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The disputes over emergency coronavirus benefits in Brazil and Argentina
Aline Gatto Boueri . Aug 25, 2020
Buenos Aires: Argentinian flag with the message "Stay Home." Photo: Carolina Jaramillo/Shutterstock
With the profound economic impact of the coronavirus pandemic, emergency wealth transfer policies have popped up in both Brazil and Argentina. While providing much-needed breathing room to vulnerable populations, they have also shown the size of the challenges South America’s two largest economies will face in the post-Covid-19 financial recovery stage.
According to data from Brazil’s federal government transparency platform, around 66 million people received the administration’s emergency aid benefit in July, comprising a BRL 600 (USD 107) monthly payment to the unemployed, informal workers, individual micro-business holders, and beneficiaries of the Bolsa Família cash-transfer program. Single mothers are entitled to a double payment of BRL 1,200 per month.
Before the Covid-19 pandemic, Bolsa Família was the most prominent wealth distribution initiative in Brazil, created back in the early 2000s by the Luiz Inácio Lula da Silva government and credited with bringing millions out of extreme poverty. Now, the sheer reach of the coronavirus emergency aid leaves the world-renowned Bolsa Família scheme to shame.
Data from the National Household Sample Survey Covid-19 (PNAD Covid-19), carried out by the Brazilian Institute of Geography and Statistics (IBGE), shows that 44 percent of Brazilian households have at least one individual receiving the benefit, a rate that drops to just 4.6 percent for Bolsa Família.</p>
<p>In short, this shows the eye-watering number of people in Brazil who previously didn’t depend on government income-transfer programs, but now require such policies to survive the economic impact of the Covid-19 pandemic.</p>
<p>According to Lauro Gonzalez, the coordinator of the Center for Studies in Micro-finance and Financial Inclusion at think tank Fundação Getulio Vargas, labor trends such as the increase of informal work and the rising proportion of people with variable income have accentuated this crisis. As <strong>The Brazilian Report </strong>has explained, <a href="https://brazilian.report/latin-america/2020/07/27/understanding-latin-america-wave-informal-employment/">the informal economy is a big problem across all of Latin America</a>.</p>
<p>Mr. Gonzalez is among the authors of a <a href="https://eaesp.fgv.br/sites/eaesp.fgv.br/files/u624/auxilioemergv10.pdf">study about the impact of the emergency aid</a> on Brazilians’ income, using data from PNAD Covid-19. The paper showed that the program increased revenues by an average of 24 percent for all types of work in relation to pre-pandemic levels. In 11 of the 36 categories analyzed by the IBGE, the increase was higher than 40 percent.</p>
<p>“The number of people that have received the emergency salary is a conservative estimate of the size of the problem. A part of the [lower middle class] falls into this category: a bracket that is vulnerable, but not poor to the point that they would receive Bolsa Família or similar benefits under normal circumstances,” Mr. Gonzalez tells <strong>The Brazilian Report</strong>. </p>
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<h2>Taking credit</h2>
<p>As Mr. Gonzalez notes, the emergency salary program was not in the interests of the Bolsonaro government’s economic team at the beginning of the pandemic. The administration first put forward a proposal to pay BRL 200 per month, before they were pressured by Congress to triple this amount and then extend the program for a total of five months.</p>
<p>Now, with the program’s success in providing income to vulnerable households, <a href="https://brazilian.report/newsletters/brazil-daily/2020/08/14/despite-pandemic-mismanagement-bolsonaro-approval-ratings-go-up/">the government has been able to claim ownership of the initiative</a>, helping President Bolsonaro enjoy some much-needed popularity boosts around the country. This does not mean, however, that the administration will be able to maintain the benefit for a significant period of time without betraying its own economic agenda.</p>
<p>“The government could have pushed welfare transfer policies at the beginning of its term, but from the economic policy point of view, personified by Economy Minister Paulo Guedes, the emphasis is on reforms leading to the ultra-liberalization of the economy, reducing the size of the state and focusing on fiscal balance,” says Mr. Gonzalez.</p>
<p>What remains unclear, according to the researcher, is what the country will do with the millions who have grown to depend on the emergency aid. “Completely discontinuing the coronavirus salary will only be compensated if the crisis eases up, which seems unlikely. The effect on people’s lives and the economy will depend on this tug-of-war between the potential reduction in effects of the crisis and the end of the emergency aid, and it will be best observed in the last quarter of 2020, when the benefit is set to end,” explains Mr. Gonzalez.</p>
<p>While the government has signaled that it intends to replace the emergency aid with a welfare transfer program entitled Renda Brasil (Income Brazil) — seen as an amalgamation of all existing benefit schemes — the Economy Ministry has yet to give any details on how this new program might work.</p>
<h2>Emergency aid in Argentina</h2>
<p>Over in Argentina, President Alberto Fernández was elected in October 2019 running on a platform that was perhaps the antithesis of his Brazilian counterpart. Regardless, with the advent of the Covid-19 pandemic, the two presidents faced similar challenges. On March 20, three days after Argentina imposed social isolation measures nationwide, the Executive issued a <a href="https://www.boletinoficial.gob.ar/detalleAviso/primera/227113/20200324">decree</a> establishing the so-called <em>Ingreso Familiar de Emergencia</em> (Emergency Household Income) program, aimed at people aged between 18 and 65 who are either unemployed, in informal work, single taxpayers — the equivalent of Brazil’s micro-business owners — and domestic workers. </p>
<p>Sixty-one percent of recipients were informal workers or unemployed between May and April, when the first installment of aid was paid out. The initial plan was for citizens to receive a single payment of ARS 10,000 (USD 135.50), but there have now been three installments as of August.</p>
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<p>Unlike what was seen in Brazil, the emergency income program was not the subject of intense disputes in Argentina, where the main sticking point between the government and opposition was the continuation of social isolation measures, which went on for five months in Greater Buenos Aires but have been gradually loosened since May.</p>
<p>According to Mr. Gonzalez, it would be difficult to make a regional analysis of the effects of income transfer policies without analyzing each country’s experience in detail. However, in general terms, he says that there are two defining characteristics in the region’s economies: medium-to-low income per capita, and high levels of inequality.</p>
<p>“The design and implementation of adequate policies involve the collective efforts of several levels of the government. Where there are more accentuated political conflicts, the pandemic’s effects may be worse, as we have seen in Brazil, with the federal government facing off against state administrations when they should have been thinking of a strategy to face the crisis,” he adds.
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