Transition PEC gains strength as a way to unlock rapporteur amendments in 2022

In search of resources in the 2022 Budget, congressional leaders once again bet on the PEC (proposed amendment to the Constitution) of the Transition and on the dialogue with allies of the president-elect, Luiz Inácio Lula da Silva (PT), to release the so-called amendments of reporter.

The strategy is to include in the PEC a device that authorizes expenses above the spending ceiling as early as 2022 to reverse the blockade of BRL 15.4 billion that is currently in effect.

In addition to leaving areas such as health and education with no cash at the end of the year, cost containment stopped R$ 7.8 billion in rapporteur amendments, funds used to irrigate works and projects of interest to deputies and senators. The instrument is used as a bargaining chip in political negotiations between Planalto and Congress.

The maneuver via PEC is seen as legally safer and gained strength again this Tuesday (29).

Centrão parliamentarians came to articulate a change in the LDO (Budgetary Guidelines Law) of 2022 to circumvent the spending ceiling and be able to expand expenses later this year, at the turn off of the lights of Jair Bolsonaro’s (PL) management.

The project intended to introduce into the text a series of devices to deduct expenses from the spending ceiling or change the schedule of mandatory expenses, redistributing “leftovers” within the limit for other expenses.

Another device authorized to account for the expenditure ceiling only the forecast of effective transfer referring to the Paulo Gustavo law to encourage culture. Bolsonaro even edited an MP (provisional measure) to postpone the expenditure of BRL 3.8 billion, but the STF (Federal Supreme Court) decided that the measure is unconstitutional – an understanding pushed by Minister Cármen Lúcia, the case’s rapporteur.

This Tuesday (29), Carmen met with Minister Paulo Guedes (Economy), the acting president of the TCU (Union Court of Auditors), Bruno Dantas, and members of Lula’s transition team to discuss the impasse surrounding the transfer of funds provided for in the Paulo Gustavo law.

At the meeting, according to reports gathered by the Sheet, the Ministry of Economy even suggested the possibility of opening an extraordinary credit (outside the spending ceiling) to honor the measure, but was warned about the impossibility of this path. This type of credit is intended for urgent and unpredictable expenses – the culture incentive law was passed in 2021, vetoed by Bolsonaro and reinstated by Congress this year.

The new government and the transition team were also warned about the legal risk of using a bill that amends the LDO to make understandings more flexible on how to calculate the spending ceiling, a rule provided for in the Constitution and which, therefore, is hierarchically above the laws.

The maneuver could be understood as unconstitutional. There are even doubts within the government about whether Bolsonaro would sanction this law after approval in Congress, given the risks involved.

The project was even approved by the CMO (Mixed Budget Commission) by a large majority, but has not yet been appreciated by the plenary of Congress. The assessment of people following the discussions is that this alternative lost strength after the STF meeting.

Faced with legal uncertainty, allies of the mayor, Arthur Lira (PP-AL), intensified negotiations to close an agreement and include in the PEC some device that solves the 2022 problem.

Lira controls the distribution of amendments in the House, which takes the largest share of the rapporteur’s amendment budget. But the Bolsonaro government is also interested in the measure to give relief to ministries at the end of their term.

The president of the CCJ (Constitution and Justice Commission) of the Senate, Davi Alcolumbre (União Brasil-AP), fights to be the rapporteur of the PEC of the Transition. He is one of the most influential in the amendments division in the House.

If it goes ahead, the tendency is for the maneuver to be incorporated into the text already in the Senate, which will analyze the proposal before the House. To enact a constitutional change, the same text needs to be approved in both Houses, in two rounds of voting. If the modification is made later, by the deputies, there would be a need for a new appreciation by the senators, delaying the progress of the PEC.

This Tuesday, the leader of the PT in the Chamber and member of the transitional cabinet, Reginaldo Lopes (PT-MG), admitted that the PEC can be changed to authorize spending outside the ceiling as early as 2022.

The most recent version of the proposal, filed on Monday (28), allows investments to be made beyond the expenditure limit, if the government has registered the inflow of extraordinary revenues. This mechanism would apply from 2023, but the congressman hinted at the possibility of this being brought forward to this year.

“Look, the text is for debate, it is clear that the agreement will take place in the Senate plenary, so there is still a lot of debate ahead. I do not see any difficulty if it is necessary, to close the 2022 fiscal year, to anticipate the application [da regra] of 6.5% of the extraordinary revenues of 2021 already in the year 2022. It will be the sixth time that the Bolsonaro government will need to break the spending ceiling law to get out of fiscal responsibility crimes”, said Lopes, upon arriving at the CCBB ( Centro Cultural Banco do Brasil), seat of the transition office.

The first versions of the Transition PEC already contained a “loophole” that allowed the extraordinary resources to be used in 2022. However, this prediction was withdrawn in the final version that was filed, which aroused the wrath of the centrão.

The Transition PEC is the bet of Lula’s team to ensure the continuity of the minimum BRL 600 benefit from Bolsa Família as of January 1st. The protocoled proposal does not mention values, but R$ 175 billion for social programs and R$ 23 billion for investments must be outside the spending ceiling. This format would be valid for the four years of the PT’s government – a period that may fall to two years in the midst of negotiations.

An increase in expenses of the magnitude intended by the PT, without compensation with an increase in revenue or a cut in other expenses, would have the consequence of increasing 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 lower number, although still negative at BRL 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.

Reginaldo Lopes showed confidence that the proposal will be approved by December 10, a date set as the deadline by parliamentarians. He said that, after approval by the Senate, the proposal could be approved in just eight days by the House, if there is an agreement.