Could Brazil launch a Universal Basic Income?

and . May 31, 2020
UBI Could Brazil launch a Universal Basic Income? Image: David Biagini/Shutterstock

Almost overnight, the coronavirus pandemic made income support a necessity in countries all over the world. Kept at home due to social isolation measures, workers have faced layoffs and wage cuts as the entire economy buckles under the pressure of the health emergency. In Brazil, the need for some form of benefits scheme was felt immediately by the tens of millions of workers in the informal sector, who virtually lost their work and income from one day to the next.

The Brazilian government’s response has been to launch a BRL 600 (USD 112) monthly stipend to informal workers, single mothers, and so-called “individual microentrepreneurs,” who are self-employed small-business owners. While fraught with delay and error, the program has successfully transferred much-needed income to vulnerable populations, so much so that there is now a call to make it permanent, as a form of Universal Basic Income.

</p> <p>Discussions over Universal Basic Income, or UBI, have sprouted worldwide in recent years. The driving force behind these debates is the profound change to the global job market, with automation accelerating dramatically and several manual professions becoming obsolete. If the trend continues, there may be less work and a bigger reliance on benefit programs.</p> <p>Though once treated as a fantasy, UBI is a very real issue, even becoming a policy point in the current U.S. elections.</p> <p>However, the natural course of the debate was interrupted by the Covid-19 pandemic. The need for income support is no longer a problem for the future, it has become an immediate issue.</p> <h2>Guedes says &#8216;no way&#8217; to UBI</h2> <p>However, the likelihood of an imminent UBI in Brazil is close to nil, thanks largely to the government&#8217;s ultraliberal economic czar Paulo Guedes and the rest of his team. While his Economy Ministry was nominatively behind the <a href="">BRL 600 emergency salary plan</a>, Mr. Guedes was not even keen on what is a relatively modest wealth transfer program, and originally proposed a payment of just BRL 200 a month to informal workers only, before being pressured by Congress to triple the amount.</p> <p>In fact, the final program ended up costing ten times more than the Economy Ministry&#8217;s original proposal.</p> <p>As opposed to making the emergency salary benefit permanent, or even temporarily extending it, Paulo Guedes is in favor of scrapping it altogether.</p> <p>&#8220;If we say there are going to be another three months, another three months, then another three months, then no-one is going to want to work. No-one will leave home and the isolation will last eight years because life will be good,&#8221; he said last week. Mr. Guedes&#8217; counteroffer was to extend the benefit by three months, but reduce the payments to BRL 200 (USD 37).</p> <p>In his defense, the current program is incredibly expensive, costing almost 2 percent of Brazil&#8217;s GDP for three months of aid.</p> <h2>A potential solution</h2> <p>Despite appearing far from implementing a Universal Basic Income, the Brazilian government has plenty of experience and history in providing welfare benefits. For instance, the Continuous Payment Benefit is a social security payment given to people with disabilities and senior citizens who do not receive a pension sufficient to maintain themselves financially. And there is also the world-famous Bolsa Família program, the cash transfer initiative that helped <a href="">anchor millions out of extreme poverty</a> during the 2000s and 2010s.</p> <p>One proposal, floated by Brazilian economists in favor of UBI, would be to propose vast social welfare reform, combining all of these benefits into one system and distributing wealth to the entire population, simplifying the process and saving vast amounts on administration costs.</p> <p>Laura Carvalho, associate professor of economics at the University of São Paulo, is among those in favor of turning the emergency aid into a permanent benefit. &#8220;We have a record level of [labor] informality in Brazil,&#8221; she <a href="">told the BBC</a>. &#8220;This crisis is likely to make that worse, so we have to think about a broader, universal, and permanent social protection network.&#8221;</p> <p>However, Ms. Carvalho and her peers point out that this would also require a <a href="">reform of the Brazilian tax system</a>, in order to make any sense. The tax burden in Brazil is heavily charged on consumption, as opposed to income and wealth, perpetuating the vast socio-economic inequality in the country. Were every citizen to receive a standard UBI, a progressive tax on income would be required so as not to nullify the benefit for poorer families, and to tax wealthier families.</p> <h2>The Maricá UBI experiment</h2> <p>It is not particularly well known, but Brazil is actually home to the world&#8217;s biggest UBI experiment, which has been in place since 2013. In the town of Maricá, an oil-rich municipality to the east of Rio de Janeiro, some 42,000 people — around one-third of the population — have been receiving a flat-rate monthly benefit from the local government for the last seven years.</p> <p>The project is financed by Maricá&#8217;s sovereign fund, supplied with royalties from the oil fields situated just off the town&#8217;s coast. From these resources, the city council created a digital currency called the <a href="">Mumbuca</a>, named after a stream running through the town and with an exchange rate pegged to the Brazilian Real.</p> <p>Maricá residents who earn up to three times the national minimum wage receive 150 Mumbucas (USD 28) per person, per month. As a digital currency, Mumbucas are only accepted in local stores, designed as a way to boost commerce in Maricá.</p> <p>Among the most palpable benefits of Maricá&#8217;s Mumbuca system was seen at the beginning of the Covid-19 pandemic. While the federal government scrambled to organize its emergency aid program, needing to make transfers to individuals who were previously not registered on any benefit system, the local government of Maricá was able to use its existing structure to almost instantly double its monthly benefit to 300 Mumbucas, providing extra aid to its citizens.&nbsp;</p> <p>While not being a true UBI — as it does not reach the entire population and the value is not sufficient to sustain one&#8217;s self throughout the month — the length of the experiment will soon allow UBI researchers around the world to draw conclusions and design their own similar projects.</p> <p>Forecasts for the post-pandemic economy are still unclear, with countries around the world beginning to feel the <a href="">effects of the Great Lockdown</a>, but unable to fully calculate how big the downturn will be. Record levels of unemployment filings in the U.S. and a huge jump in the number of Brazilians out of work will inevitably make discussions such as these — on the need for some form of basic income — even more of a necessity.

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Euan Marshall

Originally from Scotland, Euan Marshall is a journalist who ditched his kilt and bagpipes for a caipirinha and a football in 2011, when he traded Glasgow for São Paulo. Specializing in Brazilian soccer, politics and the connection between the two, he authored a comprehensive history of Brazilian soccer entitled “A to Zico: An Alphabet of Brazilian Football.”

Alcysio Canette

Alcysio Canette is a lawyer who lives in Rio de Janeiro. He hosts the podcast Lado B do Rio, a show that talks about the hidden side of Brazil’s wonderful city — which is “only wonderful to some.”

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