Congress warns Lula and recommends out-of-ceiling expenses for a determined period

President-elect Luiz Inácio Lula da Silva’s (PT) transition team was warned by members of the National Congress about the risks of permanently withdrawing a set of social expenditures from reaching the spending ceiling — a fiscal rule that limits the expenditure growth to the variation of inflation.

The recommendation given to the vice-president-elect, Geraldo Alckmin (PSB), and to members of the PT, is that the exception to the fiscal rule has a validity period, which could be one year or even four years (period of the presidential term ). The topic was discussed at a meeting on Tuesday night (8) at the CMO (Mixed Budget Committee).

The assessment among the members of the commission is that the permanent exclusion of some expenditure from the spending ceiling can have a bad impact on the financial market, at a time when the elected government is still seeking to inspire confidence and credibility among investors.

“There is a consensus that the PEC [proposta de emenda à Constituição] and removing these expenses from the ceiling is the best way. But CMO members want this to have a horizon. It may even be for the mandate [de Lula]four years, but [para eles] you have to have a deadline”, said deputy Enio Verri (PR), PT coordinator in the commission.

The warning from the members of the CMO should be taken by Alckmin to Lula, who arrived in Brasília on Tuesday night and is going to hold a series of meetings with the summit of Powers, in the expectation of already working on the sewing of support for the PEC.

as showed the Sheet In recent days, the permanent withdrawal of Bolsa Família and other social expenses from the calculation of the spending ceiling has been firmly discussed in the transition group as an option to make room in the Budget. The objective is to secure resources not only in 2023, but also in the coming years.

According to interlocutors on the team, the measure removes pressure and gives Lula’s team more time to discuss a possible structural review of fiscal rules, a task that will not be trivial and will require a series of technical analyses, in addition to building political support in Congress.

Longer-lasting exclusion of expenditures from the spending ceiling, therefore, prevents the new government from running out of space. The new risk of tightening could arise as early as April 2023, when the 2024 LDO (Budget Guidelines Law) project needs to be submitted.

One of the possibilities analyzed is to withdraw the total amount of R$ 175 billion for Bolsa Família, considering the R$ 105.7 billion already reserved in the budget proposal plus the amounts necessary to raise the minimum amount to R$ 600 and pay additional benefit of R$ 150 for children under six years old.

In this way, the amount currently reserved in the Budget proposal for Aid Brazil —enough only for an average benefit of R$ 405.21— would be redistributed to other areas that need supplementation, such as health, education and works. The new government also wants to set aside resources for an increase in the minimum wage above inflation.

The exclusion of the expense would be done through the so-called Transition PEC, which is being negotiated to make room in the 2023 Budget and was announced by Lula’s team last week.

Initially, the forecast was that the text would be presented to Congress this Tuesday. This deadline was extended to Wednesday (9), and then again extended until the end of the week.

Lula’s allies say that Alckmin will present the political scenario for the PEC to the president-elect this Wednesday.

Lula has meetings scheduled on the same day with the presidents of the Chamber, Arthur Lira (PP-AL); from the Senate, Rodrigo Pacheco (PSD-MG); TSE (Superior Electoral Court), Alexandre de Moraes; and the Federal Supreme Court (STF), Minister Rosa Weber.

“From what has been said, they want to wait for Lula’s presence, the conversation, all of that,” said the budget’s general rapporteur, Marcelo Castro (MDB-PI), after the CMO meeting. “Lula is the one who will give the final stamp.”

In addition to excluding expenses, other options are being analyzed by the team that assists in the transition. The vice president-elect himself, however, has already stated that the new government has a preference for constitutional amendment.

“We should, in the coming days, define the path. One of them, certainly the most likely, is the PEC-LOA path. The proposed amendment to the Constitution and the Budget Law”, stated Alckmin.

Those responsible for the text of the PEC recall that measures in the social area are one of the president-elect’s bets to boost the recovery of the economy.

“The ideal is to include the poor in the Budget and stay,” he told Sheet elected senator Wellington Dias (PT-PI). He was chosen by Lula to act in the negotiations of the Budget proposal for 2023.

“It is an exceptionality for this social part. What is social, is what will be defined. [Brasil]”, he said. “The understanding is that this part will have every year.”

Lula’s team has been conducting internal discussions and with members of Congress about the list of expenses that could be exempted from the expense limit. In the Legislative meetings, parliamentarians have insisted on the need to reserve resources for health, guaranteeing the recomposition of programs such as the Popular Pharmacy.

The intention to suspend fiscal rules for some expenses, however, does not change the Lula government’s intention to review the spending ceiling. The president-elect defended, during the campaign, repealing the rule. Its team of technicians analyzes alternatives, such as resuming the primary result rule (difference between income and expenses) with the main anchor or setting a more flexible spending limit.

“Does not change our commitment to review [o teto]🇧🇷 What the president wants: to have a fiscal commitment and to control the accounts”, said Dias.