Brasília – Social dialogue was a key element for Brazil to be able to quickly exit the world financial crisis that erupted in 2008. Social and macroeconomic policies combined were also crucial. The conclusions were culled from an International Labour Organization (ILO) report entitled Growth with Equity – Brazil: an Innovative Income-Led Strategy.
The report, issued this Tuesday (22nd), shows that Brazil created over 3 million formal jobs in the last two years, and that its economy grew by over 7% in 2010 and returned to pre-crisis levels. Economy and labour, however, have not grown at the same pace. Still, informal labour and income inequality have decreased, even during the crisis.
According to the report, social policies implemented by the Brazilian government during the crisis were beneficial, such as the continual raising of the minimum wage, the increase in benefits such as the Bolsa Família (Family Purse) income transfer programme, and the extension of unemployment insurance for two months. In terms of economic policies, the Tax on Industrialized Products (IPI in the Portuguese acronym) was lowered on automobiles, which may have contributed to the maintenance of 50,000 to 60,000 jobs. What is more, roughly 25 million jobs depend either directly or indirectly on vehicle production.
Also regarding macroeconomic policies, the government had public banks make credit available to Brazilian enterprises at a time in which private banks were lowering their credit supplies. This policy granted access to credit not only to large businesses, but to medium and small ones as well.
Other government measures that have helped address the crisis were the expansion of the Growth Acceleration Programme (PAC) and the establishment of the Minha Casa, Minha Vida (My House, My Life) housing programme, which aimed to build 1 million houses for low-income families in 2009 and 2010. Together, these programmes boosted job creation across different sectors.
These actions led to rising employment as early as February 2009. The Gross Domestic Product (GDP) grew by 4.2% in the fourth quarter of 2009 and 7.5% in 2010, a rate higher than pre-crisis levels.
The report also points out that Brazil must strengthen and improve its labour policies. According to the report, the extension of unemployment insurance could have included more crisis-stricken sectors. Survey data shows that the effective coverage of unemployment insurance includes 7% of workers, a rate lower than in most emerging countries. In Chile, the effective coverage is 20%, and in China and Turkey, 13%.
Brazil must work to improve its job maintenance regimes. In some cases, social dialogue has been used in order to reduce the number of dismissals. Highlight actions taken include temporary layoffs and holiday shutdowns. However, during the crisis, industries have laid off large numbers of workers. Enterprises could have reduced the workload through the lowering of wages combined with government compensation.
The report also states that in the future, social safety programmes such as the Family Purse should aim to integrate beneficiaries into productive, high-quality, decent jobs. Greater investment in basic skills and vocational training, labour force intermediation, greater availability of nurseries and child assistance services could improve workers’ access to new opportunities, which are available at the stage in which Brazil is.
Challenges facing Brazil in the next few years, according to the report, include increasing the rate of investment, reforming the tax system, and implementing a competitive exchange rate.
*Translated by Gabriel Pomerancblum
