Alckmin delivers Transition PEC that excludes Bolsa Família from ceiling without deadline

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After two weeks of intense negotiation, the vice president-elect, Geraldo Alckmin (PSB), presented this Wednesday (16) the draft of the PEC (proposed amendment to the Constitution) of the Transition, which proposes to remove the Bolsa Família program from the reach of the spending ceiling permanently and paves the way for honoring campaign promises of the president-elect, Luiz Inácio Lula da Silva (PT).

The measure is considered necessary to avoid a social blackout next year, since the Budget proposal sent in August by the Jair Bolsonaro (PL) government only guarantees an average value of R$ 405.21 for beneficiaries, in addition to imposing cuts severe cuts in funds for housing and in the Popular Pharmacy.

“We are taking a measure of national salvation”, said the rapporteur for the 2023 Budget, senator Marcelo Castro (MDB-PI), who was at the meeting to receive the text

The PEC is not going to set a maximum value for the extract bill, but estimates by Lula’s team indicate the need for R$ 175 billion for the social program next year. The amount includes BRL 157 billion to ensure the continuity of the minimum benefit of BRL 600 and BRL 18 billion to finance the additional installment of BRL 150 per child up to six years old.

The text also does not stipulate an expiration date for the measure, which leaves the door open for it to be permanent. “Without deadline. As proposed, there is no deadline. Perennial”, stated Castro.

Just considering the withdrawal of Bolsa Família from the spending ceiling, the government’s primary deficit next year could exceed R$ 235 billion. This amount is funded by public debt, which is financed by the collection (obtained mainly from taxes paid by society).

PT members, however, know that an important wing of Congress defends restricting its validity to 2023, the first year of Lula’s government. For this reason, PT allies admit negotiating a four-year term, which is seen as a compromise to wave to sectors that fear a “blank check”.

On Tuesday (15), the Panel showed that Lula defended the four-year deadline for Senate President Rodrigo Pacheco (PSD-MG), in a private conversation in Egypt, where they are participating in COP27, the United Nations climate conference .

The PEC was delivered in the Senate to the Budget rapporteur and House parliamentarians. The president of the Senate, Rodrigo Pacheco (PSD-MG), could not attend because he is at COP27. The mayor, Arthur Lira (PP-AL), did not go to the Senate Presidency, where the delivery took place. He later welcomed Alckmin into his House Presidency office.

The next step is to collect signatures for the PEC to formally begin its process, which PT members intend to do as of this Thursday (17). It should begin to be analyzed by the Senate, where the rite is simpler. In the House, the expectation is to attach the text to a proposal already in progress so that the vote is made directly in plenary.

Without Bolsa Família in the ceiling, the R$ 105 billion currently reserved for the program in the Budget proposal could be redistributed to other actions, including Lula’s promises, such as the real increase in the minimum wage (above inflation) and the recomposition of the budget. for programs such as Minha Casa, Minha Vida and Popular Pharmacy.

This seam will be conducted in parallel by the general rapporteur of the Budget, senator Marcelo Castro (MDB-PI), since the expectation is to approve the piece by the end of the year. The details of the distribution plan for these resources among the areas have not yet been released by the transition team.

One of the few points already known is that Lula’s team intends to suggest a minimum wage close to R$ 1,320 next year, which generates an additional cost of R$ 6.8 billion, as shown by the Sheet🇧🇷 The big unknown, in turn, is the volume allocated to investments.

PEC negotiators also included a device that allows the government to use resources obtained through donations in the execution of environmental projects. The articulation was made on the day that Lula spoke at COP27, demanding resources from rich countries and placing the fight against the climate crisis as a priority in his new government.

The assessment of people following the discussions is that it makes no sense to limit these expenses, 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 has difficulty establishing partnerships with the Union due to lack of space in the Budget.

The same logic must be applied to federal universities, which would be able to run expenses outside the ceiling if they are financed with their own income, such as donations or funding. 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 text of the PEC should also allow for the allocation of a portion of extraordinary revenues (obtained, for example, with bonuses for signing 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🇧🇷

The rule would be a way to compensate for the loss of space in the spending ceiling from 2024, when it will be necessary to adjust the greater growth of the limit in 2023. The rapporteur has already indicated that he will maintain the correction of 7.2% foreseen in the Budget, despite the recent slowdown in inflation. This helps next year, but forces a correction close to R$ 30 billion in the following period.

The model of excluding Bolsa Família from the spending ceiling prevailed despite warnings coming from the financial market, which sees in the size of the bill a risk of losing control of public accounts —especially if the measure is adopted on a permanent basis.

Even if the deadline is four years, the calculation being made by some analysts is that the new government will be authorized to spend R$ 700 billion outside the ceiling in the period —a value close to the estimated savings with the Social Security reform, approved in 2019 by the current administration.

People who participate in the PEC discussions, however, point out that the longer-lasting exclusion of Bolsa Família from the spending ceiling prevents the new government from running out of room to govern. The new risk of tightening could arise as early as April 2023, when it is necessary to forward the 2024 LDO (Budget Guidelines Law) project.

NEW FISCAL FRAMEWORK

The four-year period is also seen as a way of giving the new government time to structure a proposal for a new fiscal framework, something that is not trivial and demands a series of technical analyses.

In the campaign, Lula even spoke of revoking the spending cap, but the PT’s team has not yet decided which should be the new model to replace the fiscal anchor.

Amid market fears, economist Persio Arida stressed, on Tuesday, that fiscal and social responsibilities “go hand in hand” and that creating “exceptionalities” and expenditure linkages are not the best way to resolve the impasse in the 2023 Budget. he is one of the coordinators of the economics technical group in the transition and is close to the vice-elect. Arida is still quoted to occupy the position of Minister of Finance.

Economists André Lara Resende, Nelson Barbosa and Guilherme Mello are also part of the coordination.

Until Monday (14), they still had not had access to the Transition PEC, which was requested from the transition coordination. This Wednesday, the group is already aware of the content of the proposal and should have new meetings in the coming days to analyze the text and eventually offer suggestions.

In the Senate, the text must first go through the CCJ (Commission on Constitution and Justice), then through the plenary. PT leader in the Senate, Paulo Rocha (MG) believes it is possible to hold both votes on the same day.

This would give a period of two weeks for the analysis of the text by the Chamber of Deputies, fulfilling the expectation of approving the PEC later this year, in time to incorporate the changes to the 2023 Budget.

In the Chamber, the text would be attached to PEC 24, which has Deputy Tabata Amaral (PSB-SP) as rapporteur. The measure helps to gain speed, since the normal procedure would require consideration by the CCJ and the special commission.

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