Brazil Economy Minister: If Covid Second Wave Hits, Government Will Pay Emergency Aid

RIO DE JANEIRO, BRAZIL – Minister of Economy Paulo Guedes stressed yesterday, November 12th, that should there be a second wave of infections by the novel coronavirus in Brazil, the government will once again grant emergency aid to Brazilians in economically vulnerable situations.

“If there is a second wave, it is not a possibility, it is a certainty [that the government will pay emergency aid again],” he said at the National Supermarket Day event, organized by the Brazilian Supermarket Association (ABRAS). But he stressed that he considers the probability of a new wave of infections to be “slim”.

According to Guedes, the government’s plan is to gradually phase out the aid until the end of the year. “We are reducing the aid from R$600 [initial amount of aid installments] to R$300 [residual emergency aid] and then settling it later in a version of the ‘Renda Brasil’ (Brazil Income) or ‘Bolsa Família’ (Family Grant). We have the two options, it’s a political choice,” he said.

In August this year, President Jair Bolsonaro said the proposal to implement the ‘Renda Brasil’ program was suspended. The program was intended to extend the ‘Bolsa Família’.

The economic team’s proposal to finance the new program was to remove the 13th-month salary bonus from beneficiaries earning up to two minimum wages.

Guedes again advocated the creation of a tax on digital transactions, as a revenue source to counteract payroll tax relief. According to the Minister, the government is committed to not raising the tax burden.

“This commitment to not raise taxes means that we will make a tax replacement program. We don’t want to introduce a tax, we want payroll tax relief,” he said. He added that in order to relieve the payroll and encourage formal job creation in the country, it is necessary to find a “way to finance” this reduction in payroll taxes.”

Guedes also said that “there will be no tax increase for those who pay taxes.” “But for those who never paid, it will increase,” he said. According to the Minister, there will be taxes on dividends [not currently taxed] and if there is a tax over digital transactions, “those who didn’t pay will start paying.” And he added that these changes depend on the appropriate political moment.

The Minister reinforced that “the Brazilian economy is bouncing back with vigor.” He said he was regarded as very optimistic when the crisis triggered by the pandemic began: “I was surprised with the speed at which the economy is rebounding, well above my optimistic outlook,” he said.

According to Guedes, the evidence of a fast rebound of the Brazilian economy lies in the tax revenue this month that “is extraordinary” and there are data of increased consumption of electricity, diesel oil, as well as electronic bills “rising at a high speed” and employment growth.

With respect to inflation, Guedes said that many people are “angered by the supermarkets” when they see the prices of food increase, but the establishments are only “a distribution platform”. “If a product is already expensive because the exchange rate has risen or demand was strong and prices have risen, we have to let the market work,” he said.

According to the Minister, with the high prices, the Brazilian agricultural sector will increase production and within “two, three, four months the prices will begin to stabilize again.” He added that the government can reduce import tariffs to boost competition and hold back inflation when there are “abuses” in price increases.

Source: Agência Brasil