How President Lula da Silva should help the poor in Brazil this time

By:

Nov 17, 2022

On January 1, 2023, Luiz Inácio Lula da Silva (Lula) will take the reins as Brazil’s next president. Hard to believe he was in prison just four years ago, but that isn’t stopping him from already making big promises. 

For instance, Lula plans to raise the minimum wage and to reverse the deforestation of the Amazon rainforest. It’s unclear, however, how Brazil will pay for Lula’s promises.

When he served as Brazil’s 35th president from 2003 to 2010, the country was experiencing an economic boom. GDP almost quadrupled from $558 billion in 2003 to $2.2 trillion in 2010. Brazil was so successful economically that Lula often quipped, “God is Brazilian.” 

Brazil, and the world, however, is different today. From a $2.6 trillion high in 2011, Brazil’s GDP in 2021 shrunk to $1.6 trillion. And although the COVID-19 pandemic has not been kind to Brazil–more than 700,000 people have died, second only to the United States–the country’s woes began well before the pandemic. 

Today, Brazil–and as a consequence its citizens–is poorer and the government has fewer resources to provide social services to the people. It is against this backdrop that Lula will govern, not to mention the looming global recession, a slow recovery from the pandemic, and the vitriolic political climate. 

So, what can Lula do, especially for Brazil’s poor?

Pull, don’t push

Early signs point to Lula’s government implementing a push strategy of development when they need to do the opposite. 

In our paper, Leveraging market-creating innovations to solve Brazil’s education paradox, we highlight two main development strategies, push and pull.

Push strategies–especially those in education, health, infrastructure, and social services–are often driven by the priorities of their originators, typically experts in a particular field or politicians, and generate solutions that are recommended to communities that lack access to a particular resource such as schools, hospitals, etc.. Lula, for instance, is already promising an influx–or a push–of cash to the poor by increasing the minimum wage.

It’s important to note that many of the resources pushed are designed to be helpful and are often welcome by communities. 

Unfortunately, not only are many resources pushed into a context that isn’t quite ready to absorb them, but they’re also pushed without a sustainability mechanism in place. And so, what starts out as a good thing can turn into something profoundly disappointing, very quickly. 

For example, consider the case of education in Brazil. Experts in the field and education stakeholders have been working hard to implement, or push, a National Education System in the country to improve the quality and outcomes of Brazil’s education system. However, more than a decade has passed and debates are still being had on how best to implement such a new system. 

In contrast to push strategies, pull strategies are originated by people on the ground—often innovators—who are responding to the struggles of everyday people experiencing specific problems. As the innovators on the ground design and develop their solutions, they pull in the appropriate resources needed to bring these solutions to the community. Because these solutions take into consideration the local context, they are more relevant to those for whom they are designed.

For example, consider how Nubank, a Brazilian financial technology company, is creating access to banking services for millions of Brazilians. 

Nubank co-founder, David Velez, experienced the struggle of opening a bank account and figured many others had similar struggles. As he investigated the problem, he sensed that technology could play a significant role in helping people access much needed financial services. So, he built a fintech company focused on the struggles of average Brazilians. 

Today, Nubank has more than 50 million customers in Brazil, employs more than 6,000 people, and has created close to $20 billion in assets for Brazil. In addition, the Brazilian fintech ecosystem is now more vibrant than ever. In the past ten years, the number of people with access to banking services has increased by more than 50% and there are now hundreds of fintech firms serving average Brazilians

Nubank was founded in 2013, around the same time education stakeholders began discussing a National Education System in Brazil. Thankfully, Nubank is not alone.

Another Brazilian technology company, eduK is solving the country’s unemployment problem using a pull strategy. 

Since 2012, unemployment in Brazil has more than doubled from about 6% to 14%. Worse is the fact that almost six million people gave up looking for work because they didn’t believe they could find a job. The eduK platform, which offers professional courses that uses a methodology that helps people learn fast, is reversing this trend. 

It is now a one-stop shop for income generation. The company has also built a connecting service into its platform to help service workers such as plumbers, delivery drivers, or electricians offer their services. The platform currently hosts 3,200 courses, 1,100 experts, and more than 8 million subscribers.

Brazil’s problems are immense and neither Nubank nor eduK by themselves will solve all of the country’s woes. But the principles that have helped them–developing solutions for people experiencing specific problems–can go a long way in helping the country return to growth.  

Lula has a real chance to help many Brazilians, especially the poor. But to do that, his administration must resist the urge to implement push strategies which often end up being unsustainable.

Efosa Ojomo is a senior research fellow at the Christensen Institute, and co-author of The Prosperity Paradox: How Innovation Can Lift Nations Out of Poverty. Efosa researches, writes, and speaks about ways in which innovation can transform organizations and create inclusive prosperity for many in emerging markets.