Current situation in Brazil
The coronavirus has arrived in Brazil at the end of February. As of 29 April, 71’886 infections were registered and COVID-19 has caused 5’017 casualties. Given the low number of tests per inhabitants (63 tests per 100’000 inhabitants ), the actual number of cases in Brazil is presumably much higher. Experts foresee a peak of infections between May and June, depending on the region.
The Federal government has imposed an entry ban for foreigners, with only a few exceptions such as residents and family members of Brazilian nationals. Most regional States have also imposed measures of social distancing, ordering the closing of non-essential businesses, schools, universities and closed down public places.
COVID-19 will have a strong negative impact on the Brazilian economy, which in 2019 slowly started recovering from a long recession period. To mitigate the economic impact of COVID-19, the Government announced a series of fiscal and financial measures adding up to 6,5% of GDP.
Both Federal and State governments have decided several measures, seeking to provide support to companies and the population during these difficult times. Here the focus will be on providing an overview of the measures decided at the Federal level, each State within Brazil has implemented additional, individual measures aiming to support the business in their region.
- Employers may reduce the salary and the working hours of employees by 25%, 50% or 70% for a period of up to 90 days. Employees whose salaries are reduced will be eligible for governmental financial assistance ranging between RS 1’045.- (USD 209.-) and RS 1’813.-(USD 362.-) (amounts for the unemployment insurance).
- Employers may suspend employment contracts for a period of up to 60 days, but employers with gross revenues that exceeded R$ 4.8 million in 2019 will have to provide monthly financial assistance to the suspended employees for 30% of their salaries. Employees whose contracts were suspended are also eligible for governmental financial assistance.
- The employer may oblige the employees to anticipate their vacations. Exceptionally, employees, which have not yet acquired full vacation rights, may also be asked to anticipate their vacation.
- The employer may oblige the employees to work from home. An agreement must be signed by the employer and the employee to define the rules.
Support for companies
Most of the measures decided by the Federal Government in support of companies consist in postponing due payments in order to preserve their liquidity. This is for example the case with the postponing of the payment of Federal taxes PIS (1,65%) COFINS (7,6%) and Transaction IOF (0,38%) for two or three months and for the deferral payment term of 4 months for FGTS (guarantee fund for time of service paid by employers).
- Special arrangements were decided to save the airlines sector, for example, a 6-month postponement of the collection of air navigation tariffs and concession fees from airports and a 12-month extension period for companies to reimburse costumers for cancelled flights.
- For the airports, negotiations with the government led to an arrangement that postpones the yearly payment of the concession (5% of turnover) which is due in July 2020 until December 2020.
- 50% reduction in contributions for “Sistem S” for a period of 3 months. System S is a joint system of social contributions paid by companies in order to finance activities like professional education.
- Opening of new credit lines to small and medium sized enterprises (SMEs), as for example USD 14,9 billion from the State-owned Federal Savings Bank (Caixa) or USD 20 billion from Banco do Brasil.
- The National Development Bank (BNDES) announced several measures aiming at the opening of working capital loans for micro and small firms and the suspension of outstanding loan payments for 6 months.
- Emergency credit line for SMEs to finance salaries for a period of two months. Overall stimulus package of RS 34 billion (USD 6.8 billion).
Despite the several measures announced, companies are still complaining about difficulties to access the credit lines.