Bolsonaro looking for poll boost by stepping up Brazilian social programs

Brazil's government is considering stepping up social programs to help close the gap in the polls with presidential frontrunner Luiz Inácio Lula da Silva.

President Jair Bolsonaro wants to increase the monthly payments to low-income families under the Auxílio Brasil social welfare program from the current 400 reais (US$77) to 600 reais, a government official told BNamericas on condition of anonymity, confirming media reports.

Auxílio Brasil has been in place since August 2021 as part of government efforts to mitigate the economic effects of the pandemic. In May, the government made the temporary program permanent. Auxílio Brasil replaced the Bolsa Familia social program, which was created by the administration of Lula da Silva in 2004.

The government is also considering paying a temporary monthly bonus to truckers to offset the rise in diesel prices.

These changes are expected be announced officially in the coming weeks, and Bolsonaro will be hoping that they improve his chances of taking key votes from the lower-income sectors of society that provide the bulk of Lula's support.

"There is a positive political effect for the incumbent president, as Auxílio Brasil goes to a portion of the society that is very sensitive to income variations, but it's important to remember that, according to electoral polls, 80% of voting intentions are already consolidated, which means that there’s little room for gains," Alex Agostini, chief economist at local ratings agency Austin Rating, told BNamericas. 

According to a survey released this week by polling institute Datafolha, Lula has 47% backing, down only slightly from the 48% recorded in the previous survey in May, while Bolsonaro is on 28%, up from 27%.

Lula’s persistent and large lead is ringing alarm bells in Bolsonaro's team, as the former president may even gain sufficient support to win the presidency in the first-round vote.

Under electoral rules in Brazil, a candidate is declared the winner if they obtain more than 50% of valid votes in the first round, which takes place October 2. A second round, if required, would be on October 30.

INFLATION

Inflation figures have undermined Bolsonaro's chances, with prices up 12.04% in the 12 months to mid-June, according to statistics bureau IBGE, well above the central bank target of 3.5% for the year. 

With the boost in the social programs, government spending will likely remain under pressure, forcing the central bank to keep its base rate, currently at 13.25% per year, at a high level for some time to come.

"These populist measures have a direct impact on the fiscal side and will prolong the period of high interest rates. I was expecting the Selic rate to begin to be reduced in early 2023, but now I only see room for interest rate cuts at the end of the first half of next year," said Agostini.