Guedes says the government violated the spending ceiling

Economy Minister Paulo Guedes said this Wednesday (3) that the government “violated the spending ceiling” to transfer resources to the most vulnerable in a time of emergency.

He argued, however, that the Auxílio Brasil payment of R$600 this year is fiscally responsible, funded by extraordinary income.

while participating in the Expert XP event, the minister also said that the government will zero the IPI (Tax on Industrialized Products), in order to give an additional boost to the country’s industrial sector.

“We are going to re-industrialize Brazil. We are going to zero this IPI”, stated Guedes. The minister did not, however, detail how he intends to promote the measure or a timetable for its implementation.

At the end of July, the government issued a decree that determines a 35% reduction in the IPI on products that are not manufactured in the Manaus Free Trade Zone. In February, the government had cut the IPI by 25%, and increased the cut to 35% in April.

Guedes also said that the government will be able to correct the income tax table and permanently pay the Auxílio Brasil of R$600 if Congress approves the tax reform project that has already passed the Chamber and awaits analysis by the Senate.

The minister said that the Income Tax reform is the solution for the two promises already made by President Jair Bolsonaro (PL) to be fulfilled with fiscal responsibility.

The current rule provides that Auxílio Brasil will be of R$ 600 only until December. As the spending ceiling would continue to be an obstacle to these additional expenses even with this solution, Guedes once again defended the removal of constraints from the Budget, giving more freedom to the government to define priority allocations.

Analysts have cited heightened fiscal risks and possible inflationary pressure after the government decided to release overhead spending to boost social benefits months before the election.

In the presentation, Guedes asked people to believe in facts, not narratives. The minister argued that the government was accused of fiscal populism in 2021, but ended the year with a primary surplus in public sector accounts.

Guedes also stated that Brazil is at the “beginning of a long cycle of growth”, while most developed economies are at the end of the cycle of economic expansion observed over the last few years.

“We are in fiscal balance. The fiscal is strong,” said the minister, who defended the increase in social spending above the fiscal ceiling, given the impacts of the war in Ukraine for essential goods such as food. He stressed that the growth in spending forecast for this year will not lead to an expansion in the size of the State, and that, in exceptional situations, such as a pandemic or a war, extraordinary measures, such as the freezing of civil servants’ salaries, contribute to maintaining the fiscal balance.

He added that, despite the downward revisions in GDP (Gross Domestic Product) for 2023, he believes that the growth of the economy next year will be higher than that observed this year, in a scenario of decelerating inflation and falling rate. of interest.

“Brazil is doomed to grow 10 years in a row,” said Guedes, who projected that the unemployment rate should end the year at around 8%. “The worst has gone.”

with Reuters