Rumours Of Welfare Cessation Spark Bank Run In Brazil

A visibly angry Brazilian President Dilma Rousseff on Monday ordered a federal investigation to determine the source of a widespread rumour, which had claimed that the government’s social security fund was about to be shut down – causing widespread panic and a bank run at the state-owned Caixa Economica Federal bank.

A visibly angry Brazilian President Dilma Rousseff on Monday ordered a federal investigation to determine the source of a widespread rumour, which had claimed that the government’s social security fund was about to be shut down – causing widespread panic and a bank run at the state-owned Caixa Economica Federal bank.

Rousseff, whose government is up for re-election next year, described the rumours as “absurd, inhumane and criminal”; and assured the public that the government’s commitment to the Bolsa Familia program was “strong, deep-seated and permanent.”

[quote]”This government money is sacred. We guarantee these payments. We will not give up the Bolsa Familia,” she said, in remarks broadcasted across all Brazilian television networks.[/quote]

“We have put the Federal Police on the case to find out who started this rumour that was aimed at unsettling Brazilians who have been rising from extreme poverty for 10 years,” she added, urging ordinary Brazilians “not to take these rumours seriously.”

Bolsa Familia is a social security program that provides monetary benefits to nearly 50 million poor Brazilians, or about a quarter of the population. Qualifying families receive a minimum of 70 reais ($34.42) a month from the state, paid out via Caixa Economica Federal, at an annual cost of $12 billion to the state.

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Over the weekend, as rumours grew that Bolsa Familia was about to be shut down, thousands of recipients lined up outside branches of Caixa Economica Federal to receive their payments – with some even smashing glass doors and automatic teller machines in anger, reported Reuters.

“Police had to intervene in many states, trying to keep the masses in order,” according to Rafael Carregal, a journalist at Brazil’s main TV network Globo to CNBC.

[quote]”The bank branches themselves aren’t open on Saturdays. What happened is that once the rumour gained momentum, people flocked down to their local branches to try to withdraw money from the ATMs,” Carregal added.[/quote]

Caixa Economica Vice President José Urbano Duarte told Reuters that close to 1 million families withdrew their Bolsa Familia cash grant this weekend. The Bolsa Familia program was launched in 2006 under the administration of Rousseff’s predecessor and mentor, former president Luiz Inacio Lula da Silva, but some economists have said that Brazil’s deteriorating fiscal situation and heavy tax burden require some cuts in public spending.

Meanwhile, economists on Monday also trimmed their forecast for Brazil’s economic growth from 3 percent to 2.98 percent this year. According to Bloomberg, this will be the first time in a decade that Brazil’s economy will grow below 3 percent for three consecutive years, as it struggles with tepid industrial production and high inflation.

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