The History of Basic Income in Brazil and How the City of Marica Points the Way Forward

Paul Katz, Leandro Ferreira, The Boston Review

Image: Currency used in Maricá, Brazil.

While Brazilian president Jair Bolsonaro denies that a serious public health crisis is underway, a small municipality an hour up the coast from Rio de Janeiro has instituted a remarkable and effective COVID-19 response. In Maricá, a city of 160,000, about 42,000 of the city’s lowest-income residents—who already receive 130 reals (R$), about $25, per month as part of the city’s expanded basic income—will now be paid R$300 per month ($60), 169 percent of the Brazilian poverty line, at least through June. End-of-year bonuses will be advanced to make April’s payment an even larger R$430 per person. Food baskets are also being distributed to families with children in the public school system, and additional support is being offered to small businesses and self-employed workers. The sums involved are not luxurious, but they represent the difference between catastrophe and the possibility to overcome the crisis for tens of thousands of Marica’s residents.

Unlike the protagonists of countless prior commodity booms, Maricá used its petroleum windfall to enact a remarkable suite of progressive social policies.

This set of initiatives represents the most ambitious city-level response to COVID-19 in Brazil, and one of the most notable in the world. That all of this is happening in a small suburban city on the outskirts of Rio might be surprising to those unfamiliar with the recent political history of the region. To observers of the self-designated “City of Utopias,” however, there is nothing unusual about the speed or scope of Maricá’s coronavirus response. The sole municipality in the state of Rio Janeiro governed by the left-leaning Workers’ Party (Partido dos Trabalhadores, or PT), for the last decade Maricá has benefitted remarkably from a stroke of geological fortune: its location next to the Campo de Lula, the most productive oil drilling site in Brazil.

Yet unlike the protagonists of countless prior commodity booms, the city has used its windfall to distinguish itself as Brazil’s premier municipal innovator, investing its oil proceeds in a remarkable suite of progressive social policies. In addition to the basic income program, which has more than 42,000 monthly recipients, initiatives include savings accounts for high school students, free public transportation, massive infrastructure investments, and a sovereign wealth fund to lower costs of capital and guarantee social programs in perpetuity.

At the center of these policies is a local digital currency called the mumbuca. All social benefits in Maricá are paid in mumbucas, as are city salaries. The currency is backed one-to-one by reais held in reserve by the Banco Mumbuca, the largest community bank in Brazil, which is funded through the Maricá city budget. The currency is accepted exclusively and almost universally in Maricá. The 2 percent fees that businesses pay to accept the mumbuca, and thus to access its massive base of beneficiaries, go straight to the bank, where they are used to fund no-interest loans for local entrepreneurs and homeowners. The mumbuca, in other words, is not only a vehicle for financial inclusion, but also a means to turn Maricá from a sleepy bedroom community into a thriving market for goods, jobs, and leisure.

The transformation underway in Maricá is rooted in two Brazilian policy visions that have been refined over the past half century: universal basic income and the solidarity economy. Brazil has been, since 2004, the only country in the world to legislate every citizen’s right to a basic income. While financial constraints have limited the law’s application to the country’s neediest citizens, the first step toward its realization, a widely heralded conditional cash transfer program called Bolsa Família has helped tens of millions to escape poverty. The latter pillar, the “solidarity economy,” has been developed in the form of local cooperativism and the world’s largest network of state-regulated community banks.

This history helps to explain why, even as Bolsonaro encourages Brazilians to ignore the social distancing guidelines of state and municipal authorities, basic income advocates have managed to push a package through Congress offering R$600 per month to unemployed and informal-sector workers and R$1,200 to single mothers for at least the next three months. And it allows us to see Maricá as an object lesson in the power of permanent policy structures to offer rapid emergency responses that favor mutual aid over the rapaciousness that so many peer cities around the world are struggling to hold at bay.

Proposals for basic income in Brazil began to cohere in the 1970s, a time when policy experts were seeking to reinvigorate struggling welfare states in many parts of the world. Experiments with negative income taxes in the United States and the Mincome initiative in Manitoba seemed to point toward fairer ways to distribute national income. According to Fernando Freitas, whose masters thesis on the history of basic income in Brazil remains the best source on the topic, economist Antonio Maria da Silveira made the country’s first formal proposal in 1975, at the tail end of the first “Brazilian miracle,” a period of double-digit economic growth and fierce repression by the country’s U.S.-backed military dictatorship. The gains of this boom, Silveira recognized, were distributed unevenly: most workers had actually seen their real incomes decline, and a basic income for all Brazilians seemed to offer a means to fight increasing poverty while fueling the continued growth sought by the dictatorship and its opponents alike.

The idea was especially appealing to Workers’ Party cofounder Eduardo Suplicy, who had first encountered it while completing his doctorate in Economics at Michigan State University in the early 1970s. When, in 1990, Suplicy became the first PT candidate elected to the Brazilian Senate, he used his national platform to advance basic income. Months after taking office, he introduced the first version of what would ultimately become the world’s first national law guaranteeing all citizens the right to a basic income, beginning with those in greatest need. Suplicy’s bill entailed a radical rethinking of the Brazilian social safety net, which since the midcentury presidency of corporatist Getúlio Vargas had centered on the half of Brazilian workers employed in the formal sector. The benefits that Suplicy proposed, in contrast, would be universal, owed to all Brazilians by virtue of their citizenship or permanent residency.

