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Mumbuca, Brazil’s State-Aid Currency Booming on Local Level

By: María Gabriela Díaz - Jul 2, 2014, 4:04 pm

EspañolOn Friday, the city of Maricá in Rio de Janeiro state celebrated the six-month anniversary of its first state-aid currency, the digital Mumbuca. An initiative born from Maricá’s city council, Mumbuca has quickly become the answer to alleviate extreme poverty, while also boosting the local economy.

With over 70 percent of families earning less than three times the minimum wage — $R2,034 at the time, or approximately US$914 in 2013 — the local government decided to put forward an income-distribution program that could provide the citizens with the means to purchase basic goods from local businesses. The program is financed with Maricá’s high oil royalties, and it’s distributed via a monthly stipend.

Maricá is located 130 km from the capital of Rio de Janeiro, and during the launch in December, the mayor of Maricá, Washington QuaQua, explained the purpose of the program:

“Our challenge is to guarantee a minimum income to families in need, and also leverage the development of the local economy.”

To manage this fund, local authorities decided to create the People’s Community Bank of Maricá, with a new currency called Mumbuca. According to Miguel Moraes, Maricá’s human rights secretary, this currency — pegged one to one with the Brazilian real — was created as a “tool to fight against poverty, improve the income distribution, and give a boost to the local economy.” After winning the public tender, the management for this agency was transferred to Bank Palmas, the first and biggest community bank in Brazil.

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Citizens of Maricá pay with Mumbuca through debit cards. (Prefeitura de Maricá)

Bank Palmas describes the income-distribution program as “an act of courage and social justice” which ensures “that the wealth generated by oil royalties finish in the hands of the poor.”

During the initial launch, the city hall handed out 1,000 magnetic cards. Now, after six months, the number of low-income citizens who are receiving this new form of local state aid is 9,507. That is becoming a considerable minority, given a population of just over 125,000.

At present, each beneficiary receives 85 Mumbucas (US$37) per month, which can only be used to purchase food, medicines, and other basic goods in local, small businesses, previously authorized by Bank Palmas. According to Maricá’s mayor, the monthly benefit will gradually increase to 100 in 2014, and up to 300 by 2016.

According to Moraes, Mumbuca stands out from the rest of other welfare programs, since it avoids “wasteful spending or its diversion to ‘unconventional’ businesses.”

He says the idea of ​​using the debit card and distinct currency came after failures with the widely known program Bolsa Familia (family bag), which is state aid given to families in Brazilian reals: “Thus, there is no control of where the money is used. With electronic currency … we prevent the funds from being used improperly, to buy illicit goods.”

The program hasn’t only targeted the poor, but also small businesses. Local shops have confirmed that their sales have increased since the Mumbuca program first started. What people couldn’t afford before with reals, now they can with Mumbucas. So far, 102 businesses in Maricá have joined the program called Social Currency Mumbuca.

On the back of apparent success, Maricá’s human rights secretary also announced that the program will start offering microcredits for small businesses, with lower interest rates than other Brazilian banks, and flexible installments.

The community bank also gives these citizens their own accounts, something new for most of them. Fifty-five million Brazilians over 18 years old have never had a bank account, according to the Brazilian Institute of Geography and Statistics. Further, Brazil’s Central Bank calculates that over 1,900 municipalities don’t have any bank.

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Sample of Mumbuca debit card. (Banco Palmas)

The Mumbuca process is simple: every month the government approves a new list of beneficiaries, and deposits in the community bank the equivalent for their monthly stipend, also known as a “Mumbuca bag” (70 Mumbucas per month). Then, Maricá’s community bank assigns a “social currency card” to each one of the beneficiaries.

After each month, local businesses that are part of the “solidarity economy network” of Maricá receive from the community bank the equivalent to what they sold in Mumbuca, but in Brazilian reals.

Daniel Simões, a member of the Libertarian Network in Brazil, spoke with the PanAm Post about the benefits this initiative has brought to city of Maricá.

“In my opinion, it has been the best support program for the people in Maricá. It’s a highly positive measure, and today Maricá’s citizens have basic access to food supplies, medicine, and other services.”

When asked about the program increasing the poor’s reliance on the state, Simões replied, “it doesn’t increase the citizens’ dependency on the state, since it’s a measure created to fight poverty in the region, for people who are already in extreme poverty. It’s a measure that listens to the voice of the community, and includes the citizens in the local economy.”

The success of this program seems to rely on the double benefit for both the individual and businesses.

“The more people buy in the city, the more the trade grows, the more it progresses, the more it produces to sell to traders, the more produces and trade, more jobs are created, more people in employment means more consumption, and everything forms a virtuous economic cycle,” Bank Palmas explains on a public statement.

María Gabriela Díaz María Gabriela Díaz

María Gabriela Díaz reported from Caracas, Venezuela, and led the PanAm Post internship program. She has a Bachelor of Arts in political science with a focus in international affairs.