Four Challenges of the Brazilian National Social Security System’s Implementation

Created with Sketch. 28.8.2020
Created with Sketch.
Alonso de Andrade Luiz

Jaa

Establishing a reliable and encompassing national social security system in a country like Brazil is a massive, multi-generation endeavor. In this blog, I describe the four most important challenges the Brazilian National Social Security Agency – INSS struggles with, being it the main federal government instrument to operate both social insurance and social assistance benefits.

Country with long history of dictatorship

Brazil is not only about a huge country, but also of a huge and complex economy: despite the strong recession period from 2014 to 2016, Brazil still registered in 2019 the world’s ninth-largest GDP, amounting to almost two trillion US dollars. Yet, inequality is on the rise: its GINI index rose from 51.3 in 2015 to 53.9 in 2018, making Brazil reach also the ninth position among the most unequal countries in the world.

Politically, the country has been tumbling at the edge of democracy, as the 1964-1985 dictatorship period’s shadow is growing taller nowadays. Authoritarianism and inequality roots are entangled, and go even deeper into the soil, as shows the extremely violent police forces tradition and the slavery legacy. Brazil was the last western country to formally abolish slavery, an institution that not only still echoes in societal and labor divisions, but also structurally resists through its modern forms, in the unruly depths of both rural areas and metropolises.

Occurring inequalities could be even deeper though, were them not cushioned by the national social security system, which currently delivers social protection and insurance-based benefits to more than 32 million people. In particular, social insurance benefits, despite contested distributive effects on the individual level, drive remarkable impacts towards better regional income distribution, extracting high contributions from rich urban settings while providing non-contributory benefits to poor Brazilian rural countryside families.

The system’s desirable social effects are constrained by implementation capacity, though: and the path from policy design to the benefits’ effective delivery is long and thick with challenges, given the country’s complex environment.

Territory

The first and obvious challenge is the country’s territory: 8.5 million km², almost double the entire European Union area (4.4 million km²). Worse, a significant part of the 5570 Brazilian municipalities is weakly connected through deficient transport infrastructure – notably an almost inexistent railroad network and badly kept highways. And the logistic hindrance is not offset with a denser network of local social security service offices – INSS’ service network density is significantly lower than Kela’s:

Total own offices3 Municipalities/office Km²/office Population/office
Kela1 146 2.12 2,318 37,890
INSS2 1.614 3.45 5,276 130,762

Table 1. Kela’s and INSS’ service network density comparison

Sources:

1 Kela Pocket Statistics 2020; LocalFinland; UNdata

2 Dataprev; IBGE; UNdata

3 Service delivery partnerships and non-service offices were not considered.

Attendance Diversity

Brazil is home for many traditional and native populations: indigenous peoples, gypsies, artisanal fishermen, communities founded by fugitive slaves, and a variety of foraging populations. Each of those not only add to cultural complexity, demanding different standards in service delivery, but are often subject to different social security rules, being grouped with rural familiar economy workers under the label ‘specially insured people’.

Artisanal fishermen are entitled to the seguro defeso, an unemployment benefit-like grant paid during closed fishery seasons. Foraging communities living in environment conservation areas used to receive bolsa verde, a grant that was paid as long as they engaged in sustainable activities – but the program was terminated in 2018. Currently, benefits are paid to circa 10 million specially insured people:

Benefits Benefit receivers Total amount paid (million R$) Total amount paid (million €*PPP)1 Implementing agency
Artisanal fishermen1 Seguro defeso (closed season insurance) 638,497 2,260.38 850.15 INSS
All Specially insured/rural2 Social security special schemes 9.605.988 114,940.95 43,230.45 INSS
Total 10.244.485 117,201.33 44,080.61

Table 2. 2019 Benefits paid to specially insured people

Sources:

1 Portal da Transparência.

2 Social Security Statistical Bulletin. The social security special schemes grant benefits to poor or subsistence rural workers, indigenous people, artisanal fishermen, and foraging populations in general.

Apart from the diversity of traditional and native populations, service delivery complexity is increased due to the country’s inequality figures, deep educational gaps, and persistent digital exclusion. These take the service delivery intricacy one step further, making it difficult – and often unfair – to deliver the same standardized services to every citizen.

