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Montevideo, December 4th 2021 - 13:44 UTC

 

 

Brazilian markets plummet on new money support program that ignores budget expenditure cap

Wednesday, October 20th 2021 - 09:25 UTC
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Bolsonaro wants to hand 400 Reais a month to 17 million families. Guedes was prepared to hand out 300 Reais but to 14 million families Bolsonaro wants to hand 400 Reais a month to 17 million families. Guedes was prepared to hand out 300 Reais but to 14 million families

Contrary to optimism in world markets, shares in Brazil dropped 3,28% on average following news of a new “Brazil Auxilio” program intended to give monetary support to some 17 million families described as vulnerable or suffering the consequences of Covid-19. But to achieve this the budget cap on expenditure must be violated or hidden behind some accounting cosmetics.

The official announcement was to be made this week but was cancelled at the last moment given the size of the fiscal hole the transfer would mean. Under the plan sponsored by president Jair Bolsonaro and his reelection team, vulnerable families would receive a 400 Reais subsidy a month during the next twelve months.

Allegedly the original hole was to be of some 30 billion Reais, which somehow orthodox economy minister Paulo Guedes understood could be managed by transferring outlay funds. Members of Congress are eager to support the initiative thinking in their electoral campaigns.

Ministers Ciro Nogueira and Joao Rama who were part of the team negotiating and drafting the bill admitted it was not possible to finish the text, “We are still working on it”, said Rama.

The 400 Reais Brazil Auxilio was to be financed from the previous program Bolsa Familia, plus temporary auxiliary support, which since it was described as exceptional and not standing, could circumvent the budget cap rule or Fiscal Responsibility Bill.

The Bolsa Familia has a budget of 34 billion Reais, but since the project is for the subsidy to reach 17 million families instead of 14 million, the cost is estimated to balloon to 50 billion Reais. Originally the idea was to finance the exceptional expenditure with an income tax reform to be implemented next year.

Analysts point out that the political wing of the Bolsonaro administration and --given the coming presidential election-- have outgunned the more orthodox wing and tight purse policy of minister Guedes, which was prepared to a maximum 300 Reis subsidy.

Categories: Economy, Politics, Brazil.

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