University of Waterloo
Department of Economics
Econ 383: Economic Development for Fragile Countries
The inequality and poverty problem in Brazil
November 27, 2012
The inequality and poverty problem in Brazil
Brazil is the largest economic entity in the Latin America with the fifth largest geographical area in the world and a population of 196.7 million (in 2011). Brazil has achieved a significant economy growth in recent years, but the wealth is unevenly distributed among the various regions and ranks of society, resulting in an inequality problem which is inconsistent with the country’s economy scale. These problems have deep historical roots and had been ignored for a very long period of time. In this paper, the general situation of inequality and poverty as well as the causes are introduced and the inequality & poverty data for Brazil are explored and analyzed. The change of inequality status in recent years is measured in terms of Gini coefficient, size distribution of income, Lorenz curve and Kuznets curve. The status of poverty is measured by the concepts of headcount, the headcount ratio and the normalized poverty gap. The collected data shows that the levels of income inequality and poverty of Brazil have fallen since 2001. The positive factors that improve the income redistribution, such as the good performance of economy, globalization and demographic bonus are discussed. The policy supports, including the improvement of education, minimum wage, social security and assistance, are specially addressed. However, the wealth is still concentrated among a minority and serious social problems remain a trouble for the country. The economy growth is hindered and social problems of stability and justice still persist. To realize the radical change of the problem, essential reforms regarding to urban, land, tax and finance need to be implemented. And surely there are certain challenges ahead. The inequality and poverty problem in Brazil has a fine representativeness for the economic growth of developing countries. It provides a good example to understand the complex problem of unbalanced and uneven development and has great social implications.
1.1 The inequality and poverty problem
The economy of Brazil is ranked by the World Bank among the upper middle income group. Brazil has a Gross Domestic Product (GDP) of $2.48 trillion in 2011 and the per capita GDP is $ 12593 (World Bank data).The GDP growth of Brazil in 2011 was 2.7%, which dropped a lot compared to the growth of 7.5% in 2010 due to the influence of global economic slowdown. However, in respite of the economic scale, the income inequality which is measured by the GINI index is lower only than the extremely poor African countries, such as Lesotho, Swaziland, Sierra Leone and Namibia (World Bank: PovcalNet). The living conditions of the 196.7 million Brazilians vary tremendously, and the income disparity is significant. This inequality exists not only between regions but also between urban and rural areas, genders and races. The inequality problem is severe both in the rural and urban areas. In rural areas, a small number of large landowners coexist with millions of small land owners as well as farm workers without land. The large farmers possess most of rural areas and enjoy big revenue, while the small landowners and workers live in precarious conditions. Land inequalities have historical roots and have become more protruding in recent years. 10% of the largest farmers occupied approximately 78% of the total planting area. The urbanization in Brazil is rather high, as more than 80% of people Brazilians live in cities today. The gap of living conditions in the city is obvious. A significant percentage of the urban population could not acquire inadequate living resources, such as housing, infrastructure, public health, education, etc. It is reported that 38.5% of the...
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