Bolsonaro mulls dividend tax and debt forgiveness as Brazil campaign turns to economy

BRASILIA, Oct 6 (Reuters) – Right-wing Brazilian President Jair Bolsonaro on Thursday announced debt forgiveness for some consumers and a tax on dividends to pay for social spending, shifting the focus of his re-election campaign to the economy while the polls tight.

His leftist challenger, former President Luiz Inacio Lula da Silva, has also proposed a debt cancellation program for Brazilian consumers.

Recent opinion polls show Bolsonaro has taken over the helm from Lula since last week following the president’s stronger-than-expected performance in the first round of voting on Sunday.

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The two will face off in a second round on October 30.

Bolsonaro told lawmakers in Brasilia he had agreed with the speaker of the lower house of Congress to tax dividends for Brazilians with incomes above 400,000 reais ($77,000) to extend a protection program more generous social security expiring in December.

He and Lula both promised to continue monthly payments of 600 reais to the poorest Brazilians next year, but neither said how they would pay for it. Both candidates seek to change Brazil’s fiscal rules, without giving details.

Bolsonaro added that state bank Caixa Economic Federal would waive up to 90% of what is owed to it by some 4 million people and 400,000 businesses. Lula had included such a proposal in his presidential platform after gaining visibility from rival Ciro Gomes, who backed Lula after failing to run in the second round.

About 68 million Brazilians were blacklisted by rating agencies in August due to overdue debt, according to credit agency Serasa.

Caixa CEO Daniella Marques at a press conference on Thursday said the bank plans to restructure around 1 billion reais ($192.3 million) in loans that have been overdue for more than a year and already recognized by the bank as losses.

Marques said Caixa has been carrying out similar debt restructuring campaigns since 2017.

Separately, Lula received written endorsement from several economists who helped stabilize the economy in the 1990s when the country was ruled by the Brazilian Social Democratic Party, a traditional rival to Lula’s Workers’ Party.

Arminio Fraga, Edmar Bacha, Pedro Malan and Persio Arida wrote that they voted for Lula and expected “responsible management of the economy” from the former president.

A survey released Thursday by pollster PoderData showed Lula had 48% electoral support, compared to 44% for Bolsonaro. The same polling firm last week showed Lula winning a mock vote in the second round by 51% to 39% of the total vote.

PoderData was one of several polling firms criticized for understating Bolsonaro’s support in the first-round vote, which Lula won by 5 percentage points less than expected.

($1 = 5.20 reais)

($1 = 5.2001 reais)

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Reporting by Ricardo Brito and Bernardo Caram; Written by Steven Grattan and Brad Haynes; Editing by Alistair Bell and Mark Porter

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