Transition PEC should exclude environmental projects financed with donations from the ceiling

The text of the PEC (proposed amendment to the Constitution) of the Transition must include a device to allow the new government to use resources obtained through donations for the execution of environmental projects without bumping into the spending ceiling —a fiscal rule that limits progress of expenses to the variation in inflation.

The articulation is made on the day that the president-elect, Luiz Inácio Lula da Silva (PT), spoke at COP27, the UN climate conference (United Nations).

The petista called for concrete actions by countries against climate change and cited promises not kept by rich nations. He also demanded a “new global governance” and more multilateral relations to fight the climate crisis and said that the issue will have a prominent role in his new government.

The articulation was reported this Wednesday (16) by the newspaper O Estado de S. Paulo and confirmed by Sheet🇧🇷

The text of the Transition PEC is being finalized this Wednesday by the new government’s negotiators. The proposal will permanently remove the Bolsa Família program from reaching the spending ceiling, paving the way for honoring Lula’s campaign promises.

Despite the absence of a deadline, PT allies admit to negotiating a four-year limit for the validity of the measure, as shown by the Sheet🇧🇷

The calculation for the exclusion of environmental projects is that it makes sense to limit these expenses funded with outside resources, since removing them from the ceiling encourages partnerships and even makes possible new sources of financing for strategic expenses.

The Amazon Fund, for example, today finds it difficult to establish partnerships with the Union given the lack of space in the Federal Budget. The projects end up concentrated in the private sector or in states and municipalities.

The measure should not face strong opposition in the National Congress. The National Treasury itself, when presenting studies for a new fiscal framework on Monday (14), suggested the possibility of treating “green public investment” as an exception to the ceiling, aimed at environmental or climate issues.

“The discussion was also brought by the IMF [Fundo Monetário Internacional], which proposes the creation of a climate investment fund for the European bloc. Also, from the revenue point of view, the fiscal framework could be adjusted in such a way that different sources of financing, such as international donations, the carbon market or green bonds [títulos verdes] could be processed in the Budget and aligned with a proposal for fiscal sustainability in the medium and long term”, says the text produced by technicians from the body, linked to the Ministry of Economy.

The Transition PEC can also apply the same logic to federal universities, which would be able to run expenses outside the ceiling if they are funded with their own income, such as donations or other types of fundraising.

Today, this type of expenditure is subject to the limit, which generates complaints from institutions and stifles research projects. The assessment is that the new model may even induce partnerships and even reduce dependence on the public budget.

The draft of the PEC should also allow for the allocation of a portion of extraordinary revenues (obtained, for example, with signing bonuses for oil auctions) to fund public investments outside the spending ceiling. The argument is that this expense would have a kind of fiscal backing, that is, it would only be carried out through excess revenue.

The idea, however, is to stipulate a limit for this portion, so that this value is up to R$ 23 billion. In practice, the extract could be up to R$ 198 billion, if the PEC is approved in the way it was presented, as anticipated by the Sheet🇧🇷