Brazil - Covid 19 Response

Fiscal Measures

1. Spending Measures (Budget Allocations)

In 2020, the authorized budget for investments in response to the economic effects of the coronavirus pandemic was R$ 686,92 billion.

Almost R$ 550 billion were spent by the Government during last year with measures that included the Emergency Aid program, financial aid to states and cities, etc.

Constitutional Amendment No. 109 of March 15, 2021: authorized the Government to provision up to R$44 billion to fund the Emergency Aid program during the financial year of 2021, without complying with the Government’s expenditure limit.

2. Tax Measures (Deferral of Payroll Tax Obligations, Extensions of Tax Filing Deadlines)

Payment of tax under the 'Simples Nacional', a tax regime for own-account workers, micro and small entrepreneurs, due in the second quarter of 2020 was deferred to the fourth quarter.

Tax on Financial Operations (IOF) of all credit operations reduced to zero between April 3, 2020, and December 31, 2020.

Temporary exemption of Tax on Industrial Products (IPI) for specific products to support the implementation of sanitary measures to restrain the spread of COVID.

Annual income tax declaration of individuals for the financial year 2019 deferred from April 30, 2020, to June 30, 2020.

Deferral of payments of social security financing tax on revenue (COFINS), Social Integration Program tax on revenue (PIS/PASEP), and Social Security Tax on Payroll (INSS) for employers.

Simplification of customs clearance of imported essential products to combat the coronavirus (list of products comprises lung ventilators, sanitizers, masks, gloves, etc).

Finally, in 2020 the deadline for several Federal tax ancillary obligations was deferred, and the deadline for the renovation of the tax clearance certificate was postponed.

3. Subsidies to Preserve Jobs, Employee Benefits, Food Assistance

Emergency Aid program: a cash transfer program for the payment of R$ 600 per month (half of the monthly minimum wage), equivalent to approximately US$ 120, to individual micro-entrepreneurs (MEI) that integrate low-income families, informal sector workers, and uncovered unemployed workers during 5 months. In September, the Government extended the program with reduced payment of $ 300 per month up until 31 December 2020.

Payroll credit loans: a financing program for businesses’ payroll, with 85% of the financed amount guaranteed by the Government.

Emergency Employment Maintenance Program: the Government enacted Law 14,020/2020, which authorizes the proportional reduction of working hours and wages of employees, in return for the maintenance of jobs, the anticipation of individual paid vacations, mandatory vacation leave, etc. It was also introduced the possibility of temporary suspension of employment contracts for a maximum of 180 days – for businesses with annual gross revenue of up to R$ 4.8M, the employer can suspend the wage payment and the Government is committed to pay the unemployment insurance in full to the worker; for businesses with annual gross revenue above R$ 4.8M, the employer must maintain payment of 30% of the wage and the Government is responsible for 70% of the unemployment insurance.

4. Public Loan Guarantees and Expansion of Loans to Businesses

Small and medium businesses: special credit lines to micro, small and medium-sized firms; expansion of the National Development Bank (BNDES) “Credit Small Business”, granting a 24-month grace period and 5 years of a total term to pay for new loans.

Bank of Brazil (Banco do Brasil): R$ 100 billion (or US$ 20 billion) increase in its credit lines, aimed at working capital, investments, prepayment of receivables, agribusiness, and credit to individuals.

National Development Bank (BNDES): 6-month interruption of outstanding loan payments, with no late interest payment, and suspension of amortizations of R$ 19 billion (US$ 3.8 billion) for direct operations and R$ 11 billion (US$ 2.2 billion) for indirect operations for eligible sectors (oil and gas, airports, ports, energy, transportation, urban mobility, health, industry and commerce, and services).

5. Student Loan Relief

Possibility of the moratorium on payments of the Student Loan Program (FIES) up until December 31, 2020, upon request of the student.

6. Insolvency Law Relief


Monetary & Macro Financial Measures

1. Reduction of Interest Rates

In March 2020, the Central Bank cut the benchmark interest rate to 3.75%. In August, 2020 another cut lowered it to 2%.

