Brazilian President Luiz Inácio Lula da Silva is poised to make headlines this Friday, February 28, by signing off on new rules governing the withdrawal of funds from the FGTS (Fundo de Garantia do Tempo de Serviço) via the anniversary withdrawal. This important regulatory change aims to swiftly benefit approximately 12 million individuals who were dismissed without cause since January 2020 and had previously opted for this specific withdrawal method.
Under the newly proposed measure, workers who had adhered to the anniversary withdrawal option would be granted access to their previously locked FGTS funds. Currently, these workers can only withdraw a limited portion of their balance upon termination and must typically wait for two years before being able to access their full funds. The eventual implementation of the new rules is expected to have significant ramifications for those affected, unlocking around R$ 12 billion for circulation within Brazil's economy.
The modifications signal a shift from the existing two-year waiting period for accessing total funds, during which workers are only able to withdraw the severance pay, typically 40%. With the new measures, relief will arrive much sooner, allowing affected people to access their locked funds more immediately, hence providing some financial reprieve during tough economic times.
“This change is transformative for many working-class families who have endured hardships due to lengthy waiting periods to access their own funds,” asserted Minister of Labor and Employment Luiz Marinho. “It opens pathways for those dismissed without just cause to reclaim what is rightfully theirs.”
Under the government’s plan, the payments will be executed in two phases. The first phase will allow for immediate releases of up to R$ 3,000, with payments starting from March 6, targeting workers born between January and April. Payments for those born from May to August will start the next day, with the final tranche for September to December birth months on March 10. The second phase, addressing withdrawals exceeding R$ 3,000, will roll out approximately 110 days post-publication of the new MP, starting from June 17.
For those without bank accounts, the government facilitates access to funds through the Caixa Econômica Federal and select lottery locations across Brazil. This provision addresses the needs of approximately 2 million workers facing banking obstacles, giving them equitable access to their FGTS funds.
Despite the optimism around these changes, concerns have been expressed by professionals within Brazil's construction sector, represented by the Union of Construction Industry of São Paulo (Sinduscon-SP). The group highlighted worries over liquidity shortages within the FGTS, which serves as one of Brazil’s primary funding sources for housing projects. They fear this unexpected influx of withdrawals may cause ripples throughout the housing finance market.
The anniversary withdrawal itself was instituted during Jair Bolsonaro’s administration and has traditionally allowed workers to withdraw part of their FGTS balance annually on their birthday. While this method provides accessibility, it restricts the ability to withdraw full account balances upon job loss, representing a dilemma for many employees forced out of work.
“The transformation underway could have lasting effects on housing financing, impacting not only workers who need their funds but also the broader economy, which relies on stable financing for construction and infrastructure projects,” remarked Renato Cunha, president of the Brazilian Chamber of Industry of Construction (CBIC).
There’s also concern surrounding the potential economic consequences of increased liquidity. The expectation is set for consumers to have more purchasing power, but some economists warn this influx could aggravate inflationary pressures already looming over Brazil’s economy. The current forecast suggests the Consumer Price Index (CPI) may see inflation rates exceed the annual target of 4.5%, driven by rising demands for consumer goods and services.
“While these measures may temporarily boost consumer spending and support families facing economic challenges, they also present risks,” commented Bruno Shahini, investment expert at Nomad. “The government has to tread carefully to avoid inflation becoming unsustainable as increased liquid cash circulates.”
The government insists the changes are short-term solutions and have no plans to alter the anniversary withdrawal's framework again soon, marking it as primarily situational under present economic conditions. “Our focus remains on ensuring workers receive their funds, especially during these times of crisis,” emphasized Minister Marinho.
Overall, the announcement paves the way for significant changes to how funds are managed within the FGTS. Workers dismissed from January 2020 to the present who opted for channelling their benefits through the anniversary withdrawal are set to see much-needed financial relief, contingent upon the measure being enacted properly and the effective management of its rollout.
For those still within the existing parameters, the legacy rules surrounding the anniversary withdrawal will remain intact after the new measures are absorbed, creating distinct pathways for those who experience job loss moving forward.