Bureaucratic hurdles get in the way of Brazil’s relief policies

. Apr 06, 2020
Bureaucratic hurdles get in the way of Brazil's coronavirus relief policies Image: Golden Sikorka/Shutterstock

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This week, we talk about how Brazil’s government is failing to get relief to people and companies. How the coronavirus might be reaching regions less prepared to deal with it.

Brazil’s struggle to get emergency money to those in need

The Covid-19 crisis has proven how inefficient Brazil’s labyrinthine bureaucracy can be.

After approving an emergency BRL 600 salary for informal workers and single mothers, the government now must figure out how to make the money reach beneficiaries. According to the Institute of Applied Economic Research, almost 20 percent of those targeted by the emergency assistance are not enrolled in the government&#8217;s database for social programs — adding up to some 11 million people being unaccounted for. The pandemic has exposed that a sizable portion of society has no formal relationship with the state.</p> <ul><li>Since the 1970s, the Brazilian government has created sectorial databases that mostly do not dialogue with one another. These silos of information carry political power with them, and groups that control them want them to remain as insular as they are.</li></ul> <p><strong>Why it matters.</strong> In times of crisis, the government&#8217;s ability to make an inflow of money to keep the economy alive is drastically reduced.</p> <ul><li>According to the Brazilian Institute of Geography and Statistics, about 2.6 percent of Brazilians born in 2017 have no registration of any sort. Without documentation, one cannot vote, get pension benefits, or be a part of any government program.</li></ul> <p><strong>Solutions.</strong> The government has tried to find solutions for people who are not in the banking system — such as an app to create digital accounts, to be launched on Tuesday —&nbsp;but people are required to have a CPF, Brazil&#8217;s individual taxpayer ID. Pedro Guimarães, head of Caixa, the public bank responsible for paying social benefits, promised a solution for those who have no fiscal identity.&nbsp;</p> <ul><li>Caixa expects 80 million Brazilians to download its app. For CPF-less Brazilians, &#8220;there are discussions at these moments with the Central Bank, as we have a potential fraud problem here,&#8221; said Mr. Guimarães.</li></ul> <p><strong>Problem.</strong> People with little or no documentation are usually among the poorest groups of society — meaning that they need the coronavirus <a href="https://brazilian.report/newsletters/brazil-daily/2020/03/27/brazil-to-pay-emergency-salary-to-informal-workers/">emergency money</a> the most.</p> <hr class="wp-block-separator"/> <h2>Brazilian companies already feeling the coronavirus blow</h2> <p>Another bottleneck for the government is to make its budget for helping companies actually reach the business community. Economy Minister Paulo Guedes said over the weekend that the money set aside for the Covid-19 effort is &#8220;clogged within the financial system.&#8221; According to Central Bank head Roberto Campos Neto, banks are &#8220;afraid&#8221; of default risks as the country — and the global economy —&nbsp;drives towards a recession.</p> <ul><li>Companies in many sectors have already felt the deterioration of credit lines — higher interests (despite the benchmark rate being at historic lows), lower deadlines, and less money available.&nbsp;</li></ul> <p><strong>Why it matters.</strong> Small and medium-sized companies are the backbone of the Brazilian economy. They account for 99 percent of all businesses in Brazil, are responsible for one-quarter of the Brazilian GDP, and employ 52 percent of the registered workforce.</p> <div id="buzzsprout-player-3212182"></div> <script src="https://www.buzzsprout.com/299876/3212182-coronavirus-brazil-facing-a-job-apocalypse.js?container_id=buzzsprout-player-3212182&#038;player=small" type="text/javascript" charset="utf-8"></script> <hr class="wp-block-separator"/> <p><strong>Solution.</strong> The government bets on the direct purchase, by the Central Bank, of companies&#8217; credit and bonds portfolios as a way of making the money reach companies and bypassing banks. For that to happen, however, Congress must pass a constitutional amendment, which is already under discussion.</p> <p><strong>Crisis.</strong> Several sectors are already experiencing major losses, according to research by Brazilian small business support service Sebrae. Losses in revenue range from 88 percent for tourism firms to 44 percent among agriculture companies.</p> <p><strong>Black box.</strong> The government announced a BRL 1.2-trillion (USD 224 billion) program for companies. However, <em>Folha de S.Paulo</em> columnist Vinicius Torres Freire writes that <a href="https://www1.folha.uol.com.br/colunas/viniciustorres/2020/04/entenda-fatos-mentiras-e-misterios-do-gasto-do-governo-contra-o-coronavirus.shtml">only one-sixth</a> of that is &#8220;new money.&#8221; The rest is advancing already budgeted expenses —which is important, but highly insufficient.</p> <p><strong>Delay.</strong> As Bruno Carazza, an expert in Brazil&#8217;s public spending, told reporter Brenno Grillo: &#8220;The government wasted a lot of time by not accepting the effects of the pandemic at first, delaying the adoption of relief measures. This will cause many economic and social losses. And the political use of the crisis — with the federal government undermining isolation measures taken by mayors and governors — is very bad because the situation requires coordinated action.