Brazil could bail out small- and medium-sized enterprises

The Economy Ministry is reportedly mulling over a BRL 10-billion plan to provide “grants” for small- and medium-sized enterprises (SMEs). Funds would be provided by public banks, and SMEs would have only one condition: to pay their 2021 taxes without delay, according to news website Poder360. 

Up to one million companies could be included in the program, which is temporarily referred to as the “no-default bonus.” 

Economy Minister Paulo Guedes says the money to pay for the program would come from profits obtained with bailout packages of large firms, such as airlines. As the National Development Bank (BNDES) is implementing bailouts via convertible debentures — a tool that allows bonds to be converted into stocks — Mr. Guedes intends to wait for the assets to become more valuable and then trade the stocks, amassing profits. 

“It is a well-known strategy and was successfully implemented in the U.S. back in 2008, when the Federal Reserve did exactly this sort of operation,” said the minister.

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