We won’t go crazy on the fiscal side just because there is an election, says Guedes – 06/08/2021 – Market

After the market’s negative reaction to the likely renewal of emergency aid, Minister Paulo Guedes (Economy) said on Tuesday (8) that the government will not be “crazy on the fiscal side” because of the 2022 presidential elections.

Guedes said that the extension of assistance is not a political issue and stressed that the reformulation of Bolsa Família, currently being prepared by the government, will respect the spending ceiling.

“Don’t spend a single night worrying about the possibility of us going crazy on the fiscal side just because there’s an election next year. We will never do that”, said Guedes in a presentation in English during a videoconference with Bradesco BBI.

According to Rafael Ribeiro, an analyst at Clear Corretora, the fall of the Stock Exchange on Tuesday gained intensity throughout the afternoon after Guedes stated that the government intends to renew the aid. In profit taking after eight consecutive highs, the Ibovespa closed down 0.75% to 129,787 points.

“The possibility of expanding emergency aid increases market caution, as it increases investors’ fear of a possible worsening of the fiscal scenario,” says Thayná Vieira, economist at Toro Investimentos.

In an interview with leaf in May, the head of Economy acknowledged the arrival of electoral articulations and stated that the government would prepare measures in the areas of employment and social “for you to clap your hands”.

“We played defense for the first three years, controlling expenses. Now comes the election? We are going to attack”, he said at the time, considering that everything would be done seriously and within the ceiling, a rule that limits government spending to inflation variation.

On Tuesday, the minister said that the government’s plans for the social area involve three stages: the probable extension of emergency aid for two or three months, the expansion of the Bolsa Família program and the creation of a fund that would be used to transfer privatization resources of state-owned companies for a wealth transfer program.

Guedes confirmed that the government intends to renew emergency aid. He said the decision is not political, but technical and public health. He explained that the extension will accompany the Covid-19 vaccination program in the states, citing an expectation that vaccine coverage will reach 70% of the adult population by September.

The current plan of the economic team is to extend the benefit for another two months, with the forecast to end in September this year. The minister said, however, that there is the possibility of an extra third installment in October.

“Possibly, we will now extend the aid for another two or three months, because the pandemic is here. The governors are saying that in two or three months the adult population will be fully vaccinated, so we will renew the aid for two or three months. And soon after, Bolsa Família, which has already been reinforced, comes in”, he said in a videoconference with the Parliamentary Front of the Services Sector.

In the format elaborated by the folder, two additional months of aid would have a total cost of R$ 18 billion. Of this amount, R$ 11 billion would be released through extraordinary credits, resources destined to unforeseen and urgent situations. This amount is not accounted for in the spending ceiling.

Another R$ 7 billion will come from leftovers from the current round of assistance. The program in effect today has a four-month duration, from April to July, and received R$ 44 billion.

The idea is to keep the public benefited and the values ​​of the installments. The standard payment amount is R$250. For female heads of household, the benefit is R$375. People who live alone receive R$150.

With the expansion of aid assistance this year, the government will save resources with the Bolsa Família benefits that will no longer be paid. This is because part of the Bolsa Família beneficiaries temporarily migrated to the aid. In this way, the Executive would have more funds to implement the new social program.

According to Guedes, the government’s plan calls for the end of aid to be linked to the expansion of Bolsa Família. Unlike the emergency initiative, resources for the permanent social program will be fully within the spending ceiling, he said.

So far, the government has not presented a proposal to expand the Bolsa Família. President Jair Bolsonaro defends that the average value of benefits should go from the current R$190 per family to at least R$250.

In his presentation, Guedes stated that the government is still considering creating what he called the Brazil Fund, which would be fed with part of the privatization resources and dividends from state-owned companies. These funds would be transferred to low-income people as a way to increase social programs. The idea had already been presented on other occasions.

According to the minister, this program would not be fixed and recurring. Transfers to the poorest would only be made if the government managed to sell state-owned companies or received dividends.

For him, this would be a way to encourage the political class to work for the sale of Union assets.

Experts criticize the measure, arguing that the Fiscal Responsibility Law prohibits the use of privatization funds to cover current expenses.

During the videoconference, Guedes also stated that the government’s new employment program will pay R$550 to young people who enter a qualification program in companies. Previously, the minister had said that this transfer could be R$600.

The new program should institute the BIP (Productive Inclusion Bonus), paid by the government, in the amount of R$275 per month, and the BIQ (Qualification Incentive Bonus), paid by the company, also of R$275.

According to the minister, the program will be aimed at young people aged between 18 and 28 who want to undergo on-the-job training. According to him, the participant can stay in the program for up to a year or a year and a half.

“We think there will be a very rapid increase in the level of employment. Let’s pick up where the incidence of unemployment is higher”, he said.

The minister stated that the government is already being approached by large companies that would be “ordering” young people.

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