Federal, multilateral entities mobilize to help flood-hit Rio Grande do Sul

Brazil’s federal government announced economic measures with an impact of up to 50bn reais (US$9.70bn) to help Rio Grande do Sul state, which has been hit by intense rains and unprecedented floods.

Companies and individuals will be able to pay debts and taxes later and the government will help firms obtain financing, as well as make early welfare payments.

The main impact would come from micro and small business support program Pronampe, as it will be used to provide guarantees worth 4.5bn reais, which the government expects to generate a boost of around 30bn reais for companies.

Several neighborhoods in state capital Porto Alegre and other cities remain flooded, which, aside from causing infrastructure damage, is paralyzing economic activity.

The state reported that 1.7mn people of a total population of 10.8mn were directed affected by floods, with around 68,520 now living in shelters, more than 200 dead or missing and 754 injured.

More federal support will be necessary, as the full scale of the damage is not yet known. 

“Do not take these measures announced [on May 9] as something isolated. Others will be added for the reconstruction of Rio Grande do Sul,” finance minister Fernando Haddad said in a statement.

Meanwhile, Rio Grande do Sul officials estimate the state will need at least 19bn reais, with 219mn reais for disaster response, 2.5bn reais for assistance, more than 7.2bn reais for recovery and almost 9bn reais for reconstruction.

“Based on the needs we have observed so far, this is the amount that will be required to finance public policies and restore places and lives that have been affected. The state will particularly require roads, housing, subsidiary credit and social actions to assist affected people,” governor Eduardo Leite said in a statement.

MULTILATERALS 

The reconstruction will also require the mobilization of development benefits and financial institutions.

"The investments necessary to reconstruct the state will likely be government funds, just as the mobilization of financial agents will also take place through multilateral institutions. The private sector does not have the capacity to coordinate actions in this respect like multilateral institutions do," João Cortez, a partner at infrastructure consultancy Vallya, told BNamericas. 

The president of the Inter-American Development Bank (IDB), Ilan Goldfajn, said the bank is developing initiatives to generate 5.5bn reais in support of Rio Grande do Sul.

Of this total, Goldfaijn said 1.5bn reais are guaranteed and aimed at rebuilding infrastructure, protecting employment, health and water services.

Meanwhile, 4bn reais for climate change adaptation and resilience projects still have to be authorized.

"Climate change is real and is increasingly showing how it is affecting all countries. In addition to the package of measures we're announcing, the IDB can also help with our technical expertise, with projects that can be carried out to try to tackle climate change from here on, which, in our view, is only just beginning," Goldfaijn said at a press conference.