Emergency aid “maintained” an even greater drop in GDP in the second quarter | economy

The phenomenon has a first and last name: Emergency aid. He was primarily responsible for recovering the lost income of 60 million small businessmen, liberals and informal professionals, and for supplying gas for consumption, the main engine of the Brazilian economy.

So far, the program has approved 5 installments of R $ 600 for each beneficiary (mothers who are heads of households receive installments of R $ 1,200). Another 4 installments of R $ 300 were announced on Tuesday (1st) by President Jair Bolsonaro, and must be made official by Provisional Measure.

For economists heard by G1, although the benefit was not enough to reverse the remains at 9.7% of GDP in the second quarter of 2020, the drop would be much greater if there were no income transfer.

Calculation carried out by MB Associados at the request of G1 shows that the fall in GDP this quarter without Emergency Aid could reach 18.2%. In its forecasts, the consulting firm expected a fall of 11.7% in the period, a difference, therefore, of 6.5 percentage points. According to economists, government aid (which also includes stimulus programs like Pronampe) caused Brazil’s GDP to fall in a similar way to that of developed countries.

“The income support programs have helped maintain a certain pattern of consumption, especially for the lower income classes,” says MB Associados chief economist Sérgio Vale.

“If in 2008 there was a discussion about a more aggressive use of monetary policy, this time there was no other alternative than the aggressive use of fiscal policy,” he says.

Although it has cushioned the fall, aid had a limited action in the period due to the closure of the economy. April was marked as the most difficult month of the crisis not only due to the reduction in income, but also due to the impediment of production due to social isolation measures to combat the spread of Covid-19.

Even in May and June, when factories and stores began a slow reopening, sectoral earnings were out of balance. Retail earnings were more consistent than industry and services.

Especially in the first month, but also in the rest, the extra income went to basic necessities, such as food and pharmacies, and part went beyond small repairs of the house, in construction materials, and renovation of the domestic environment , such as electronics and household appliances.

Without further interference from isolation, the expectation is that the effects of resource injections on consumption will be clearer in the third quarter.

As reported by the G1 in August, aid increased Brazil’s aggregate revenue pool by 2.1%, according to FGV calculations, and prevented more than 30 million people from falling below the poverty line and reduced inequality rates.

In practice, the effects are shown in the example of Hilderlania Alves: the 27-year-old student has seen her quality of life improve since April, when household income went from R $ 1.3 thousand to R $ 2.5 thousand monthly.

A fellow in a pre-university course, Hilderlania lives with her mother, Luciana, and her father, Arcádio, in Iguatu, in the interior of Ceará. Luciana Nunes is 50 years old, a housewife and a farmer. The family stopped receiving Bolsa Família when she had access to disability retirement from her father, Arcádio Bezerra, 55, more than four years ago.

• Emergency aid can be extended until early 2021 if Renda Brasil is not approved earlier

Each one receives R $ 600 from the aid and four installments of the benefit have already been deposited.

“It has vastly improved our lives in many ways. We are paying our bills on time, such as electricity and gas, which used to be very difficult to get. And we are managing to buy products that would have been unviable before, in addition to improving the variety of foods, ”says Hilderlania.

The student says that her family stopped depending on the availability of medicines in health centers and placed beauty products in the shopping basket, such as creams and makeup. The money was also used to support the studies, with new school supplies and the new mobile Internet plan on cell phones.

“Our diet basically had more affordable carbohydrates and proteins, like chicken, eggs, and ground beef. Now we have a healthier diet, with first-class meat, liver, cheese, veal rib, cold cuts, fish and vegetables, ”he says.

Although the future of the program is uncertain, the Hilderlania family is aware that the aid, in the current model, will end. In an extra effort, they do their best to save at least 10% of government-transmitted income.

“We knew it wouldn’t be for long. Life may get worse, due to the economic weaknesses generated by the pandemic. But my mother is waiting for a new social income program to be implemented, ”he says.

Even with higher incomes, money is a privilege. A survey by the Brazilian Institute of Economics of the Getulio Vargas Foundation (Ibre / FGV) shows that Emergency Aid reaches 97% of the income of the poorest sectors of the population.

“Even assuming a significant increase in Bolsa Família’s budget, the cessation of aid will generate large losses for the most vulnerable sectors of the population, which will depend more on the recovery of the labor market,” says economist Daniel Duque, researcher in charge of the survey.

In this group are farmers Antonia Raimunda Vieira de Paula and Antonio Vieira de Paula, both 50 years old.

Antonia is a beneficiary of Bolsa Família and received R $ 247 before the pandemic. Antonio took, on average, R $ 400 per month from the sale of fruit pulps also in Iguatu, in the interior of Ceará. With the pandemic, sales were not viable, but since April, revenues have risen to R $ 1,200.

With the double win, the couple abandoned the fees and went to collect in cash. They were also able to pay off old debts. “It was impossible to make a big purchase during the month. Now yes ”, says Antonio.

The farmer says that he no longer has problems paying his water, electricity and gas bills, but confesses that he fears that the aid will end. In addition to a job market that has not returned to work, he fears that he, his wife and their 21-year-old daughter, who suffer from chronic diseases, will be forced to take risks amid the pandemic.

“The way is going to be getting ahead, buying less. It would be great if the help was extended for longer, ”he says.

For the economist Paulo Feldmann, professor at FEA USP, cases such as that of Antonio and Antonia are sufficient justification for the Emergency Aid to last until the end of the crisis.

The high fiscal cost of the program, he says, reflects an error in targeting, in which beneficiaries who are not in the most essential assistance group had access to transfers..

“It is a serious mistake to ‘find’ 20 million invisible. This caused a fiscal gap that should not have existed. The government would have to fix this soon and aid should be directed to those who really need it,” says the economist.

The future of the program and the difficulty of maintaining the incentive programs are reasons for an arm fight between Jair Bolsonaro and the Minister of Economy, Paulo Guedes.

The president, who experienced an increase in popularity by rescuing the income of the most vulnerable, is pressing for the new Renda Brasil, a program that replaces Bolsa Família, to have a share value higher than that proposed by the economic team.

Although the discussions are not over, Emergency Aid will be postponed until the end of 2020, generating a greater impact on the primary deficit. The program costs R $ 50 billion per month.

“The aid served its main purpose, but perhaps it would be interesting to have a more designed gradual exit mechanism. Ideally, it would have already started so that it could be done without a higher fiscal cost,” says Thais Zara, senior economist at LCA Consultores. .

Bolsonaro is pushing for more spending because he won over potential voters in regions where he had few followers. A recent study, carried out by economists Ecio Costa and Marcelo Freire, from the Federal University of Pernambuco (UFPE), shows that the economic impact of Emergency Aid has particularly benefited the states of the North and Northeast.

In the Northeast, where Bolsonaro had the lowest voting rates in 2018, the impact is, on average, 6.5% of 2019 GDP, more than double the national peso, 2.5%. The state that benefited the most is Maranhão, with 8.6%.

In the impact ranking by states, the first 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 ranks 25th.

“In some municipalities in less developed regions, Emergency Aid brought the feeling that the economic crisis in Covid-19 did not impose negative consequences. The injections of free resources into the economy cause consumption to occur, trade does not skyrocket, the industry continues to produce and services are demanded, ”explains Costa.

However, of the 60 million beneficiaries, the new Renda Brasil is expected to serve only 20 million. And the value should be below R $ 600. There are 40 million people left in an economy that is still slipping.