The Americas Quarterly's fall issue focused on Latin America's rising middle class: "Who are Latin America's new middle classes and what effect will they have on politics, economics and business?" One article, by the World Bank's Luis Felipe López-Calva, dives into the definitions and origins of this burgeoning middle class, a phenomenon that seems to be (finally) gaining traction/acceptance/notice among among the foreign policy community.
One of the main factors behind this monumental, and welcome (if still tentative) trend is thought to be the consistently high price of raw materials produced by Latin America--Peruvian copper and gold, Brazilian soybeans, etc. But important and substantial political and policy shifts have played a huge role in translating raw wealth (Latin Americans have long exported massive amounts of raw material with profits accruing only to the region's tiny elite--coffee anyone?) into development.
Brazil, a country that accounts for nearly a third of the region's population, deserves a big portion of the credit. That country's bolsa familia program, a consolidation (and expansion, under Lula) of several smaller conditional cash transfer (CCT) programs that began under Fernando Enrique Cardoso, has played an important part in bringing the poverty rate down from around 44 percent in 1990 to about 24 percent in 2009--nearly cutting it in half.
A close look at bolsa familia shows that this is an impressive, if mixed, program, in terms of outcomes. First, the idea behind the thing is to break the intergenerational cycle of poverty and develop long-term human capital through health care and education mandates. These mandates--for recipients--come in the form of minimum school attendance (at least 85 percent monthly attendance for kids between 6 and 15 years) and vaccinations and medical check-ups, among other things. No medical check-ups? Not attending school? No cash.
The idea behind the "conditionality" of the CCT is two-fold: First, conditionality makes cash cash transfer schemes ("handouts" to some) palatable to voters and policy makers. Second, health, nutritional, and educational conditions are thought to ease the opportunity costs poor people face when deciding whether or not to send a pregnant mom to the clinic or pull a child out of school to work, for example.
The program is huge. It reaches some 46 million individuals (around a quarter of the population). On educational measures, bolsa familia had a clear and positive (if slight) impact, resulting in a 3.6 percent lower probability of children being absent from school, and 1.6 percent lower likelihood of dropping out. At the same time, kids whose families benefit from the program were more likely to be failing school, an indication that progress doesn't come from just showing up, and an indictment on the poor quality of Brazilian schools (especially in the poor and rural northeast).
Unfortunately, the program had similar effects on healthcare attainment. Recipient families surveyed in 2010 were apparently no more likely to have their kids immunized--another indictment of Brazil's failure to provide much of its population with access to good healthcare infrastructure.
The program did better on nutritional measures, yielding significant improvements in infant nutrition (a variable with huge long-term impacts on childhood development),and a 26 percent increased chance of children under 5 years having a normal weight and height.
Not surprisingly, the program has had huge (and less conflicted) impacts on poverty. Between 2003, the year the program began in its current, robust form, and 2008, extreme poverty in Brazil fell from 12 percent to 4.8 percent. Despite the fact that the program suffers from some "leakage" (including individuals and families who should not qualify for benefits) and "exclusion" (not including some who do), over 70 percent of cash benefits reach the poorest 20 percent of the population, with around 95 percent reaching the bottom 40 percent, a subgroup that closely resembles the number of Brazilians living near or under the poverty line. Analysts believe that the program accounts for a major portion of this drop in poverty, and especially, extreme poverty.
And, as a preemptive response to the refrain that handouts lower the incentive to work, consider that labor market participation increased among recipients by an average of 2.6 percent (4.3 percent among women, compared to non-participant counterparts). Stable access to cash also makes people eligible for credit (Brazil has a robust micro-credit culture, evidenced by TVs and refrigerators in the homes of most favela-dwellers), which helps build a stronger domestic market for durable goods. One study estimated that for each real spent, the Brazilian GDP will increase by R$1.44--not a bad bang for the buck.
Latin American economies need to support the development of a robust middle class (not just a class of "not poor, but not middle class yets"), something that can survive economic downturns like we saw in 2008-09. This is good, not just for democracy ("no middle class [bourgeois], no democracy"), but for the lives of millions in the region who have long struggled under the yolk of oppressive poverty and oppressive dictatorships.
China may be good for this trend. While many have some apprehension about China's intentions (China surpassed the U.S. as South America's biggest trading partner in 2010), and worry about Latin America becoming another "China's Africa," they have also shown a willingness to invest in, and provide easy financing to moderate leftist governments working to expand spending on the poor and middle classes. At the very least, their rapid development and voracious appetite for timber, various ores, and agricultural products bodes well for continued investment. Its relationship with some governments (see for example Ortega, Daniel or Chavez, Hugo) and their combined impact on democratic and civil rights are less certain.
Not all China does in the region should make Americans hyperventilate. Yo-yo Ma's Obrigado Brazil might attest to that (Yeah yeah, I know he's American, born in France...).
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