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

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

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

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

The Brazilian Labor Force Econ. Active Population 98,9 mil 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 Informal workers and employers (55.3 mill – 56%) Workers in open unemployment (8.1 mill- 8%) PNAD, 2007 What is available in Brasil to help workers? But only % have work accident insurance (SAT) coverage

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)

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

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.

Social Spending in Brazil is limited in comparison with Europe * Brazil: Brazils 0.5% of GDP above is from IADBs 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 Brazils Bolsa Familia, ie. about 0.4% of GDP in * BRs Gov spending on intermediation, training, inspection, occupational safety and health in 2006 was equivalent to 0.02% GDP.. Source: OECD, IADB;

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.