Brasilia.- Valquiria Ferreira’s greatest wish for 2021 is for the Brazilian government to extend emergency aid with which 68 million poor citizens like her were able to cope with the pandemic since April. But his country is fiscally asphyxiated and it is difficult for him to afford it.
“Without that money, I would have gone hungry. If the government doesn’t extend the aid, I don’t know what I’m going to do. 2021 will be too hard,” this separated 35-year-old woman who lives with her three children in Santa Luzia told AFP. , a favela of Brasilia.
Your concern is well founded. On Tuesday he received the last payment of the so-called emergency aid, one of the most generous economic stimulus programs against the pandemic in the world, which has benefited a third of the 212 million Brazilians with initial allocations of 600 reais (about 115 dollars ), reduced by half in September.
Ferreira will then run out of income from January, when economic reactivation is still a long way off (the government projects a 4.5% drop in GDP in 2020), unemployment remains at record levels and inflation is on the rise, stimulated in part by Those billions of reais that increased the consumption of the most disadvantaged.
Brazil, with more than 192,000 deaths from the pandemic (a balance surpassed only by the United States), is also experiencing a severe rebound in cases and deaths and has lagged behind in the global race for the vaccine.
According to data sent by the Getúlio Vargas Foundation (FGV / IBRE) to AFP, emergency aid lifted 12.8 million Brazilians out of poverty (people who live on less than 5.5 dollars a day) and 8.8 million out of extreme poverty ( on less than $ 1.90 a day).
With the end of the aid, the poverty rate will return to slightly higher levels than before the pandemic and the extreme poverty rate may double.
Only 19.5 million Brazilians will continue to receive resources from the existing Bolsa Familia, the amount of which is much lower.
“We are going to place ourselves on the edge of a social abyss”, warns Marcelo Neri, director of the Center for Social Policies of the FGV.
Between the markets and the poor
President Jair Bolsonaro, who saw his popularity skyrocket thanks to emergency aid, argues that these subsidies should be cut “because Brazil can no longer bear” the pressure of its deficit and debt.
This aid cost the state coffers about R $ 230.98 billion ($ 45 billion) and, added to other stimulus measures, represented an effort of almost 10% of GDP.
In parallel, the debt / GDP ratio jumped from 75.8% in December 2019 to 90.7% last month and could reach 96% when the 2020 accounts are closed, according to official projections.
“Brazil is between a rock and a hard place, because the markets are pressing on the fiscal side and it has a situation of growing poverty,” explains Neri.
For Austin Rating economist Alex Agostini, “if it were only for this year’s expenses due to the pandemic, the government would probably have the strength to continue for some time with emergency aid, until the economy recovers.”
“The problem is that Brazil has accumulated a negative fiscal balance since 2014 and this year it ended up blowing everything up,” he adds.
On the other hand, the independent economist Felipe Queiroz believes that removing aid will have a much more damaging impact than debt. “The emergency aid has a multiplier effect, generates employment, generates consumption and prevents GDP from having a more pronounced fall,” he says.
Keynes vs Guedes
2020 should be the year in which Paulo Guedes, the ultra-liberal Minister of Economy, put into practice his plan of privatizations and adjustments demanded by the markets.
But ironically, the pandemic forced the government to deploy “a large-scale Keynesian policy” and postpone reforms, in Neri’s words.
For Agostini, the possibility of moving forward with the reforms will depend largely on the elections to the presidency of the Chamber of Deputies and the Senate in February. “If you have someone aligned with the government, the chances are good. If not, as is happening now, we will have to negotiate a lot and that will delay everything.”
But that will not necessarily be the agenda of Bolsonaro, who to govern needs alliances with parties that do not have a great interest in reducing the size of the state and, to be reelected in 2022, will need the support of voters now threatened by misery.
–
