Watchdog Criticizes Brazil Welfare Program

A report published Monday alleging irregularities in Brazil's federal welfare program cast a shadow over the initiative, the latest in a string of challenges for Brazilian President Dilma Rousseff as her administration tries to revive a once-highflying economy.

A series of audits from Brazil's Comptroller General found more than 5,000 cases of benefits paid to individuals who made more than the maximum eligible income for the country's Bolsa Familia, or "Family Assistance," program. Relatives of government officials and people who were deceased over a year were counted among beneficiaries as well.

The findings aren't entirely unexpected for a program that costs over $10 billion per year and benefits about a quarter of Brazil's 190 million-population, making it one of the world's largest social welfare programs. But a report by Brazilian online news portal UOL which tallied up the irregularities on Monday sparked criticism of the government's oversight of the program, started by Ms. Rousseff's popular predecessor and mentor, former President Luiz Inacio Lula da Silva.

Brazil's Ministry of Social Development and Fight against Hunger, which manages the program, didn't immediately respond to a request for comment.

The bad publicity comes as Ms. Rousseff is taking the biggest hit to her popularity since taking office in 2011. Polling institute Datafolha said this week that 57% of respondents in its June survey approved of Ms. Rousseff's administration, down from 65% in March—a surprising change in sentiment since Ms. Rousseff's popularity remained high through Brazil's economic slowdown. Inflation and unemployment were among the biggest concerns.

The Bolsa Familia criticisms also follow an embarrassing incident last month in which a wave of false rumors that the assistance program would be shut down caused a mass panic as thousands of welfare recipients rushed to withdraw their payments from ATMs.

Ms. Rousseff angrily dismissed the rumors in a public appearance on May 20, saying the government's commitment to the program, credited for lifting the poor and spurring the rise of a new middle class in Brazil, is "strong, deep-seated and permanent." The program offers a guaranteed minimum income for all Brazilians equal to about $35 per month.

An investigation into the rumors, which spread in part through Brazil's vibrant social media networks, is continuing.

Ms. Rousseff's ratings still place her ahead of her potential opponents in next year's election, and most economists expect Brazil's economy to rebound slightly to about 2.5% growth in 2013.

But in Datafolha's survey, the percentage of respondents who believed Brazil's economy would improve dropped to 39% from 51% in March, while 19% believed the economy would worsen, up from 10% in March. Fifty one percent said they were worried inflation would rise, up from 45% in the previous survey, and 36% believed unemployment would increase, up from 31%.

The concerns aren't unfounded—Brazil's rolling 12-month inflation rate in May was 6.5%, at the top of government's range of tolerance, and the nation's unemployment rate also climbed for a fourth-consecutive month in April, though it remains low at 5.8%.

At the same time, Ms. Rousseff has come under fire from critics who blame her administration and the Workers Party for the slowdown in Brazil's economy, which reached 7.5% growth in 2010 but dropped to 2.7% growth in 2011 and 0.9% last year, underperforming expectations. Brazil's economy grew 0.6% in the first quarter of 2013 from the previous quarter, below expectations.

In May, Brazil's central bank has raised the country's base lending rate by half a point, to 8%, in hopes of reigning inflation in, a shift which João Augusto de Castro Neves, senior analyst at political research and consulting firm Eurasia Group, said is meant to address public concerns and could mitigate Ms. Rousseff's drop in the polls.

The government is "sending a message that it is not seeking economic growth at all costs, at the cost of inflation," he said. "Those kinds of actions, the central bank being more hawkish, [shows] the government is changing the tone."

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