Brazilians flock to withdraw stimulus plan cash

 Brazilians buckling under austerity measures had a novel experience Friday -- an invitation to put extra cash in their pockets.

Salaries in Brazil include a mandatory contribution to a savings fund which is meant to remain untouched except in case of unemployment, sickness or home buying.

But President Michel Temer's government allowed Brazilians from Friday to stick their hands in the cookie jar.

Temer is trying to wrestle the floundering economy out of a two year recession. Suspending the requirement for compulsory reserves is meant to get Brazilians back in the spending habit and stimulate the wider economy.

"Workers can take out money which they can now consume, save or invest," the finance minister, Henrique Meirelles, said.

From early Friday branches of the state-run Caixa bank were filled with people eager to take the government up on its offer. About 30 million people are eligible to withdraw from the fund, which contains some 43.6 billion reais ($13.7 billion dollars).

Banks opened two hours early for the occasion, and within three hours 700,000 people had made withdrawals, reported G1 news site.

Monica Neves, a 42-year-old store manager, said she had about 1,300 reais ($411) stored up. In a country where the minimum wage is 880 reais a month, that's worth something.

"I'm going to pay off debts," she said at a Caixa branch in Rio de Janeiro.

The government says there'll be a lot of people like Neves, given that about a quarter of the population has debts.

Others waiting to take out their reserves echoed a common refrain across the corruption-riddled Latin American giant.

"It's the least they can do," said unemployed Rio resident William Souza, 58. "Give the money back to the people before they steal everything!"

- Belt tightening time -

The measure, which will run until the end of July, goes against the grain of the hugely unpopular government's belt tightening policies.

Congress recently approved a 20 year budget spending freeze and Temer is trying to pass pension reform, all to impose discipline on the budget and rein in spending before the country goes bankrupt.

In Rio de Janeiro, which hosted the Olympics last August, the state government has run out of money and relies on a federal bailout.

Nationwide, things are getting better, the government says. Although a deep recession passed the two year mark this month, Meirelles says that growth will return later this year.

The stimulus measure is popular and could put a bit of a spring in the step of a population weighed down by record 12.6 percent unemployment. But analysts are not sure how much the stimulus plan will boost the economy.

The expectation is that about $9.5 billion will be withdrawn from the available fund. That's no more than half a percent of Brazil's GDP.

And only roughly half of that is expected to go directly into consumption, with the rest going to paying debts or investment.

But "it will have a psychological impact, showing that the government is trying to improve" the situation, said Alex Agostini, chief economist at Austin Rating.

source: AFP