October 2015 Archives

Reflecting on CLAS Events: The New Bolivian Economy

By Hong R. Zhang Durandal, Masters in Public Policy student, Harris School of Public Policy

 

 

 

 

 

                                                                                                                                       In April 2015, the Bolivian Minister of Economy and Finance Luis Arce Catacora came to the University of Chicago to present a new economic model that Bolivia has developed and put in practice since 2006. He explained the Economic Social Communitarian Productive Model and why it is effective in Bolivia. In this system, the state becomes the largest investor in the economy and it focuses on developing a strong domestic demand while strengthening the Bolivian currency.   

Since the implementation of this economic system, the Bolivian economy has been growing constantly and it has reduced extreme poverty by more than 10%. Arce said, “Bolivia reduced extreme poverty from 32% to 18%, we would like to lower it to a similar rate as Ecuador which is only 12%.” At the same time he also mentioned that the unemployment rate declined from 8.5% to 4% and that this was one of the lowest in the region. There is no doubt that the Bolivian economy has strengthened since the implementation of this new economic system but it is unclear if this boom was solely due to the rise in price of raw materials or other factors. The system is still young compared to other more robust and well tested systems around the world. The exportation of natural resources still is the backbone of the Bolivian economy but with an emphasis on reinvesting in other industries, industrializing raw materials, and the redistribution of wealth among the ones that need it the most. Let’s explore the actual facts and what this new economic system has been able to do for the Bolivian people.

Among the most notable achievements of Evo Morales presidency under this new economic system have been: improvement of education availability in rural areas, creation of new infrastructure of parks and soccer fields, improvement of public transportation, and the launching of the first Bolivian satellite to bring free Internet to the most remote areas in the country. These high capital investments were possible due to the high prices of oil during the first five years of presidency of Evo Morales. Yasimientos Petroliferos Fiscales Bolivianos (YPFB), the national oil extraction and producing agency, has been trying to increase its extraction of oil and expand into refining some types of oils to later export to neighboring countries like Paraguay, Brazil, and Argentina. The most successful investment in transportation infrastructure has been the “teleferico” (cable car) system in the capital city La Paz. This infrastructure, which is the largest urban cable car in the world, connects more than 2 million people from two adjacent cities, La Paz and El Alto, and ascends to more than 16,500 feet. Previously a great number of people spent more than one third of their incomes and 2–3 hours commuting using various public transportation methods; with the teleferico commuters have cut their traveling time to 20 minutes from one city to the other. The system can transport 18,000 people per hour over 11 kilometers. The government has plans to develop more transportation infrastructures like metro trains for Santa Cruz and Cochabamba and other major cities.      

The Morales administration has used extensively policies of cash transfers from profits from the teleferico, YPFB, and other government income to fund pensions for the elderly, school funds for children, breakfast funds, and the “Doble Aguinaldo.” Through this egalitarian approach the Bolivian government works extensively to close the inequality gap between the wealthy and the poor and achieve the most equal wellbeing and economic welfare among its citizens. With some programs the government has achieved great efficiencies like providing funds for children and the elderly. However, the system fails when it tries to apply this egalitarian approach to the entire Bolivian population. The private sector has been hurt because of the “Doble Aguinaldo,” which forces private business to pay a double bonus at the end of the year to all its employees. This translates to a triple salary payment for the month of December. Many businesses went bankrupt due to this egalitarian policy under Bolivia’s new economic model. As in any transfer policy, resources have to be taken from somewhere to be given to others. The Economic Social Communitarian Productive Model has great potential to reduce inequality in the country by making everyone almost equal in wealth and wellbeing, but is it the right path for an economic model that can sustain generations to come and solve 21st century economic global challenges?   

To conclude, Minister Arce Catacora pointed out that Bolivia can develop to become one of the major energy players in Latin America through the industrialization of fossil fuels, exports of lithium, and the development of hydroelectric plans and renewable energy. Bolivia needs to capitalize its competitive advantage in its abundancy of energy resources and leverage them to create economic stability for years to come.

Minister Arce Catacora made a compelling case on his new economic system to many scholars and students at the University of Chicago but much more needs to be studied on the Economic Social Communitarian Productive Model to call it a successful reform. Bolivia has been able to reshape itself and come out of an era of decades of political instability, extreme poverty, and inequality. Scholarship and research from the University of Chicago can shed light of the merits and challenges of this new economic system. Thanks in part to the Center for Latin American Studies and the Harris School of Public Policy, the school has opened its doors to become the most diverse University in terms of ideas, discussions, and constructive debate. 

 

 

 

Sources: http://webcache.googleusercontent.com/search?q=cache:MwXYYiNooSIJ:www.sl...

Please note:

The contents of this blog do not necessarily reflect the views of the Center for Latin American Studies or the University of Chicago. 

On the Current Brazilian Housing Program

On the Current Brazilian Housing Program

By Marcella de Araujo Silva I  Visiting Brazilian PhD student at CLAS

In 2009, the Brazilian government announced the creation of a new housing program. After a three-decade gap in public policy, Minha Casa Minha Vida (My Home My Life) promised the greatest provision of housing funding for historically marginalized populations. Families whose monthly income was up to R$5000 (around US$1200) could finally apply for different types of grants according to their income brackets. They are three: bracket one comprising families whose incomes vary between R$0 and R$1600; bracket two, R$1601–R$3275; and bracket three, R$3275–R$5000. Bracket one is also known as the “social interest bracket” and subsidies go up to 95% of housing cost.

