(Bloomberg) — Brazil Finance Minister Fernando Haddad rolled out a plan worth 50.9 billion reais ($9.9 billion) Thursday to help millions of people hit by floods in the nation’s south as investors keep a wary eye on public spending.
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The initial measures, which include subsidized credit from the federal government, will be directed to 3.5 million people including workers, social program beneficiaries and rural producers, as well as companies, states and municipalities, Haddad said. The proposals entail an impact of 7.7 billion reais on this year’s primary budget result, which excludes interest payments, he said.
Torrential rains in the southernmost state of Rio Grande do Sul have left at least 107 people dead and 165,000 displaced, setting up a defining moment in Luiz Inacio Lula da Silva’s presidency. The devastation has hit industries including agriculture, manufacturing and banking, increasing spending pressure at a time when investors are already fretting over public accounts.
Read more: Brazilian Floods Are Inflicting Billions in Economic Devastation
“This money will not be taken from other regions of the country,” Haddad said. “It is the federal government that is contributing these resources to Rio Grande do Sul without harming the programs that serve other regions of Brazil.”
The government will speed up social benefit payments in May, and next week will present a proposal to renegotiate Rio Grande do Sul’s debts, Haddad said.
The 7.7 billion reais impact on Brazil’s primary budget result will be considered as extraordinary expenditures and, therefore, will be excluded from the public spending cap and fiscal target, he said.
Speaking alongside Haddad, Lula said his administration will announce the resumption of some flights to Rio Grande do Sul later today and will also present more aid for flood victims next week. He said officials will only have a full understanding of the damage once the water recedes.
Financial markets have become increasingly concerned in recent weeks that the government is backing off pledges to limit deficits and strengthen public accounts. Lula is seeking measures to spark economic growth, and last month his administration said it will weaken a closely-watched budget goal in 2025.
–With assistance from Bruna Lessa.
(Updates with comments from Lula in seventh paragraph)
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