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Brazil has managed to reduce poverty levels with emergency aid during the Covid-19 pandemic, but if government revenue assistance efforts do not continue, 15 million Brazilians will return to this condition in January, warned Marcelo Neri, director of FGV. Social and founder of the Center for Social Policies (FGV Social / CPS).
The extension of the subsidies is paralyzed in Congress and faces some opposition within the government, whose economic team is worried about an uncontrolled budget deficit.
“We are between the cross and the sword,” Neri told Reuters.
The FGV study published on Thursday shows that the number of poor Brazilians – who earn less than half the minimum wage, or R $ 515 per month – fell 23.7%, reaching a new historical low of 50 million people, Thanks to the help. monthly, which started at 600 reais, but is now reduced to 300 reais through December.
President Jair Bolsonaro, whose popularity has grown thanks to cash transfers, is trying to find a way to keep payments, but there is no way to fund them without breaking the spending ceiling and worsening an already high budget deficit.
Brazil was more generous to its poor population during the pandemic than other Latin American nations, despite its worse fiscal situation and attempts by Economy Minister Paulo Guedes to maintain fiscal austerity efforts, Neri said.
“Guedes turned out to be a surprisingly generous Keynesian policy manager. Now, we are in a situation where you have to be a little Keynesian, but we don’t have the resources,” he said.
Keynesianism, or Keynesian school, is a political-economic theory that defends the State as an active agent in the face of economic crises and high unemployment.
Brazil, which suffered a strong outflow of funds from equity and fixed income markets in the first half, runs the risk of generating even more noise among investors if spending increases in 2021, warned Neri, PhD in Economics from the University from Princeton, USA.
Emergency aid was the government’s most important initiative in the crisis. With a value of 600 reais from April to August and 300 reais the rest of the year, it will have a total cost of 321.8 billion reais in 2020, benefiting more than 60 million people per month.
Senator Ney Suassuna (PRB-PB), a member of the Joint Budget Committee, told Reuters there was no consensus on how to finance cash transfers next year, despite expectations that the pandemic crisis will continue amid a fragile improves. in the business market.
As in most of Latin America, the pandemic has reduced the size of the traditional middle class, with 4.8 million Brazilians leaving this group due to loss of income, Neri said.
Millions of people in the Latin American middle class are being dragged back into poverty by Covid-19, which has hit the region’s job market harder than anywhere else in the world. Poverty is expected to return to 2005 levels in Latin America.
