Brazil hopes to inject US$ 11.2 billion into its slowing economy after announcing a plan Wednesday to put some extra cash in the pockets of workers. Workers will be allowed to withdraw up to 500 reais (US$ 133) this year and a certain percentage in 2020 from a severance fund that employers are required to pay into.
Normally, employees can only touch the money if they lose their job, buy a home or retire. Some cash will also be released from a social security fund. Announcing the “emergency” measure, President Jair Bolsonaro said Latin America’s biggest economy was “not doing well.”
The extra money would help some 63 million people with “debts and overdue water, electricity and gas bills,” said Bolsonaro, who came to power in January on a promise to fix the economy.
Brazilian media estimated 96 million workers would benefit. The stimulus is expected to add 2.5 percentage points to GDP per capita during 10 years as well as create 3 million jobs. A recent survey showed 35% of Rio de Janeiro workers planned to use the money to reduce debts.
Not everyone welcomed the government’s gesture, however, with some taking to Twitter to mock the small amount on offer.
Brazil is teetering on the edge of recession as it struggles to recover from the devastating 2015-2016 crisis that saw the economy shrink nearly 7%. The economy contracted 0.2% in the first quarter of 2019 and economists expect growth of less than 1% for the full year.
Around 13 million people are unemployed and record numbers are giving up looking for work. It is the second time in as many years that Brazil has invited workers to take money out of the reserve, known as FGTS.