April 13, 2020 / 4:03 PM / 4 months ago

Exclusive: Brazil to launch $1.9 billion credit scheme for micro firms - sources

FILE PHOTO: The central bank headquarters building is pictured in Brasilia, Brazil November 27, 2019. REUTERS/Ueslei Marcelino/File Photo

BRASILIA (Reuters) - Brazil will launch a 10 billion-real ($1.9 billion) program to support micro businesses with good credit history but whose finances have been hit hard by the economic impact of the coronavirus pandemic, two Economy Ministry sources told Reuters.

The scheme, to be unveiled this week, will be targeted at firms with annual revenue of up to 360,000 reais and will be operated via state-owned lender Caixa Economica Federal.

Some 3 million businesses could be eligible, according to the sources, who spoke on condition of anonymity.

Caixa Economica Federal and the Economy Ministry did not immediately respond to requests for comment.

One of the sources said around 10 billion reais of financing will potentially be made available, to firms that have shown themselves to be “good payers” of their income taxes via the “Simples” tax payment system for small businesses.

Initially, the idea was that the Treasury would make funds available via public banks. But for that to occur a proposal would need to be drawn up and sent to Congress, which would take longer.

The plan now is to offer these small companies a credit the equivalent of 30% of two months’ worth of revenue, which according to one of the sources would be the calculated amount the business needs “to survive.”

The scheme follows the 40 billion-real program announced last week aimed at helping companies with annual revenue of between 360,000 and 10 million reais meet payroll.

Brazil’s primary budget deficit this year is approaching 500 billion reais ($96 billion), or 7% of gross domestic product, even before a state aid proposal of up to 222 billion reais to tackle the coronavirus is factored in, the Economy Ministry said on Saturday.

Reporting by Marcela Ayres in Brasilia; Writing by Jamie McGeever; Editing by Matthew Lewis

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