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Poverty in Brazil nears low due to COVID-19 stimulus: RPT

Economist Daniel Duque joins Yahoo Finance’s Zack Guzman to discuss how Brazil's emergency stimulus relief for the coronavirus is reportedly helping combat poverty and inequality in the country.

Video Transcript

ZACK GUZMAN: I want to be looking at some of the data that we're getting out of other countries in their own experiments here to replace lost wages, as many workers grapple with hard impacts of the COVID-19 pandemic. And interesting updates out of Brazil there, as cash being handed out to citizens there has dropped the poverty rate to near lows. Overall, 66 million people, about 30% of the population over there in that country has been getting roughly the equivalent of about $110 a month, which is a very ambitious program there. And that has led to improving inequality. And it raises a lot of questions about what might be the right path forward here in the US as we continue to await discussions of the next round of stimulus here between Republicans and Democrats.

Joining us now for more on what we're seeing out of the data playing out in Brazil is Daniel Duque, Brazilian Institute of Economics researcher. And Daniel, appreciate you joining us here. I mean, I just want to go through some of the data that you guys were reporting here, because it's pretty shocking when you think about what you're seeing on the poverty rate, those living on less than $1.90 a day, you saw that number fall from 3.3% in June from 8% last year. And those living below the poverty line were at 21.7% versus 25.6%. I mean, both of those are more than decade lows. So talk to me about the impacts of the program and how you're seeing it change the economic breakdown of Brazil right now.

DANIEL DUQUE: Thank you. The program is really ambitious. It was really ambitious. And it was kind of a product from a dispute between the Congress and the federal government.

They're kind of in a political tension. And then they-- during the pandemic, they fought a little about the value of the program. It's 600 reals, so about something around $200 a month.

And now we have the-- in June, there were 3.3%, the extreme poverty rate in Brazil. In July, it's around 2.5%. It decreased a little more. And now over half of the households in Brazil, they have at least a member receiving these benefits. So it's really huge coverage.

ZACK GUZMAN: Well, it's clearly reaching those families. And the interesting thing, too, from the data here is the idea of this-- so it's called the GINI coefficient. And it really measures inequality. It's something economists look at. And it's something that in your data playing out here, showing it's basically a scale up to one. One would show the most inequality in a country.

And in the US, I mean, we've been watching our own GINI coefficient rise here since it's been tracked back in the '60s. The census bureau there would show it at about 0.397 back in the '60s. And it was spiking, rising decade after decade, climbing to 0.485 here in the US. But you're saying that this program in Brazil actually dropped it to below 0.5 in Brazil for the first time ever. So talk to me about that.

DANIEL DUQUE: Brazil is a really unequal country. And its GINI coefficient has been always above 0.5. It remained above 0.65 at the beginning of the year. And now, it dropped to below 0.5 because of this program.

Because in liberal market, actually, inequality is rising, OK. So the poor, they had to face more unemployment now. They face more unemployment. And their income is decreasing a lot more than the richer, because the richer have access to home office and this kind of technologies that allowed them to remain in their jobs.

But the poorest, they didn't have the kind of-- this kind of technology. They're not in this kind of employment that allows-- that is possible to do from home. And actually, liberal market is crashing. And inequality in the liberal market is increasing a lot.

But this program, this emergency aid, has been so-- this coverage and developed a program, the benefit, it's so huge that then the overall inequality-- all-- consider all sources of income, it's been decreasing a lot. So it's a really interesting experience, because in the middle of the crisis, the middle of pandemic, the middle of market-- liberal market inequality rising, we've been facing historical lows in inequality and in poverty.

ZACK GUZMAN: Well, that's what's the interesting thing here to see play out as well, because it's kind of a no brainer when you think about Jair Bolsonaro, the leader over there in Brazil, in terms of his popularity rising as a result of this, in terms of handing out aid to citizens, it's a similar kind of discussion we're seeing play out here in kind of the complexity in wrapping your head around why you wouldn't be able to pass through even the things that Republicans and Democrats agree upon here, mainly those $1,200 checks that could get sent out to Americans that are impacted by this. When you talk about paying for it, that's another big question mark that exists, not just in Brazil, but also here in the US, when you discuss what happens when you continue offering aid like this. Though it does help in reducing inequality. But what are you seeing play out in terms of the idea that you really can't afford not to pay, when you think about how many people, whether it is Brazil or America here, and workers impacted, like you said, where you can't go and work from home?

DANIEL DUQUE: This program now, it's really-- today is really expensive. I mean, it costs more than over 4% of GD-- Brazil in GDP. So it's kind of a huge impact on our expenditures.

But now people-- people, they're now-- they're able to really maintain their consumption. Actually, retail sales, they are booming right now in Brazil. We have our economic-- our economy is facing, I mean, the same drop, same decrease of all economies in the world. But when we see these certain sectors, like retails, like construction, they're actually booming, because the people are using their money they have to consume, to build, to expand their houses. I mean--

ZACK GUZMAN: Yeah, I know, it's very similar to what we've seen play out here, too, which is very interesting to see inequality at least improving there. We'll see how our own methods work back here stateside. But Daniel Duque, Brazilian Institute of Economics researcher, appreciate you bringing us that data.