June 18 2021
1. President promises to increase Bolsa Família payments to R$ 300 in December
President Jair Bolsonaro promised to increase the monthly family subsidy – Bolsa Família – from an average of R$ 190 to an average of R$ 300 (USD $37 to $59). According to Bolsonaro, the new amount will be paid beginning December. The increase has been seen as a political maneuver to gain more support for the elections next year. The president did not present studies on how this measure will impact the federal budget and said that the inflation on basic items motivated his decision and that the cost is calculated. “It is a burden to the country, but we know that the people are facing difficulties. So, our economy team has made the final decision on this new Bolsa Família amount,” stated the president.
The federal government also decided that it will extend the payment of the emergency aid for people with low incomes and people in vulnerable situations due to the pandemic. Another benefit planned by the Ministry of Citizenship will offer up to R$ 250 (USD $49) monthly for children and teenagers of families who are included in Bolsa Família and who lost a family member due to COVID-19. The amount will be paid until they are 18 years old. The government plans to use R$ 196.2 million (USD $38.6 million) in 2022 to help 68,000 young people across 35,000 families.
2. Average per capita monthly income is the lowest since 2012 and inequality increases in the country
The average per capita monthly income of Brazilians fell below R$ 1,000 for the first time in ten years, according to research published this week by Fundação Getulio Vargas (FGV). Simultaneously, the pandemic spurred an increase in the gap between the rich and the poor in Brazil, according to the Gini Index. In the first quarter of the year, the index stood at 0.674. In the same period of the previous year, it was at 0.642. The closer the index is to 1, the larger the inequality. Even before the pandemic, there was an increase in inequality due to the 2015 and 2016 recession in the job market, but it is now worse.
In the first quarter of 2020, the average per capita monthly income of Brazilians was R$ 1,122 (USD $221). This year, it fell 11.3% to R$ 995 (USD $196). According to economist Marcelo Neri from FGV Social, although the pandemic affected some groups in the job market, it was the poorest who were hit the hardest. “The situation has now worsened. The pandemic came at a fragile time for labor. The result is worse than what we saw during the lost decade. We have lost ground,” he said.
Folha de S.Paulo: Desigualdade cresce no Brasil
3. Bolsonaro now asks to move COVID-19 vaccine delivery forward
After a series of setbacks and refusals since 2020, President Jair Bolsonaro officially requested the delivery of vaccines by Pfizer to be moved forward. Alongside ministers, Bolsonaro participated in a virtual meeting with representatives from the company and requested that the largest possible number of doses be delivered ahead of schedule by July. The government currently has two contracts that ensure 200 million doses will be delivered, but the deadline is December.
The immunization campaign is showing signs of speeding up. Yesterday, for the first time since the pandemic began, Brazil vaccinated 2 million people in one single day and 27 state capitals are now vaccinating people who are not part of high-risk groups. So far, nearly 60 million people have received one dose of the vaccine, representing 28.5% of Brazilians. Almost 24 million – 11.3% of Brazilians – have been totally vaccinated with both doses. Despite this, after over two months of stability, the country is once again seeing an increase in the number of deaths, with an average of 2005 deaths each day. Over 496,000 people have died in Brazil and 17.7 million have been diagnosed with the virus.
4. With third consecutive increase, basic interest rate hits 4.25% a year
The basic interest rate increased for the third consecutive time and went from 3.5% to 4.25% annually – a 0.75% increase. The Monetary Policy Committee (COPOM) released a statement saying that “the basic situation indicates that it is appropriate to maintain the interest rate at a neutral level.” According to the Committee, at their next meeting – which is scheduled for August 3rd to 4th – another increase of around the same amount is planned. However, a greater increase has not been ruled out if the inflation projection worsens. This caught the attention of market agents.
Experts say that successive increases reveal that the Committee is worried about inflation and believe that further increases will happen by the end of the year. According to research conducted by the Central Bank with financial institutions, the basic interest rate could reach 6.25% by December. However, some agents are reevaluating the situation and believe the rate could hit 7.5% this year. In COPOM’s statement, they say that inflation pressure is higher than expected and the risk of an energy crisis contributes to high inflation expectations in the short term.
5. Water crisis increases electricity costs and affects the industrial sector
Electricity prices, which vary according to the country’s capacity for generating energy, will increase by at least 20%. According to Electricity Regulatory Agency director André Pepitone, the new prices will be determined at the end of June. The main water reservoirs in hydroelectric plants are being affected by the most severe drought of the last 100 years. According to the federal government, it will be necessary to increase the use of thermoelectric plants to meet the country’s needs. This could result in an additional cost of R$ 9 billion (USD $1.78 billion) by November. The National Electric System Operator is waiting for the government’s approval to keep thermoelectric plants operating even during the rainy season – from November to April – to try to avoid rationing measures in 2022.
This week, energy-intensive industries have presented a plan to voluntarily decrease their energy consumption and move their production outside of peak times to reduce the risk of blackouts. Members of the government believe rationing won’t be necessary this year, but a preventive measure that plans for changes in the energy sector is currently being developed. The measure plans to create a group that will have the power to change the flow rate of hydroelectric plants without the approval of states and cities. Meteorologists believe that rainfall in the areas of major reservoirs won’t increase until the end of the year.
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