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Small business owners next in the firing line amid Covid-19 crisis

and . Apr 03, 2020
Small business owners next in the firing line amid Covid-19 crisis 25 de Março Street: Latin America's largest popular commerce. Photo: Vinicius Bacarin/Shutterstock

That the Covid-19 pandemic will cause severe damage to the Brazilian job market is an inescapable fact. In fact, Brazil’s far-right President Jair Bolsonaro has made this his main platform throughout the crisis, with a discourse prioritizing the economy even above the health of the population. While the president backs irresponsible and unscientific measures of reopening commerce and relaxing social isolation policies, his cabinet has proposed measures to provide financial assistance to the lowest income strata of the population and informal workers, though the implementation of these subsidies is stalling in Brasilia. Though these groups are rightly identified as being vulnerable and in need of assistance, the government cannot forget about the legion of very small business owners across the country, who are set for some precarious times ahead.

</p> <p>These business owners are referred to in Brazil as &#8220;microentrepreneurs,&#8221; in relation to a special government tax regime allowing individual firms with annual revenue of under BRL 81,000 to pay a simplified and reduced tax in return for joining the regular and formal economy.</p> <p>As shown by the chart below, among the largest groups of microentrepreneurs in Brazil are hairdressers and manicurists, followed by clothes retailers, sales promoters, and construction workers. In other words, they are predominantly professions that require an in-person economy and cannot function virtually.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/1776301" data-url="https://flo.uri.sh/visualisation/1776301/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p>There are a total of 10 million active microentrepreneurs in Brazil, with registrations on a steady rise ever since the <a href="https://brazilian.report/power/2020/01/12/brazil-labor-reform-overhauled-courts/">2017 labor reform</a> freed up companies to <a href="https://politica.estadao.com.br/blogs/fausto-macedo/reflexos-da-covid-19-e-os-contratos-de-terceirizacao-na-administracao-publica/">outsource</a> work for their core activities. For instance, a newspaper would be allowed to hire journalists as third-party contractors, as opposed to direct formal employees, and all of the labor benefits that go along with it.&nbsp;</p> <p>By definition, the revenue cap for microentrepreneurs means that these individuals have a low to middle income and could see their businesses run into the ground as a result of Covid-19-related work stoppages.&nbsp;</p> <h2>Government measures for small business owners?</h2> <p>So far, efforts from the government and Congress to assist microentrepreneurs have been timid at best. The Economy Ministry issued a resolution to push back deadlines for microentrepreneurs to pay taxes, meaning they will have until the end of June to do so. However, without revenue coming in, there wouldn&#8217;t be much to tax regardless.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/1778306" data-url="https://flo.uri.sh/visualisation/1778306/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <p>Two bills are currently processing in their early stages in the Senate: one which would exempt microentrepreneurs from paying utility bills during the pandemic and issue them with a minimum wage, while another provides advantageous credit lines. However, neither proposal has made much progress.</p> <p>The government&#8217;s main piece of legislation to assist <a href="https://brazilian.report/newsletters/brazil-daily/2020/03/27/brazil-to-pay-emergency-salary-to-informal-workers/">low-income autonomous workers</a> — a monthly stipend of BRL 600 — includes only very low-income microentrepreneurs, depriving most of them of even the most basic of safety nets.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/1778253" data-url="https://flo.uri.sh/visualisation/1778253/embed"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <h2>Unemployment in Brazil</h2> <p>The potential winding up of countless small businesses in Brazil could cause a strain on the country&#8217;s <a href="https://brazilian.report/newsletters/brazil-daily/2020/01/21/unemployment-brazil-here-stay-ilo/">unemployment figures</a>, for which the expectations are already not great. Global trends are terrifying, especially as 6.6 million people <a href="https://www.cnn.com/2020/04/02/economy/unemployment-benefits-coronavirus/index.html">filed for unemployment</a> in the U.S. in March, an all-time record.</p> <p>Approximately 11.6 percent of people in Brazil are currently out of work, according to official statistics, but it could be a while before we can understand the true effects of the coronavirus pandemic on the country&#8217;s job market.</p> <div id="buzzsprout-player-3212182"></div> <script src="https://www.buzzsprout.com/299876/3212182-coronavirus-brazil-facing-a-job-apocalypse.js?container_id=buzzsprout-player-3212182&amp;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <p>The Economy Ministry recently suspended disclosure of the General Register of Employed and Unemployed Persons (Caged), which was one of the best sources of data on the number of people in formal work around the country. The official justification given was that not enough companies had provided sufficient data on their members of staff, allegedly affecting the quality of the data. In this case, Brazil will have to rely on polling institutes to estimate unemployment levels for the foreseeable future.

 
Euan Marshall

Originally from Scotland, Euan Marshall is a journalist who ditched his kilt and bagpipes for a caipirinha and a football in 2011, when he traded Glasgow for São Paulo. Specializing in Brazilian soccer, politics and the connection between the two, he authored a comprehensive history of Brazilian soccer entitled “A to Zico: An Alphabet of Brazilian Football.”

Marcelo Soares

Marcelo Soares is a Brazilian journalist specializing in data journalism and reader engagement.

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