Withdrawal of pandemic welfare fuels poverty in Brazil

The pandemic shantytown sprang up virtually overnight when people began using scavenged wooden boards to build shacks on a plot of empty land in Sao Paulo, Brazils biggest city.Geovani de Souza and his pregnant wife were among the 200 families who moved in over the last six months amid the economic turmoil caused by COVID-19.Without a job, I couldnt pay my rent, was evicted from where I was living and found the solution here, said de Souza, who now relies on occasional work as a bricklayer.

The pandemic shantytown sprang up virtually overnight when people began using scavenged wooden boards to build shacks on a plot of empty land in Sao Paulo, Brazil's biggest city.

Geovani de Souza and his pregnant wife were among the 200 families who moved in over the last six months amid the economic turmoil caused by COVID-19.

"Without a job, I couldn't pay my rent, was evicted from where I was living and found the solution here," said de Souza, who now relies on occasional work as a bricklayer. Similar stories abound.

The Penha Brasil shantytown's rapid creation reflects a resurgence in poverty after the government limited socioeconomic turmoil in 2020 with one of the world's most generous welfare programs. Now that flow of money has been curtailed, leaving vulnerable Brazilians exposed to soaring food prices and a still-worsening job market. And the strain comes at a time when there is no near-term hope of mass vaccination to safeguard the labour force.

"Government welfare will be less, and a recovery process is harder because of the pandemic and slow vaccination," said Sérgio Vale, chief economist at Sao Paulo-based consultancy MB Associates. "People are poorer, have more expensive bills and more expensive food. ... It will be difficult to survive." Last year, Brazil's government provided payments totaling almost 300 billion reais (USD 55 billion) that reached 68 million people, about a third of the population. The money buoyed economic activity as President Jair Bolsonaro denounced restrictions aimed at containing the pandemic. Brazil's recession, which shrank the economy by 4.1%, was smaller than countries in the same region, where some economies sank by twice as much.

But the federal government withdrew the welfare lifeline at the end of the year, prioritizing beleaguered public finances and failing to anticipate the brutal COVID-19 tsunami that materialized in January. Welfare resumed in April, but for roughly two-thirds as many people. They are also receiving less than half the previous monthly amounts.

Brazil's job market has cratered, along with those of other Latin American economies with many informal workers, according to an international comparison published May 14 by the government's economic research institute.

In the three months through February, Brazil's underutilization rate — comprised of unemployed workers, people working few hours and potential workers outside the labor force — climbed to 29.2 per cent, the highest level for that period since 2012, according to the national statistics institute. It includes 14.4 per cent unemployment, which Vale forecasts will climb further still.

Poverty — defined as households living on less than one minimum wage — spiked in the first quarter of 2021 to its highest level in at least nine years, after plunging last year, according to Marcelo Neri, director of the Getulio Vargas Foundation's social policy center.

Food insecurity for people with informal jobs is quadruple that of salaried employees, according to Tereza Campello, a former minister of social development.

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