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https://www.bloomberg.com/news/articles/2020-09-02/brazil-hands-out-so-much-covid-cash-that-poverty-nears-a-new-
low?s=03

Brazil Hands Out So Much Covid

Cash That Poverty Nears a Low
September 2, 2020

66 million of the neediest Brazilians got $110 in monthly aid

How long can the government afford to keep up the stipends?
Brazil, which has suffered one of the world’s worst pandemic tolls, has responded to the crisis by
distributing so much cash directly to citizens that poverty and inequality are approaching
national historic lows.

Some 66 million people, 30% of the population, have been getting 600 reais ($110) a month,
making it the most ambitious social program ever undertaken in Brazil, a shocking shift under
President Jair Bolsonaro who railed against welfare, dismissed the virus -- and now finds himself
newly popular.
The government hasn’t published its own figures yet but data from the Getulio Vargas Foundation,
one of Brazil’s top universities, show that those living on less than $1.9 a day fell to 3.3% in June
from 8% last year, and those below the poverty line were at 21.7% compared with 25.6%.
Both represent 16-year lows.

Economist Daniel Duque, the main investigator, said poverty has, in fact, hit the lowest rate since
data collection began 40 years ago but a shift in definitions in 2004 makes direct comparison before
then slightly complicated.

He added that unpublished measurements from July and August show that inequality calculated by
the so-called Gini coefficient fell below 0.5 for the first time ever.

In other words, as Covid-19 has killed some 122,000 Brazilians, it has paradoxically driven down
poverty and inequality, at least in the short term, and also placed government welfare at the heart
of political debate, like a decade ago with the “Bolsa Familia” program that lifted millions.

The issue will reverberate in November’s local elections, a dry run for the presidency in 2022.

Duque says it’s as if Brazil had suddenly created a massive basic-income program.

He believes it won’t be possible to end it soon: “The population will surely demand more types
of programs like this, and we can’t run the risk of a massive drop-off.”

In fact, the government has begun paring it back.

On Tuesday, Bolsonaro announced that handouts would be halved for the remainder of the year.

And while he promised to make some form of stipend permanent he hasn’t indicated how he will
pay for it.

On Wednesday, the president of Brazil’s Central Bank, Roberto Campos Neto, said the emergency
subsidies have been effective but need to end rather than turn into a new policy.

“We had a detour,” he told Bloomberg’s Erik Schatzker at the Emerging & Frontier Forum 2020.

“We were one of the emerging market countries that spent the most money. We thought that was
important and it was very efficient. But we need to Go Back to the original plan.”

He added, “In the last few days, the market has been punishing Brazil very badly. The community
understands that we need to go back to the plan, we need to spend in a responsible way.”

Economists agree that the approach is unsustainable.

Brazil is headed to its largest primary deficit ever of over 11% of GDP this year, and
“the challenge is, how do you unwind from this?” says Christopher Garman,
managing director for the Americas at Eurasia Group. “There is no free lunch.”

Markets agree. Last week, investors engaged in a massive selloff of Brazilian assets after Bolsonaro
suggested he might be willing to exceed constitutional spending caps to finance permanent
stipends.

The real slid more than 2.2% to 5.6320 per dollar, while Brazilian stocks fell 2.7%, the most in
emerging markets. Both are still recovering.

This is due to the astronomical price of the program, known commonly as the “coronavoucher,”
50 billion reais ($9.3 billion) a month through August.

It cost in five months what Bolsa Familia -- created by former President Luiz Inacio Da Silva, or Lula
-- spent in eight years. That plan gives out $35 per month, reaching some 14 million families this
year.

The coronavoucher, which accounts for nearly half of Bolsonaro’s recovery package, has driven up
his popularity, especially with the poor.

Jose Carlos Alves, 56, who sells souvenirs on the outskirts of Brazil’s capital, Brasilia, says the $110
each month have shifted his politics as he faces more months without tourists or sales.

Once loyal to Lula’s long-ruling Workers’ Party, he says the aid “shows Bolsonaro cares and now
has my vote in 2022.”

Monica de Bolle, a senior fellow at the Peterson Institute for International Economics, who advised
lawmakers on the legislation for emergency aid, said this is a wider phenomenon:
“Bolsonaro has realized the obvious: Brazil is a poor country with lots of poor people and if you
give them cash transfers you’ll get their votes.”

Before the pandemic, Brazil had two years of recession followed by a very slow recovery,
increasing poverty. More than a third of the country is on some kind of social benefit.

Bolsonaro, 65, a self-described right-winger who accused past administrations of running a

“proletariat dictatorship,” saw his approval rating rise to 37% in a recent poll by Datafolha from
32% in June. Among Brazil’s lowest earners, it rose to 35% from 22%.

