The March 30 Forum article advancing the idea of cash to the poor (“In Defense of the Handout”) missed one very essential point. The poverty in both Brazil and Mexico that was reduced dramatically was not due to the “Bolsa Familia,” the payment to mothers to keep their children in school, but rather by other government actions that paved the way for new investment and the creation of new jobs.
The payment plan was introduced in Brazil by President Luiz Inacio Lula da Silva. His predecessor, President Fernando Henrique Cardoso, is certainly more responsible for the dramatic reduction in poverty in Brazil than anyone in the last 100 years. President Cardoso eliminated 95 percent of all import tariffs within a few days of taking office. Prior to Mr. Cardoso’s election, Brazil was one of the most protectionist nations on Earth. Over the years, tariffs and import taxes were created to protect national industries. For example, prior to 1995 the tariff on imported automobiles was 250 percent of the landed price. Thousands of industries were similarly protected, which created a stagnant economy that remained frozen in place for more than 50 years.
Once the tariffs were removed by Mr. Cardoso, the Brazilian economy took off like a rocket. The Brazilian economy grew at a faster rate in 10 years than it had in the previous 75 years, either as a percentage or in actual numbers. Once new high-paying jobs were created, people could afford to buy automobiles and houses and send their children to school. One of the more interesting developments of the increase in prosperity in both Brazil and Mexico is that Volkswagen stopped producing the Beetle in both countries. When people had enough money to buy a larger car, the market for Beetles disappeared.
There is no question that the Bolsa Familia is a wonderful plan for those countries where a huge percentage of children do not attend school. Both in Mexico and Brazil, the results have been positive and dramatic, but now is the time to concentrate on the future of both countries and to encourage other countries to emulate the overall economic plans of Mexico and Brazil, not just give money to people.