Brazil Aid’s impact reaches 34% of the municipalities’ GDP

RIO DE JANEIRO, BRAZIL – The impact of the Brazil Aid (Auxílio Brasil, survival assistance from the federal government for the very poor) can exceed 30% of the Gross Domestic Product (GDP) in the municipalities.

Among the 100 cities with the most significant impact of the benefit on municipal economies, 96 are in the Northeast, 3 in the North, and 1 in the Southeast.

The projection is from Ecio Costa, professor of economics at the Federal University of Pernambuco (UFPE) and P³ Inteligência.

In the municipality of Serrano do Maranhão (Maranhão state), the effect of the Brazil Aid on the GDP is the most significant: almost 34%. Seven of the ten municipalities with the highest impact of the benefit on GDP are in Maranhão.

Also, according to the survey, the Brazil Aid is equivalent to 10% or more of the GDP for 648 Brazilian cities – 597 of them in the Northeast.

Among the 100 cities with the lowest impact of the benefit (between 0.01% and 0.1% of GDP), 81 are in the South – 54 in Rio Grande do Sul (RS), 26 in Santa Catarina (SC), and one in Paraná (PR). The others are in the Southeast (17), Center-West (1), and Northeast (1).

The 10 municipalities with the smallest impacts of the Brazil Aid on the GDP are, in order: Pomerode (SC), Nova Roma do Sul, Carlos Barbosa, Fagundes Varela, Aratiba, Picada Café, Três Arroios, Westfália (all in RS), Iracemápolis (São Paulo state) and Vila Flores (RS).

The capitals with the greatest impacts of the benefit on the GDP are the following:

• Belem (2%)
• Fortaleza (1.82%)
• Macapá (1.66%)
• Rio Branco (1.64%)
• Teresina (1.61%)
• Salvador (1.59%)
• João Pessoa (1.54%)
• Maceió (1.4%)
• São Luís (1.33%)
• Aracaju (1.14%)
• Natal (1.13%)

Brasília (0.19%), Curitiba (0.23%), Florianópolis (0.24%), Porto Alegre (0.33%), São Paulo (0.37%), Belo Horizonte (0.45%), and Rio de Janeiro (0.48%) had the smallest impacts.

According to the projections of economist Ecio Costa, the average impact of the Brazil Aid should be 1.04% of the national GDP in 2022.

In the states, the biggest impacts are in Maranhão and Piauí, above 4%. Eight of the ten states with the biggest effects are in the Northeast – only Rio Grande do Norte was left out. Acre and Pará, in the North of the country, were also included.

By region, the Northeast is the biggest beneficiary since it has always had the largest number of beneficiary families.

Impact of the Brazil Aid on the GDP of the regions:

• Northeast 3.45%
• North 2.16%
• Southeast 0.57%
• Center-West 0.54%
• South 0.4%

“The percentage will be higher precisely where you probably have the largest number of beneficiaries compared to the size of the municipality and the economy. In general, the poorest municipalities have a greater need for aid because they have a poorer population,” explains Costa.

The economist used 2019 GDP data for the municipalities (the latest available survey within IBGE statistics) and then inflated it for 2020 and 2021.

Concerning the Brazil Aid data, he used the data available at the Ministry of Citizenship from January to May and then projected the value for June to December.

These figures do not include a possible increase in the value of the Brazil Aid to R$600 (US$115). According to the economist, the effect of this increase would potentiate the impact on the GDP of all the municipalities, with an approximate increase of 25%.

In the case of the municipality of Serrano do Maranhão, there were 4,370 beneficiary families in May. The city has a population of 10,343 inhabitants, according to the IBGE. The average amount paid was R$422.27 – the total passed on to families was R$1,724,545.

According to economist Ecio Costa, Auxílio Brasil has a significant impact because it is a direct income transfer program for the population, without any counterpart that could hinder the arrival of resources at the end.

“Therefore, there is a pulverized and multiplier effect. And, as families spend the money on several fronts, with a slightly larger portion on food and construction materials, this ends up moving the economy in all segments,” he explains.

According to him, for some municipalities, the Brazil Aid can bring the feeling that the economic crisis does not impose so many negative consequences since this injection of resources into the economy favors consumption, which affects trade, services, and industry, avoiding even layoffs.

But there is the caveat of inflation, which erodes the purchasing power, especially of the low-income population, because it weighs more heavily on food, the main item consumed by the beneficiaries.

Another study done by the economist in 2020 showed that the economic impact of the Emergency Aid during the pandemic also benefited mainly the Northern and Northeastern states.

In the Northeast, the impact averaged 6.5% of GDP, more than double the national weight of 2.5%. In the North, the impact was 4.8%. The most benefited state was again Maranhão, with 8.6%.

In the impact by states ranking, the top six are from the Northeast. On the other hand, although the state of São Paulo is the largest recipient, in nominal terms, compared to the size of its economy, it ranked 25th.

The economist recalls that the Emergency Aid had the largest number of beneficiaries and amounts paid.

“Since then, inflation has eroded the purchasing power of the beneficiaries, and it is even greater for those who need the aid because it weighs more on the items they consume the most, which are food items,” he points out.

With information from G1