The decree including changes to meal vouchers and food vouchers, signed by President Luiz Inacio Lula da Silva this week, is an excellent example of how to make a correct diagnosis, have good intentions, and yet adopt a measure that is bound to fail.
The Workers’ Food Program (PAT), created in 1976, currently serves more than 300,000 businesses. These are employers who are willing to help their employees with common “tickets” in exchange for tax benefits. In total, it has 22 million employees and has a network of 800,000 authorized restaurants and supermarkets. Despite the scale, there was something to correct. The main problem is the high fees charged to commercial establishments. The average that restaurants and supermarkets pay for meal or food vouchers (5.19%) is higher than the amount required for credit cards (3.6%) and debit cards (2%). Faced with this problem, Lula chose a notoriously flawed remedy: scheduling. It set a ceiling of 3.6% for the rate. The government’s stated intention is to reduce food prices. It is certain that the plan will not achieve its goal.
- Editorial: It is unreasonable to try to forcefully reduce food prices
For two reasons. First, because the ceiling creates distortion in price formation. Voucher operators will no longer be able to charge higher fees to establishments that generate little business, so they will increase the amount they charge those who pay below average. Large supermarkets with thousands of customers who get advantageous negotiations will be closer to restaurants serving a few dozen dishes a day, and the user will pay more. The second reason: Even those establishments whose prices will be reduced are unlikely to pass on the difference to the consumer, as studies of similar situations show.
Other changes set forth in the decree are worthy and have a better chance of success. The deadline for transferring amounts to restaurants and similar businesses was set at 15 calendar days after the transaction, and is no longer about a month. However, there is doubt about its feasibility. About 30% of voucher companies’ clients work in the public sector, and city councils and state-owned companies tend to take longer to pay. To avoid surprises, the government exercised extra caution: it granted a one-year period to amend contracts.
The decree also prohibits voucher companies serving more than 500,000 employees from being responsible for the entire certification chain and requires the cards to be used at any device – certainly an advance in favor of competition. If these measures lead to new companies entering the market and increased competition, prices should fall significantly. However, all this could have been demanded by organizations dealing with competition. There was no need for the intervention of the executive authority, especially in wrong measures.
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