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Brazil Elections: Will Stimulus Help Bolsonaro?
Will a new stimulus plan help Brazilians and boost votes for Bolsonaro?
BY LATIN AMERICA ADVISOR
Inter-American Dialogue
Brazilian President Jair Bolsonaro’s administration is planning to provide approximately 165 billion reais ($32 billion) of economic stimulus this year through a program known as the “Income and Opportunity Program.” The initiative includes early payment of pension checks, the expansion of payroll-deductible loans and a new microcredit program. The payment for pensioners is expected to be released in July, a few months before the October presidential election. Why is the Brazilian government launching this plan now, and what are its most significant components? Who will benefit from the program, and how will it affect small and medium-sized enterprises in the South American country? To what degree could it bolster support for Bolsonaro, who is currently trailing former President Luiz Inácio Lula da Silva in the polls?
Anya Prusa, senior director at Dentons Global Advisors-Albright Stonebridge Group: Social spending traditionally ticks up in an election year in Brazil for a simple reason: it tends to boost incumbent popularity. Against a backdrop of accelerating fuel and food prices, President Jair Bolsonaro is undoubtedly eager for any advantage as October approaches. This latest stimulus package is just part of a bigger government push to reduce the strain of high inflation and low growth on Brazilians’ pocketbooks, from the government’s Auxílio Brasil welfare program to the recent effort to cut fuel taxes. There are some signs that these earlier stimulus measures have helped to boost the president’s approval ratings: recent polls show that Bolsonaro has chipped away at the gap between himself and his top challenger, former President Luiz Inácio Lula da Silva, since the start of this year. However, while the margin has narrowed, Lula retains a comfortable lead, and recent polls also indicate that nearly one third of Brazilians blame Bolsonaro for higher fuel prices; another 22 percent blame Petrobras. This new stimulus package is unlikely to provide enough of a boost for Bolsonaro to overcome these negatives by October. Many of the new stimulus package’s programs will be welcomed by lower and middle-income Brazilians, but the initiative pales against the economic challenges ordinary Brazilians are facing, from unemployment to inflation—particularly as higher government spending will only add to Brazil’s inflationary pressures.
Troy Benavides, associate for Brazil and the Southern Cone at McLarty Associates: Amid a tight fiscal environment, rising inflation and interest rates, elevated levels of household debt and an uncertain election outlook, the Bolsonaro administration is announcing measures to alleviate pressures on consumers without aggravating government spending. The same day Bolsonaro announced the stimulus package, the Economy Ministry revised its 2022 GDP growth projection downward from 2.1 percent to 1.5 percent. Despite a significant recovery since the pandemic, unemployment is forecast to stagnate in the double digits for 2022. Additionally, real household wages have fallen by more than 10 percent since 2020 and have reached the lowest point recorded by Brazil’s National Statistics Agency (IBGE). To alleviate inflationary pressure on consumers, the Economy Ministry also announced import tax exemptions on food products and ethanol, as well as a 10 percent reduction in tariffs on capital and IT goods. While the stimulus measures have high electoral appeal, they will likely have a limited economic impact. The early payment of pension checks simply advances payouts that would occur at the end of the year to before the elections. While the new microcredit program expands access to credit for small- and medium-sized enterprises to invest in capital equipment and other goods for their businesses, it risks increasing debt levels over the long term. The administration’s economic efforts—including stimulus programs, tax cuts on industrialized goods, the Auxílio Brasil cash transfer program and others—may not be sufficient to guarantee Bolsonaro’s re-election, but the gap between him and his primary opponent Lula continues to tighten in the polls.
Leandro Ferreira, head of the Brazilian Basic Income Network: The Bolsonaro administration’s announcement of an economic stimulus package is no surprise under the electoral circumstances. The package is untimely and poorly organized in terms of social impact on the target demographic. The main measures of it are the possibility of withdrawing funds from workers’ career-saving funds—the Fundo de Garantia por Tempo de Serviço—and the anticipation of formal workers’ ‘13th wage,’ an annual bonus-like benefit paid in December of every year. Those are simply resources owned by the workers being mismanaged to let Bolsonaro profit from the political calendar, as the presidential election is taking place in October. Additionally, the expansion of financial credit margins to poor people, especially those in programs such as Auxílio Brasil, the successor of the well-known Bolsa Família program, are going to reinforce the financialization of social policy, using assured benefits as collateral to loans with no guaranteed efficacy. This package ignores the needs of vulnerable people that could only lean on the emergency benefits from Covid-19 crisis responses but have not recovered their income so far. From March 2020 through October 2021, recurring payments have lifted millions of people out of poverty using a policy option pushed forward by civil society and Congress. Instead of taking electoral advantage, Bolsonaro should focus on reducing the number of people living in vulnerable situations, managing inflation rates better and overcoming the cost-of-living crisis of all Brazilians, especially when it comes to acting and regulating the food and energy markets.
Republished with permission from the Inter-American Dialogue's daily Latin America Advisor
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