Brazil’s Landmark Bolsa Família Program Receives US$200 Million Loan

WASHINGTON, September 17, 2010 – The World Bank approved a US$200 million loan for the second phase of support to Brazil’s Bolsa Família. The program reaches 12.7 million families (or nearly 50 million people) and is among the most effective social protection programs in the world, having helped raise approximately 20 million people out of poverty between 2003 and 2009 and well as significantly reducing income inequality.

“Brazil was changed by Bolsa Família. The program touches the lives of millions of families and contributed to a deep social and economic transformation of the country, integrating millions of previously excluded people,” said the Minister of Social Development and Hunger Alleviation, Márcia Lopes. According to her, the World Bank played an important role in the consolidation of Bolsa Família in 2004 and this new loan integrates itself to the improvement process of the program.

The first phase was supported by a US$572 million loan approved in 2004, to help develop, strengthen and expand Brazil’s flagship social protection program, which provides direct cash transfers to poor families who keep their children in school and under regular medical supervision. By this Bolsa seeks to reduce both immediate and future poverty.

“Since 2003 the country has made significant headway in reducing poverty, lowering inequality, and improving the development opportunities of its vulnerable population,” said the World Bank’s Country Director for Brazil, Makhtar Diop. “But Bolsa has recently revealed itself fundamental also as a key safety net to mitigate the impact of the food and oil prices increases, and more recently of the global crisis and economic downturn.”

This second phase aims to further strengthen Bolsa Família’s ability to achieve its objectives of reducing poverty and inequality and promoting the use of education and health services of the poor population. Between 2003 and 2009, poverty (PPP $2 per day) has fallen from 22 percent of the population to 7 percent.  Income for Brazil’s poor grew seven times as much as for the rich, and three times the national average. As a result, inequality in Brazil fell markedly between 2001 and 2009, and is at a 30-year low. Together with Bolsa, several other programs and general economic growth contributed to these results.

The new financing will help to:

·         strengthen program management, accountability and control functions in three main areas: the registry of beneficiaries, management of benefits, and monitoring of conditionalities;

·         consolidate the program’s monitoring and evaluation system; and

·         integrate other social protection programs with Bolsa Família, to promote innovations and strategies for beneficiaries’ exit from poverty through investments in areas such as education incentives, and links with the labor market and productivity programs.

The second phase will support reforms and adjustments to improve Bolsa Família’s effectiveness in reaching outcomes such as: at least 75 percent of families in the 20 percent poorest group receiving Bolsa transfers; at least 90 percent of primary-age school children in extremely poor beneficiary families attending school; and at least 75 percent of children aged 0- 6 year old and pregnant women complying with health conditionalities.

“In these past seven years, Bolsa has come of age as a poverty reduction and social protection program.  Brazil is exporting its considerable know-how to numerous other developing countries and even the City of New York, which modeled its conditional cash transfer program on it,” said World Bank Project Manager, Ian Walker. “In this second phase, as part of the support to Brazil’s National Commitment for Social Development, the project will help link beneficiaries to skill and income generating activities, reinforcing the medium-term sustainability of Bolsa Família’s poverty alleviation impacts.”

This commitment linked IBRD Flexible Loan has a variable spread and is denominated in US dollars, with the following terms: 5 years grace period, 30 years total repayment term, with level repayments; all conversion options selected; and Interest Rate Cap/Collar premium to be financed out of the loan proceeds.