Maricá’s city-level response to COVID-19 is the most ambitious in Brazil, and arguably the world.

Suplicy’s 1991 bill never passed, but it presaged the political ferment that would characterize the Brazilian 1990s. The country had just left behind two decades of dictatorship and enacted a remarkably progressive constitution in 1988, and new social and intellectual currents were churning fast. These were the doings not only of politicians linked to the PT and other formal parties, but also to social movements pursuing diverse if often interrelated iterations of collectivism.

The effort to democratize the economy through collective forms of production was not new in the world, nor unique to Brazil. The initiatives developed by Robert Owen in the nineteenth century gave rise to cooperatives, the classical form of what has come to be called the solidarity economy. The particular forms that these collectives assumed in Brazil were heavily influenced by the ideas of Austro-Brazilian economist and PT luminary Paul Singer. The need to sustain a large body of workers excluded from the formal labor market helped economic collectives to take root in Brazil and elsewhere, offering shared access to production, distribution, consumption, savings, and credit. In the 1990s and beyond, they came to include informal production groups, collective management of businesses that had failed during successive financial crises, farm unions to secure a better position in the market, community management of joint finances, and even mechanisms to include individuals with mental health challenges. What joined these initiatives were the principles of collective management, the sharing of profits, and the commitment to decent jobs for all workers.

Each of these initiatives had its origins in the self-organization of civil society, and together they reshaped the practices of social movements, unions, and neighborhood associations. At a time marked by the fall of the Berlin Wall and the collapse of Soviet socialism, the solidarity economy became the programmatic reserve of left-wing parties and movements at the margins of capitalism. Support from successive governments, from small municipalities to the 2003–10 administration of the first Workers’ Party president, Luiz Inácio Lula da Silva, deepened the reach of these measures and diversified their modes of action.

Perhaps the clearest example of this phenomenon is the community bank. In the late 1990s, the residents of a poor community in the city of Fortaleza, a tropical tourist destination with underdeveloped infrastructure, formed a community association and launched a bank offering small loans to neighborhood businesses. Inspired by Singer’s ideas and by liberation theology, community leaders founded a bank in the same vein as Nobel laureate Muhammad Yunus’s Grameen Bank in Bangladesh. The initiative, soon named Banco Palmas, grew quickly. Through its practice of collective management, the bank created its own local currency, the palma, to ensure that shared resources remained within the community. This social currency proved an enormous success, in part because it was pegged to the real and thus offered meaningful security to local businesses.

Federal authorities moved quickly to limit the circulation of the palmas, only changing course and developing a regulatory framework for the currency after Lula’s election. This was a joint effort of the Brazilian central bank and the National Secretariat of the Solidarity Economy, a new agency led by Paul Singer himself. Singer passed away in 2018, leaving behind a richly theorized model of cooperativism that, while often overlooked in public debate, has reshaped life in countless communities. Today, Banco Palmas presides over a network of more than a hundred community banks and social currencies, the most extensive in the world.

As community banking took root in the late 1990s and early 2000s, social policy began to shift as well. In 1997 a new federal program offered to subsidize local basic income initiatives, and a growing number of state and municipal authorities, taking advantage of this, began offering cash for parents who sent their children to school. In 2001 this was further expanded with federal guarantees to support such programs completely. Sensing opportunity, Suplicy reintroduced his basic income bill that year. Three years later, Lula signed a modified version into law. The measure promised Brazilian citizens and permanent residents the right to a monthly income with no restrictions, beginning with those most in need and to be expanded within the bounds of budgetary constraints.

The day after sanctioning Suplicy’s law, Lula signed into law the first step toward a guaranteed income, the now-famous Bolsa Família. This conditional cash transfer program built on Bolsa Escola as well as similar local initiatives. Implemented on a scale unmatched by previous federal social programs, Bolsa Família has proven remarkably effective, slashing the share of Brazilians living below the World Bank’s international poverty line from 9.7 percent to 2.7 percent in its first decade. In recent years, the program, like the country’s community banking network, has survived the 2016 coup against Lula’s successor, Dilma Rouseff, and the concomitant rise of Brazil’s radical right, which has used Bolsa Familia as a lightning rod. There is no more striking case study than Bolsonaro, who clearly detests the program and has cut more beneficiaries than in any previous administration, yet who also added a thirteenth annual payment around the holidays, a standard formal-sector benefit. While ever more precarious, the state of Bolsa Família, like the proliferation of social currencies, shows that the terrain on which Brazilian social policy is debated has shifted meaningfully since the millennium.

To ensure that these programs outlive Maricá’s oil income, the city launched a sovereign wealth fund. It enables the city, in which a sizeable share of the population lives in poverty, to enter the financial market on favorable terms.