The social dimension of such a program is better understood if we take into account the depth of the Brazilian housing deficit. According to Fundação João Pinheiro’s national statistics, there is a lack of 7 million housing units nationwide. The numbers are even worse if we consider living standards such as urban infrastructure, house densification, inadequate shelter, inadequate landing, and bathroom-less houses. Ninety percent of the Brazilian housing deficit—either quantitative or qualitative—involves the poorest families whose meager earnings do not exceed R$1600 (approx. US$400) monthly (1). 

Despite its undeniable social purpose, Minha Casa Minha Vida was also created with an economic goal. The program was conceived in the aftermath of the 2008 crisis as an anti-cyclical measure. On the one hand, the Brazilian government would finance building contractors, expanding the market and creating thousands of jobs. According to the president of Câmara Brasileira de Construção Civil (Brazilian Chamber of Building Construction), by November 2014, there were 500,000 workers whose jobs were on Minha Casa Minha Vida building sites (2). In addition, the federal government would help millions of poor families’ dreams of owning a house come true, as Banco do Brasil (Bank of Brazil) repeatedly advertised on television. Financing production and granting consumption was for at least four years the class-conciliation strategy of economic growth with social redistribution fostered by the Partido dos Trabalhadores’ (Workers Party). Minha Casa Minha Vida promptly became the second most important social policy in the country, right after Bolsa Família, the government’s poverty eradication program.

Minha Casa Minha Vida Popular.jpg

Minha Casa Minha Vida popular condominium in Colônia Juliano Moreira, Jacarepaguá neighborhood, West Zone, Rio de Janeiro. Photo by Samantha Gifalli.

Notwithstanding, since its release, social movements and urban researchers have scrutinized Minha Casa Minha Vida’s apparent success. Even though the program addresses an old social demand, its mode of production, the form and physical quality of the new apartment buildings, and its territorial and social effects are objects of criticism (3). 

Among architects and urban planners, Minha Casa Minha Vida’s most criticized aspect is its institutional framework. Enrollment varies according to income bracket. For brackets two and three, the dynamics are exactly the same as any regular real estate market. The negative outcomes are predictable. Since there is more credit, apartment prices increase enormously, sometimes making it nearly impossible for families to afford a new house. Since 2008, skyrocketed rents—97% higher in São Paulo and 144% in Rio—have pushed families from central areas towards more distant ones. For the social interest bracket, the enrollment procedure is two-fold: families might enroll themselves or they might be registered by social workers, according to maps of natural disaster risk areas. The outcomes are highly controversial and conflicting: depending on risk areas’ geographical limits, higher-income families unwilling to leave their houses for tiny apartments are registered, and extremely poor families who have lost shelter and belongings countless times are not.

Bypassing Ministério das Cidades’ (Ministry of Cities) intersectorial perspective of housing, sewage, and urban mobility programs, Minha Casa Minha Vida does not address sustainable urban infrastructure. For instance, in the metropolitan area of Rio de Janeiro alone, between 2010 and 2012, almost 100,000 apartments were built, most of them in areas with limited access to public transportation and bereft of urban and social facilities. Hence architects and urban planners perceive the program as a massive production of housing units, rather than urban planning.

Not only does the project consist of building great numbers of units, but it does so in highly concentrated spaces. In the city of Rio, 27,000 units are distributed among only 82 condominiums. Each of them is shaped as an enclave, with high security bars, controlled entrances, and inner recreational areas of poor quality—a housing type until now more common among upper classes gated communities. Once they are handed over to the new residents, they become private spaces, privately managed. The extra expenses caused by this privatization make the housing scheme unaffordable to social interest bracket families.

Finally, these popular condominiums are distributed across cities according to the income brackets they encompass. In Rio’s most valued areas—the South Zone, nearby downtown, and near North Zone—where urban land prices are higher, barely any Minha Casa Minha Vida housing can be found. However, in the West Zone, unfairly known as the hinterlands of the city, there is great concentration of low-income condominiums. Thus, two modes of segregation overlap: the center-periphery and the gated-community.

As we can see, the current Brazilian housing program is highly controversial and it poses important challenges to sociological inquiry. What roles do these apartments play in poor families’ economic strategies and housing trajectories? How are these popular condominiums inscribed in the urban fabric? What kind of city is under construction? Only good qualitative and ethnographic research can unfold these processes and shed light into how people are coping with their dilemmas.

Footnotes

(1) Fundação João Pinheiro (2012). Déficit habitacional no Brasil 2009 / Fundação João Pinheiro, Centro de Estatística e Informações. - Belo Horizonte. 

(2) http://www.brasil.gov.br/economia-e-emprego/2014/11/minha-casa-minha-vid...

(3) All recent publications on Minha Casa Minha Vida and other urban-related themes can be found on this website http://www.habitacaoecidade-observatoriodasmetropoles.net/?cat=6