Permanent expansion of Auxílio Brasil to R$400 generated internal divergence in the Economy

The conversion of the extraordinary benefit of Auxílio Brasil into a permanent expense triggered internal differences within the Ministry of Economy, according to documents obtained by the Sheet through the LAI (Access to Information Law).

The target portion of the controversy was created in December 2021 to ensure the minimum amount of R$400 to beneficiary families, as promised by President Jair Bolsonaro (PL). Its validity would be temporary, until the end of 2022, but in April this year the National Congress decided to make it permanent to avoid a cut in the benefit from January 1, 2023.

In recent days, the government started to support the creation of a new temporary tranche of R$ 200, in response to the rise in fuel prices and inflation. With that, the floor of the program would go to R$ 600 until the end of this year.

The National Treasury Secretariat recommended a full veto of the permanent Aid Brazil of R$ 400, considering that the change violated fiscal rules. The sanction, according to the agency, could also violate the electoral law, since it would mean changing the conditions of the social program in the year of the presidential elections.

On the other hand, the Federal Budget Secretariat, supported by an opinion from the PGFN (Attorney General’s Office of the National Treasury), reported that it did not see any obstacles to the change from a fiscal point of view, but recommended a new consultation with the legal body – which maintained a favorable interpretation of the sanction.

Higher authority than the two divergent bodies, the Special Secretariat for the Treasury and Budget accepted the PGFN’s understanding and said it saw no obstacles to the publication of the law, but recommended that the Planalto Palace analyze the electoral issue.

“With regard to the notes of the STN regarding electoral legislation, despite extrapolating the powers of this SETO, we suggest evaluation by the Presidency of the Republic itself at the time of sanction”, says an informative note of May 17. A day later, the law was sanctioned without vetoes by Bolsonaro.

In a note, the AGU (Advocacy-General of the Union) informed the Sheet that “no violation of the Law on Elections was envisaged” and, therefore, “the matter was not addressed” in an opinion written by the organ. The document recommended sanctioning the project.

The extraordinary benefit was created as temporary because the government did not have a new source of revenue to fund the permanent expansion of the program, as required by the LRF (Law of Fiscal Responsibility). This source would be the taxation of profits and dividends, included in the proposal for the reform of the Income Tax, but the text ended up stalling in the Senate.​

Bolsonaro then edited in December last year an MP (provisional measure) creating the extraordinary benefit until the end of 2022 — enough to get through the election year without violating the LRF.

The strategy was to create a temporary portion to circumvent the tougher fiscal requirements and also to bypass the prohibitions of the electoral law. The legislation prohibits, in the year in which the elections are held, the free distribution of values, goods or benefits, with the exception of social benefits already in effect in the previous year.

After the MP, the government obtained in Congress the approval of the PEC (proposed amendment to the Constitution) of the Precatórios, which postponed the payment of judicial debts of the Union and relaxed the spending ceiling, a rule that limits the growth of expenses to inflation.

The amendment authorized the government to regulate, in 2022, the conditions, access rules and other requirements of the social program without the need to meet the legal limits for increased expenses – in practice, removing the LRF.

The same passage, however, says that compliance with the rules will be waived in the event of a change “that entails an increase in expenses in that year”.

The National Treasury interpreted the wording as an exception only to spending in 2022. In other words, the government would need to present a source of revenue starting next year to finance the policy, which was not done.

“In this sense, the exception granted by the constitutional command would only reach the increase in expenditure that was observed in the year 2022”, says a note prepared by the technical staff of the body on May 12.

Hours later, the Secretary of the National Treasury, Paulo Valle, issued a letter reinforcing the reasons for the full veto, including the lack of clarity regarding the PEC’s provision on fiscal rules and the possible affront to the electoral law.

“The permanent elevation of the benefit of the PAB [programa Auxílio Brasil] in years after 2022, it may represent the granting of a benefit of a different nature from the original, not falling within the exception applicable to ‘social programs authorized by law and already in budget execution in the previous year’ [da lei eleitoral]”, warned Valle. The secretary also recommended consulting government legal bodies.

On May 17, the PGFN reiterated its understanding that the constitutional provision is sufficient to rule out the requirements for tax compensation for the permanent extraordinary benefit. The “mere maintenance” of the expense in later years would not be sufficient to exclude the exception.

“Only a new creation, expansion or improvement, outside of 2022, will attract the incidence of these standards. [fiscais]”, said the legal body of the Economy.

At the time of the project’s vote, technicians admitted behind the scenes that the wording of the constitutional amendment gave rise to controversial interpretations, but the final understanding was that there was legal support for the law’s sanction.

For Élida Pinto, a professor at FGV-SP and prosecutor of the Public Ministry of Accounts of the State of São Paulo, the PGFN interprets the formal act of implementation of the measure as the target of the exception, and not its execution over the years. “If the government increases the Aid in value or scope outside of this exercise [2022]such a reading would not fit”, he says.

Regarding the electoral issue, lawyer Ricardo Barretto, a doctor of law from UnB (University of Brasília), assesses that, although temporarily, the portion that raised the benefit to R$ 400 was already in execution in 2021.

Therefore, he understands that there was no affront to the electoral law. “What was done was not an increase in 2022, but rather ensuring continuity from 2023 onwards, so I understand that there was no violation of this specific provision,” he said.