After an expedition along the coast of Brazil in 1503, the navigator Amerigo Vespucci returned to Europe, noting in the account of his voyage that he has discovered a group of islands lush enough to convince him that “paradise is here.” It is common in Brazil to say that this line from Vespucci about the Fernando de Noronha archipelago, now a national park, is what inspired Thomas Moore’s description of Utopia in 1516.

While Vespucci’s islands are more than 1,200 miles from Rio, Maricá still fits Moore’s story, and not only because of its coastal mountains and many lagoons: like Moore’s Utopia, Maricá now figures prominently in economic and philosophical debates about just societies.

The set of initiatives taken by the city, basic income among them, has given Maricá a new claim to the nickname the City of Utopias. It is undeniable that extraordinary income from offshore petroleum reserves has made a bold vision of the future possible for the city. But it is also true that other Brazilian municipalities that have seen new oil revenues, including in the state of Rio, were not able to formulate or implement a project capable of altering the typical course of predatory resource extraction and its negative externalities.

All of this is directly connected to the personal trajectory of Washington Quaquá, the first PT mayor elected to govern Maricá. A charismatic political leader with an unusual history, even by the standards of the Latin American left, Quaquá was born in Maricá’s favelas. Elected in 2008 and reelected four years later, Quaquá’s administration coincided with a favorable economic moment, a period often referred to as the “second Brazilian miracle.” He seized the opportunity to advance a vision of political transformation grounded in a proprietary mix of collectivism, class struggle, and pragmatism. His approach was heavily informed by Paul Singer and Eduardo Suplicy, with basic income, community banking, and a dramatic infrastructural overhaul at its heart.

For Quaquá’s transformative social experiment to succeed, the popular conception of Maricá as a poor, inhospitable, unattractive place in the shadow of the Marvelous City, Rio, would have to change. Few were as invested in this state of affairs as the bus monopoly responsible for shuttling residents back and forth between Maricá and Rio. Because regional cities such as Maricá have typically had little or no wealth generation, contractors in garbage collection, food distribution, and transportation have long offered local elites an opportunity to earn consistently outsize profits. Taking direct aim at this system, in 2014 Quaquá instituted a free public bus network within the city. The move brought the city national attention, enraging local elites while earning deep praise from residents, who rely on public transportation to cross a sprawling municipality of 140 square miles.

Quaquá dedicated himself to consolidating his project through the election four years later of his successor, Fabiano Horta, also from the PT. It was during Horta’s term that the policies launched by Quaquá reached full scale. This was especially true of the city’s basic income program, which is a global flagship. First launched in 2013, the policy initially offered payments of 85 mumbucas to households listed in the Cadastro Único, Brazil’s unified register for social benefits. As the basic income program expanded, the monthly payments increased to 130 mumbucas, and additional benefits were offered to pregnant women, students, and indigenous residents. By June 2019, some 14,000 lower-income households were receiving the benefit.

That month, Horta oversaw the largest expansion of the program yet. The 130 mumbuca payment, the city announced, would now be made to individuals, not households. To qualify, individuals needed to be registered in the Cadastró Único, belong to households earning less than three times the Brazilian minimum salary, and have lived in Maricá for three years. Following a concerted registration drive in late 2019, the program’s rolls swelled to more than 42,000 individuals. Each of Maricá’s 42,000 basic income beneficiaries now receives a sum equivalent to R$1,560 per year, or 4.5 percent of Brazil’s per capita GDP. (By point of contrast, the value of the annual dividend paid by the closest thing to a minimum income program in the United States, the Alaska Permanent Fund, ranges from 1.5 to 3 percent of Alaska’s per capita GDP.) In the aggregate, the program injects R$5.5 million into the local economy each month, all of which must be spent in the city of Maricá.

To ensure that these investments will outlive Maricá’s oil income, in late 2017 the city launched a sovereign wealth fund, which has already achieved a total value of R$285 million ($55.7 million). The fund offers a platform for the city, in which a sizeable share of the population lives in poverty, to enter the financial market on favorable terms, with resources that could exceed R$1 billion in the next decade. As it grows, the income from this fund will enable the city to lower costs of capital for critical development projects while guaranteeing key social programs in perpetuity. This model has broad applicability, and not only in places experiencing commodity booms, as recent proposals for municipal “coronabonds” in the U.S. illustrate.

The response to the COVID-19 crisis will have a determinative impact on political processes around the world. This is doubly true in Brazil, where Maricá’s anticipatory measures against the virus, announced before a single case had been recorded there, are diametrically opposed to the denialism and cruelty of Bolsonaro’s federal government. Beyond downplaying the danger of COVID-19 and urging the abandonment of social distancing for the sake of the economy, the government was also timid in the face of growing demands for social protection on the part of the population, leading a national coalition of civil society organizations to successfully push Congress for a basic income in the mold of Maricá.

As the opportunities for emergency response opened by Maricá’s embrace of basic income and the solidarity economy reveal, policies built in the present can open or close the space available to policymakers for decades. Our responses to the COVID-19 crisis, in Brazil as in the United States and elsewhere, will help determine the shape of the world to come. Let’s be sure that the policy choices we make now drive us, not toward reinvestment in individualism and greed, but toward a deepening of cooperation and solidarity.

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