Bolsonaro's response to the pandemic favors the 'very rich', says economist.

Sputnik - The response of Jair Bolsonaro's (no party affiliation) government to the COVID-19 pandemic prioritizes banks at the expense of people and will have a huge impact, according to an economist interviewed by Sputnik Brasil.

In March, the Central Bank (BC) pledged up to R$ 1,2 trillion in liquidity to deal with the crisis. One of the measures adopted was the reduction of the reserve requirement ratio (the minimum rate that banks must maintain in their vaults to guarantee the stability of the financial system). With this, in theory, banks will be able to lend to companies facing difficulties created by the global economic slowdown caused by the pandemic. 

However, the Minister of Economy himself, Paulo Guedes, acknowledged that the funds released to the banks remained "stuck in the financial system" and did not reach the population and businesses. 

According to Fábio Sobral, an Economics professor at the Federal University of Ceará (UFC), the choices made by Guedes' economic team show a preference for the "very wealthy" sectors of the population. Sobral points out as an example of this preference that the amount suggested by the Federal Government for emergency aid, currently at R$ 600 per month, was initially R$ 200.

"Banks are safe to withstand business failures, but the companies themselves were not protected, including the smallest businesses, the small businesses, these are completely unprotected and, even more so, the working classes [are unprotected] because it took too long for the emergency aid to come out," says Sobral.

The UFC professor believes that the lines formed across the country to receive emergency aid showed "inhumane conditions" and that the policies adopted by Bolsonaro will, in fact, prolong the effects of the pandemic in Brazil since simply reopening the economy will not work. 

"Desperation can lead to even more intense withdrawal of people. According to some economists, a large part of how consumption works depends on people's perceptions and expectations. So if you think there will be a second wave [of infections], there is a serious restriction on consumption and this tends to undermine production. The effects are expansive in this case," says Sobral. 

Foreign criticism

Former IMF chief economist Maurice Obstfeld also negatively assesses Brazilian policies in response to the pandemic. In an interview with the newspaper Valor Econômico, Obstfeld stated that the Brazilian economy is likely to contract even more than the 5,3% predicted by the IMF. 

"President Bolsonaro's dismissive response to the disease will cost Brazil dearly, both in terms of lives and income. With proper leadership, Brazil clearly had the capacity to safeguard people's health, but now it is an area of ​​high incidence in Latin America. This does not protect the economy; on the contrary," stated the former chief economist of the IMF.