RIO DE JANEIRO, BRAZIL – The federal government has just announced new measures to contain the damage to the economy caused by the spread of the coronavirus in Brazil. The package is aimed at small and medium-sized companies (SMEs), with annual revenues between R$360,000 (US$72,000) and R$10 million.
There will be a R$40 billion credit line (R$20 billion per month) that is exclusively intended to finance two months’ worth of payroll costs, with a maximum limit of up to two minimum wages.
For instance: if an employee’s salary is one minimum wage (R$1,045), he/she will receive the same amount. If the employee is paid three minimum wages (R$3,135), however, he/she will receive two minimum wages (R$2,090) over those two months or the employer will pay the difference.
The program will be financed by the National Treasury, which will contribute R$17 billion per month, and by private banks, contributing R$3 billion. BNDES (National Bank for Economic and Social Development) will be responsible for the operationalization.
“Today the Brazilian Central Bank does not have this capacity, the most it can do is inject liquidity into the system,” says the president of the Central Bank, Roberto Campos Neto, on the direct purchase of credit, adding that the initiative requires a constitutional amendment.
This incentive is expected to be available within two weeks, he said. The credit line was designed by the Central Bank, the Economy Ministry, and the BNDES. “The measure will benefit 1.4 million companies, with 2.2 million employees,” Campos Neto says.
The credit will be paid at an interest rate of 3.75 percent per year, without the collection of bank spread and with repayment terms of 36 months for companies. The contractual condition for the release of the amount is that any company accepting the package may not fire employees for two months.
According to Campos Neto, the SME will close the contract with the government and the money will be allocated directly to the employee through an automated system. “The employee is paid and the company is left with the debt to pay later,” says Neto.
According to labor attorney Joel Gallo from the Souto Correa office, despite the initiative, the government continues to exempt itself from its responsibilities to the population. “The small and medium-sized entrepreneurs will receive short-term help, but they will have to pay the bill themselves later, in what will be a new debt,” he says.
The alternative, he says, is that the government should subsidize rather than lend money so that employees can keep their jobs. “It’s been done like this all over the world.
Regarding the measures that should be announced for casual and free-lance workers, the state-owned Caixa Economica Federal bank reported that the proposal passed by the Chamber of Deputies has not yet reached the Senate. According to a representative, the bank is working with the INSS (Brazilian Social Security Institute) to organize the operation.
Last Thursday, March 26th, the Chamber of Deputies passed a bill authorizing a monthly transfer of R$600 to casual workers and people with disabilities. In the case of women providing for the family, the emergency aid amount will be paid in double (R$1,200).
Source: Exame