Stagnation or cuts in the value of social and social security benefits could cause a severe retraction in economic activity in municipalities in the interior of Brazil, shows a survey by the Research Center for Macroeconomics of Inequalities (Made), of the Faculty of Economics and Administration of the University of São Paulo (FEA-USP), launched this week.
According to the study, pensions, Bolsa Família and the Continuous Payment Benefit (BPC) have a significant weight in the economy of these cities and represent almost half of the budget of the poorest families.
“As the amount received by these families is used almost entirely to purchase basic necessities, the money immediately circulates in local businesses, guarantees jobs and keeps municipal revenue active”, highlights the economist, professor at Unicamp and Made researcher, Luiza Nassif.
According to the survey, of the 5,569 Brazilian municipalities, around 4,000 are outside metropolitan regions. In these cities, according to the study, the weight of public transfers is double that of large urban centers. In Ceará, for example, social and social security benefits account for 22% of the aggregate income of the capital and metropolitan region. In cities in the interior, this number is 40%.
The Made/USP study projected the economic effects of the evolution of income from social and social security benefits in interior cities for the next three years. The study was based on the years 2022 to 2025, in which there was real growth for BPC and pensions, and compared this scenario to the context of adjustments used between 2019 and 2022, without real gains in the minimum wage and a total freeze.
The survey shows that, without the readjustments, aggregate income in the interior of the country would suffer a severe retraction, remaining between 6.8% and 10.8% below the level with the real appreciation of social and social security benefits.
“This would generate a chain reaction in economic activity that even affects families that do not depend on public assistance”, assesses Nassif.
The study shows that the most critical scenarios would occur in the interior of Rio Grande do Norte, Amapá and Piauí, in which total income would fall between 17% and 18%, without the current rate of increase in social benefits. In Amazonas, Sergipe and Pernambuco, the loss would be around 15%. In Ceará, Maranhão, Alagoas and Bahia, the drop would be between 10% and 13%, while in Mato Grosso do Sul, Rio de Janeiro, Espírito Santo, São Paulo, Mato Grosso, Rio Grande do Sul and Santa Catarina, the loss would reach 6.5%.
The survey highlights that, in addition to the effects on the income and economic activity of municipalities in the interior, the benefits play a decisive role in combating poverty.
“For those who live on the edge, any adjustment below inflation pushes the family directly into poverty,” says Nassif. According to her, for families with income of up to 1.5 minimum wages per capita, benefits can reach 50% of income.
Simulations carried out by the survey indicate that the absence of real gains in benefits, between 2022 and 2025, would have pushed approximately 2.7 million people into poverty in municipalities outside metropolitan regions, 2.4 million of them into extreme poverty.
In absolute numbers, the biggest increases in poverty would occur in Bahia (up to 336 thousand more people), São Paulo (up to 263 thousand) and Minas Gerais (up to 251 thousand), followed by Maranhão, Pará and Ceará (with more than 200 thousand people each).
“Looking at the impact that the drop in income causes, the damage that a slowdown in the growth of benefits can do to local economies becomes clear,” observes Nassif. “Maintaining the real appreciation of social security, BPC and income transfer programs is the minimum guarantee of dignity for families and survival for local commerce in deep Brazil", he adds.
