Brazil can turn on spending taps 'quickly' to tackle crisis if need be

BRASILIA: Brazil's government will open the spending taps "quickly" to tackle the second wave of the COVID-19 pandemic if congress demands it, but with an eye on longer-term fiscal stability, Economy Minister Paulo Guedes said on Thursday.

Guedes was speaking after meeting newly-elected Senate leader Rodrigo Pacheco, who has said one of his priorities is reviving some form of emergency aid for millions of Brazil's most vulnerable people that expired on Dec. 31.

"With the pandemic attacking us again ... now we have the protocol. If Congress triggers a state of emergency or public calamity, with all the experience we have had, we are in a position to react quickly to the crisis," Guedes said.

Brazil's fiscal response to the pandemic last year was one of the most generous of any emerging country in the world, worth more than 8% of gross domestic product. More than half of that, around 322 billion reais ($59 billion), was in direct cash transfers to millions of poor families.

They were approved under a "State of Calamity" emergency budget and were not subject to usual budget rules, which meant the government's spending cap was not broken. Guedes insists the cap is the government's fiscal "super anchor" and must not be breached.

Guedes said on Thursday that any action should be taken "within a framework of recovery for the public finances ... robust enough to face any imbalances."

Brazil's deficit and debt ballooned to record highs last year, and Guedes has insisted the country cannot afford any more fiscal largesse. But with millions of people in financial difficulty, unemployment high and the economy slowing, the pressure for more support is building.