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Brazil launches a subsidised motorcycle credit program for delivery drivers using apps

The Brazilian government launched on Friday a subsidised?credit program to help app-based drivers purchase motorcycles. This is a new initiative aimed at boosting demand and supporting a sector of the workforce which has grown rapidly in recent years.

Bruno Moretti, Minister of Planning, said at an event held in Brasilia that the program would offer interest rates for male and female drivers of 11,5% and 12,5%, respectively.

The benchmark rate of the central bank is currently 14.5%.

Moretti stated that state-run lenders Caixa Econômica Federal and Banco do Brasil would provide?financing for eligible borrowers. He also noted that a government funded will mitigate credit risks by covering a part of potential losses. The Ministry of Industry, Development and Trade stated that the new loans are expected to be worth up to 2.5 billion reais (494,19 million dollars).

This initiative is the latest of a series quasi-fiscal policies introduced at the beginning of the year. They do not affect the primary balance of the federal government, but they are meant to 'boost demand before the elections in October. Leftist Luiz inacio Lula da So is running for a fourth non-consecutive term.

The new measures include a program to renegotiate consumer debts, initiatives to encourage truck purchase and vehicle financing support for ride-hailing driver. The app-based drivers program will offer discounts on motorcycles made in Brazil. This includes electric models. It will be open to drivers who have been registered for at least 6 months and completed 100 trips or delivery.

This will cover all taxi drivers, cyclists and motorcycle couriers who have been formally employed for at least six consecutive months by the same company.

A government statement states that borrowers have up to 48-months to repay their loans, and a grace period of two months.

ABOVE TARGET INFLATION On?Friday earlier, Dario Durigan reiterated the government's plans to launch a program later this month to renegotiate consumer debts and personal loans for Brazilians that are up-to-date on their payments. Economists warn that the combination of demand-boosting measures and inflationary pressures resulting from the U.S. supported?war against Iran has clouded the outlook on monetary policy ease in Brazil. Previously, the central bank of this South American country was expected to make much larger rate cuts in 2018. The annual inflation rate is 4.72% and above the central banks' official 3% target. BTG Pactual expects only one more?25-basis point rate cut next Monday, followed by a pause for the remainder of the year. In a report released this week, the firm estimated that the Lula government's previous stimulus measures would inject 142 billion Reais into the Brazilian economy this year. This is equivalent to 1% of the GDP.

(source: Reuters)