Assessing Fiscal Sustainability: A Comprehensive Analysis of Brazil's Continuous Cash Benefit (BPC) Program

Abstract

This paper analyzes the Brazilian social benefit known as Continuous Cash Benefit Programme (BPC), considering its rules, resource utilization, potential impacts,and adverse effects on society. The literature review was based on the Austrian Theory of Economic Intervention.We observed that the BPC needs to be reassessed regarding values, long-term sustainability, and control of adverse effects. Results showed that the value of the BPC per capita is higher than the value of other social benefits in Brazil. 37% of the budget for the analyzed social programs is allocated to the BPC, but it reaches only 18% of the total number of beneficiaries. The benefit amount is also higher than the nominal per capita household income of more than 40% of the Brazilian Federal Units. Since the BPC amount is tied to the minimum wage, which historically experiences real increases in value, and Brazilian data indicate a process of population aging, we expect that expenditures on the benefit will significantly rise in the coming decades. Additionally, we have observed that the BPC creates an adverse incentive for a portion of the population not to contribute to the country's social security system, as they anticipate fitting into the BPC's rules upon retirement. For the sake of public expenditure efficiency and fiscal sustainability, the value and rules of the BPC should be reviewed.