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Rumors spark bank run, break-ins in Brazil

Police had to intervene as people flocked to ATMs.

Brazil bank run1Enlarge
A plate reading Banco do Brasil (Bank of Brazil) is seen at the entrance of the institution in Sao Paulo, Brazil, on April 26, 2013. (Yasuyoshi Chiba/AFP/Getty Images)

Rumors that Brazil's social security fund called Bolsa Familia was to be cancelled led thousands of people to rush to withdraw money from a Brazilian bank over the weekend.

Customers lined up at ATMs at dozens of bank branches of Caixa Economica Federal, a government-owned bank, which pays the social security subsidy on Saturday and Sunday.

"The bank branches themselves aren't open on Saturdays. What happened is that once the rumor gained momentum, people flocked down to their local branches to try to withdraw money from the ATMs," Rafael Carregal, a journalist at Brazil's main TV network Globo told CNBC.

Brazilian newspaper Estado de Sao Paulo reported that at five branches in the northeastern city of Sao Luiz and four others in the state of Maranhao, depositors broke into branches. Most of the branches that were affected were in the poorer northeast region of the country.

In all, branches in 12 states were affected as the government tried to quell the rumors.

"Police had to intervene in many states, trying to keep the masses in order. The minister of national development had to make a speech (on Sunday) reassuring the people that nothing was to be changed in their benefits program," Carregal said.

Bolsa Familia is a social security program that pays money to 13.8 million poor families in Brazil. It was the flagship program of President Luiz Inacio Lula da Silva's center-left government aimed at alleviating poverty and encouraging school enrollment. While Lula left office in December 2010, the current President Dilma Roussef is seen as Lula's protégé and has largely continued his policies.

"There is absolutely no possibility of payments being suspended or indeed any alteration to the normal timetable. Bolsa Familia is being paid. It's being paid on time. And it's being paid according to the schedule," Tereza Campello, Brazil's minister for social development said over the weekend.

Brazil's Justice Ministry said it was investigating the rumors.

But Globo's Carregal said he wouldn't be surprised if more depositors tried to withdraw money on Monday, when banks finally open.

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Original Source URL: 
http://www.cnbc.com/id/100750288

http://www.globalpost.com/dispatch/news/business/political-risk/130520/brazil-bank-run-bolsa-familia-social-security