Lula to create ministry for small and medium-sized enterprises

During his weekly live broadcast on Tuesday, President Luiz Inácio Lula da Silva announced his intention to create a Small and Medium-sized Companies Ministry, the 38th in his cabinet, “to support those who seek credit and opportunities.”

The announcement came amid months-long negotiations to distribute cabinet positions to two center-right parties as part of Lula’s effort to expand his Congress coalition. Both the Republicans and Progressives parties, allied with former President Jair Bolsonaro, are essential for the government to enjoy a majority in Congress, as they have a total of 90 House members combined. The cabinet reshuffle is expected to be presented this week.

The president acknowledged the importance of creating formal jobs, but said “many Brazilians want to be entrepreneurs.” Brazil’s Individual Micro-entrepreneur (MEI) system is a type of labor formalization offered to individuals, many who were previously working informally. More than 15 million Brazilians have registered as MEIs since 2008.    

Last week, the government proposed increasing the MEI annual revenue cap from BRL 81,000 (USD 16,500) to BRL 144,900. This alteration could bring 470,000 small companies into the category, and allow them to simplify declarations and taxes, give them greater access to credit lines and social security benefits, and reduce the costs of starting a business.

The Brazilian Report has already shown that MEIs have higher education levels and earn more than the average Brazilian worker. Experts believe that the program targets people who were not its intended audience, and will probably not be sustainable over time.

However, for Lula, targeting this significant portion of the population offers political gains. Last year, on the eve of the second round of elections, supporters of Mr. Bolsonaro took a last jab at Lula by saying that he would “end MEI.” Lula struggled to deny the information during televised debates, giving Mr. Bolsonaro a significant boost.
Labor Minister Luiz Marinho has already made several statements signaling that the MEI annual revenue range will increase, that there will be other tax benefits, and that the foregoing of revenue from these changes will be offset by an increase in taxes on the super-rich.

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