The Central Bank of Brazil’s (BCB) Governor, Roberto Campos Neto, announced a BRL 40 billion emergency aid in order to support the payroll costs of micro, small and medium-sized enterprises’ (SME). The financing will be released in two tranches of BRL 20 billion — 85% of which comes from the National Treasury (BRL 17 billion, through the Brazilian Development Bank – BNDES‘ on-lendings), and the remaining 15% will be funded by banks (BRL 3 billion).
Companies with gross revenues between BRL 360 thousand and BRL 10 million per year — the so-called small and medium-sized companies (SME) — will have access, for two months, to an emergency payroll financing line. The measure has the potential to reach 12.2 million employees and 1.4 million companies.
- The maximum amount financed per worker will be two minimum wages (BRL 2,040) per month.
- The funding will go directly to the worker’s account, as happens today through payrolls operated by financial institutions. The company will be responsible for the debt.
- The company that request the payroll loans will be committed to the maintenance of jobs during the two-month program;
- The cost of the financing program to SMEs will be exactly the Interbank Deposit Certificates’ (CDI) interest rate, currently at 3.75% p.a., which means that the payroll financing line’s spread is zero;
- Regarding the credit risk coverage, the federal government and banks will share, respectively, 85% and 15%, of each transaction;
- The maturity of this emergency aid will be 36 months, with a grace period of six months.
The loans will start to be granted after the issuance of a Provisional Measure that will provide for an ‘extraordinary credit’ of BRL 34 billion and the creation of a fund operated by the BNDES, which will be supervised by BCB. The financial institutions will fund the remaining BRL 6 billion.
Additional initiative in progress
The BCB’s governor also announced that the monetary authority is preparing a draft proposal of a constitutional amendment that will allow BCB to purchase corporate debt securities directly from companies — analogous to procedures adopted by the U.S. Federal Reserve.