This article considers contemporary policy claims about "what literacy is" and "what literacy does." First, the article reviews in-depth the ways in which development discourses define literacy, and the claims made in development discourses about the "consequences" of literacy for economic and political development. I then draw on 24 months of ethnographic research in Brazil with 41 highly impoverished literacy students from four literacy programs in two cities in order to demonstrate that there is no predictable "impact" of literacy on development. Instead, I show that the opportunities afforded by literacy depend greatly on the "types of literacy" and the "types of literacy programs" made available to students, as well as students' cultural understandings of literacy and the social, political, and economic contexts within which they attempt to assert new literacy practices. The article concludes that we should not consider literacy as an actor with some "impact"; instead, we should examine how people use literacy in ways that are conditioned by social and cultural forces.