Good morning! Today, the government’s new wealth transfer program could blow a hole in the federal spending ceiling. The Covid inquiry tones down its accusations against President Bolsonaro. Petrobras struggling to keep up with Brazil’s fuel demand, and beef producers stuck amid China export ban.
Bolsonaro arming a fiscal time bomb
Everything was set for the government to make a major announcement on Tuesday afternoon, bringing its new Auxílio Brasil cash transfer program to life, paying monthly benefits of BRL 400 (USD 71), per some reports. If confirmed, the scheme would give larger stipends than the current coronavirus emergency salary (BRL 300) and could boost President Jair Bolsonaro re-election chances.
- But the wrath of the markets fell on the government. The benchmark stock index took a tumble, the Brazilian Real lost ground against the U.S. Dollar, and rumors about the imminent resignation of multiple members of the economic team began to circulate.
- Under fire from the business community and financial markets — usually friendly camps — the government put everything on hold, and claimed it is still fine-tuning the program’s details.
- Short-term yields, a good thermometer of how investors see the health of an economy, are climbing fast.
The pickle. There...