Auxilio Brasil

The government doesn’t know how to fund its new welfare scheme

Hailed as the future centerpiece of President Jair Bolsonaro’s re-election campaign next year, the Brazilian government launched its new welfare scheme Auxílio Brasil — without knowing how it’s going to pay for it. In fact, some analysts believe the new program is unlikely to last for more than one year.

Auxílio Brasil is being brought in to substitute the world-renowned Bolsa Família program, which has been in place since 2003 and currently benefits 14.65 million families. Providing monthly stipends in exchange for basic social conditions (such as keeping children in school), international organizations have held Bolsa Família up as an example of how to drastically cut poverty without indebting public accounts.

The transition between the two programs has been a mess and is still shrouded with doubt. As an example, the Economy Ministry drew up the program based on unclear and imprecise data, and still is not clear how the project would be financed as of next year.

The government is placing its chips on the so-called “Precatórios PEC,” a constitutional amendment bill that would reduce the amount of court-ordered debt repayments the government would have to make next year — thus freeing up space on the budget. The matter was approved in an extremely tight first-round House vote on Wednesday, and it is unclear whether it will pass a second time.

Experts say the measures could result in a BRL 100 billion (USD 17.8 billion) hole in public accounts as well as a confidence crisis among market agents in Brazil and abroad.

President Bolsonaro’s main motivation to swap out Bolsa Família for a program of his own is simply electioneering. Though it has been passed through several governments, Bolsa Família is still indelibly linked to the administration of Luiz Inácio Lula da Silva — who currently leads polls for next year’s election.

However, beyond a simple rebranding, The Brazilian Report showed that the new Auxílio Brasil program is substantially weaker than its predecessor, dismantling a series of social policies and protections that made the cash-transfer scheme effective in the first place. 

And even though the base monthly stipend will rise from BRL 190 to BRL 400, on average, around 25 million families will be left penniless as of this month. The number of poor households in Brazil tripled in the closing months of 2020, and these families were receiving the now-extinct coronavirus emergency aid.