Improving social spending for a better life for all in Brazil

Public policy
Fiscal Policy - Public and Welfare Economics

On the occasion of its dress rehearsal for the World Cup of 2014, Brazil is making worldwide headlines, but not, as could be expected in the past, to celebrate a victory or to moan, and debate the reasons for, a defeat, but to question through massive popular protests whether a sport that has long been a source of national pride should take precedence over pressing social needs in the allocation of public resources. In this short note we look at how justified are the protesters’ complaints about the quality of public services, and how they could be accommodated over the next few years in a fiscally sustainable way. Given space constraints, we focus on two key items of social spending, education and health, which, together with public transportation and security, are at the core of the protesters’ demands.

1. Education

It should be recognized upfront that Brazil has made major strides over the last two decades in improving access to education. In 1993 only 40 percent of the labor force had completed primary education, and only 30 percent secondary one. By 2009 those ratios had practically doubled1. Moreover, access has become more equitable: the number of years of schooling of children in the bottom quintile of the income distribution has also doubled, from 4 to 8, and their PISA2 scores have improved. The main policy instruments responsible for these achievements were special-purpose federal transfers equalizing education funding per student across regions, states and municipalities (FUNDEF and subsequently FUNDEB); cash transfers for poor families, conditional on school attendance of their children (Bolsa Escola and subsequently Bolsa Familia); and the introduction of a common national yardstick to measure learning achievements of students (SAEB).

Despite these achievements, much remains to be improved in education in Brazil. A comparison of the 2009 PISA scores shows a gap of nearly 100 point (20 percent) between the learning achievements in math, science and reading of the average student in the OECD and in Brazil. Brazil also lags behind Chile, Mexico and Uruguay in such scores3. The coverage of pre-schooling (which is increasingly recognized as key to subsequent learning performance) is still deficient, and class repetition rates are high. School facilities in poorer and/or more remote rural areas remain quite inadequate. While some of the states have taken innovative steps to link teachers’ pay to students’ learning achievements, in most others there is no monetary incentive for teachers’ performance, and principals are neither provided adequate autonomy in managing their schools nor held accountable for results. A disproportionate share of classroom time is spent on routine or administrative activities, as opposed to active teaching and learning.

Such undeniable shortcomings in the quality of education in Brazil cannot be simply blamed on inadequacy of resources devoted to this function, nor can they be expected to be remedied just by increasing such resources. Total public spending on education has risen in recent years to a level (over 4.7 percent of GDP) that is higher than the average for countries of similar per-capita income. More significantly, spending per student is significantly higher in Brazil than in countries of comparable (or even higher) per-capita income with higher learning achievement scores (e. g. Korea and Chile). Despite improvements in recent years, a disproportionate share of education spending continues to go to tertiary education, which tends to benefit mostly upper income groups4. Very little spending is devoted to vocational training, a fact that is partly responsible for the serious skill mismatches plaguing Brazil’s labor market. All of these considerations suggest that there is significant scope for improving the quality and equity of education in the country within the existing envelope of resources, and that any increase in such envelope should be targeted to clear priority objectives.

Specifically, an effective reform agenda for education in Brazil should focus on the following areas:

• Building on the progress achieved to date by maintaining the above-mentioned policy instruments (FUNDEB, Bolsa Familia and SAEB) that contributed to such progress
• Redirecting resources from tertiary to secondary education, and improving the technical and vocational content of the latter, including in partnership with the private sector
• Focusing new resources on broadening the reach of pre-schooling programs; and on improving school facilities and equipment, and teacher training programs in the more deficient areas
• Ensuring that the learning achievement objectives stipulated in national education plans are adequately reflected in curricula, and in teachers’ training and evaluation programs
• Linking teachers’ pay and job security to performance, and increasing autonomy and accountability of principals; and
• Stimulating, rewarding, and disseminating sound innovation initiatives (e.g. the creation of charter schools) at the state and local levels, which are responsible for the bulk of education delivery in Brazil.

2. Health

The 1988 Constitution defines access to comprehensive health care as a basic right of every Brazilian citizen. In response to this mandate, a national unified health system (Sistema Unico de Saude, or SUS) was set up in 1990, to replace the previous system under the umbrella of the Social Security Administration. The creation of the SUS was aimed at universalizing access to health care and improving its quality, including through more decentralized and participatory delivery of services.

Under the SUS umbrella, wide-ranging reforms have taken place over the last two decades that undoubtedly contributed to significantly improving basic health indicators, such as life expectancy and infant mortality in Brazil5. These reforms involved, among other things, a substantial expansion of outpatient care, with growing emphasis on preventive services, such as vaccinations and family health; prioritizing the poorer regions of North and Northeast of the country; transferring most public hospitals to the state and municipal levels, and increasing their operational autonomy; and experimenting with public-private (especially not-for-profit organizations) partnerships (e.g. in Sao Paulo).

