Guedes embarks on Bolsonaro’s campaign and incorporates Auxílio Brasil speech at R$ 600

Minister Paulo Guedes (Economy) embarked on the campaign of President Jair Bolsonaro (PL) and took up the speech of maintaining the minimum benefit of R$ 600 in Auxílio Brasil, despite this representing the need for changes in the spending ceiling — a constitutional rule that prevents federal spending from growing above inflation.

The head of the economic team has also been out in the field, in meetings with businessmen and representatives of the financial market, to counter criticisms and defend the policies adopted under his management.

Before the submission of the 2023 Budget proposal, which put the government in the firing line for cuts in social programs, Guedes adopted a more moderate speech in relation to Auxílio Brasil.

According to financial market interlocutors, in meetings in early August, the minister sought to leave the promise of maintaining the higher value to Bolsonaro’s account, which was interpreted as a reservation to the additional fiscal impact resulting from this signaling.

In these conversations, Guedes also conveyed the message that the Auxílio Brasil floor of R$ 600 would be valid for this year, and the future of the benefit would be discussed at a later stage.

However, sending the Budget without this minimum guarantee, due to legal restrictions on the inclusion of this expenditure, left the government exposed to criticism. Guedes stopped participating in a press conference to detail the data and the promise of R$ 600 in the future, as suggested by government technicians, according to reports made to the Sheet.

Guedes turned the switch and abandoned prudence on September 1, the day after the budget proposal was presented. “The commitment is made, it will be R$ 600 and that’s final”, he sentenced to an audience of businessmen.

The endorsement of the head of the economic team was immediately incorporated into the president’s speech as a kind of mantra to dispel criticism. “He [Guedes] assured me that we are able to maintain the R$600,” Bolsonaro told Jovem Pan on September 6.

So far, however, there is no concrete evidence of how the extra cost of the decision will be accommodated in fiscal rules, or how it will affect the trajectory of the country’s public debt. The campaign of former president Luiz Inácio Lula da Silva (PT) started to use the potential cut in the program as a factor to wear down Bolsonaro.

In the budget proposal, R$ 105.7 billion is reserved for the social program, enough to fund an average benefit of R$ 405.21. Ensuring the floor of R$ 600 would require an extra expense of R$ 52.5 billion.

The amounts do not include Bolsonaro’s new promise, an additional R$200 for the Auxílio Brasil audience that gets a job (a rule already provided for in law since 2021, but not implemented by the president).

In private conversations with the market, the minister has adopted an austere tone, agreeing with fiscal concerns while admitting the need to make changes to the spending ceiling. The path to this and the exact format of the rule in the future, however, have been overlooked.

In public, in turn, Guedes has already emerged talking about calamity or the extension of the state of emergency to ensure the payment of the R$ 600, raising insecurity about the existence of a lasting solution to the fiscal impasse.

The National Treasury is internally discussing a proposal to give more flexibility to the ceiling, as detailed in the Sheet, allowing an increase in expenses when the public debt follows a more favorable trajectory. But the parameters are not yet known — and they could determine whether or not the government would have extra space as early as 2023.

The technicians’ proposal has been Guedes’ starting point to talk to the market about the future change in the roof, without much detail. He also clings to the promise that the R$ 600 of Auxílio Brasil will be conditioned to the resumption of taxation of profits and dividends distributed to individuals in order to maintain the discourse of fiscal responsibility. The measure does not solve the problem of the ceiling, but indicates a permanent source of income to cover the expense.

Along the same lines, the minister has shown his intention to rescue the “DDD” agenda, which includes untying, unindexing and releasing expenses. Next year, the Budget will have 93.7% of the expenses previously stamped for pensions, salaries, education and health expenses and other items considered mandatory.

Guedes defends “breaking the floor”, an image commonly used by the minister to make room in the Budget by untying and unindexing expenses. In 2021, however, his team tried to propose policies in this direction, with the freezing of pensions, which would be uncorrected for inflation – an unpopular idea, which made Bolsonaro fire the threat of a “red card” to anyone who was the author of similar ideas. , which they would take from the poor to give to the poor.

At the same time, the minister gives indications of not being so rigid with his proposal. According to interlocutors, Guedes has already signaled that, in the event of Bolsonaro’s re-election, a slice of the Budget will continue to be stamped for the rapporteur’s amendments.

The rapporteur’s amendments are public resources used as a bargaining chip in negotiations with the National Congress, privileging government allies. Next year, they will total R$ 19.4 billion – almost the amount of all investments to be controlled by the ministries in 2023.

Defender of “giving back control of the Budget to the political class”, Guedes has already minimized the relevance of the rapporteur’s amendments as they represent “less than 1%” of total spending, which will reach R$ 1.9 trillion next year.

Guedes conditions his permanence as minister to reforms and privatizations

Despite talking about the future, Guedes makes his stay in office conditional on maintaining the “alliance between liberals and conservatives.” The expression is a way for the minister to refer to an agenda of reforms and privatizations that has support to advance within the government and in Congress.

Over the three years and eight months of his government, however, he did not always have this support. After implementing, in the first year, a more robust pension reform than expected in the market, the economic team had to deal with the effects of the pandemic and the spending impetus of the political and military wings.

The proximity of the electoral calendar also inspired Palácio do Planalto to seek instruments to boost Bolsonaro’s popularity. Since 2021, there have been four constitutional amendments in an attempt to create space in the Budget for measures with popular appeal, such as the expansion of Auxílio Brasil and the creation of temporary benefits for taxi drivers and truck drivers.

Criticized in these meetings for giving in to electoral pressure, Guedes defends himself by extolling the positive performance of the economy and telling his interlocutors that the changes were made “within the rules”.

In fact, the changes were submitted to the scrutiny of the National Congress — which accepted to amend the Constitution to open the coffers in an election year. On the other hand, the minister heard that one of the weaknesses is precisely the insecurity resulting from the ease of changing the Constitution after so many attacks.

In those conversations, according to reports, Guedes agreed with fiscal concerns but offered no solutions. Despite complaints about the lack of detail, the minister reacts to those who accuse him of not explaining the economic plan of a possible second Bolsonaro government.

“I think it’s pathetic sometimes people saying, ‘Oh no, he never said what his plan is,'” he said in a video shared by the president on Thursday (8). After listing goals of economic opening, tax reduction, spending control, social focus and Central Bank autonomy — among other initiatives not mentioned — Guedes said that “everyone knows what the program is.”