RIO DE JANEIRO, BRAZIL – Economy Minister Paulo Guedes expects that the Brazilian government will become a shareholder of airlines due to the crisis caused by the coronavirus. In his opinion, this will be the consequence of the public rescue model to be provided to the sector.
“It’s public money. Let’s get some money in there, let’s buy a piece of the company. And up ahead, when the company has recovered, we will find that we have made money to safeguard the airlines”, he said in a meeting with entrepreneurs on Tuesday, May 19th.
Behind the scenes, the government is preparing a consortium of banks to be formed by BNDES (National Development Bank) and private institutions that would provide credit to companies with instruments convertible into shares. “This week, we will solve the airlines’ problems; they will receive the funds. They will be diluted [through] convertible debentures,” he said.
Guedes’ plans to mitigate the crisis include launching an entire workforce relief program to encourage job creation after the coronavirus pandemic’s peak. The program would be launched in 30 to 40 days. “We will discuss labor charges and the possibility of hiring people free of labor taxes upon resumption. Without collecting taxes. This is something we’re studying; we will do this. We’re going to have to launch this now,” he said.
Although he did not clarify how the money will be paid, the Minister mentioned a transaction tax (a reminder of his idea to introduce a new CPMF – financial transactions tax). “Several trade associations said they would prefer a transaction tax than a labor tax,” he said.
Nevertheless, Guedes denies that he wants the return of the CPMF and jokes that the last one to mention it was dismissed (a reference to the ex-Treasury Secretary, Marcos Cintra). People at the meeting understood that the Minister advocates the establishment of a tax on digital operations, something already mentioned by the Minister.
“It was never the CPMF; it was always a tax on transactions. How do we tax it? There are digital transactions,” the Minister said during an interview with journalists in December 2019. According to the Minister, the coronavirus crisis bill cannot be left for future generations to pay: “We must have the courage to launch this alternative. With less union interference, with less labor legislation. We will move in this direction,” he said. “We can generate ten, fifteen, twenty million jobs in the next one, two, three years if we dare to move in this direction,” he added.
Guedes is confident that the country will register a V-shaped growth trajectory after the coronavirus crisis. The format, however, would be similar to the Nike logo (with the second leg of the V lying down), pointing to a slower activity resumption: “It’s a Nike V. It rises slowly. I still think Brazil is in that position; it is still able to recover relatively quickly. That’s what I believe. But we’re going to have to take action to make it happen in 30 days,” he said.
And he once again rejected a resumption of public investment, as advocated by government members. “The way is private investment. And it is job creation by the private sector,” he said. “If I have R$100 billion instead of public spending, I would rather reduce taxes,” he said.
Source: Folhapress