&#8221;</p> <hr class="wp-block-separator"/> <h2>Markets</h2> <p>Analysts have rotated their stock portfolio looking for safety in April, which means good cash flows, resilience, and the chance to benefit from the devaluation of the Brazilian Real, amid the market crash and expected recession. According to a study by news website <em>Money Times</em>, shares of four companies have grown in the preference of 28 analysts: Vale (mining), state-owned bank Banco do Brasil, Magazine Luiza (retail), and GPA (food retail).&nbsp;</p> <p style="text-align:center"><strong><em>Natália Scalzaretto</em></strong></p> <hr class="wp-block-separator"/> <h2>Coronavirus around Brazil</h2> <p>The number of confirmed coronavirus infections in Brazil has risen to 11,130, while the death toll reached 486 casualties as of April 5, according to <a href="https://covid.saude.gov.br/">data</a> provided by the Health Ministry. São Paulo, Brazil’s most-populated state, is also the worst-affected: 4,620 coronavirus infections and 275 deaths. Rio de Janeiro comes in second, with 1,394 cases and 64 deaths. Authorities worry about the virus&#8217; spread to the interior of the country, as intensive care beds and ventilators are highly concentrated in state capitals and higher-income regions.</p> <iframe src="//datawrapper.dwcdn.net/0vXs4/1/" width="100%" height="500" scrolling="no" frameborder="0" allowtransparency="true"></iframe> <hr class="wp-block-separator"/> <h2>Looking ahead</h2> <ul><li><strong>Cabinet.</strong> Tensions between Health Minister Luiz Henrique Mandetta and President Bolsonaro have never been higher. Despite not singling out the minister&#8217;s name, Mr. Bolsonaro took an obvious shot at Mr. Mandetta over the weekend: “Some in my administration, something went to their heads. They were normal people, and suddenly became ‘stars’ who talk nonstop and there are provocations. Their time hasn’t come, but it will. My pen is powerful and it will be used.” Hours later, Mr. Mandetta responded on <a href="https://twitter.com/Ihmandetta/status/1246983815429570560">Twitter</a>: “Despite the president&#8217;s insinuations, I stand strong and steady in the fight for a better Brazil, with transparency and competence, unlike those who do little and talk much.”</li><li><strong>Quarantine.</strong> The state of Santa Catarina has announced on Sunday that it will relax social isolation rules and will publish a decree allowing autonomous workers to resume their activities. The move goes against the recommendations of the Health Ministry, which said Brazil could face a peak of infections over the next few days.</li><li><strong>China.</strong> A new member of President Bolsonaro&#8217;s inner circle has blamed China for the Covid-19 spread&nbsp;—&nbsp;claiming that the Asian giant will come out &#8220;stronger&#8221; from the ensuing crisis. The Chinese Embassy in Brasília <a href="https://twitter.com/EmbaixadaChina/status/1247001668832702474">issued a statement</a> in response: &#8220;Deliberately elaborate, such statements are completely absurd and despicable, have a strong racist undertone and unspeakable objectives, having caused negative influences in the healthy development of bilateral China-Brazil relations.&#8221; The Asian behemoth is by far <a href="https://brazilian.report/business/2018/11/14/brazil-trade-china-commodities/">Brazil&#8217;s leading trading partner</a>.</li><li><strong>Exchange rate.</strong> Businesses have been worried about currency volatility. On Friday, the U.S. Dollar reached its highest nominal value against the Brazilian Real (BRL 5.327). A volatile and weak currency affects input purchases and debt payments for many — making a bad situation even worse.</li></ul> <hr class="wp-block-separator"/> <h2>In case you missed it</h2> <ul><li><strong>War budget. </strong>Brazil’s lower house passed the so-called “War Budget” bill, which allows for the creation of a supplementary budget to be used especially for actions in the <a href="https://brazilian.report/coronavirus-brazil-live-blog/">fight against Covid-19</a> and its economic side effects while Brazil is under a state of public calamity — which will be until December 31 of this year. With the goal of facilitating emergency spending, the bill would allow the government to circumvent austerity rules, increasing the deficit in order to boost spending on healthcare and social aid. As a constitutional amendment, the bill must now be approved by the Senate in a two-round vote that calls for a 60-percent majority.</li><li><strong>Uncontrolled spread. </strong>The Health Ministry believes that five Brazilian states might be close to the level of “uncontrolled spread” of Covid-19 — the highest level in the government’s scale. The federal capital, Brasilia, has the country’s highest infection rate: 13.2 cases for every 100,000 people. The report recognizes that states and municipalities that implement social distancing measures have presented better results since then.</li><li><strong>Spread.</strong> Rocinha, Rio&#8217;s biggest favela, has registered its 4 first Covid-19 infections. As we showed in our <a href="https://brazilian.report/newsletters/brazil-daily/2020/04/03/brazils-poor-neighborhoods-are-coronavirus-breeding-grounds/">April 3 Daily Briefing</a>, poor communities might become coronavirus breeding grounds, as poor sanitation and precarious living conditions make social isolation more difficult. In Rocinha, for example, 39 percent of households have 2 or more people per bedroom.</li><li><strong>Agribusiness.</strong> Brazil&#8217;s National Sanitary Surveillance Agency has authorized federal agriculture defense labs to perform Covid-19 tests for at least six months. Brazil has massively underreported cases, partially due to a <a href="https://brazilian.report/latin-america/2020/03/29/low-testing-casts-doubt-over-covid-19-reality-brazil/">lack of testing</a>, as <strong>The Brazilian Report</strong> has shown — according to some estimates, the real number of cases is at least five times as high as official figures.

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