percent and the amount of time students spend in school by three 
months.  Unfortunately, increased school attendance does not 
guarantee educational gains, given the shortcomings of Brazil's 
public schools.  As Souza explains, "The problem is not demand for 
schooling, but the supply of good schools."  PBF brings more kids 
from marginalized families -- many of whom represent the first 
generation ever to attend school -- into an educational system that 
is woefully inadequate.  Overcrowding, a truncated school day 
(Brazilian elementary and high school students only study three to 
four hours per day) and rigid school structures hostile to 
innovation frequently combine to undermine the benefits that might 
have been gained from increased attendance.  While the public system 
is inadequate, efforts at reform are being made by the Ministry of 
Education and state and municipal governments, some of which are 
being supported by various Public Affairs programs in Brazil (reftel 
C). 
 
¶14.  (U) A study conducted by IPEA and the Brazil office of the 
United Nations Development Program (UNDP) found that Brazil's 
education system is not capable of assisting PBF beneficiaries 
escape poverty.  The study modeled the impact the PBF would have had 
on Brazil's current poverty levels had it been instituted since 
¶1976.  In other words, the researchers attempted to go back in time 
 
BRASILIA 00001098  004 OF 004 
 
 
and simulate 30 years of PBF implementation, modeling perfect school 
enrollment of beneficiary children, to model how current levels of 
poverty would have been impacted.  According to their study, current 
poverty levels would have only dropped from 25 percent (what it is 
today) to 22.3 percent.  The researchers concluded that exposing 
more students to a weak public educational system would not have led 
to a significant improvement in poverty levels. 
 
---------------- 
PBF AND POLITICS 
---------------- 
 
¶15.  (SBU) PBF remains a popular program, particularly with the 
poor, who constitute President Lula's political base.  The program 
likely contributed to Lula's successful 2006 Presidential 
reelection.  In the Northeast, President Lula's home region and an 
area which concentrates program beneficiaries, Lula averaged between 
68-85 percent of the vote.  Another study indicated that nationwide, 
for every one percentage-point increase in a state's population 
receiving PBF funding, Lula's voting share jumped by more than 7 
percentage points in the 2006 race.  This has led critics like PMDB 
Senator Jarbas Vasconcelos, from Pernambuco in the Northeast, to 
charge that PBF benefits amount to vote buying.  Senator Vasconcelos 
also criticizes the PBF for not doing more to address the 
substandard education system that children attend. 
 
--------------------------------- 
COMMENT: A PARTIAL ANSWER AT BEST 
--------------------------------- 
 
¶16.  (SBU) Bolsa Familia has ameliorated daily living conditions for 
the poorest Brazilians.  Cash transfers, however, will not address 
the significant structural problems -- most importantly a weak 
public education system -- that continue to undermine longer-term 
goals of social and economic mobility and opportunity.  The PBF also 
suffers from operational challenges that may be easier to address, 
including: building a more complete registry, designing mechanisms 
to systematically evaluate and police the program, creating a modern 
compliance management system, and, eventually proposing an exit 
strategy for beneficiaries.  Nonetheless, to advance the PBF key 
goals of long-run upward mobility, education reform stands out as 
the critical need.  Independent of Brazil's ability or willingness 
to address the underlying conditions impacting the country's poor 
populations, Bolsa Familia is politically popular and, as a result, 
no candidate in next year's presidential election is likely to 
challenge it.  The program appears to have become a permanent part 
of Brazil's political infrastructure -- almost a sacrosanct 
entitlement -- ensuring that it is here to stay.  END COMMENT. 
 
¶17.  (U) This cable was co-drafted by Consulate Sao Paulo and 
Embassy Brasilia, with input from Consulates Rio de Janeiro and 
Recife. 
 
KUBISKE