The government stimulus, which represents about 7% of GDP, is widely credited with saving
Brazil from a grimmer outcome, although the economy is expected to contract more than 5% this
year -- Less disastrous than Mexico and Argentina which could contract by some 10% each.
Even as the virus is spreading hunger from the U.S. to the Saharan Desert, many governments face
the same challenge: how to pare back pandemic emergency spending without choking off fragile
economic recoveries.

The U.S. also responded to the virus with the most generous social benefits in its history, including a
$600-a-week top-up for unemployment payments, that increased average incomes.

That program expired in July and lawmakers are still arguing over an extension, even as
economists warn that it’s too early to withdraw budget support.

In Europe, France, Germany, Italy and others are considering extending payroll aid for those out of
work while the U.K. is planning to phase it out in October.

The coronavoucher in Brazil has raised questions of how best to deal with grinding economic
vulnerability, whether Bolsonaro is exploiting cash stipends to stay in office -- and whether
opposing the handouts to defeat him is acceptable.

“People have a right to be concerned about Bolsonaro’s populist inclinations and his ability to blow
things up if he wants to,” De Bolle said.

“They are not right to be calling for fiscal adjustment now.

Brazil has an epidemic that’s completely out of control with a lot of people that, had they not
received an emergency basic income program, would have probably died.

Brazil’s Central Bank Says Nation Might Be Ready for a Digital Currency by 2022
Sep 3, 2020
Banco Central President Roberto Campos Neto says Brazil will have "all the ingredients" for a digital currency by
2022.

Brazil’s chief central banker Roberto Campos Neto said Wednesday that his country could be ready for a digital
currency (CBDC) by 2022.
By that time, the Banco Central president said, Brazil will have an interoperable instant payments system and a
"credible" and "convertible" international currency - "all the ingredients to have a digital currency," he said at a
Bloomberg event covered by local outlet Correio Brazilienese.

Campos Neto also was reported to have said that CBDCs are the consequence of fast-digitizing financial systems such
as Brazil's.

Banco Central is rolling out its PIX instant payments system in November and launching an Open Banking initiative
later this year.

The comments place some context around Banco Central's late August move to create a working group to begin
studying CBDC issuance. That group's final report should be ready within six months to a year, he said Wednesday.

https://www.coindesk.com/brazil-digital-currency-by-2022
https://www.correiobraziliense.com.br/economia/2020/09/4872772-banco-central-ve-espaco-para-
moeda-digital-no-brasil-em-2022.html

Central Bank sees space for digital currency in Brazil in 2022

For Campos Neto, the instant payment system, open banking and the modernization of the exchange
rate may pave the way for the next two years
posted on 02/09/2020

Brazil may have the necessary conditions to issue a digital currency in 2022.

The assessment is by the president of the Central Bank (BC), Roberto Campos Neto, who has said that
the digital currency will be the future of the financial system.

"To have a digital currency, you need an instant payment system that is efficient and interoperable;
an open system, where you can create competition; and a currency that has credibility, is
convertible and international. After that, I think you have all the ingredients to have a digital
currency.

We think we will have this in 2022", evaluated Roberto Campos Neto, in an event promoted by
Bloomberg this Wednesday (09/02).

The president of the Central Bank stressed that the issue of digital currency is not the cause, but the
consequence of this process of digitization and modernization of the financial system.

And he recalled that this process has already started in Brazil, through the BC's innovation agenda, the
BC Agenda, which, by the way, has not stopped and had no event postponed due to the crisis of the
new coronavirus.

Campos Neto recalled that the BC will launch in November Brazil's instant payment system, the PIX.

Open Banking is also starting to be implemented this year with the aim of increasing competition in
the national financial system and, according to the minister, it will be broader than that of other
countries.

In addition, Campos Neto has been talking with parliamentarians about the bill that the BC presented
in 2019 to modernize the Brazilian exchange rate system.
The project is expected to be voted on in the next two weeks, according to the minister.

And that is why he believes that the conditions for issuing digital currency will be established in
Brazil as early as 2022.

With an eye on this process, the BC has even created a working group to assess the impacts of the
eventual issuance of digital currency in Brazil.
The group was created exactly two weeks ago, "in order to foresee the future of financial relations",
and is expected to present conclusions on the matter within six months to a year.

In the creation of the working group, the BC recalled that the issuance of digital currency by central
banks (CBDC in the acronym in English, central bank digital currency - CBDC) has been "object of
worldwide study" and "may be a possibility to improve the current model of commercial transactions
between people and even between countries".

The monetary authority also explained that "a CBDC distinguishes itself from cryptocurrencies
without national trust (guarantee), like bitcoins, because it is just a new form of representation of
the currency already issued by the national monetary authority, that is, it is part of monetary policy of
the issuing country ".

A CBDC is, therefore, the same currency that is already circulating in the country, only issued in a
digital form. That is, a kind of "digital real".