Brazil in the Global Economy- Measuring the Gains from Trade

1. Brazil in the Global Economy- Measuring the Gains from Trade CARNEGIE ENDOWMENT FOR INTERNATIONAL PEACE April 9, 2009

2. Assessing and addressing the employment effects of trade: A EU funded project in four countries Brazil; Chile; South Africa; India Main objective: Develop assessment tools for governments and social partners that enhance policy design

3. Objectives (cont.) Before trade reform: to get economy (workers/companies) ready to take advantage of trade opportunities (e.g. education, (re)-training) During trade negotiations: to target aid for: labor adjustment; strengthening labor administration and compliance with basic rights laws; facilitating positive management-labor relations After trade reform: to facilitate adjustment and help workers in transition During external shocks: to provide rapid and targeted intervention

4. Labour market policies • “Passive” LM policies and programs: • Unemployment insurance • Early retirement and other voluntary separation programs • Social assistance • “Active” LM policies and programs: • Labour market intermediation • Employment creation • Wage subsidies • (re)Training • Microcredit

5. Workers in “open unemployment” (8.1 mill- 8%) What is available in Brasil to help workers? The Brazilian Labor Force Formal economy workers (35,5 mill -36%)with labor card registry entitling them to rights and obligations under laws on labor, OSH and other social security provisions But only 32-33% have work accident insurance (SAT) coverage Informal workers and employers (55.3 mill – 56%) PNAD, 2007 Econ. Active Population 98,9 mil

6. Unemployment insurance (UI) in Brazil • Only 35% of the labor force is in formal employment and of this group, only 2/3 of those who lose their jobs would qualify for UI.* • In 2005, 5.3 million workers received average benefits of R$389 (1.36 X MW) for an average period of 4.2 months. • Brazil is one of 5 countries in Latin America with a UI program and its program is the most extensive. • * Few self-employed workers even in the formal ranks, e.g. paying social security, would not qualify for UI unless they also make contributions to Length of Service Fund (FGTS)

7. Social Assistance – The Bolsa Familia program • Currently 11.1 million families receive benefits (between R$20-R$182/month) • Recently extended coverage (new ceiling of R$137 per capita = 1.3 million additional families) • It can help workers in transition, but the benefits are quite limited

8. Active policies • Public employment service (SINE) is extensive • Training programs (PNQ) • Various microcredit programs (PROGER, PRONAF) • In 2006, 2.8 million loans were given totalling R$25 billion.

9. Social Spending in Brazil is limited in comparison with Europe * Source: OECD, IADB; • Brazil: • Brazil’s 0.5% of GDP above is from IADB’s Good Jobs Wanted. It refers to Labor and Emp. Ministry programs* plus UI, and microcredit spending figures from late 1990s which increased to R$25 billion by 2006, thus raising the above total spending to nearly 1% of GDP and not including Brazil’s Bolsa Familia, ie. about 0.4% of GDP in 2006. • * BR’s Gov spending on intermediation, training, inspection, occupational safety and health in 2006 was equivalent to 0.02% GDP. • .

10. In conclusion: • Brazil has advanced significantly in the development of labour market policies that can assist workers in transition. • But spending and coverage is still quite limited. • Workers negatively affected by trade agreements will need government assistance, as will workers affected by structural and technological change, external shocks and recessions. • Workers in the formal and informal economy are affected differently and have different access to LMPs and related spending and coverage. • Informal economy workers require differentiated programs and instruments regarding earnings, OSH coverage and overall social security contributions and access, micro-credit, retraining, etc.