Archive for August 9th, 2010

India, Brazil and Venezuela: Trying to learn what works in subsidies for the poor

August 9, 2010

Since we are always discussing how to solve many problems in Venezuela, I thought I would note this article in today’s New York Times about the discussion going on in India about the safety net for the poor. India has had a system in place to attempt to provide a safety net for the poor. The system gives people certain items every month. The new proposal is to simply give either food coupons or cash to the people in order to make the system more efficient.

I don’t know much about the current system in India, maybe someone could point us to a good source on it. But one thing that struck me about the article was that the budget for India for this safety net for the poor is US$ 12 billion. Since India has a population of 1.1 billion people, 42 times larger than that of Venezuela, this means that the program is puny on the scale of the population and the numbers used for Mercal/PDVAL/Misiones here in Venezuela is huge on a relative scale.

Note also, the parallel in corruption in both cases, as it is estimated that 70% of the subsidy (which includes kerosene) never reaches the people.

Coincidentally Luis Pedro España, a Professor at the Catholic University in Caracas who has devoted his life to study poverty in Venezuela, gave a talk recently saying that it would only cost US$ 3.5 billion to lift all Venezuelans out of poverty by using direct cash subsidies to the poor, as has been done in Brazil, rather than subsidizing the food, paying people to go to meetings like Mision Ribas and the like.

Think about it, US$ 3.5 billion is quite doable given the country’s macroeconomic numbers. In fact, this would be roughly the same amount spent in 2008 by PDVAL/PUDREVAL in bringing in food to the country, which we have recently learned only 14% of it eventually reached the people.

España notes that despite the close relations between the Chavez and Lula administrations, there has been no effort by the Chavez Government to learn about the Brazilian program, which has been so successful. España suggests that the programs set up by the current Government of Venezuela, not only are full of graft, but also have a clientelistic component in which those receiving subsidies only get them if they participate in political activities.

It would be interesting to know how España came up with his number, it is criminal not to try something like that in Venezuela at that cost. Unfortunately, Chavez has never much had interest on learning what true experts on poverty think on how to solve it.