Aid Measures From Floods Hit Brazil’s Budget

• According to finance ministry data compiled by Reuters, Brazil estimates aid measures taken by authorities after deadly floods in its southernmost state will cost at least 13.4Bn reais (US$2.6Bn) from its budget.
• Heavy rains, which have battered Brazil's Rio Grande do Sul state since late April, caused historic floods that killed over 150 people, while nearly 100 residents are still missing and more than 500,000 have been displaced, official data shows.
• A plan to guarantee credit lines with lower interest rates for small businesses and a cash handout program for families affected by floods are among the measures accounted for in the current fiscal estimate.
• However, the number is likely to rise, as the ministry has not disclosed the fiscal impacts from other measures recently announced such as a plan to buy homes from the private sector to house displaced people.
• Not all the aid measures taken by the government impact its budget since some of them only bring forward payments of social benefits. A proposed freezing of state debt payments also has no effect due to government accounting specifications in the country.
• Investors have closely watched Brazil's fiscal situation after the federal government decided to loosen its 2025 fiscal target earlier this year (targeting a primary surplus target between 0% and 0.25% of GDP, down from the previous 0.5% of GDP target.), even before the rains in Rio Grande do Sul.

(Source: Reuters)