BRAZIL-The Damage

This is what it’s all about

The three principal economic functions of government are: 1) to ensure full employment of economic resources; 2) to ensure stable prices; 3) to promote sustainable growth and prosperity.

The PT has done none of the three. The table below shows the effect of the PT administration on the relative standing of Brazil’s family income classes:

Families By Income Group
	2015	2016	Change
A	1,820,680	1,936,187	+108.567
B1	3,371,482	3,338,254	-33,228
B2	12,084,321	11,550,360	-533,961
C1	15,278,490	14,821,849	-456,641
C2	16,438,173	17,091,862	+653,689
D/E	17,765,940	18,026,573	+260,633
Total	66,765,086	66,765,086

If the policies of the PT benefitted any particular economic class, it was the rich at the peak of the income pyramid. The increase in the number of families at the very top is typical of economies with rising inflation and flagging employment.

Those at the top are able to hedge their losses to inflation via their asset base that they can readily invest in high-yield securities and they are less affected by rising unemployment.

The numbers highlighted in yellow constitute Brazil’s middle class (average monthly incomes ranging from R$4.9k [B2] to R$1.6k [C2] and those in red show those on the bottom rungs of the income ladder. 

The figures suggest that the declines in classes B1 through C1 are reflected in the increases in the C2 through D/E groups. The figures show that some 1 million families are now worse off than they were in 2015.

This study is based on the “permanent” income of the families (i.e. includes ownership of assets as well as monetary income). An alternative study based solely on monetary income received) conducted by another consulting company showed that some 3 million families slipped downward on the income ladder.

This is the first time since 2008 (during the global financial crisis) that the trend reversed for economic mobility in Brazil.

For a government that prided itself on stimulating economic mobility of the poor, it seems to have been well off the mark. For an emerging country with one of the world's worst income distribution ratios it has been a disaster!