Anti-Crisis Housing Package

By Nicole Pelligrino, Contributing Reporter

BRASILIA – Confidence in the Brazilian economy is at its lowest in over four years, according to a study released on March 26th by the Getulio Vargas Foundation (FGV). Naturally, Brazilians are feeling the effects of the waning economy, much like the rest of the world. Since September 2008, the Brazilian government has pumped nearly R$500 billion into the economy to quell the effects of the global recession. The latest measure by the Brazilian government will inject R$34 billion into constructing one million new homes, primarily to assist in reducing housing shortages for the poor and to create new jobs.

Indeed, Lula’s sensitivity toward issues facing the poor has helped sustain his popularity. With the next election only a year away, some have speculated that Lula is increasing his party’s (Partido dos Trabalhadores (PT) –The Worker’s Party) chances of re-election by passing a several measures aimed at keeping their support. “This is an emergency response, on the one hand to the global economic crisis, and on the other to the housing problems faced by some Brazilians,” Lula said last week in a speech to businessmen in Brasilia.

In this slumping economy, no socioeconomic group is feeling the crisis’ effect more than the Brazilian underclass. National unemployment is expected to rise in the country’s six largest metropolitan areas, according to a recent Bloomberg poll . In addition to the job shortage, the housing shortage remains dire.

The package will expand housing credit to previously ineligible Brazilians. According to Finance Minister Guido Mantega, Brazil’s housing market is in desperate need of growth. He added that while housing credit comprises 10 percent of the GDP in Mexico and 30 percent in Spain, Brazil’s is only at about 2 percent (Bloomberg).

Mantega claimed that the package would increase economic growth about 2 percent, as well as creating over 1.5 million new jobs.

With the passing of the new package, Brazilian families earning less than R$1,395 per month will pay as little as R$50 per month to become homeowners. Subsidies will be available for families making below R$2,790 per month.

Gafisa SA and their low-income subsidiary Construtora Tenda SA, and Cyrela Brazil Realty SA Empreendimentos; Participacoes, Brazil’s largest home building and real-estate companies, showed positive returns immediately after the passing of the package.

Yet still, the World Trade Organization (WTO) recommends that Brazil spend even more of its GDP on anti-crisis measures, about two percent. To date, Brazil has only spent about .05 percent of its GDP on anti-crisis measures. The Brazilian government might need to take even further action to help control the crisis.