Opinion – Vinicius Torres Freire: How Bolsonaro and the gang planted another bomb in the country’s future

The only new emergency in Brazil is the critical moment of Jair Bolsonaro’s candidacy. But there is no law that authorizes the breaking of safes and Budget laws in case of danger for reelection. As you know, that’s what this Aid PEC is for, the so-called “Kamikaze”. PEC: Proposed Amendment to the Constitution.

What less people realize is the lasting effect that break-ins will have on interest rates and, therefore, on growth and, therefore, on poverty and misery and the future of the shaky next government.

Inflation has been above 10% since September 2021. Food inflation was near century highs at the end of 2020, A YEAR AND A HALF A year ago. Poverty exploded in 2021. It is possible that it even dropped a tic in 2022, although those who suffer from hunger, cold and despair should not have noticed the difference.

The justification of the PEC dos Auxílios for the “emergency” is, therefore, an impudence. The text of the PEC that went to the plenary, in addition to being illiterate, with truncated, jammed and dirty wording in legal terms, is just a piece of paper to dress an electoral fraud with a legal costume.

The PEC throws in the trash the laws that limit public spending: electoral laws, budget guidelines, fiscal responsibility, and the more than clumsy “golden rule” (debt only for investments). It ends with “any fence” for the expenses foreseen in the PEC. It was approved by 72 of the 73 senators present, out of a total of 81.

Would alleviating misery cost money? Clear. What was done, sensibly and planned? Nothing, until Bolsonaro was afraid of losing in the first round.

The break-ins come from the gambiarra in the spending ceiling, from 2021. It continued with the law that defined fuel, among other goods and services, as essential. There, the budget law and the fiscal responsibility law also went to waste.

All this means that there is no point in writing a norm for limiting or planning public expenditures in the Constitution. It is easier to change the Constitution than the condominium statute.

A fiscal norm, preferably a realistic one, is a sign that public spending will not be carried out on a whim, to favor a rogue government, that it will be subject to a cost-benefit calculation, that public debt will not grow without limit.

Without this and everything else constant, lenders will charge more to lend to the government. By table, the other interest rates in the economy rise, whether that of the provision of a refrigerator, house or car, or the cost of companies to raise capital to expand their business.

These break-ins will have more visible effects when the inflationary tide ebbs. With sluggish GDP growth and less revenue from rising prices, more money for basic government needs will be lacking and/or deficits and debt will increase.

Ah, yes: we have the alternative of putting more fire into inflation.

The next government will have relatively less money, more spending and less freedom to reallocate spending, not least because the center wants to keep up to 40% of what remains of “free” money to spend.

The next government will also have to create some “ceiling”. It may be better than Michel Temer’s. But you will have to create. If you don’t, you will see interest and exchange rates ruining your government since 2023.

Given the “new ceiling”, the limits of the 2023 budget law, increased expenditures, demoralization of tax laws, a negotiating Congress, a world close to recession and resistance to spending cuts and/or tax increases, the next administration will be well chipped.

Bolsonaro and the gang planted another bomb in the future.