A proposal by Brazil's far-right President Jair Bolsonaro to dramatically increase welfare payments to the country's underprivileged groups a year ahead of elections shook markets Thursday and triggered resignations at the Economy Ministry.
The programme could cost the government an extra 30 billion reais (US$5.3 billion dollars) at a time when inflation is already high and exceed the government spending ceiling established by law.
Bolsonaro's government announced earlier this week that it was setting up a new social welfare programme to replace the 'Bolsa Familia' system created by the leftist administration of former president Luiz Inácio Lula da Silva.
The new scheme will start in November with a 20 percent increase in benefits paid to nearly 17 million Brazilians in need.
Coming just a year before a presidential election in which Bolsonaro is widely expected to be defeated by Lula, the move was seen by several analysts as a pre-election sweetener.
The measure rattled investors. The São Paulo stock market fell 2.75 percent, while the price of the US dollar rose to 5.65 reais, its highest level in six months.
Concerned by the plan, several economic officials quit their posts, including top Treasury officials Bruno Funchal and Jeferson Bittencourt, authorities said.
Bolsonaro denied that his project, whose source of funding has not been specified, is against the law.
"There are around 16 million people registered with the 'Bolsa familia', and though the financial aid reaches an average of 192 reais, many people receive 40, 50, 60 reais. What we are saying is: 400 reais for all," he said Thursday.
Bolsonaro also offered to "help" 750,000 truckers with compensation for increases in the price of diesel.
The president made the announcements at a time when his popularity is at its lowest level since he took office in 2019, and amid high inflation and high unemployment.
Guedes to stay
Brazil Economy Minister Paulo Guedes has decided to stay in the job even after losing four key members of this team over disagreements about the government’s spending plans, according to a person familiar with the situation.
Guedes held a meeting with the remainder of his team late on Thursday after the mass resignations. The minister said he would stay because he believes his departure would further deteriorate the situation, the person said, asking not to be identified to discuss internal government matters.