But no one knows. Shhhh…

The combination of (i) economic growth, (ii) employment growth, (iii) high interest rates and (iv) raising funds at low cost made the earnings of ​​FGTS (Brazilian workers’ fund) beat the major banks in Brazil for the last two years, says Folha. But where do these profits go to? We will tell you later…
In 2009, the worker’s fund netted R$11.4 billion after deducting all expenses. These earnings are higher than the the earnings reported by Banco do Brasil and Bradesco. Last year, another R$13 billion was generated, second only to Itau’s R$13.3 billion profits.

However, the official earnings reported by FGTS are well below these shown amounts  because the Brazilian government uses this money to fund its own projects like “Minha Casa Minha Vida” (and overall government bribery, of course!). Caixa Economica, the fund’s administrator, reported only R$5,4 billion in FGTS earnings for 2010, and R$2,5 billion for 2009.
The fund’s earnings growth became a source of greed in the government’s economic team. In recent years, the FGTS has benefited from economic growth, which generated more formal jobs, and therefore increased the base of contributions. Part of the money raised was directed to housing loans which generated more return for the fund, and the remainder were invested primarily in government bonds.

Now here is the catch: at the same time that FGTS has been profitable by investing in government securities, the fund paid a very low return to the workers (which own the money). The law says that the return should be the TR (Reference Rate) plus 3% per year, but the fund paid back less than 4% in 2010 lower than inflation!

What ‘s the takeaway? FGTS is very profitable, but for the government. So far, not a penny of that profit was credited to the accounts of workers, who are losing buying power as the inflation (7%+) is higher than the return (4%) they are earning in the fund.
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