Brazil drafts aid package for states and cities

Brazil drafts aid package for states and cities

Economy & Policy Corporate & Sovereign Strategy Structured Finance Regulation Politics Coronavirus Brazil Latin America

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Brazil's Chamber of Deputies approved late on Monday a BRL80 billion ($15.5 billion) financial aid package for city and state governments to make up for lost tax revenues during the coronavirus pandemic.

The lower house passed the bill by 431 votes to 70 and sent it to the Senate, where it could receive stiff opposition from parties aligned with the administration of President Jair Bolsonaro.

Major Vítor Hugo, a Bolsonaro ally in the lower house, opposed the bill, saying it would benefit states and cities that did not control spending during a crisis, according to the local financial newspaper Valor Econômico.

According to the bill that passed the lower house, state and city governments can receive the funds from May to October this year, when tax revenues are expected to fall by 30%.

In addition, the bill suspends loans payments by state and city governments to the national development bank BNDES and the federal savings bank Caixa Econômica Federal. It also prevents the federal government executing guarantees held by Banco do Brasil until the end of the year.

Earlier this month, BNDES announced a BRL40 billion credit line to help up to 1.4 million small businesses pay their employees, while the Central Bank said it could purchase up to BRL1 trillion of private sector assets to boost liquidity and increase availability of credit to companies impacted by COVID-19.