Government will have surplus and reduce debt, but not in 24 hours, says Alckmin

The vice-president-elect, Geraldo Alckmin (PSB), said this Thursday (17) that the future government of Luiz Inácio Lula da Silva (PT) will work on a plan to cut expenses and seek to resume the primary surplus to reduce public debt, but that this cannot be done in 24 hours.

“There will be a primary surplus, there will be a reduction in the debt, but this cannot be done in 24 hours. This is done over time,” he said to a group of journalists during a break in work on the transition of government, at the CCBB (Centro Cultural Banco do Brazil).

The vice-elect, who also coordinates the transition of government, promised to present a kind of “flight plan” with future actions -which includes cutting expenses and approving a tax reform “in the shortest possible time” to seek simplification and drive growth.

The declarations are an attempt to reduce the nervousness in the financial market after the elected government delivered to Congress the PEC (proposed amendment to the Constitution) of the Transition, which removes almost R$ 200 billion from the spending ceiling to make room for expenses such as the Bolsa R$600 for a family, an additional benefit of R$150 for children up to six years old and public investments.

Investors fear that the increase in expenses will lead to a lack of control of the public debt and demand that the transition present measures to guarantee the sustainability of the accounts.

“I don’t see the reason for this stress. The focus has to be on economic growth, and, for that, the Brazilian State needs to work,” stated Alckmin. The vice-elect evaluated the markets’ reaction to the PEC as “momentary”. “This will be clarified and overcome,” he said.

He stated that the “absolute priority” of the new government is to guarantee the continuity of Bolsa Família payments. The 2023 Budget proposal is considered “unfeasible” for having only enough resources for an average benefit of BRL 405 to families, in addition to cuts in housing programs and the Popular Pharmacy.

According to the vice-elect, the effort to negotiate the PEC to ensure the transfer of income “does not exclude fiscal responsibility”. He also highlighted that the estimated values ​​(up to R$ 175 billion for the social program and R$ 23 billion for investments) are part of a “preliminary project” and that not all the fiscal space obtained will necessarily be consumed.

With the exclusion of Bolsa Família from the ceiling, the new government would gain R$ 105 billion in space within the Budget to redistribute to other areas.

“The government made a draft, a proposal that does not talk about numbers. It has a concept, I no longer want to discuss this business of not having money for the social protection network, so I exclude it [do teto de gastos]🇧🇷 Now the LOA [Lei Orçamentária Anual] will detail. For education, need so much. For culture, there are two laws approved, Aldir Blanc and Paulo Gustavo, which must be complied with. It has a decision of the Federal Supreme Court. The government does not mean that it will spend. That’s an authorization, even. It’s a ceiling, up to that amount, “he said.

The vice-elect said he still does not see political threats to the progress of the PEC and said that the team will work “to convince” the parliamentarians. “The path that the government is taking, from President Lula, is the path of the Legislature, of respecting the institutions.”

Alckmin also promised to present the flight plan with the measures that will be adopted by the new government to maintain the sustainability of the accounts.

“First point, the government will act on the expenditure side, cutting expenses that can be cut,” he said. He gave as an example the possibility of doing a fine-tooth comb on federal government contracts. “If it’s priced right, great, but you can have space there,” he said.

The vice-elect also defended the need to carry out a permanent assessment of expenditures and tax exemptions. “Everything needs to be permanently evaluated, spending and income. What is not evaluated is not well managed,” he said.

Also called tax expenditures by the Ministry of Economy, subsidies reduce public revenue from tax exceptions created to reduce costs to consumers or producers. The account will pass the BRL 450 billion mark for the first time in 2023, a nominal advance of 49% since 2019 (the first year of the Bolsonaro government).

“The issue of fiscal adjustment is permanent. It’s not ‘I did it in 24 hours’ and that’s it. You are permanently adjusting.”

Alckmin also said that the government “is going to discuss” a proposal to reform the framework of fiscal rules, to replace the spending ceiling, but stated that “things come in time”. To journalist Miriam Leitão, he detailed that one of the elected government’s ideas will be to remove the spending ceiling from the Constitution to remake it in ordinary law.

Another priority, according to the vice-elect, is tax reform. “Tax reform, it is essential,” he said. “It’s a very good situation, you have two PECs very close to each other, both seek to simplify, replacing numerous taxes with a VAT [Imposto sobre Valor Agregado]🇧🇷

According to him, the issue is central because a simplification of the tax structure can leverage growth, which helps to reduce the ratio of indebtedness and GDP (Gross Domestic Product). He avoided naming whether this will be a priority in the first year of government, but recalled that the theme is in the plan presented during the campaign and said that the expectation is “to approve it in the shortest possible time”. “Now, it is necessary to respect the other Power”, he stated.

Administrative reform is also in the Lula government’s plans, said Alckmin. “There will be a lot to be done in terms of management. Now, each thing in its own time”, he stated.

Another point highlighted by the vice-elect is the search for international agreements. “Brazil needs to have a greater presence in foreign trade,” he said. According to him, the country needs to increase its insertion in the global economy, also taking advantage of the moment of greater liquidity in the markets to attract resources to finance projects in Brazil.

Alckmin pointed out that, upon assuming the Presidency in 2003, Lula received a country that recorded consecutive primary surpluses, that is, revenues greater than the volume of expenditures. This is a reality different from the current one. Brazil has accumulated gaps in its accounts since 2014 and, although there is a forecast of a positive result in 2022, the perspective is for a return to the deficit situation from next year.

“When President Lula took office, in 2003, he came from a government with a surplus every year. He continued. Now, it comes from a deficit. You don’t do magic,” he said.

The vice-elect also commented on the decision of former finance minister Guido Mantega to leave the transition group after his appointment generated controversy and provoked reactions such as that of the Novo party, which threatened to go to court.

Mantega had been appointed to the technical planning, budget and management team and would work on a voluntary basis because he is disqualified by the TCU (Union Court of Auditors) to hold a position in a commission or function of trust in the federal public administration. He was punished in the case of fiscal pedaling.

For Alckmin, the controversy surrounding Mantega’s participation in the transition is “unfair”. without incurring any expenses. But anyway, I think he anticipated it, he took an attitude saying ‘look, I ask to be excluded from the transition group so as not to create any problems'”, he said.

“Strictly speaking, it’s unfair. A person who was going to work for free, has a public spirit, is not being appointed to any position, you limit voluntary work. But anyway, he took the attitude that I even called to thank him.”