Public spending on health has risen significantly, especially in the last decade, to around 4 percent of GDP, a level broadly comparable with the average of countries at similar levels of development6, and has been increasingly redirected to financing primary care. It has also been substantially decentralized, with the federal share declining from 85 percent in the late 1980s to around 45 percent currently7. Regional disparities in health spending have declined, as a result of changes in the criteria for allocation of federal transfers.

Despite these improvements, many challenges continue to beset the delivery of health care in Brazil, and addressing them adequately will require significant policy changes, not only additional resources. This is especially the case because Brazil’s population, although relatively young at present, is aging at a faster rate than in many other countries, and this will significantly increase pressures on public health spending over the longer term8.

First, the coverage of the SUS in practice remains uneven, and indeed inequitable. Household surveys indicate that about one third of the population does not receive even one basic health consultation a year. Also, the SUS covers a smaller share of health costs in the lower than in the middle and upper deciles of the income distribution. This is the case because richer households, that typically have access to supplementary private health insurance plans, tend to use those for basic care, but to resort to SUS services for the more costly specialized treatments. Moreover, the universal and free-of-charge character of the system entails rationing through queuing, resulting in late diagnoses and substantial delays in accessing treatment (estimated to average 76-113 days for different types of treatment). Not surprisingly, therefore, surveys show high levels of popular dissatisfaction with public health services.

Second, quality control of the services provided by the system is widely considered inadequate. There is a need to extend and strengthen accreditation procedures for the whole range of health providers; to develop and keep up-to-date appropriate protocols for the treatment of endemic diseases; and to better integrate diagnostic and curative services.

Third, and most important, there is ample scope for efficiency gains, by, among other things, consolidating small hospital facilities, to obtain economies of scale9; further reducing resort to (more costly) hospital care by improving availability of outpatient care facilities; increasing transparency and accountability of health providers, and vigorously combating reportedly widespread corruption and fraud; and better articulating the coverage of the SUS and of the supplementary (typically employer-provided) private health insurance plans.

3. Some concluding thoughts

Although the brief considerations above can hardly do justice to the complex issues at hand, it seems clear that legitimate demands of the Brazilian population (especially its growing middle class) for better access to, and quality of, essential social services will not be met just by increasing the budgetary resources devoted to them. Indeed, a realistic assessment of a sustainable fiscal space for such increases suggests that it is severely constrained by a number of factors:

• The already high levels of the tax burden, and of the gross public debt and its cost
• The rigidities affecting other major categories of public spending, such as personnel and pensions
• The need to address large gaps in productive infrastructure, and to save for future generations at least a significant share of revenues from non- renewable natural resources; and, last but not least,
• The relatively fragile fiscal situation of many of the states and municipalities which are responsible for the delivery of most education and health services.

Therefore, and in contrast to the immediate policy responses to the protests, emphasis should be placed on taking the necessary (albeit sometimes politically difficult) steps to improve the quality and efficiency of health and education spending in a fiscally responsible and sustainable way. There is already substantial knowledge in both the official and the academic communities in Brazil of the nature of such steps, and it could be supplemented by international expertise if needed. What is required is political will to act. We hope it exists and is exercised soon.


Bruns, B., Evans, D. and Luque, J., 2011: “Achieving World-Class Education in Brazil – The Next Agenda”, Directions in Development, the World Bank, Washington, DC

Clements, B., Coady, D. and Gupta, S., 2012: “The Economics of Public Health Care Reform in Advanced and Emerging Economies”, International Monetary Fund, Washington, DC

Gragnolati, M., Lindelow, M. and Couttolenc, B., 2013: “Twenty Years of Health Reform in Brazil - An Assessment of the Sistema Único de Saúde”, Directions in Development, the World Bank, Washington, DC

Medici, A., 2011: “Propostas para Melhorar a Cobertura, a Eficiência e a Qualidade no Setor Saúde”, in Bacha, E.L. and Schwartzman, S.(eds.): ”Brasil: a Nova Agenda Social”, GEN/LTC, Rio de Janeiro

OECD, 2011: “How’s life? Measuring well-being”, OECD publishing, Paris

Veloso, F., 2011: “A Evolução Recente e Propostas para a Melhoria da Educação no Brasil”, in Bacha and Schwartzman (eds.)

1. Bruns, Evans and Luque (2012)

2. PISA are the OECD standardized achievement tests for math, science and reading comprehension

3. OECD (2011) and Veloso (2011)

4. The ratio of per student spending on tertiary education relative to income per capita is nearly 6 times that on basic education (compared with 2 times or less in most advanced and emerging countries).

5. OECD (2011)

6. Medici (2011)

7. Gragnolati, Lindelow and Couttolenc (2013)

8. The IMF projects the public health spending to GDP ratio to rise on current policies by the equivalent of 1.6 percentage points by 2030 and to double by 2050. See Clements and others (2012).

9. Most hospitals are too small to operate efficiently, with 65 percent having fewer than 50 beds. Moreover the mean bed occupancy rate is very low (around 45 percent).



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