Congress should restrict scope of Transition PEC, analysts assess

The National Congress should limit the scope of the Transition PEC, which aims to exclude disbursements with the Bolsa Família from the spending ceiling rule and makes other budgetary changes, believe financial market analysts, who have once again expressed concern about the country’s fiscal health after the presentation of the text of the Proposed Amendment to the Constitution.

In reports published this Thursday, after vice president-elect Geraldo Alckmin released the content of the proposal, analysts pointed out that it was necessary to closely monitor the course of the measure and signaled that it should be mitigated by parliamentarians.

In the evaluation of the political analysis team at XP Investimentos, for example, “the tendency in Congress is to build a much leaner version compared to the text presented yesterday”, according to a report by the brokerage firm.

For Guide Investimentos, Congress “is willing” to approve the measure, announced by the team of president-elect Luiz Inácio Lula da Silva.

“However, for this it is likely that the content of the PEC will be changed. For example, including some limitation on the amounts spent and most likely a deadline for these measures to lose effect, for example, a period of only 4 years (next presidential term) “, says the report, signed by analyst Gabriel Araújo Garcia.

Along the same lines, political scientist and analyst at Órama Investimentos Lorena Laudares stated in a report that “Congress plays a very important role in this process”.

“We see it as unlikely that this draft will be approved in the way it is. We believe that a temporal limitation for this removal of Bolsa Família from the ceiling is more palatable for parliamentarians. It is necessary to wait for the unfolding of the next episodes”, he said.

Martin Castellano, head of research for Latin America at the Institute of International Finance (IIF), recalls that the text of the PEC is still open to negotiations and that many internal discussions will take place from now on.

“In the meantime, we will have noise and overreactions,” he said on his Twitter account.

On Wednesday night, Alckmin presented the draft of the Transition PEC to parliamentarians with a proposal to “exceptionalize” from the spending ceiling 175 billion reais for the payment of Bolsa Família from 2023 in the amount of 600 reais, with an additional 150 reais per child, without a fixed deadline.

The suggestions presented by the transition team also include an authorization for part of the extraordinary income to remain outside the ceiling and can be redirected to investments, within a limit of 23 billion reais, and also proposes to remove donations to universities from the spending ceiling rule. and funds related to the preservation of the environment.

On the morning of this Thursday, the dollar registered a strong rise against the real, future interest rates soared and the Ibovespa, the B3 reference index, fell by more than 2%.

The movement in the markets also happened after Lula, who is in Egypt for the United Nations (UN) climate summit COP27, returned to criticize the spending ceiling and disdained the reactions of the financial markets to his speeches.