Using FGTS can weaken workers, says professor

As of this Monday (26), Brazilian workers can use part of their FGTS (Service Time Guarantee Fund) balance to pay off debts through Novo Desenrola Brasil.

The measure, however, raises concerns about the risks of weakening workers' long-term financial security.

Juliana Inhasz, Economics professor at Insper, assessed that Desenrola 2.0 follows the same logic as the first version of the program

"What Desenrola 2.0 does is something very similar to what Desenrola in the first version did. It treats the symptom of debt much more than the cause", he stated.

According to her, by resolving debt without attacking its origins, the program creates space for the population to subsequently contract new debts.

More comprehensive program, but with risks
Inhasz acknowledged that Desenrola 2.0 is more comprehensive than its previous version. However, the teacher expressed concern about the use of FGTS as a debt settlement instrument.

For her, although there is an economic logic in exchanging an expensive debt - such as credit card or overdraft debt - for a resource available in the fund, social reality imposes serious risks.

"This person will eventually be left unassisted at a time of greatest need and this is a very serious social risk", he warned.

The expert also highlighted that the low-income population will hardly be able to replace, on their own, the assets taken from the FGTS after paying off their debts.

"We are talking about a population that is often deciding which bill to pay", said Inhasz. In this scenario, voluntary replenishment of the reserve becomes practically unfeasible, which could compromise the worker's financial security in the future.

Criticism of the government's recurrent use of the FGTS
Inhasz criticized what he classified as the government's frequent and unjudicious use of the FGTS to inject resources into the economy.

"This could be setting up a bomb, which will soon explode and explode in the laps of those who are most fragile, which in this case is the worker", he warned.

For her, even though the measure is economically viable in technical terms, "it is important that it is used very sparingly."

For the professor, the structural solution to Brazilians' debt involves a medium and long-term agenda aimed at increasing productivity and income.

"We need to think about policies that increase productivity," he said, adding that this also involves resolving the fiscal problem, reducing interest rates and improving the business environment.

According to Inhasz, forcing higher wages without increasing productivity does not solve the problem, as Brazil's inflationary history shows that wage gains end up being consumed by rising prices.

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Source: CNN