FGTS (Brazilian Severance Indemnity Fund): New withdrawals pose a risk to the Fund and will not alleviate most debt, warn Caixa bank employees.

Fenae - The government has announced plans to allow further withdrawals from the Severance Indemnity Fund (FGTS) this election year "for workers to pay off debts." The measure, expected to be formalized in the coming days as a "solution" to the country's debt problem and economic recovery, would, according to the Executive branch, reach 40 million people: those with formal employment contracts and access to the FGTS.

The National Federation of Associations of Caixa Econômica Federal Employees (Fenae) warns that new withdrawals from the Fund—in addition to further compromising the sustainability of the FGTS (Severance Indemnity Fund), making investments in housing, sanitation, urban infrastructure, and other strategic areas financed with these resources unfeasible—will not solve the problem of default, since they will not reach the vast majority of economically vulnerable Brazilians. Nearly 60 million workers will be left out of the measure, according to a survey commissioned by Fenae from Dieese [Inter-Union Department of Statistics and Socioeconomic Studies].

Among the 58,6 million excluded [not included] in the "solution" presented by the government to contain the growing indebtedness, are 46,6 million informal workers [salaried employees, domestic workers, and other workers without formal registration] and 12 million unemployed: Brazilians without formal employment contracts and, therefore, without access to the FGTS (Severance Indemnity Fund). "Releasing more withdrawals from the Severance Indemnity Fund is a palliative measure that reaches less than half [40%] of the workforce and further weakens the FGTS, which is the 'savings' of most workers and one of the main sources of financing for homeownership, for example," emphasizes the president of Fenae, Sergio Takemoto.

At the end of February, when announcing Caixa's results for the fourth quarter of 2021, the bank's management reported that R$ 140,6 billion in housing loans were contracted in the accumulated total for the past year, considering resources from the FGTS (Brazilian Severance Indemnity Fund) and the Brazilian Savings and Loan System (SBPE). 

DECAPITALIZATION — The Dieese survey, commissioned by Fenae, also reveals the decapitalization of the Severance Indemnity Fund (FGTS) over six years. Since 2015, when the so-called "extraordinary withdrawals" [not foreseen in Law 8.036/1990] began to be authorized, the net revenue of the FGTS has been decreasing: R$ 14,4 billion in 2015; R$ 10,1 billion in 2016; R$ 4,9 billion in 2017; R$ 9,2 billion in 2018; R$ 3,4 billion in 2019; and a negative R$ 1,9 billion in 2020, when withdrawals exceeded the Fund's revenue [R$ 129,1 billion in withdrawals against R$ 127,2 billion in deposits]. In 2021, net FGTS revenue was similar to that of 2012, at around R$ 17 billion.

Updated figures from Dieese show that considering only 2017 [Temer government] and 2019 [Bolsonaro government], R$ 44,3 billion and R$ 37,2 billion were withdrawn from the Fund, respectively. These were the years in which withdrawals of funds from inactive and active FGTS accounts were permitted.

Fenae notes that other rounds of withdrawals from the Guarantee Fund were authorized in 2020, reaching the release of R$ 36,5 billion through the Emergency Withdrawal; and also last year, when more than R$ 20 billion were withdrawn through the Birthday Withdrawal. An estimate made by the FGTS Operating Agent shows that this withdrawal modality has been draining the Fund: until September 2021, there was an increase of R$ 11,6 billion in the outflow of resources from the Fund, representing 9,2% more than would happen if there were no Birthday Withdrawal.

"Workers who opt for the Birthday Withdrawal program lose the right to withdraw their FGTS (Severance Indemnity Fund) in case of dismissal; that is, they are left without assistance in a situation of extreme vulnerability," recalls economist Clóvis Scherer, from Dieese.

He also points out that the money withdrawn from the Fund to pay off debts — usually incurred with banks — ends up returning to the financial system itself. In this case, the resources can remain "stuck" [retained by banks due to the risk of default] and keep the economy stagnant, or be loaned out again at even higher interest rates. "Therefore, the government's 'logic' does not generate a sustainable process of economic dynamism," Scherer emphasizes.

“We advocate for counter-cyclical measures,” states the president of Fenae. “However, this burden cannot fall on the worker, who loses twice: on the one hand, due to the reduction in their FGTS balance in case of dismissal, serious illness, or the purchase of their own home; and, on the other hand, due to the Fund's limitations in fostering, for example, the construction industry, which, in addition to housing, generates employment, stimulates the economy, and contributes to reducing default rates,” adds Sergio Takemoto.

According to the Central Bank, Brazilian families' debt to the financial system reached a historic record of 51,2% of the Gross National Disposable Income of Families (RNDBF) last October. 

SUSTAINABILITY AT RISK — The government's plans to authorize new withdrawals from the FGTS (Brazilian employee severance fund) would represent, according to estimates, an additional R$ 20 billion withdrawn from the Fund. Each worker [of the 40 million with formal employment contracts] could withdraw up to R$ 1.

The measure — expected to be formalized through a Provisional Measure — provoked a reaction from the Brazilian Chamber of the Construction Industry (CBIC), which, like Fenae, also warns of the need to preserve the sustainability of the Fund. "We believe that this measure goes against what is in the country's best interest. The FGTS is not a supplement to income, but rather funding for investment and the generation of well-being, employment and income," said the president of CBIC, José Carlos Martins, in February.