Government announces measures to inject $20 billion into the economy

In an attempt to boost production and revive growth, Brazil's government announced new credit stimulus measures Thursday (Jan. 28) that will inject $20 billion into the economy. The most impactful of these measures is streamlining the process for issuing infrastructure debentures and obtaining resources from the Investment Fund of the Guarantee Fund for Length of Service (FGTS) for use in infrastructure projects. The move, which is expected to unlock up to $5.4 billion, is pending congressional approval.

Private sector workers will now be allowed to use a portion of their unfair dismissal severance penalty paid by employers into their FGTS as collateral for taking paycheck-deducted loans. The government expects the measure to provide $4.1 billion worth of credit.

A credit line will be opened to refinance the Investment Support Program (PSI) and the Machinery and Equipment Financing Program (FINAME), which should result in total loans of $3.67 billion.

The government has also announced that it is boosting credit offerings from state-owned banks at lower rates than those found in the market. This should benefit primarily micro- and small businesses, the construction industry, exporters, and agribusiness.

Reopening Banco do Brasil's agricultural credit program will add a further $2.45 billion. Funds from the National Development Bank (BNDES) will be allocated to Real Estate Receivables Certificates (CRIs), giving the housing credit market a $2.45 billion boost.

The BNDES credit line to finance business working capital at lower interest rates will put up a $1.22 billion offering. Pre-shipment export funding will offer longer maturity periods and lower interest rates, providing an additional $980 million worth of credit.

According to Finance Minister Nelson Barbosa, the government will not incur costs with these measures, because the credit programs will be provided at market rates, and the government is merely streamlining procedures and reducing risks, which helps reduce market interest rates as well. “When it comes to credit, most of these initiatives are on a management level and will not result in costs to taxpayers,” he said.

*With additional reporting by Paulo Victor Chagas and Sabrina Craide.

Translated by Mayra Borges