Bolsonaro Proposes 2021 Minimum Wage of R$1,067 – No Real Increase

RIO DE JANEIRO, BRAZIL – The Jair Bolsonaro government has submitted a proposal to Congress for a minimum wage of R$1,067 (US$213) in 2021, leaving the minimum with no real increase for the second year running. The projection is part of the PLOA (Annual Budget Bill).

Compared to the current R$1.045, the increase amounts to R$22, a value that should only replace the inflation projected for 2020, measured by the INPC (National Consumer Price Index), of 2.09 percent. In practice, it means that the minimum wage will remain unchanged for two years.

The projection for the minimum wage in 2021 is R$12 lower than the PLDO (Draft Budget Guidelines Law). When sending the proposal to Congress on April 15th, the government estimated that the wage floor in 2021 would be R$1.079, based on the 3,29 percent projected increase for the INPC at the time.

Real increase ended last year

Between 2007 and 2019, the law provided that the minimum wage would increase in real terms, above inflation, whenever there was economic growth, in line with the PT (Workers’ Party) administrations’ policy of increasing the minimum wage.

This method of calculation considered the inflation of the preceding year, as measured by the INPC, plus the GDP (Gross Domestic Product) results from two preceding years.

The formula expired last year, and the Bolsonaro government decided not to replace it with another minimum wage policy. Consequently, the government began to readjust the minimum wage only for inflation, in line with the Constitution.

Lower projection for GDP increase

The Budget proposal also cuts the economic growth estimate for 2021, from 3.3 to 3.2 percent.

As well as expecting a lower GDP growth next year, the Bolsonaro government has reduced the estimate for official inflation in 2021, measured by the IPCA (Wide Consumer Price Index). The projection fell from 3.65 to 3.24 percent.

In 2020, a year strongly impacted by the novel coronavirus pandemic, the government expects a 4.7 percent drop in GDP. The projection is more optimistic than the market, which on average expects a 5.28 percent drop.

Major collapse in public accounts

The projected shortfall in public accounts in 2021 has been rising since April. Earlier, the primary shortfall projection stood at R$149,61 billion, and today it has increased to R$233,6 billion. It will be the eighth year running of primary deficit in the country.

Now the prospect is for a net revenue of R$1,283 trillion in 2021, a drop of R$97,3 billion in relation to the amount estimated in April. For next year, expenses were estimated at R$1.517 trillion, a drop of R$13.3 billion on the same comparison basis.

For the consolidated public sector, which includes the federal, state, and municipal governments, the projection is for a R$237.3 billion deficit in 2021.

R$453.7 billion depend on congressional approval

The ceiling for government spending next year will total R$1.485 trillion, an amount based on the 2020 ceiling, corrected for inflation in the 12 months ending in June this year.

According to the projection, there will be a R$453.7 billion shortfall for the payment of welfare benefits, staff expenses, supplements from the federal government to FUNDEB (funding of basic education), among others. The release of this money will depend on the approval by Congress of a supplementary borrowing limit.

Source: UOL