Favela-Based Currency

Joaquim de Melo Instituto Banco Palmas

Like many of Brazil’s favelas, Conjunto Palmeiras was failing. A neighborhood of Fortaleza, the country’s fourth largest city, the community’s 32,000 residents were plagued by poverty, hunger, high unemployment and crime rates, and scant social services. The economy was stagnant. Any cash generated locally tended to flow into outside neighborhoods. The market, such as it was, benefitted very few.

But Joaquim de Melo envisioned a different market. Based on an alternative currency. And so he set up Bancos Palmas and created the Palma, a complementary currency valid only within the local community. And then he rewarded people for using it. Backed by national currency funds held in reserve, residents using Palmas are offered preferential pricing for buying and selling locally. Producers, consumers, retailers, and service providers are all linked and supported by this local currency network which stimulates the favela economy through increased production and consumption based on estimates of community needs. The PalmaCard, a credit card valid only for local purchases, has increased spending, and microloans are enabling more residents to set up small businesses to make the goods and services needed in the community.

With more commercial establishments accepting the alternative currency, and more residents using it, the Palma has become both a support network for the families of Conjunto Palmeiras, and a great stimulant to the local economy. Jobs have been created, businesses established, and new services offered. Thanks to de Melo’s vision, a vibrant market now exists in a place which, until recently, was on the sidelines of the economy. The Palmas project holds so much promise, it is now being recommended to other regions of the country by Brazil’s Central Bank.