Corona aid money could become basic income

Corona aid money could become basic income

Jair Bolsonaro with journalists © Thomas Milz (KNA)

Right-wing populist President Jair Messias Bolsonaro plans a generous social program for Brazil's poor. This could secure his re-election – and ruin state finances at the same time.

Universal basic income already exists in Brazil, at least according to Verfang. So far, however, there has been no accompanying law to make the benefits a reality. President Jair Messias Bolsonaro, of all people, who started out with neoliberal ideas, could now introduce a basic income via the detour of Corona aid. Millions of Brazilians, previously invisible to the state, could benefit.

There have been two surprising pieces of news recently. On the one hand, Bolsonaro's tarnished popularity recovered, especially among the poorest part of the population. In addition, Brazil suddenly recorded 13 million fewer poor people in July – a historic record, according to the think tank Fundacao Getulio Vargas (FGV). Behind both messages are the Corona relief funds, which are currently paid to 65 million Brazilians – about 40 percent of all adults.

Bolsonaro wants to maintain aid for the poor

"This is an artificial income that has surprisingly reduced poverty," explains economist Marcelo Neri, responsible for the FGV study, in an interview with the Catholic News Agency (KNA). "Actually, we would have expected that this would only prevent an increase in poverty." Without the Corona aid, the pandemic would have torn a 15 to 30 percent hole in the average income of a Brazilian worker. But thanks to the aid, income was 29 percent higher in June and as much as 34 percent higher in July than before, according to FGV.

Bolsonaro wants to keep this to guarantee his re-election at the end of 2022. For this, he throws his promises of a neoliberal revolution overboard. And neoliberal banker Paulo Guedes, his hitherto seemingly all-powerful finance and economy minister, perhaps right along with him. For in the face of empty coffers, Guedes slows down and preaches a leaner state.

"Renda Brasil" instead of "Bolsa Familia."

At the beginning of the pandemic, Guedes only wanted monthly aid of the equivalent of 30 euros per person. But Bolsonaro pushed through 90 euros. And instead of the original three monthly installments, he now wants an extension until the end of the year or even until 2021. Since maintaining the 90-euro rate would gobble up 6.4 percent of gross domestic product (GDP), the amount will likely be cut to a more "reasonable" 45 euros starting in September.

In the long term, Bolsonaro wants to transform the aid into a new social program to replace the current "Bolsa Familia" (family stipend) of his leftist predecessor Lula da Silva (2003-2010). "Bolsa Familia," which benefits some 40 million Brazilians, costs the state 0.5 percent of GDP. Bolsonaro's "Renda Brasil" (Brazil Income) with higher amounts and millions more families would likely be twice as expensive. Bolsonaro has understood that "more state" cements his power.

Economy sees aid as positive

Even the business community, which was originally thrilled by Guedes' neoliberal shock, sees the state's spending spree as a positive thing. In poor areas, more money is currently in circulation than ever before thanks to Corona aid; consumption is rising. In some sub-states of the poor north and northeast, FGV found income increases of up to 120 percent.

Even cut amounts are likely to have a lasting positive effect, according to economist Neri. This is because the money pumped into the economy has already kick-started economic cycles. But how is "Renda Brasil" supposed to fit into the struggling budget, which is also capped by a spending brake? "A new program would have to be financed by cuts elsewhere – in other words, a redistribution from one pocket to the other."

"There's a big danger lurking there"

With local elections in November, Congress, along with Bolsonaro, is eyeing the votes of the poor; risk of unfunded promises looms large. The expansion of social benefits, possibly even in the direction of a universal basic income, would be financially irresponsible. "There is a great danger lurking there," said Neri.

On the other hand, the economic situation makes an expanded transfer program necessary. Because during the pandemic, for the first time ever, it was measured that more than half of the population was not in employment, either formal or informal, Neri said. "And this value continues to rise, as an effect of the pandemic." Without the aid, poverty would reach fatal heights.

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