RIO DE JANEIRO, BRAZIL – The Ministry of Economy is preparing the announcement of a new social program that will serve as a mark for the Jair Bolsonaro government, while at the same time removing a legacy left by the Workers’ Party administrations and by ex-president Luiz Inácio Lula da Silva, through the ‘Bolsa Família‘.
With GDP in free fall due to the novel coronavirus pandemic, Bolsonaro decided to seek the support of the poorest sections of the population, who benefited from the R$600 (US$120) emergency aid and who now expect the government to maintain the aid during the crisis that will stretch into the coming months.
The team led by Minister Paulo Guedes, who took office with the mission of reducing the size of the state with privatizations and structural reforms, baptized the program as ‘Renda Brasil’ (Brazil Income).
The aim is to combine several existing programs, including the ‘Bolsa Família’, under the same umbrella, according to four anonymous sources familiar with the subject. Faced with the fiscal squeeze, there is no prospect of further public resources in the initiative.
The officials are combing existing programs to reallocate the money more efficiently. This would be the case with the salary bonus, for instance, which provides for the payment of a benefit to workers who receive approximately two minimum monthly wages.
The estimate is that the almost R$20 billion spent annually with the bonus will reach formal workers, and would be spent more efficiently with people who are on the fringes of the labor market.
The changes in the programs, the sources said, would not be achieved in a single step. The Ministry of Economy is also working on a plan to supplement the income of workers who receive less than a minimum wage, through a negative Income Tax measure.
In this case, a rate would be applied to the worker’s declared income and the amount converted into cash paid by the state to increase their income. The income from a federal asset fund would finance these payments.
The pandemic has affected Bolsonaro’s popularity, with both unemployment and poverty increasing. The government’s reaction came with the payment of monthly grants to casual workers, a program that costs R$45 billion per month, more than the R$30 billion per year spent on the ‘Bolsa Família’.
The President announced that the government will extend the benefit, which was due to end in July, for another two months and the new social program will follow.
“We’ll start a new program now since we’ve seen that there are 38 million invisible Brazilians who are worthy of being included in the labor market,” Guedes said at the last cabinet meeting with Bolsonaro.
Source: Bloomberg