For weeks, long queues have formed daily in front of branches throughout Brazil of the state-owned Caixa Econômica Federal bank. They are the millions of unemployed, informal and self-employed workers left out of work due to the pandemic in line to request the emergency contribution promised by Bolsonaro: 600 reais a month (95 euros), for three months.
The numbers expose the fragility of the country. Out of a population of 210 million inhabitants, 97 million have applied to obtain the benefit of the government: 50 million applications have been accepted, 26 million rejected, 12 million have to re-submit requests due to bureaucratic defects and 5 million are in the analysis phase.
The system should have been automated, with requests being submitted through a dedicated application. But good intentions collided with the stark reality of Brazil. Technical errors, bureaucracy and the lack of skills of a large part of the population in using technology and digital channels have led millions of people to show up at the counters. The scenes are of gatherings and kilometric rows starting at night.
In April, 35 billion reais (5,6 billion euros) were disbursed, according to the government. Forecasts are that the economic package will cost a total of 122 billion reais (19 billion euros). The main problem is getting the money into the pockets of those who need it most given that the underground economy is very vast. Before the pandemic, the statistical institute (IBGE) estimated 38 million undeclared workers, 40% of the workforce. And 12 million are unemployed.
Now, with the economy idling for two months, there are also the 6 million workers on layoffs to calculate, in addition to small entrepreneurs and traders of non-essential services practically at a standstill and on the verge of bankruptcy. With the country engaged in the hot front of phase 1, it is unknown what will become of them as phase 2 is not even under discussion.
To stimulate the economy, the Central Bank has repeatedly intervened with cuts to the reference rate, now at 3%, the lowest value in history. Meanwhile, the exchange rate with the dollar soared and reached 6 reais. Internal estimates indicate a GDP collapse of 3,8% for this year, but the World Bank and the IMF make even darker forecasts, respectively of 5% and 5,3%.
Elected with the promise of relaunching the economy after years of contraction or low growth, Bolsonaro's strategy is to put pressure on governors and mayors, who hold the levers to decree the quarantine measures, to reopen everything as soon as possible. “Entrepreneurs tell me I'm in intensive care. You know what happens next: either you go home or you go to eternal rest,” she said on the week.
The big industrialists are with him. During the week, the president went with a delegation of 15 businessmen to the Supreme Court to ask the judges to force local administrators to loosen the social isolation measures. To date, there are 10 thousand victims of covid-19 in Brazil, at a rate of 800 a day. The health ministry has admitted it does not know when it will peak, perhaps between June and July.
Meanwhile, Bolsonaro's absurd statements that minimize and ironize the pandemic are driving away the moderate wing that supported the president. After the expulsion of the former Minister of Health Luiz Henrique Mandetta and the resignation of the Superminister of Justice and former judge of Lava Jato (the green-gold Clean Hands) Sergio Moro, also the Novo party, which represents the liberal right, has disengaged from the government.
Despite the decline in popularity and the risk of impeachment, the Bolsonaro government continues to enjoy the favor of a large part of business. In reality, hopes are pinned on Economy Minister Paulo Guedes, an economist of the Chicago school, and on the liberal agenda with recipes opposite to those of the left that he governed for 13 years.
Even before the health crisis, Bolsonaro cut the funds and the number of families who were entitled to Bolsa Família, a kind of basic income for the poorest implemented under the Lula government and which has lifted millions of people out of poverty. Traditionally excluded groups suffer the most: blacks from the suburbs, low-skilled workers and rural areas.
"La Bolsa Família has lost space over time and this explains the increase of the worst type of inequality which is that of extreme poverty", explains Mario Neri of the Getúlio Vargas Foundation, one of the most authoritative economic research centers in the country.
One and a half million people have been withdrawn from the social program in recent months while the failure to link the benefit to inflation has caused these families to lose 19% of purchasing power from 2015 to today. Nevertheless the Bolsa Família costs 0,4% of GDP and keeps the economy going: each real granted puts 1,78 back into circulation, according to the foundation.
Guedes has promised a quick, V-shaped recovery. “We will surprise the world”, he said a few days ago. For now, the market trusts him, but last year, in the first year of government, there was no economic shock: with a favorable scenario, GDP grew by just 1,1%. Now, the coronavirus has also shuffled the cards.