2. Expansion of Central Bank’s Holdings of Government Bonds

Constitutional Amendment No. 106 of 2020 (“War Budget”) enacted in May 2020: during the validity term of Decree No. 6 of 2020 (state of calamity), the Central Bank will be authorized to buy and sell National Treasury bonds in the secondary local and international market, giving preference to bonds issued by micro, small and medium enterprises.

3. Other Measures to Support Flow of Credit

See item “Public Loan Guarantees and Expansion of Loans to Businesses” above. Two resolutions of the Central Bank were issued to facilitate the renegotiation of debts of individuals and entities and to encourage the offer of credit:

  • Central Bank Resolution No. 4,782 of March 16, 2020: for purposes of credit risk management, financial institutions were temporarily released from identifying “problematic” assets in the restructuring of credit operations occurred up until September 30, 2020.
  • Central Bank Resolution No. 4,783 of March 16, 2020: established new percentages to be applied to the Risk-Weighted Assets (RWA) amount, for the purpose of calculation of Additional Principal Capital Conservation (ACPConservação), expanding the capacity of capital allocation of financial institutions.

4. Suspension of Foreclosures/Evictions

Courts not allowed to grant, without the previous hearing of the other party, interim injunction orders for eviction in certain possession proceedings involving commercial and residential urban properties up until 30 October 2020 (Law 14,010/2020). Amongst the cases comprised by this law were certain claims based exclusively on non-payment of rent and ancillary charges of the lease.

5. Reductions/Suspensions of Mortgage Payments

Certain finance institutions announced the possibility of suspension of mortgage payments for up to 6 months.

6. Asset Purchases (Liquidity Facilities, Purchase of Private and Public Sector Securities, Acquiring Equity of Larger Affected Companies)


7. Exchange Rate Adjustments


Health Policy Responses

1. Social Distancing

In February, the Government sanctioned Law 13,979/2020 introducing social isolation and quarantine as possible measures to combat the pandemic effects.

Specific measures for social distancing determined on a local or state basis.

In general, people are being advised to stay home where possible, wear masks and maintain a safe distance of at least 1 meter from other people.

2. Closure of Public Places for Gathering

Specific measures for closure of public places for gathering determined on a local or state basis.

3. Closure of Non-Essential Businesses

Specific measures for closure of non-essential businesses determined on a local or state basis.

4. School Closures

Specific measures for school closures determined on a local or state basis.

After some attempts to reopen schools, in-person classes in all states remain suspended at the time this article was prepared (March 2021) both in public and private institutions since late March 2020.

Global Cooperation - International Assistance

Brazil is a member of MERCOSUR, a South American economic and political trade bloc, which announced measures to facilitate the return of citizens to their member countries of origin during the pandemic.

Other Measures

In March 2020, the Congress approved the legislative Decree No. 6 of 2020 recognizing the state of public calamity in Brazil until December 31, 2020.

Central Bank Resolution No. 4,820 of May 29, 2020: until December 31st, 2020, financial institutions and other entities licensed by the Central Bank are prohibited from:

(i) paying interest on own capital above the greater of (a) 30% of the net profit; and (b) an amount equivalent to the mandatory dividends established by the Corporations Act (Law 6,404/1976) if a corporation, or provided in the operating agreement if a limited liability company;

(ii) buying back shares, unless authorized by the Central Bank;

(iii) reducing the share capital, except when the reduction is mandatory by law or approved by the Central Bank; and

(iv) increasing the remuneration of directors, managers and members of the Board of Directors and the Fiscal Council.

In March 10, 2021, the President sanctioned Law 14,124/2021 to authorize the public administration to enter into contracts, with no requirement for bidding, for the acquisition of vaccines against Covid-19 and supplies for the vaccination, including prior to the sanitary registration or authorization for exceptional and emergency use with the Brazilian Health Regulatory Agency (Anvisa).

Published Date