World Bank Seeks to Provide Grant to Aid Brazil’s Poor

Faced with evidence that free-market reforms in Latin America have been of little benefit to the poor, the World Bank is preparing a $1-billion grant to boost property ownership in disadvantaged regions of Brazil.

The five-year grant would be matched by $1 billion from the Brazilian government and be used to resettle up to 175,000 families on farms averaging 70 acres. The program would be modeled on a successful pilot program the World Bank started in this northeastern city two years ago.

This deal is unrelated to last week’s $41-billion bailout arranged for Brazil by the International Monetary Fund. The World Bank also contributed to the bailout package. An international organization owned by 178 countries, the World Bank lends money to improve infrastructure and living conditions in developing countries.

An increasing body of research on Latin America’s economic liberalization has shown that the poor have been left behind by reforms that have brought monetary stabilization, open markets, increased consumerism and higher profits for U.S. and other foreign firms operating here.

Key economic indicators, such as wealth distribution, job creation and worker education are either lagging or unchanged compared with a decade ago before free market reforms hit.

Economists say one way of giving the poor a better share in free-market-based economies is to increase home and farm ownership. Property ownership expands settlers’ purchasing power by enabling them to borrow against their asset. Owners typically make further investment in their property, which also stimulates the local economy.

Resettlement programs have been political staples in Brazil for three decades--some 270,000 families were resettled over the last four years. That program typically involves a government confiscation and repayment to former owners at an average cost of $30,000 per deal.

But the pilot program here is market-based, meaning buyers and sellers hash out a deal on their own without the interference of the government. Buyers also get financing incentives from the World Bank to negotiate the cheapest price. The average sale price in the pilot program is $10,000.

The World Bank’s pilot program started here in 1996 and has since spread to five states in the northeast, Brazil’s poorest region. Some 15,000 families have been resettled. New owners are expected to pay back one-third of the purchase cost.

If approved by the World Bank’s board in February, the program would spread to 13 states and be the largest of its kind in the world. Brazil’s Land Policy Minister Raul Jungmann told reporters he would go to Washington--where the World Bank is based--early next month to hash out details. A top World Bank official said approval of the $1-billion project is likely.

“It’s path breaking. The program is a high priority for the Brazilian government and is a high priority for the bank,” said Gobind Nankani, Brazil program director at the World Bank.

Some observers with experience in land reform here see problems with the program, especially in semi-arid parts of Brazil, where growing conditions make it unlikely that settlers can make enough on crops to repay their loans. Also, the viability of some of the farms depends on irrigation projects that have yet to be built.

“This is a faster program, and you avoid the government involvement which complicates things and adds to cost,” said Carlos Guanziroli, a consultant to the United Nations Food and Agriculture office in Brasilia. “But it might not be so easy to manage with so many poor families demanding land.”

Some past land-resettlement programs sponsored here by the World Bank have been disappointments, officials concede. Some failed programs were overly ambitious, aiming for improvements in areas such as education, health and electrification.

In those heavily bureaucratic programs, only a fraction of the money ever reached the settlers, said Tulio Barbosa, a World Bank official based in Brasilia. The pilot program, on the other hand, is more narrowly focused on property ownership and, as a result, 93% of the funds went to settlers to buy homes or farmland.