Transition PEC proposes Bolsa Família outside the ceiling for 4 years, but PT admits to negotiating

Senator Marcelo Castro (MDB-PI) filed this Monday (28) the text of the PEC (Proposed Amendment to the Constitution) of the Transition, which authorizes the government of the president-elect, Luiz Inácio Lula da Silva (PT), to exclude expenses with the Bolsa Família program from the spending ceiling for a period of four years.

The text also provides for investments outside the limit in case of extraordinary revenue collection. In practice, the proposal has no specific value for these expenses, but estimates by the PT itself point to an extra ceiling expense of up to R$ 198 billion with the PEC.

The measure is negotiated by the elected government in order to maintain the minimum benefit of BRL 600 from Bolsa Família as of January 1st, institute an additional payment of BRL 150 per child up to six years old and honor other campaign commitments of the PT, such as raising the minimum wage and resuming investments.

Despite the text presented foreseeing the withdrawal of Bolsa Família from the spending cap for four years, members of the transition team already admit to negotiating a series of points, such as a reduction for two years.

As shown to Sheetthe top of Congress indicated that the PEC only has a chance of being approved with a validity of two years, and interlocutors of the elected government also admit to giving in on this point.

Another point under negotiation is to set the exact limit for extra spending in the year 2023 in the text of the Transition PEC. The format is defended by some parliamentarians and also has the sympathy of the economy group in the transition.

The current reference for this value is the calculation of BRL 150 billion made by the transition team. An additional expenditure of this amount would keep the ratio between expenditure and GDP (Gross Domestic Product) constant. The current estimate is that this number should remain at 19% this year, while the 2023 Budget was sent with a forecast of 17.6%.

Castro, who is also rapporteur for the 2023 Budget, said this Monday that “all of this will be the result of intense negotiations” and that the initial proposal, which did not stipulate a deadline for excluding expenses from the ceiling, was revised “due to many reactions ” of Congress.

“Initially, there was the idea that the Bolsa Família spending ceiling would be permanent, but due to many reactions, the four-year proposal was reached,” he declared upon arrival at the CCBB (Centro Cultural Banco do Brasil), headquarters of the transition.

“It is clear that all this will be the result of intense negotiations, and anyone who covers the National Congress knows that it is rare for a matter to enter Congress and leave in the same way”, he said. “We agreed with leaders that we would input and, as the PEC is processed in the Constitution and Justice Commission, we will then seek a common text.”

The leader of the PT in the Senate, Paulo Rocha (PT-PA), also said this Monday that the PT is “willing to talk”. “The PEC comes with a four-year proposal, and we are willing to seek mediation. Lula is taking these initiatives, including coming to talk, to value good politics and the Brazilian Parliament,” he said.

“The fact is that we said in so many words that one year was not possible, that this made operations unfeasible. Because, in practice, one year is six months, since the government has to send the new LDO [Lei de Diretrizes Orçamentárias] in April for the National Congress,” he said.

Former Minister of Finance and Planning Nelson Barbosa, one of the four coordinators of the technical group for the economy in the transition, stated that the PEC was the strategy “considered the most viable from a political point of view”, and defended the approval of the text until the end of year.

A PEC needs the signature of 27 senators, a third of the House, to start processing. Castro stated that the signatures will be presented by this Tuesday (29).

The initial draft of the proposal, presented by elected vice-president Geraldo Alckmin (PSB), foresaw the withdrawal of the Auxílio Brasil —which will once again be called Bolsa Família— from the fiscal rule for an indefinite period. In the text filed this Monday, the logic was maintained, but the deadline was adjusted to four years.

Other points presented on the 16th were maintained. The text of the PEC allows, for example, 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 proposal, however, stipulates a limit for this portion, equivalent to 6.5% of the excess revenue verified in 2021 – which results in a value of up to R$ 23 billion.

The PEC also includes 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, the United Nations climate conference, demanding resources from rich countries and placing the fight against the climate crisis as a priority.

The same logic would be applied to federal universities, which would be authorized to run expenses outside the ceiling if they are financed with their own revenue, such as donations or funding. Today, this type of expenditure is subject to the limit, which generates complaints from institutions and stifles research projects.

Without compensation for raising revenues or cutting other expenses, the increase in expenses in the magnitude intended by the PT would increase the account deficit in 2023. The Budget officially projects a shortfall of R$ 63.5 billion, but the current government has updated this estimate to a smaller number, although still negative at R$ 40.4 billion.

The existence of public deficits indicates that the government is financing expenditures by issuing a larger volume of Brazilian debt. The cost is close to the economy’s basic interest rate, the Selic, currently at 13.75% per year.

With the PEC, the PT intends to resolve the imbroglio of the lack of funds in 2023 and gain time to discuss the new fiscal rule that will replace the spending ceiling.

Members of the elected government assess that it is necessary to start discussions in the CCJ (Constitution and Justice Commission) of the Senate by the end of this week to have enough time for the vote. Castro stressed this Monday that the PEC must be approved by the Senate and the House by December 16, in time to make adjustments to the 2023 Budget.