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Brazil's Bolsonaro and economy minister split over welfare spending

08/26/2020 | 03:04pm EST

BRASILIA, Aug 26 (Reuters) - Brazil's President Jair Bolsonaro said on Wednesday he had rejected a proposal by his Economy Minister Paulo Guedes for a new cash welfare program called "Renda Brasil" because it would involve cutting other social programs.

The disagreement highlights the split between Guedes, who is struggling to keep Brazil's fiscal deficit under control, and a president whose popularity and re-election chances have risen thanks to the financial assistance distributed during the coronavirus pandemic.

The two are also at odds over the government's plan to extend emergency pandemic payments to low-paid and informal workers until the end of the year, currently 600 reais ($106) per month, which the minister wants to cut to under 200 reais.

The rift sent the Brazilian currency down 1.5% against the dollar and saw the Bovespa index in Sao Paulo fall 2.2% by mid-afternoon.

The Economy Ministry issued a statement quashing speculation that Guedes was planning to quit.

Brazil's emergency pandemic payments, known as the "coronavoucher," has benefited 30 million households, or 44% of the country's total, since March.

Recent opinion polls show these payments were a key factor in boosting the popularity of right-wing Bolsonaro to its highest since taking office last year, especially in the poorest region, northeastern Brazil, once a stronghold of the left.

But Guedes has said the pandemic handouts cost the Treasury 50 billion reais a month and are fiscally unsustainable.

To hold on to his newfound support, Bolsonaro is seeking to rebrand Bolsa Familia, the popular cash transfer program launched in 2003 by former leftist President Luiz Inacio Lula da Silva, which helped build a bastion of support for his Workers' Party.

Renamed Renda Brasil, Bolsonaro hopes to expand the welfare payments to an additional 7 million poor families, taking it to a total of 21 million, and to increase the stipend.

But the president said he was unhappy with the way the Economy Ministry had proposed funding Renda Brasil, via cuts in other social programs such as the salary allowance scheme that many low-paid workers qualify for.

Bolsa Familia, which enjoys widespread popularity and support, costs the Treasury around 30 billion reais ($5.5 billion) a year.

"I can't take from the poor to give to the poor. I cannot take away 12 million people's salary allowance to give to a Bolsa Familia or Renda Brasil, or whatever," Bolsonaro said at an event in the state of Minas Gerais. (Reporting by Lisandra Paraguassu; Writing by Jamie McGeever and Anthony Boadle; Editing by Lisa Shumaker and Bernadette Baum)

© Reuters 2020
Stocks mentioned in the article
ChangeLast1st jan.
EURO / BRAZILIAN REAL (EUR/BRL) 0.01% 6.4005 Delayed Quote.41.67%
IBOVESPA 2.24% 109786.3 Delayed Quote.-8.30%
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