Elected government wants to wash its hands of fiscal responsibility and stay four years without any type of limitation, says senator

Less than 20 days before the beginning of the parliamentary recess, the team of the president-elect, Luiz Inácio Lula da Silva (PT), is still trying to overcome resistance and approve a Proposed Amendment to the Constitution (PEC) to guarantee greater fiscal strength for the beginning of the new government.

Despite the short deadline, even congressmen who are critical of the text filed by Senator Marcelo Castro (MDB-PI) see good chances of approval of the proposal when the lights go out in 2022. But probably not with the comfort desired by Lula.

Author of an alternative proposal to the PEC defended by the elected government, Senator Alessandro Vieira (PSDB-SE) says he will resist “as much as possible” to avoid an exaggerated hole in the spending ceiling and will work to pressure the next government to discuss a new fiscal anchor for the country.

For him, it is possible to reach a quick consensus in the National Congress around the maintenance of BRL 600.00 per month in Bolsa Família (a program that will be resumed in place of Auxílio Brasil) and an additional BRL 150.00 for families with children up to six years.

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It is also possible to move forward in budget recompositions for programs such as school lunches, but even so, the parliamentarian believes that the fiscal space requested by the future government is exaggerated and may pose risks to the country’s economic stability.

“The proposal that will surely be approved in the end will be very different from the one presented by the transition team. We have very big restrictions regarding the size of the fiscal space created and the deadline for it”, he said in an interview with InfoMoney🇧🇷

“What the proposal presented transmits is a feeling that the government wants to wash its hands of any remnants of fiscal responsibility and carry out the four years of government without any type of limitation. This does not seem to be good for Brazil, it does not seem to be good for the public accounts, and it will face our resistance in a constructive way”, he said.

The Transition PEC provides for the full withdrawal of Bolsa Família from the spending cap – a fiscal rule that limits the evolution of public expenditure in a fiscal year to the accumulated inflation of the previous year – for a period of four years.

In practice, this means BRL 175 billion in 2023 alone, with BRL 105 billion already provided for the program in the annual Budget Bill (PLOA) forwarded by the Jair Bolsonaro (PL) government.

The proposal also foresees the use of any “extraordinary income” for investments by the federal government, with a maximum limit of R$ 23 billion. As a parameter, the text establishes that the amounts cannot exceed 6.5% of the collection, which exceeded the forecasts of the budget law in 2021.

The alternative PEC presented by the senator limits the amount outside the spending ceiling to R$ 70 billion. In this way, it would be possible to guarantee the Bolsa Família program at the level defended by the elected government, but not the fiscal space desired by Lula and his team.

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The text also includes a device that stipulates the deadline of July 17, 2023 as the deadline for the new government to send to the National Congress a complementary bill that provides for a new fiscal anchor, tying the discussions.

“The government is trying a shortcut, to have complete freedom and be able to govern without worrying about fiscal responsibility. It’s not a rational way to act. I understand everyone’s anxiety, so that Brazil can be reconstructed, but it has to be done with technical quality, respecting budgetary limits and thinking about medium and long-term development”, he suggested.

Vieira said that he has not yet been approached by the elected government to address the issue and criticizes the way in which Lula’s team has conducted the negotiations to approve the PEC. “They are not in a real negotiation process. The negotiation they are trying to do is typical of the old days, via ‘centrão’, secret budget, budgetary space, for old caciques. It is a bad start to use these tools, which were so criticized throughout the campaign, even before the inauguration”.

The parliamentarian also highlights “innovations” present in the protocol version of the Transition PEC that may lead to legal questions in the future. “They are transferring responsibility for allocating budget resources to a government that has not been sworn in. There is no constitutional provision for this. This is an anticipation of exercise, ”he warned.

Check out the interview highlights:

InfoMoney: Two weeks ago, the government presented a draft for the Transition PEC. The text bothered parliamentarians and economic agents. Last Tuesday (29), it formalized a text with very few modifications. How do you evaluate the movement of maintaining a contested text, opening up the possibility of negotiation during a procedure that will need to be short?

Alessandro Vieira: It is a choice of the new political group that will take over in January. It doesn’t seem like the best choice to me, because there will be, right away, a defeat in the process. The proposal that in the end will surely be approved will be quite different from the one presented by the transition team.

We have very big restrictions in relation to the size of the fiscal space created and the deadline for it. What the presented proposal conveys is a feeling that the government wants to wash its hands of any fiscal responsibility and carry out the four years of government without any type of limitation. This doesn’t seem to be good for Brazil, it doesn’t seem to be good for the public accounts, and it will face our resistance in a constructive way.

We have presented alternatives. We understand, yes, that the spending ceiling was useful, but it proved to be insufficient, insofar as, over the four years of the government [Jair] Bolsonaro, there were successive breaks − so, it has to change. Now, it cannot be a random thing, negotiated at the end of the lights, in which we know that the tools that will remain are the typical ones of the “centrão” − maintenance of a secret budget, exchange of billionaire amendments − for the text to be approved. We will resist as much as possible, trying to get the new team, duly named and sworn in, to negotiate, with transparency with society and Congress, a new fiscal anchor.

