Key insights
- Brazil's new subsidized credit program for ride-hailing and taxi drivers, while localized, raises concerns about the broader implications of government intervention in credit markets. The program could distort market signals and potentially weaken the effectiveness of monetary policy, indirectly impacting global capital flows and risk sentiment.
SAO PAULO, May 19 (Reuters) - Brazil’s government on Tuesday unveiled a program offering up to 30 billion reais ($5.95 billion) in subsidized credit for ride-hailing drivers and taxi operators to finance new vehicles, part of a broader effort to expand access to lending.
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The measure, signed into law by President Luiz Inacio Lula da Silva, adds to a pattern of pre-election stimulus, embedding subsidies through cheaper credit and expanding the role of state-backed lending
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It comes as Brazil’s central bank has warned that subsidized credit can weaken the transmission of monetary policy by blunting the impact of interest rate changes on borrowing costs
DETAILS
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The program will provide loans at below-market interest rates for the purchase of new cars priced at up to 150,000 reais, including flex-fuel, hybrid and electric models that meet sustainability criteria
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Eligible applicants include app-based drivers with at least 12 months of activity and a minimum number of trips, as well as registered taxi drivers
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The government estimates that between 1.2 million and 1.4 million workers could qualify for the program
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The program will be operated by state development bank BNDES, which will channel the funds through partner financial institutions, backed by a federal credit guarantee scheme covering up to 80% of loan risk
($1 = 5.0378 reais)