The first central message of this reportis that Brazil has over the last years achieved greatprogress in its social policies and indicators. The secondcentral message is that poverty remains unacceptably highfor a country with Brazil's average income levels. Theworst remaining income poverty is mostly concentrated in theNortheast region, and in the smaller urban and rural areas.The third central message is that, with decisive action,Brazil can achieve ambitious targets for furtherimprovements in social indicators, including the objectiveof reducing the rate of extreme income poverty by 50 percentby the year 2015. Poverty is a complex and multi-dimensionalphenomenon. Recognizing the rich literature on poverty inBrazil, this report attempts a few specific contributions.First, it presents a new 1996 poverty profile with abreakdown by city size, incorporation of the imputed valueof owned housing, and regional price deflators. Second, itprovides analysis of the incidence of selected public socialspending based on the 1996/7 "Pesquisa sobre Padroes daVida (PPV)." Third, it selectively synthesizes otherwork on poverty in Brazil in order to present an overview ofcross-sectoral comparisons of the effectiveness of policyinterventions. Fourth, it provides suggestions and selectiveinputs for devloping a national poverty reduction strategy.The report updates a previous World Bank assessment (reportno. 14323) and builds on earlier work on urban poverty strategy.