IM: Is there time to approve the PEC? There are about 20 days left for the parliamentary recess…

VA: [Para] What is really urgent, no doubt. What is really urgent is the guarantee of budgetary space to pay the Auxílio Brasil, which will once again be called Bolsa Família, of R$ 600.00, with an additional R$ 150.00 for families with children up to six years – which is the benefit of early childhood. This is urgent and has to be resolved.

We can also imagine that it is easy to reach a consensus regarding the recomposition of some budget allocations: school lunches, for example. But even so, the sum of all these ventilated recompositions hardly reaches half of the fiscal space that is intended in the PEC presented by the transition. In addition to some innovations that will generate legal challenges later, because they are transferring responsibility for allocating budgetary resources to a government that has not been sworn in. They bring a device that the changes must meet the requests of the transition team. This has no constitutional provision, it is quite doubtful. This is an exercise anticipation. It seems to me to have severe difficulties from a constitutional point of view.

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IM: The PEC creates exceptions to the spending ceiling for four years. Some parliamentarians defend that the “waiver” (that is, the license to spend) lasts only one year. The elected government indicates not to give up at least two years, understanding that, otherwise, it would run risks and would have to negotiate right at the beginning of the management, since the 2024 LDO will need to be forwarded in April…

AV: It is the nature of democracy that there is a constant process of budget negotiation. This is absolutely natural. The government is trying a shortcut to having full slack and being able to govern without worrying about fiscal responsibility. It’s not a rational way to act.

I understand everyone’s anxiety for Brazil to be reconstructed, but it has to be done with technical quality, respecting budgetary limits and thinking about medium and long-term development, because every time there is an increase in the basic interest rate, the public debt increases between R$ 36 and 50 billion. So, we give with one hand and take away with the other… Increased inflation.

A little more reflection is needed on this, because the period is very narrow and we are not going to be able to do a job well done in 20 days, when the lights go out, in a Congress that will be extremely renewed. They are anticipating the exercise of the Executive and, in a way, prolonging the exercise of the Legislative. Those senators and deputies who will not be in Congress in February will decide the future of Brazil for the next four years. It doesn’t seem rational to me.

IM: A two-year waiver for the PEC is under discussion. Would you feel comfortable with a proposal under such a goal?

AV: No. We want to persist in a solution only for the year 2023, and, throughout that year, discuss a new tax regime. Brazil needs a new fiscal regime, but this has to be debated with quality.

IM: You are the author of an alternative proposal to the Transition PEC, which is approaching 27 signatures to start processing in the Federal Senate. Did the government look for you?

AV: We have been talking to parliamentarians. We received a statement from Minister Paulo Guedes (Economy) in the sense that the fiscal space that he understands as necessary is precisely the one that we present in the proposal [alternativa]: BRL 70 billion [fora do teto de gastos no exercício de 2023]🇧🇷 But the governing base seems disjointed to me. I didn’t see any proposal or consistent movement.

IM: And on the part of the elected government? Was there dialogue?

AV: No. They are persisting in this broader proposal. They are not in a real negotiation process. The negotiation they are trying to do is a typical old-time negotiation, via ‘centrão’, secret budget, budgetary space, for old caciques. It is a bad start to use these tools, which were so criticized throughout the campaign, even before the inauguration.

IM: How do you see the relationship between the negotiations around the Transition PEC and the game for the succession of presidencies of the two legislative houses?

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AV: It seems that the two presidents of the houses [Arthur Lira (PP-AL), na Câmara dos Deputados, e Rodrigo Pacheco (PSD-MG), no Senado Federal] are concerned, at the moment, with securing their re-elections. This naturally starts to influence the negotiation process.

Our position, especially that of senators who are in the middle of their terms and who are part of independent parties, is to try to put a rational axis in the discussion, to escape from the lower debate of exchanges of amendments, positions or support for re-election and move on to a discussion that effectively meets the interests of Brazil.

IM: Political analysts have highlighted the tight deadline for the approval of the Transition PEC and indicated the possibility of alternative plans gaining strength. This is the case of the possible release of funds from a provisional measure with extraordinary credit, the use of jurisprudence from the Federal Supreme Court (STF) and the Federal Audit Court (TCU) or the postponement of the vote on the Budget and the PEC for the beginning of the next parliamentary term. Do you understand these movements as viable?

AV: They are technically viable moves. There is no doubt that there is technical credibility to this. The ideal would be to solve what is urgent right away, which is the value of R$ 70 to 80 billion, referring to the Brazil Aid, the early childhood benefit and some recomposition of essential areas that we very clearly have a diagnosis of problems. And the rest will be resolved the following year, with a transparent debate, the new Congress, a new team at the Ministry of Economy and thinking about Brazil’s interests.

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