(Recasts with government request for more dividends from state-owned companies, adds details)
BRASILIA, July 25 (Reuters) – The government of Brazil, which is holding an election in October, has sent a letter to state-owned companies asking them to increase dividends to finance extra federal spending this year, Special Treasury and Budget Secretary Esteves Colnago said on Monday.
According to Colnago, a generic request was forwarded to state-owned development bank BNDES, oil firm Petrobras and to state-controlled banks Banco do Brasil and Caixa Economica Federal.
The government asked for higher dividends, as long as they did not hurt investments or guidelines for minimum capital adequacy, and which would be paid quarterly rather than semi-annually, the secretary said during a news conference.
Colnago stated that Petrobras already pays quarterly dividends, and added that Banco do Brasil had answered it would not be possible to change its policy.
Petrobras said no decision has been made on 2022 dividend payments. The oil giant also said its board may decide on a new dividend payment on July 28, when it reports quarterly results.
The extra dividends would offset a 41 billion-reais ($7.65 billion) spending package approved by Congress ahead of the presidential election in October. They would also compensate for about 17 billion reais in federal tax cuts to lower fuel prices this year, said Colnago.
Congress recently approved a massive aid package outside the constitutional spending cap, which included an increase in the cash transfer program for low-income families, Auxílio Brasil, from 400 to 600 reais, but limited to this year.
Keeping payments at current levels in 2023 would require 50 billion to 60 billion reais ($11.08 billion) in budget spending, said Colnago.
According to the secretary, the budget bill to be sent to Congress next month will likely lower transfers from 600 reais to 400 reais ($74) per month. He emphasized it would still indicate to lawmakers the cost of raising the program, though he added it would be a challenge to fund higher transfers.
President Jair Bolsonaro, who seeks re-election but trails in opinion polls, has promised the program will grant Brazilians 600 reais in 2023, without specifying the budget design.
Former President Luiz Inacio Lula da Silva, who is leading in polls, has also said he would maintain the higher value, and that he intends to overturn the spending cap. ($1 = 5.3571 reais)
Reporting by Marcela Ayres in Brasilia Editing by Josie Kao and Matthew Lewis