Brazil Sees $1.5 Billion Fiscal Impact From Post-Flood Measures

May 10, 2024 by

Brazil’s aid measures after historic floods battering Rio Grande do Sul state will result in a fiscal impact of 7.7 billion reais ($1.49 billion) for the federal government, Finance Minister Fernando Haddad said on Wednesday.

Most of the impact will come from the injection of 5.5 billion reais into a guarantee fund that backs the National Program to Support Microenterprises and Small Businesses (Pronampe).

Brazil Floods Deaths Reaches107

PORTO ALEGRE, Brazil, May 9 (Reuters) – The death toll from severe flooding in southern Brazil has risen to 107, civil defense said on Thursday, as rescue operations continued and authorities began to see the cost of recovering from the devastation in the state of Rio Grande do Sul.

In a dramatic symbol of the disaster, rescuers saved a horse that had been trapped precariously for two days on a rooftop in a badly flooded town.

More rains are forecast in the coming days, raising fears that water levels will rise further in the inundated state capital of Porto Alegre and nearby town where streets have turned into rivers. At least 136 people are still missing and more than 165,000 have been displaced from flooded homes and rescued by boats and helicopters.

Television images showed the horse straddling the roof of a farmhouse on the outskirts of Canoas, a town north of Porto Alegre. The animal was secured by firemen and loaded into a Zodiac inflatable boat to take it to safety.

The floods have destroyed infrastructure and bridges, blocking access to Porto Alegre, where supermarket shelves are empty and looting has been reported at night. Governor Eduardo Leite said initial calculations indicate that Rio Grande do Sul will need at least 19 billion reais ($3.68 billion) to rebuild from the damage, which has extended into farm areas around the capital.

“The effect of the floods and the extent of the tragedy are devastating,” he said on social media.

In Brasilia, the federal government estimated the fiscal impact of the flooding at 7.7 billion reais ($1.49 billion), mostly due to the injection of funds into a support program for small businesses hit by the floods.

“This doesn’t end here,” President Luiz Inacio Lula da Silva said at an event announcing steps to help the stricken state. Lula said the full extent of Rio Grande do Sul’s needs would be known only when the water recedes.

($1 = 5.1588 reais)

(Reporting by Amanda Perobelli and Leonardo Benansato in Porto Alegre, Andre Romani in Sao Paulo and Marcela Ayres in Brasilia; writing by Anthony Boadle.Editing by Marguerita Choy)

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Torrential rains and subsequent floods in Brazil’s southernmost state have caused unprecedented devastation in recent days, killing 107 people and displacing more than 165,000.

“This doesn’t end here,” President Luiz Inacio Lula da Silva emphasized at the same event, adding that the full extent of Rio Grande do Sul’s needs would be grasped when the water recedes.

Haddad said that 4.5 billion reais would be allocated for guarantee concessions, aiming to leverage these resources to offer credit of up to 30 billion reais to businesses of this size.

Additionally, 1 billion reais are set to be directed towards interest subsidies within Pronampe, with the minister emphasizing that reconstruction efforts would require zero interest charges in some cases.

A proposal approved by Congress paved the way for the expenditures related to the disaster not to be included in the calculation of the government’s official goal of eliminating its primary deficit this year.

However, as the measures also involve new expenses, they will exert pressure on the public debt, an impact that Planning Minister Simone Tebet told Reuters was seen as marginal.

Haddad said the government would also implement other measures that do not affect the primary balance, such as the anticipation of benefits and income tax refunds, and suspension of debt payments.

In total, considering the leverage expected in the credit programs, the government estimates that the announced measures will put 51 billion reais into the economy.

($1 = 5.1559 reais)

(Reporting by Marcela Ayres; editing by Gabriel Araujo, Kirsten Donovan)

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