Planalto prioritizes economic agenda in Congress to reverse Bolsonaro’s rejection

A month from the end of 2021, the Planalto Palace prioritizes economic projects in Congress to try to reverse or reduce the rejection of Jair Bolsonaro (no party). The agendas have popular appeal on the eve of an election year.

Structural reforms, such as tax and administrative reforms, dear to minister Paulo Guedes (Economy), are out of the plans. The idea is to improve the president’s image, now at record negative levels, according to polls.

Today, five projects are seen as urgent by palace auxiliaries. They are: the PEC (proposed amendment to the Constitution) of the Precatório; the new exchange rate framework; BR do Mar; the privatization of the Post Office; and changes in the ICMS (Tax on Circulation of Goods and Services) for fuels.

The Planalto Palace list, however, should not be fully attended to by Congress. The main obstacle is the thorny relationship with the Senate.

The president of the House and potential opponent of Bolsonaro in 2022, Rodrigo Pacheco (PSD-MG), was elected with government approval. However, he has adopted an independent role.

Since Davi Alcolumbre (DEM-AP) left the House, the dispute over the control of amendments has disorganized the base, argue Bolsonaro’s advisers, and means that the government has no estimate of how many senators support his proposals.

For this reason, too, electing allied senators became the president’s priority in 2022.

Palace assistants urgently try to implement the PEC of Precatórios — which defaults on judicial debts recognized by the Judiciary and without the possibility of appeal — and unlock the increase in Brazilian Aid to at least R$ 400 per month.

This is the main agenda of the government in Congress, as it is a promise by the head of the Executive and a bet to increase popularity among the country’s lower income groups.

The intention is to start paying the benefit of R$ 400 in December, but the largest benches in the Senate want more changes in the PEC, despite the concessions already made by the leader of the government in the House, Fernando Bezerra (MDB-PE), who is rapporteur of the proposal.

Bolsonaro said, on Tuesday (23), that he wants the PEC to be approved next week. “For us to start paying these R$ 400 in December,” he told Rede Correio SAT, from Paraíba.

For Planalto, approval by the end of the year of the bill that changes the ICMS rule for fuel is also a priority. This has also been a flagship for Bolsonaro in recent months because of the rise in the value of gasoline.

The measure has already been approved in the Chamber. The text provides that ICMS becomes a fixed amount.

The states and the Federal District may annually define specific rates. The tax rate will be calculated based on the average value of fuels in the last two years.

The expectation of the sponsors of the proposal, such as the president of the Chamber, Arthur Lira (PP-AL), is that the price of gasoline and other fuels will fall in 2022 — an election year.

However, critics of the project say this method will cause distortions and raise the cost by 2023.

The project has been stopped for a month and a half in the Senate, which still has no agreement to vote on the proposal.

The government has been pressured to take measures to contain the rise in fuel prices. Therefore, there is a dispute between the Palácio do Planalto and governors who accuse Bolsonaro of unfairly blaming the states, despite the fact that ICMS rates have not risen.

The government’s idea is to guarantee in this last month of the year the measures that can give the president a more advantageous position in the electoral dispute. For this reason, also, the gas aid was urgently treated in the Planalto.

Sanctioned on November 22, the “Brazilian Gas Aid Law” determines that families enrolled in the CadÚnico (Single Registry for Social Programs) with a monthly per capita family income less than or equal to half the minimum wage can be benefited.

Bolsonaro confirmed that the idea is to start paying the gas voucher in December. “The objective is to serve that most needy part of our society”, he said, also to Rede Correio SAT, on Tuesday.

In addition to agendas with popular appeal, the government wants to advance in projects that please investors and the financial market, such as the privatization of Correios. The proposal, which breaks the state-owned company’s monopoly and opens the company to private capital, was approved by the Chamber in August and has been stopped at the Senate.

Leaders of independent parties, such as the MDB, criticize the idea of ​​privatizing the state-owned company. There is an articulated proposal that suggests transforming Correios into a mixed capital company, instead of privatizing.

The government also listed the bill that makes a series of changes in the Brazilian foreign exchange market and paves the way for individuals to maintain accounts in foreign currency, such as the dollar, in Brazil.

The proposal was altered by the Senate and, now, it needs to go through a new vote in the Chamber.

The economic team is betting that, by unlocking the liberal agenda, it will be possible to boost investments in the country, which accelerates the growth of the GDP (Gross Domestic Product) and generates jobs. The economic crisis is one of the concerns of Bolsonaro’s allies in the campaign for re-election.

Even though all these measures are evaluated as a priority by Planalto, more realistic assistants admit the difficulty of approving them this year. It is possible that only the PEC of the Precatório is voted.

On medium to long-term reforms, such as administrative and tax reform, the president’s interlocutors already admit that they will lose sight of it.

Government leaders in the Chamber say that there are still no votes to approve the PEC that reformulates the rules for civil servants.

The tax reform was sliced ​​this year. The proposal to merge PIS and Cofins is in the Chamber and was stopped after strong lobbying from sectors that can pay more taxes with the measure, such as services.

The proposal to change the IR (Income Tax) rules is another item that is stalled in the Senate due to lack of political support.

At a dinner this week at the headquarters of the CNI (National Confederation of Industry) promoted by the MBC (Brazil Competitive Movement), Guedes made an appeal for the approval of the reforms.

“Within the government, there is also an environment that you think the president will gain if he doesn’t reform,” he said. “I think it’s the opposite. Moving forward with the reforms is the sign of an administration that wants to move Brazil. But there are people, the guy wants to be elected… Well, never mind,” he said.

Behind the scenes, Guedes faces a battle with the political wing, in particular with Minister Onyx Lorenzoni (Labour and Social Security), who is expected to run for government in Rio Grande do Sul. leave reforms aside.

Priority government proposals for 2021

PEC of Precatório

• Provides for payment in installments of federal debts recognized by the Courts, when there is no longer any appeal
• Under the proposal, the government would pay in 2022 only debts up to R$ 600,000
• A change in the calculation of the spending ceiling was included in the PEC, which opens a gap for Auxílio Brasil (successor to Bolsa Família) of R$ 400 in 2022, the election year

Foreign Exchange Bill

• It deals with the Brazilian exchange market, Brazilian capital abroad, foreign capital in the country and the provision of information to the Central Bank for the purpose of compiling official macroeconomic statistics

Cabotage Bill (BR do Mar)

• Establishes BR do Mar, an initiative that seeks to encourage navigation between national ports (cabotage)
• One of the goals is to reduce Brazil’s dependence on road freight transport

Post privatization

• The proposal allows postal services, including those provided today by Correios under a monopoly regime, to be explored by the private sector
• The objective is to eliminate the restriction on entry of companies in the sector, increasing competition
• Today, the Post Office has exclusivity in sending letters, telegrams and other messages

Fuel Law Project (ICMS)

• Proposal creates a fixed amount of ICMS
• Rate can be set by the states and the Federal District each year
• Tax rate will be calculated based on the average value of fuels in the last two years and, therefore, the expectation is that the value of the fuel will be reduced