Emergency Covid-19 aid has been essential for low-income workers

. Jun 25, 2020
Emergency Covid-19 aid has been essential for low-income workers Woman waiting for food donations in Planaltina, Goiás. Photo: Marcos Casiano/Shutterstock

The next tug of war between Brazilian President Jair Bolsonaro and Congress is set to revolve around the emergency coronavirus aid paid out to vulnerable populations, initially slated as a three-month program of BRL 600 monthly payments. With the term of the benefit coming to an end, nearly every major power broker in the capital agrees that extending the aid is a necessity — despite the federal government claiming it does not have the funds to keep it going.

A study by Brazil’s Institute of Applied Economics (Ipea) — using data provided by a household survey held by the Brazilian Institute of Geography and Statistics (IBGE) — shows that, as of May, roughly 39 percent of Brazilian households had access to the benefit.

Those eligible included unemployed and informal workers, individual very-small business owners, recipients of the Bolsa Família cash-transfer scheme, and single mothers — who received double the benefit amount.</p> <p>On average, recipient households were given BRL 846 each — which amounts to 45 percent of the average income of currently employed workers and 78 percent of self-employed workers’ income. For domestic workers — who traditionally earn low wages — the aid was calculated as 21.2 percent higher than their previous average income.</p> <p>“Considering that [self-employed and domestic workers] were the main target of the program, the amount offered has served to make up for the potential household income losses caused by the Covid-19 pandemic,” wrote researchers Maria Andreia Parente Lameiras and Marco Antônio Cavalcanti.</p> <p>Providing families with an extra income during the pandemic may be crucial to cushion the economy from an even steeper recession, as household consumption amounts to <a href="">65 percent of Brazil&#8217;s GDP</a>.</p> <h2>Regional breakthrough</h2> <p>The aid has proven to be even more important due to the country’s <a href="">regional inequalities.</a> Per IBGE, 9.7 million Brazilian workers had no income — or 11.5 percent of the country’s workforce. But in the Northeast and North regions, this percentage reached 16.8 and 15 percent of workers. Also, 27 percent of workers in the Northeast — 5 million people — were on leave from work, the highest ratio among all Brazilian regions.&nbsp;</p> <p>The study also pointed out that the emergency aid had a more significant impact in the North and Northeast, not only because the average amount received by each household was above the national average, but because it also surpassed the average income they’d receive in normal circumstances.</p> <div class="flourish-embed flourish-chart" data-src="visualisation/2975964" data-url=""><script src=""></script></div> <h2>Proposals for continuing the benefit</h2> <p>Criticized for its long delay in agreeing on the emergency aid, the <a href="">hiccups in registering beneficiaries</a>, and the undue deposits to tens of thousands of Brazilians, the federal government is once again in the spotlight over the coronavirus aid program.</p> <p>After President Jair Bolsonaro and Economy Minister Paulo Guedes said multiple times that it would be unfeasible to maintain the aid with its current parameters, due to its high cost for public accounts — estimated at <a href="">BRL 51 billion a month</a> — the federal administration is mulling over ways to provide a gradual transition for workers. At first, the government proposed paying a further <a href="">three installments of BRL 200</a> per month, then shifting to two sums of BRL 300.&nbsp;</p> <p>This week, however, it was rumored that Mr. Bolsonaro would prefer a more advantageous extension to the benefit, providing consecutive monthly payments of BRL 500, BRL 400, then BRL 300. The possibility was hastily announced on social media by Government Secretary Luiz Eduardo Ramos, <a href=";utm_medium=social&amp;utm_campaign=twfolha">but his post was swiftly deleted</a>. According to his calculations, the cost of the program would reach BRL 229.5 billion, or 53 percent of all the money transferred through Bolsa Família since 2003.&nbsp;</p> <p>Continuing the benefit program in these molds goes against the government&#8217;s pro-austerity rhetoric —&nbsp;but it could reap electoral gains for Mr. Bolsonaro. As we discussed in our <a href="">May 20 Daily Briefing</a>, the president has been losing support in the middle class while becoming more popular among lower income populations — a phenomenon analysts believe is down to the receipt of the emergency aid.</p> <p>In this vein, Economy Minister Paulo Guedes recently announced preparations for a <a href="">new cash transfer program</a> entitled Renda Brasil (Income Brazil), expected to work as a negative income tax and swallow up a number of other social benefits in the process, including Bolsa Familia. Economists, however, see several contradictions in the plan, fearing that it may be little more than a political ploy and an attempt to nix discussions over a Universal Basic Income, currently underway in Congress.

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Natália Scalzaretto

Natália Scalzaretto has worked for companies such as Santander Brasil and Reuters, where she covered news ranging from commodities to technology. Before joining The Brazilian Report, she worked as an editor for Trading News, the information division from the TradersClub investor community.

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