(Bloomberg) -- Senators are likely to consider a new round of financial help for vulnerable Brazilians as soon as a new head of the upper house is elected in February, with one of the candidates for the job defending an urgent discussion about the theme and another saying she wouldn’t oppose the idea either.
Senator Rodrigo Pacheco, the front-runner in the race, on Wednesday said that if elected he would immediately start a discussion about what to do with this “part of the population living in extreme poverty, whose situation was aggravated by the pandemic.”
He mentioned the possibility of extending emergency cash handouts that expired in December, or boosting the current cash transfer program known as Bolsa Familia.
“Some economic premises will need to be sacrificed in order to maintain some sort of assistance to these people,” Pacheco, who’s supported by President Jair Bolsonaro, said in an interview at his cabinet. “we’re going through an exceptional moment with people unemployed and dying.”
Brazil posted a record primary budget deficit of 11.5% of gross domestic product last year as the government deployed massive stimulus measures to support the economy during the pandemic. Most of the funds were consumed by a program of monthly stipends to informal workers who lost their income during the crisis.
Read More: Brazil Economic Team Sees Growing Need for Extra Covid Stimulus
The program was so large for Brazilian standards that poverty indicators briefly fell to all-time lows while Bolsonaro’s popularity temporarily soared to a record. Investors worried about Brazil’s ability to foot the bill have started the refuse buying long-rated government bonds, leading Economy Minister Paulo Guedes to promise to reimpose budget austerity this year.
On the Fence
Pacheco’s main competitor in the race, Senator Simone Tebet, said that an eventual extension of the financial aid would depend on how fast Brazil will be able to vaccinate its population against the coronavirus.
“I’m not for nor against” a new round of financial help, she said in a separate interview. “The government is committed to fiscal responsibility but if President Jair Bolsonaro believes that more aid needs to be discussed, it’s up to him to set the tone,” she said, adding that any additional assistance this year must be more modest and for a shorter period of time.
Pacheco and Tebet both said they are committed to approving a long-delayed tax reform in 2021, preferably in the first half of the year. They also rejected calls to impeach Bolsonaro for allegations he mishandled the response to the coronavirus crisis. Brazil is one of the hardest-hit countries by the pandemic, with more than 8.5 million cases and 211,000 deaths.
“Impeachment is something that should be used in extreme cases,” Pacheco said.
Spending Cap
But they expressed slightly different ideas about the future of a spending cap rule that investors consider as one of the last line of defenses against a full-blown fiscal crisis. While Tebet said the rule is a “big achievement” and that any review must be done with great caution, Pacheco would seek to find a negotiated solution with the economy ministry to ensure Brazilians are assisted during the pandemic.
Pacheco also has the support of Davi Alcolumbre, the ougoing senate president, as well as the simpathy of some opposition parties. Tebet is running with the backing of the Brazilian Democratic Movement, the largest party in the senate.