Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your experience. Save up to 40% More details

Brazil nixes welfare expansion announcement amid currency sell-off

EconomyOct 19, 2021 06:11PM ET
Saved. See Saved Items.
This article has already been saved in your Saved Items
© Reuters. A view shows the Central Bank headquarters building in Brasilia, Brazil October 4, 2021. REUTERS/Adriano Machado/Files

By Marcela Ayres and Jose de Castro

BRASILIA (Reuters) -Brazil's government canceled an announcement for a generous new welfare program on Thursday, after a central bank currency intervention failed to calm market concerns about looser government spending ahead of next year's election.

President Jair Bolsonaro, who has seen his poll numbers fall over his mishandling of the pandemic, a weak economy and rising inflation, summoned ministers for a 5 p.m. announcement of the new welfare program, according to a document seen by Reuters.

But just minutes before the official release of the expanded welfare plan, which had spooked investors and deepened real losses against the dollar, the event was suspended, a spokesperson for the citizenship ministry said.

The news of the expanded welfare plan came on the same day as a central bank intervention to prop up the real. The bank sold $500 million in a spot auction after a week of expanding currency swap sales that have failed to support the currency.

Despite the intervention, the benchmark Bovespa stock index ended the day down over 3%, while the real slid around 1.4%.

According to a source with knowledge of the situation, the event was canceled as the government was unable to settle on the final text. No further date for the event has been given.

A second source, speaking on condition of anonymity, said earlier on Tuesday that the government planned to expand the 'Bolsa Familia' stipend, which now costs 34.7 billion reais ($6.21 billion) annually. Under the proposal, the government would add some 50 billion reais in new temporary funding, renaming the program 'Auxilio Brasil.'

The new policy, which would pay some 400 reais per month to 17 million families, represents a defeat for Economy Minister Paulo Guedes, who had drawn the line at 300 reais and tried to keep the program within the spending cap, the source said.

Newspaper O Estado de S.Paulo reported that some 30 billion reais would be counted outside the spending cap. An O Globo columnist reported that 50 billion reais would be exempted.

It remains to be seen if the government will now modify its plans for the scheme. The Economy Ministry did not respond to a request for comment.


Investors in the real have been spooked by political risks, a fragile economic recovery and the prospect for rising interest rates in more wealthy economies.

Those concerns came into clearer focus on Tuesday, with growing rate-hike bets in markets such as Britain, where a cumulative rise of 35 basis points has been priced in by the end of the year.

Brazil's central bank has already raised interest rates by 4.25 percentage points this year to fight double-digit inflation and signaled 100-basis-point hikes at upcoming meetings, while stressing the need for continued fiscal discipline.

Rattled by the outlook for looser spending, interest rate futures surged as much as 50 basis points for 2024 and onward, while pricing in a more aggressive 1.25-percentage-point hike at the next policy meeting this month.

The government is facing growing political pressure to spend more, as an economic recovery sputters, with unemployment stuck near 14% and poverty soaring.

In an interview published late on Monday by news magazine Veja, Arthur Lira, the speaker of the lower house of Congress, defended new social spending outside the spending cap limit.

Lira told Veja that the COVID-19 pandemic's terrible impact in Brazil, home to the world's second-highest coronavirus death toll after the United States, meant that fiscal responsibility could not be prioritized over the urgent needs of the most vulnerable.

($1 = 5.5841 reais)

Brazil nixes welfare expansion announcement amid currency sell-off

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with other users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind:  

  •            Enrich the conversation, don’t trash it.

  •           Stay focused and on track. Only post material that’s relevant to the topic being discussed. 

  •           Be respectful. Even negative opinions can be framed positively and diplomatically. Avoid profanity, slander or personal attacks directed at an author or another user. Racism, sexism and other forms of discrimination will not be tolerated.

  • Use standard writing style. Include punctuation and upper and lower cases. Comments that are written in all caps and contain excessive use of symbols will be removed.
  • NOTE: Spam and/or promotional messages and comments containing links will be removed. Phone numbers, email addresses, links to personal or business websites, Skype/Telegram/WhatsApp etc. addresses (including links to groups) will also be removed; self-promotional material or business-related solicitations or PR (ie, contact me for signals/advice etc.), and/or any other comment that contains personal contact specifcs or advertising will be removed as well. In addition, any of the above-mentioned violations may result in suspension of your account.
  • Doxxing. We do not allow any sharing of private or personal contact or other information about any individual or organization. This will result in immediate suspension of the commentor and his or her account.
  • Don’t monopolize the conversation. We appreciate passion and conviction, but we also strongly believe in giving everyone a chance to air their point of view. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at’s discretion.

Write your thoughts here
Are you sure you want to delete this chart?
Post also to:
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Are you sure you want to delete this chart?
Replace the attached chart with a new chart ?
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
Sign up with Email