Bolsa Familia vs. Reforms

Is populism a real problem in Latin America?  I’d say it is – as it diverts attention and resources from the much needed reforms.  Populist leaders run on platforms of addressing the needs and concerns of the ignored segments of the population – the poor.  To simplify – there two ways of doing it.  One, is giving a handout – i.e. subsidizing food prices, providing free services, etc.  There is an interesting story in the Washington Post on one such program in Brazil – Bolsa Familia.

Bolsa Familia is the cash assistance program that pays more than 11 million low-income families in Brazil about $40 per month in cash if they meet conditions such as ensuring their children regularly attend school and have regular health checkups and vaccinations. The assistance was enough for Rodrigues da Silva to afford his first television set, and it has been instrumental in helping President Luiz Inacio Lula da Silva overcome corruption scandals and build a lead of more than 20 points in opinion polls heading into the runoff against former Sao Paulo state governor Geraldo Alckmin.

Such programs may help Lula win elections.  They may even address some of the short-term concerns of the poor.  But, they do not fix the underlying problems. 

An alternative to populist programs, or handouts as I call them, is reform – economic and political reform that secures political and economic liberty and provides the poor with access to political and economic institutions.  It has much to do with lifting people out of poverty altogether, creating new opportunities, and giving them a chance to create their own future – rather than providing some assistance within a system that offers few opportunities for development and growth.

There are some signs that Lula will not be able to get by on promises and programs such as Bolsa Familia in his second term.  As this CSM story highlights, he will have to do more to get corruption under control and fix the economy:

“Everyone agrees, I think, on what needs to be done,” says Helio Magalhaes, chairman of the board at the American Chamber of Commerce in Brazil. “The tax burden needs to be reduced, government spending has to come down, and social security needs to be reformed because it generates such a huge deficit. And the government needs to invest in infrastructure to create the conditions for long-term investment. From a business point of view, those are the fundamental things.”

Will Lula stay the course of Bolsa Familia?  Or will he move towards real structural economic and political reforms?