Rules Intricacy

Services’ complexity is not only an outcome of citizens’ diversity. Social security rules suffer constant changes in every level, from major national reforms to lesser rules and procedures shifts, and also localized rule changing based on court decisions. In the last thirty years, the Brazilian national social security system was the object of seven major reforms through constitutional amendments, besides 223 laws and 441 executive decrees enacted altering INSS structure, major procedures, or rules (federal government’s legislation portal).

Rules and procedures are adjusted weekly. Based on internal bulletins, 365 internal norm acts were issued in the last six months, reaching an average of two changes per day. Those usually alter the agency’s structure, refine and detail major laws’ and decrees’ interpretation, and lay specific provisions regarding INSS procedures.

This scenario is further complexified due to the agency’s workforce diversity. Its 21,111 civil servants come from the most diverse backgrounds, as there is no strict formation criteria for admission. Indeed, a small part of the case-working and service workforce was readapted from extinct public service careers, including chauffeurs (96), telephone operators (23), security guards (224), even entertainers (10) and a baker.

Finally, all of this intricacy evolves into a feedback loop, as it allows too much room for discretion and interpretation issues, which are often solved in the courts, generating new rule exceptions and further complexity. Social security is among the most demanded subjects in courts: 3.68% of 2019 total lawsuits, being INSS regarded as one of the most frequent litigants in Brazil. Daily, 7.000 new lawsuits are filed against the agency, resulting in R$ 92 billion (€*PPP 34.6 billion1) paid in judicially decided benefits per year: 15% of the Brazilian social security benefits budget (INSS management report 2019). Together, INSS, federal courts, and both federal government’s and public defense lawyers’ expenses amounts to R$ 4.6 billion (€*PPP 1.73 billion1) per year.

Informality

Informality in the Brazilian labour markets is on the rise, a possible product of global trends, as the business shift from products to platforms. Furthermore, the Brazilian 2017 labor law reform raised the proportion of informal jobs from 40.5% at the end of 2017 to 41.4% at the end of 2019. Informal workers are typically excluded from social security, and thus they were the main target for the recent Emergency Aid benefit, established to buffer coronavirus’ social impacts.

High informal labor force share in Brazil not only jeopardizes social security coverage and the collection of contributions, but also affects service delivery, hindering the claimant’s predictability regarding his right to benefits. Most benefits base on working periods, and the administrative data that support benefit granting is majorly based on tax collection information, both from employers and self-employed payers. Job contracts can also be proven by their written terms if these were registered in the worker’s work record booklet – though the lack of data from contributions makes benefit investigation processes slower.

An extra challenge: despachantes

From the insured citizens’ standpoints, the complexity resulting from the four above mentioned challenges drives doubt and insecurity, as it is hard to keep up with procedures and granting criteria, and thus to predict the right to benefits. Consequently, private intermediation is a common phenomenon in Brazil: regardless of the official services’ gratuity, private agents, usually called ‘despachantes’, are profiting on public agencies’ intricacy.

The thriving despachante business grows in every relationship between citizens and the State where access to public services demand too much documentation or rules are too complex. The profession is even regulated, having its own federal council recognized by law, 16 regional councils, and a parliamentary front representing more than 30.000 agents.

Claimants hiring these agents are either expecting to save the time that would be spent understanding INSS rules, or they believe that only through despachantes’ services it is possible to access social benefits. Often, this idea is sold by the very agents’ propaganda itself. Nevertheless, a significant share of benefit-granting frauds involves despachantes’ actions (1; 2; 3; 4).

More information (in English)

The Unlikely Brazilian Social Policy Response to Coronavirus – Basic Income Emergency Aid

World Social Report 2020 (pdf)

The Atlantic: A Day in the Life of Brazil’s Insane Bureaucracy

1 Values converted from reais (R$) to euros (€) adjusting for 2019 OECD purchasing power parity from Brazil to Finland.

Luiz Alonso de Andrade
MPP, intern, Kelan tutkimus
luiz.alonso_de_andrade@kela.fi