Federal aid compensates municipalities’ losses amid pandemic

aid federal government
São Paulo’s Avenida Paulista. Photo: Will Rodrigues/Shutterstock

Money transferred by the federal government to help cities fight the Covid-19 pandemic surpasses expenses by BRL 24 billion (USD 4.4 billion), leaving new mayors in a comfortable position to start their terms on January 1, 2020. 

The data comes from a study by Marcos Mendes, a researcher at the São Paulo-based Insper business school.

Analyzing the finances of 40 percent of Brazil’s wealthiest cities, Mr. Mendes found that the top 29 biggest cities increased their total of available cash by BRL 16 billion in the first eight months of the year — 60 percent more than during the same period in 2019.

In São Paulo, available funds increased by 50 percent to BRL 19.5 billion. Meanwhile, in São Luís, the capital of northeastern state Maranhão, growth hits almost 400 percent.

The researcher concluded that aid from the federal government outstripped revenue losses in the period (around BRL 5.5 billion) almost eight times over. This improved performance can be explained by a recovery of tax revenue and pardons or extensions for municipal debt payments. In Mr. Mendes’ view, however, this could encourage new mayors to spend more money despite the challenges ahead.

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