SAO PAULO/BRASILIA (Reuters) - Brazil is running short of hard currency needed to pay funds aimed at helping people impoverished by the coronavirus crisis, according to two sources and a document reviewed by Reuters, the latest blow to the country’s troubled stimulus program.
Cash is vital in Brazil, where almost a third of the population is unbanked, lacking access to credit and debit cards. The country’s state-controlled mint on Monday asked workers to ramp up production of paper money starting this month, putting in for overtime as needed, according to a document reviewed by Reuters.
The letter added that the additional banknotes are needed for the aid, which some 60 million people are expected to seek.
The program to pay 600 reais ($102.90) a month to those lacking regular work contracts has already had a troubled rollout as crowds seeking the funds have formed at many branches of state bank Caixa Economica Federal, risking contagion amid the pandemic.
Some people who lack bank accounts have even camped out overnight at branches to get their hands on the cash.
The stumbles in the program passed by the Brazilian congress come amid rising criticism that the far-right government of President Jair Bolsonaro has failed to take dramatic enough action to stimulate an economy which according to some forecasts could shrink by double digits this year.
About 30% of Brazil’s population is unbanked, a greater percentage than in China and even India, according to the World Bank.
The government started to pay an initial installment under the program at the beginning of April, but delayed the second, scheduled for the end of last month. A new schedule is likely to be released in coming days.
One of the sources directly blamed the hard currency shortage for the delay in the second installment, while another said it could not yet be paid because the first was still in progress, while confirming that there was a currency shortage.
Economic Policy Secretary Adolfo Sachsida said there was a “technical issue with the payment sources” for the funds but denied there was any issue around currency shortages.
“If, by any chance there’s a lack of cash, a lack of physical notes, we’ll find a way to correct that,” he said.
Brazil’s central bank, which oversees money supply, confirmed it has been in talks with the mint to raise output, moving a bigger chunk of its annual banknote production into the coming weeks, according to a statement sent to Reuters.
The amount of hard currency in circulation has already spiked 23% year-on-year to 291.2 billion reais, but much of the additional paper money is being hoarded by individuals and businesses because of worries about the crisis and because with much of the economy shuttered there are fewer places to spend cash, the regulator said.
“The inquiries aim at building a safe inventory and offseting potential outcomes of money hoarding,” the central bank said.
The talks are aimed at increasing the mint’s weekly money production by 40%, according to union leader Aluizio da Silva Junior, adding that the union has yet to sign off on the request.
The central bank said it was unaware of any delays in aid payments. The Social Assistance Ministry, responsible for the emergency funds, did not respond to a Reuters request for comment. Caixa Economica Federal, the bank in charge of payments, declined to comment on the matter.
The number of people seeking the emergency fund has surprised government’s officials, who were expecting to pay 98 billion reais to 54 million Brazilians. Recent calculations, though, updated the number to 124 billion reais and 60 million people - equivalent to Italy’s population.
Caixa Economica estimates that nearly 30 million digital accounts will be opened by unbanked people as a consequence of the emergency payment, a legacy expected to help people when the pandemic is over.
Reporting by Carolina Mandl, in Sao Paulo, and Marcela Ayres, in Brasilia, Additional reporting by Jamie McGeever in Brasilia; Editing by Christian Plumb and David Gregorio
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