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The Spread of Benefits Alleviating Poverty in Brazil


By: Helmut Schwarzer and Guilherme Delgado
 Insights: Development Research


 June 2002

New Measures

In the 1970s unconventional measures to expand coverage were introduced in Brazil. The most notable of these was the creation of a non-contributory rural scheme (1971) followed by social assistance pensions (1974), all providing flat-rate benefits. The new constitution in 1988 improved the coverage and generosity of these schemes. As traditional urban contributory pensions introduced in the 1920s reached maturity, non-contributory schemes became responsible for extended coverage and the breaking of the barriers of informal labor and poverty, which are common in developing countries. By December 2001 the Brazilian Social Security Institution INSS paid out 20 million benefits, 6.3 million of these in the rural scheme and 2.1 million in assistance pensions.

The rural scheme provides benefits covering old age, disability, sickness/maternity, labor-related accidents and for widows or orphans of rural workers. Old age pensions are granted at age 60 for men and age 55 for women, five years below the retirement ages of urban dwellers. The insured are not required to meet contribution requirements, but to document previous periods of rural work. Benefits are equal to one minimum wage (US $87 in April 2002).

  Cost and benefits

The scheme is financed partly through a contribution of 2.2% of the value of the agricultural product sales. However, this revenue barely covers one-tenth of the total cost of rural benefits. Thus the deficit requires annual transfers from the urban workers scheme and the Treasury of about 1% of the GDP.

Yet such a deficit is justified by the enormously positive socio-economic impact of the program. Recent research by IPEA showed that the rural pensions

  • Significantly reduce poverty among the elderly. In  the north-east and south regions, 85.3% and 90.8% respectively of the beneficiaries’ households were above the household income threshold of US1$ per person  per day

  • Facilitate household investment in agricultural production and improve living standards within the household

  • Enabled the survival of the rural small scale and household economy in the 1990s

  • Reduce  rural-urban migration

  • Strengthen family ties as the elderly share their pension income within the household

  • Ensure significant income redistribution from the rich urban south-southwest to poorer areas in Brazil

  • Improve the well being of women who are entitled to an independent pension.

The main lessons to be learned are:

  • Relying on contributory pensions alone cannot extend social security coverage beyond formal employment in developing countries. A noncontributory scheme is required to cover the excluded population.

  • Flat-rate benefits proved to be efficient in extending coverage. Despite complaints about the low unitary value of the pensions, they induce significant income redistribution and poverty alleviation.

  • Sustaining non-contributory pensions is costly, but these have a large and positive social impact.

  • A universal social rights approach allows a targeting of the poorer segments of the population without stigmatizing beneficiaries.

  •  Studies should but be carried out to evaluate the potential for extending the principles of rural social security to the urban household economy in Brazil.

IPEA/Instituto de Pesquisa Economica Aplicada, SBS/Ed. BNDES 14th Floor, 70.076-900 Brasilia-DF-Brazil.


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