Economy

Delay and timidity of federal government measures worsen prospects for entrepreneurs

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At the same time that President Jair Bolsonaro defends the end of social isolation to “prevent the economy from crashing”, the federal government he commands does not carry out practical measures to facilitate the resumption of economic activities. Few new resources, delay and bureaucracy for the money to actually reach the pocket of Brazilians are some of the reasons for the climate of uncertainty to prevail.

NO NEW MONEY
The Minister of Economy and Planning, Paulo Guedes, announced on March 16 a financial aid package of R $ 147.3 billion. However, part of this amount is not from new resources, but advance payments that would be made in any way during the year: R $ 46 billion of the 13th salary of INSS retirees and pensioners (paid in April and May), R $ 12.8 billion from the salary allowance and R $ 5 billion from the Income Generation Program of the Workers’ Support Fund (FAT).

Another part refers not to the transfer of funds, but to exemptions: R $ 30 billion from employers’ contributions to the FGTS and R $ 22.2 from the federal portion of Simples Nacional – and this is not an exemption, but a suspension. In summary, a measure that will only prevent the entrepreneur from having another debt, as the drop in revenue is being brutal.

LITTLE NEW MONEY
From new resources, an increase of R $ 3 billion in the Bolsa Família program, R $ 4.5 billion in direct investments to combat the pandemic (transfer to states and municipalities, purchase of inputs and equipment) and R $ 5 , 5 billion for emergency aid of R $ 600 reais for self-employed workers and Brazilians in situations of social vulnerability.

DELAY
Between the federal government publicizing the measure and the Brazilian feeling its practical result, weeks passed. The aid of R $ 600 reais, announced on March 16, only started to be paid on April 17. In fact, the government’s initial proposal was a benefit of R $ 200, but the amount was increased by the National Congress.

The National Program to Support Micro and Small Enterprises (Pronampe) was only sanctioned on Tuesday (19). But it is not known exactly when the resources of this credit line will actually be transferred to the entrepreneurs.

BUROCRACIA
Many Brazilians had difficulty obtaining R $ 600 emergency aid, for a number of reasons – from the difficulty of registering, through authorization to receive money, to the endless lines to withdraw money.

Microentrepreneurs, small and medium-sized entrepreneurs are also struggling to gain access to BNDES credit lines. Of the R $ 5 billion available for working capital, just over half R $ 2.75 billion was actually contracted and of the R $ 40 billion for payroll, only R $ 1.78 was released. The main reason for the bailout not being released is what the bank calls “documentation problems”, that is, the entrepreneur is unable to meet the requirements of the financial agent, whether it is a restriction on existing credit, an inability to provide guarantees or a lack of certificates (tax, labor, FGTS, etc.).

In relation to payroll loans, the entrepreneur’s concern is the requirement to guarantee the employee’s job – how can he do this if he doesn’t know if he will be able to keep the doors of his business open?

How countries reacted to the crisis

Germany approved on March 23 a financial aid package of 1.1 trillion euros (32% of GDP) for workers and companies. Among the measures, transfer of up to 15 thousand euros to self-employed and small companies, and the guarantee of loans with financial institutions.

The United States Senate on March 25 approved a plan to inject $ 2 trillion into the economy (10% of GDP), which included paying $ 1,200 per family, with an additional $ 500 per family. son, up to a limit of $ 3,000. People received checks in the mail. The American government also distributed $ 300 billion in subsidized interest loans to small businesses.

On March 19, the Argentine government decreed a 60-day dismissal ban and, on the other hand, a 95% reduction in employers’ labor obligations. In addition, it has expanded the food aid plan and will pay half the workers’ wages. It also banned, for six months, cuts in electricity, water, gas, landline or mobile and internet for non-payment, for retirees, unemployed and small entrepreneurs.

On March 20, Uruguay initiated a plan that provides for low-interest loans for small and medium-sized companies, postponement of taxes and social contributions and the cost of 25% of workers’ wages.

Question of values
But if before the pandemic Brazil did not have the money to pay its expenses (the famous “fiscal deficit”, which last year was R $ 95 billion), how did you manage now? He didn’t fix it, but he needs to make this money show up – these are the macroeconomic measures. It would be the same dilemma as a family man: does he take out a loan to buy the expensive medicine or let his son die?

That is what other countries have done, such as Germany, whose government is going to borrow money, raising its public debt from 60% of GDP to about 80%. But can a country owe so much? He can. Japan, for example, has an estimated public debt of 230% of GDP. What really matters is what interest rates these loans are set at, and it depends on the country’s credibility to honor its commitments. But there is another story …