Brazil’s FGTS Governing Council has postponed a measure that would reduce the number of annual birthday-withdrawal payments workers can borrow against. The change, originally scheduled to take effect on November 1, is now set for March 31, when the council will decide whether to proceed, keep the current rules or return to them after further review.
Workers can currently advance up to five annual FGTS birthday withdrawals. The proposal would cut that limit to three. In this loan arrangement, future withdrawals are used as collateral, and banks can charge interest of up to 1.8% a month.
The postponement followed a vote at Thursday’s meeting, which ended with two votes in favor, two against and one abstention. Because the proposal was introduced outside the meeting agenda, it will be sent to the Labor Ministry’s legal advisory office. The resolution will be published in the Official Gazette only after a legal opinion is issued and presented to council members.
Labor Minister Luiz Marinho, who chairs the council, said the government needs more time to consult Congress and financial institutions. He said the proposed reduction is still under review and that reducing the limit before potentially raising it again would be inappropriate. The council is due to revisit the issue in March.
According to the Labor Ministry, a study estimates that reducing the limit to three advances could affect 12.2 million workers; 92% of them earn no more than four minimum wages. Since the advance option was introduced, it has generated R$242.5 billion in transactions. Of that total, R$94.2 billion went to workers, while R$148.3 billion went to financial institutions.
Employer representatives questioned the proposal’s urgency, noting that it had been presented without a legal opinion or an impact study. Labor Ministry secretary Carlos Augusto Simões said the measure would have a neutral impact on the fund. Abelardo Campoy Diaz, a representative of the National Confederation of Commerce, opposed keeping the five-advance limit, arguing that it could be reduced to three while studies are completed and reviewed later if needed.
Sources: Folha Mercado.