Tara Sabre Collier

Why Inclusive Growth is Critical for Economic Success in Brazil’s BoP

Based on its GINI Coefficient, Brazil is one of the most inequitable countries in the world (additional statistics can be found here) and has long been a top global tourist destination. In this blog post I explore the question of whether the tourism industry can be shifted to perpetuate greater equality, or is destined to remain part of the problem. Here, I open an argument that inclusive growth is intricately linked to the potential for growth in the tourism industry in particular.

Income inequality in Brazil has been on the decline for several years. This has held true in industries such as education and transportation, as well as in social policies. Race and gender disparity, however, comprise two of the more complex factors in the country’s push for greater economic equity. These issues have yet to be resolved and must be carefully considered as the country pushes for new and continued growth in the tourism industry.

To frame the issue of inclusive growth, the Portrait of Inequality (PDF in Portuguese), published by Brazil’s Applied Economic Research Institute, showed that Afro-Brazilians comprise 49 percent of Brazil’s population, yet they are twice as likely to live below the poverty line. More than 40 percent of Afro-Brazilians live below the national poverty line and Afro-Brazilians comprise 66 percent of households in the favelas. Women in Brazil on average earn just 56 percent that of men’s earned income, even when accounting for significantly higher educational levels for women. Moreover, 30 percent of Brazil’s female labor force is in a situation of high economic vulnerability, i.e. domestic labor, unpaid labor or self-consumption labor. In addition to regular structural issues that limit economic access at the base of the pyramid, Brazil also must address these social and institutional issues for more inclusive growth.

Tourism has long been a tremendously vital sector in the Brazilian economy, generating more than $5 billion in revenue in 2009. Unfortunately, however, the sector has not had a great track record for trickling down impact. First, over 50 percent of tourism receipts in developing countries end up routed back to developed countries through imports or income to foreign labor or foreign firms. Secondly, the sector creates a massive number of jobs for the low and lowest income quintiles in Brazil, but many are low-wage and low-mobility positions. These positions include hotel and hospitality staff, cleaning staff, travel agencies, etc. And the informal side of the tourist sector is rampant with the previously mentioned racial and gender disparities. While there is no conclusive study to reference, one can easily observe that women and socially-excluded groups are over-represented in these informal tourist sector activities with even more limited livelihoods and mobility.

In the cities of Salvador and Rio de Janeiro, for example, major tourist attractions include Afro-Brazilian patrimonies – such as capoeira, samba, candomblé and traditional cuisine – and many of the service providers are Afro-Brazilians operating informal businesses. What elevates the precariousness of this issue is that Brazil is overtaking Thailand as the world’s most popular sex tourism destination. These income-generating activities perpetuate tremendous tourist demand while at the same time providing very limited pathways out of informality and economic limitation.

Racial and gender inequity, sex tourism, cultural tourism, and economic opportunity form a complex intersection in Brazil, though it is one that is shifting. One part of increasing the tourism sector’s inclusiveness is a broader upgrading of labor market access through transport, education and social policies- and this has already begun. Under Brazil’s Growth Acceleration Plan, the government has committed to investment in sustainable and eco-friendly urban development and slum upgrading, thus creating a plethora of jobs in construction, education and social services, often for low-income people. Since Rio de Janeiro was awarded both the 2014 World Cup and the 2016 Olympics, the city has unrolled a comprehensive revitalization plan, which will develop many low-income areas, promote green construction and provide training in tourism, hospitality, foreign languages and IT for the local population. New metro and transport routes will be availed in favelas and other low-income areas, expanding access to jobs.

However, there are still unanswered questions as to whether this growth plan will take specific action to address for social disparities. The lack of coherent inclusiveness strategies could easily perpetuate exclusion. It does, however, look promising.

At the broader federal level, Brazil has been extremely progressive about attacking gender and racial inequality. Lula’s administration launched a Secretariat for Racial Equality and a Secretariat for Policies for Women, which act at the federal and local level. Both have released innovative programs, ranging from training to credit to federal policies. These policies include affirmative action programs in public universities as well diversity training and supplier diversity programs. The Secretariat for Policies for Women even has a program to incentivize jobs for women in the rapidly expanding construction sector. In various capacities, state and local government are working to ensure that women and diverse ethnic groups are well-represented and take advantage of these opportunities in the economy, including the tourism sector.

The Secretariat for Social Assistance and Human Rights and the Secretariat for Policies for Women have launched a new program to help over 1,000 low-income women in Rio de Janeiro become integrated in the tourist economy, by providing several modules of relevant job and entrepreneurship training. The program is a win-win- filling a gap in human capital needed by 2014 and helping these women move out of the informal sector. Also, and although they do not specifically address gender, SEBRAE (the Brazilian SBA) is helping by not only providing training, but establishing SME handicrafts centers which market goods primarily produced by women entrepreneurs and cooperatives.

These are just 2 examples … but there is potential for so much more. The most interesting thing about this shift is the collaborative interaction between investors, the private sector, government and communities that seems to be going on in Rio. Can tourism be a boon to better income distribution in Brazil? If they rightly incorporate social inclusivity into market-based growth, I think it will. Let’s check back in 2016.

Base of the Pyramid