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Rural Brazil: Covid-19, income and emergency aid

How did the relief measures for the most exposed populations to the scourges of the new coronavirus pandemic hit rural Brazil? What was the relief provided for this vulnerable segment of our population? This text evaluates these questions. For Brazil as a whole, information and analyses that highlight the importance of these measures are already available.

 

The so-called emergency aid (EA) of the federal government – 600 BRL per month for five months – has been important to face the crisis caused by the pandemics in Brazil. The EA acts as a lever to reduce the negative results in the socioeconomic conditions of informal workers, individual micro entrepreneurs, self-employed and unemployed people. In general, as a FGV (Getúlio Vargas Foundation) study has indicated, the EA would have reached the impressive percentage of 42% of the Brazilian households; as a comparison, the Bolsa Família Program (Family Grant) reaches 19%. In May, the poverty level in Brazil, which had hit 25% of the population during the pandemics, downed 3 percentage points, to 22%[1].

 

It must be remembered that the Family Grant has not been readjusted since 2014, and the access limit to it, which was 42% of the minimum wage in 2004, when it was created, is currently 17% (significantly restricting access). Still, the number of beneficiaries increased from roughly 6 million in 2004 to approximately 14 million nowadays. After 2004, the poverty has reduced, on average, 1.3 to 1.6 percentage points per year (Souza et al, 2009[2]).

 

According to data from PNAD-COVID19, by IBGE, in May, from the 84 million employed people in Brazil, 19.8 million were temporarily away from work. From this amount, 16.2 million people were away due to the pandemics and 9.3 million of them were not being remunerated, not even partially. As a result, the average income effectively received by workers in May was 1.889 BRL, 18.2% lower than the value usually received, of 2.320 BRL. This difference is an approximate measure of covid-19 impacts on Brazilian workers’ income. According to Ipea (2020)[3], the household income in Brazil with the AE, on average, reached 95% of what could have been reached without the pandemics.

 

And what does the data show for rural areas? This question is important because both poverty and inequality are more severe in the rural areas in Brazil. Data from 2009 show that rural poverty was twice the national average (Neri, 2011[4]).

 

Among the residents in rural households, 9.9 million were employed in May, and from this total, 1.8 million were away from work, being 1.4 million (78%) because of the pandemics. Among total people away from work due to covid-19, 930 thousand people were not being remunerated. The average income received by workers living in the rural areas, of 1,068 BRL, was 16.4% lower compared to the usually received, of 1,278 BRL (which is already lower than the average in the urban area, of 2,452 BRL) – giving an estimate of the impacts of the pandemics on the income received by workers living in rural areas.

 

From the 9.4 million rural households (13% of almost 71 million households in the country), 5.3 million had access to the emergency aid in May, an impressive coverage of 56.2%, which was higher than in the urban areas, where 36.4% of the 61.4 million households, or 22.3 million, received the aid. The income increase due to the EA in May was 934 BRL, on average, in the rural area, and 93% of rural households had per capita household income lower than this value, highlighting the impact of the social protection policy on the life condition in the rural area.

 

In May, the total effective household income – which includes, besides the labor income, other sources such as retirement, alimony, donation, family grant, BPC (financial benefit focused on the elderly and people with disabilities in situation of social vulnerability), unemployment insurance, among others – was 1,798 BRL, representing 89.5% of the usual income (2,008 BRL). However, considering the EA, the total average household income was 2,324 BRL, 15.7% more than the total usual income. The analysis for the rural households income deciles indicates that the program had good coverage and allocation of resources, mainly to lower-income households.

 

For the first decile – rural households with income up to 100 BRL (effective labor income + other sources, except EA) – the coverage (percentage of households in this range that received the benefit) was 85%. For the second decile (from 110 to 450 BRL), it was 94%. The relatively lower coverage for the first decile might result from difficulties to require the EA for very low-income people. As for rural households with income between 3,000 and 4,165 BRL, 39.9% received the aid, and for those with income higher than 4,165 BRL (highest decile), the coverage was 29%, which indicates the progressivity of the measure.

 

For rural households with income lower than 110 BRL, the effective income received in May was almost zero (labor income + other sources, except the EA). With the EA average value of 833 BRL, the total average household income + EA was 244% higher compared to the usual average income of these families, of 341 BRL (labor income + other sources, except the EA). For the second decile, the effective income in May accounted for 35.8% of the usual and, with an average EA of 1,077 BRL, the total income received was 1,261 BRL, 270% more compared to the usual income. Concerning rural households with income above 4,165 BRL, the effective average income (7,057 BRL) accounted for 96% of usual (7,326 BRL) and, with the aid, the total average income reached 7,250 BRL, 97% of the usual income.

 

Therefore, the measure had wide coverage in the rural area, higher than that observed for urban areas, and favored especially the poorer families. The public policy, in general, contributed to maintaining or even increasing the average consumption capacity, being an essential measure of social protection. Still, many people in rural households with extremely low income did not receive the aid – almost 500 thousand people were in households with monthly income up to 100 BRL that did not receive the aid.

 

Moreover, although it is an essential policy with an important social protection effect in this peak period of the pandemics, its continuity in a longer period is little feasible considering the fiscal situation in Brazil. In spite of the measures related to the pandemics, recent projections indicate a 5.95% decrease of the GDP in 2020 (Focus – Market Report, 2020[5]). More recent forecasts by the International Monetary Fund[6] indicate that global economy may decrease almost 5% and that the recovery will be slower than expected.

 

Depending on the speed of the economic recovery, and of the labor market (which tends to be slower), after the “control” of the health situation and less strict social distancing measures, the situation of poorer rural families might become concerning without the emergency aid, which will be an important challenge to policy makers. More vulnerable workers (less qualified, informal, entrepreneurs of small establishments and, in general, with lower-income) tend to be severely affected, scenario that will also influence future income by negatively affecting labor productivity as a result of job and income interruptions.

 

Due to this scenario and these perspectives, the urgency of a basic income program – or similar – is even more obvious, such as those proposed by several research institutions and in the executive and parliament. The improvement of Cadastro Único (for poor and extremely poor families), which would allow a rational fusion of current assistance measures, is the basis of proposals. The question, however, is: what is the source of funds in the current scenario and the predictable horizon in some years?

 

 

 

[1] Check FGV’s Conjuntura Econômica, pp 42-53, July 2020, an article by Solange Monteiro that indicates a research about the impacts of the EA on poverty, using PNAD COVID-19 data, from Daniel Duque, in which these results were obtained. Figures that refer to value and access limit to the Family Grant are based on data from Bruno Ottoni, also indicated in that text.

[2] Souza, P.H.G.F.; R. G. Osorio; L. H. Paiva; S. Soares. 2019. Os Efeitos do Programa Bolsa Família sobre a Pobreza e a Desigualdade: Um Balanço dos Primeiros Quinze Anos. Texto para Discussão 2499. Ipea. Brasília

[4] Neri, M. 2011. Pobreza e Nova Classe Média no Campo. Centro de Políticas Públicas e Sociais. FGV/IICA. Rio de Janeiro. Check also: Panorama da pobreza rural na América Latina e Caribe, FAO: http://www.fao.org/3/CA2275ES/ca2275es.pdf.

[5] Focus – Market Report - 07/17/2020 - July 2020. Check: https://www.bcb.gov.br/publicacoes/focus.

[6] Check https://www.imf.org/en/Publications/WEO/Issues/2020/06/24/WEOUpdateJune2020

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