Machine blackout and risk to retirement expose difficulties in Bolsonaro’s outcome

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Even after five changes to the main fiscal rule in the country to increase spending during his term, President Jair Bolsonaro (PL) comes to the end of his term in the face of a widespread blackout of the public machine and at the risk of a lack of money to pay pensions .

The budget problems, with impacts on the daily life of the population, are the portrait of a dramatic outcome for the current government, which may be forced to take a ride on the PEC (proposed amendment to the Constitution) of the opponent — the president-elect Luiz Inácio Lula da Silva (PT)—to once again breach the spending ceiling and manage to pay the bills.

While the successive records in collection provide a celebrated surplus in the accounts, the first since 2013, the need to respect the expenditure limit forces the government to carry out a blockade of R$ 15.4 billion on resources from ministries and funds stamped by parliamentarians through so-called rapporteur amendments.

As a result, almost all of the resources forecast for the month of December have evaporated. There is only R$ 2.4 billion to cover all the bodies’ discretionary expenses, which include the purchase of materials and payment of contracts. Areas such as Health, Education, Environment and Justice are strangled, and some activities are being paralyzed.

Not even the so-called mandatory expenses escaped the squeeze. The government still does not know how it will be able to fully pay the INSS (National Social Security Institute) payroll for December, as it does not have authorization from Congress to cut the rapporteur’s amendments once and for all and reallocate resources for retirement. These benefits saw significant growth in 2022 following a task force to reduce the application queue.

A consultation sent by the Civil House to the TCU (Union Court of Auditors) may pave the way for the possibility of editing an extraordinary credit MP (provisional measure), which authorizes expenditures outside the ceiling. Another option is to include in Lula’s Transition PEC a device that allows Bolsonaro to exceed spending limits at the end of 2022.

The approval of PECs to circumvent the spending ceiling became, in the Bolsonaro government, a kind of fiscal management instrument. Whenever there was strong pressure for more expenses, a new special authorization was negotiated with the National Congress — the most recent of which came from the head of the Executive himself and guaranteed him a check of R$ 41.2 billion to boost social programs on the eve of the election .

Throughout his term, Bolsonaro spent BRL 794.9 billion outside the ceiling, according to a survey by economist Bráulio Borges, from Ibre/FGV (Brazilian Institute of Economics of the Getulio Vargas Foundation), reported by BBC News Brasil. The expenditure ceiling is a constitutional rule that limits expenditure growth to inflation variation.

The quality of extra-high expenditures, however, has been questioned by experts and control bodies, who see misuse of public funds in unfocused policies. Evidence of this is that the increase in expenses was not enough to prevent paralysis in a series of organs.

In Health, the government determined a new block of BRL 1.4 billion, bringing the frozen total for spending to BRL 3.8 billion.

The first blockades had mainly affected the rapporteur’s amendments, intended, in general, for health funds in municipalities chosen by parliamentarians. The new obstacle, however, fell on strategic programs.

One of those affected was Farmácia Popular, a program that delivers medicines for chronic diseases, such as asthma and diabetes, to the population, free of charge or with discounts. There were R$ 194 million frozen.

Another R$ 224.6 million from Fiocruz (Oswaldo Cruz Foundation) were blocked, compromising expenses for research and assistance, in addition to the budget for the construction of vaccine factories. Health technicians fear that the measure will make it even more difficult to implement public policies until the end of the year.

At the MEC (Ministry of Education), the 2022 blackout demonstrates an escalation in the budget draining process that marked the current management. The portfolio has BRL 466 million available to make commitments (first phase of spending, when money is reserved for a given action) throughout the month of December, an amount considered low for a portfolio of this size. The total blockade adds up to R$ 2.4 billion.

On Thursday (1st), the government still froze all payment limits for the portfolio in December, a measure that reaches the federal higher education network. Even before the December blockade, the consequences of the lack of budget were already visible in virtually all areas of activity of the portfolio.

Due to lack of money, there was a delay in contracting for the production and delivery of textbooks this year. There was also the cancellation of the delivery of works aimed at learning recovery.

Technical teams had to recycle Enem (National High School Examination) questions to ensure a test with unpublished items, as the government did not invest in the production of new questions.

Budget cuts at MEC also contributed to the dismantling of the main mechanism for educational planning and the transfer of federal resources for basic education, the PAR (Plano de Ações Articuladas).

In this system, city halls register their demands, and the federal government makes transfers to support school infrastructure, such as building day care centers, purchasing school buses and materials.

Until December 2, 2022, the government paid BRL 354 million through PAR. It is the lowest value in at least a decade. Last year, the amount had been BRL 796 million – already significantly reduced compared to the annual average of BRL 2.5 billion between 2012 and 2018, in values ​​adjusted for inflation.

The Ministry of the Environment, in turn, received an indication of a blockade of R$ 90 million, although the Economy reported a smaller blockage, of R$ 76.4 million at the end of November. The largest portion of the cut fell on Ibama (Brazilian Institute for the Environment and Renewable Resources).

A craft obtained by Sheet shows that the agency did not even have that money in cash at the time the blockade was determined. In practice, the portfolio was completely without funds and still had a kind of “blocking balance”, which could lead to the cancellation of already contracted expenses.

The president of Ibama, Eduardo Bim, who is an ally of Bolsonaro, warned that the measure could cause the “total paralysis” of activities. According to him, there will be no money to pay bills for water, electricity, surveillance and security, transportation of servers, transportation of goods, bonuses, computerized systems, ombudsman work, auditing and internal affairs, telephone services and outsourced employees.

Bim claims that Ibama will not be able to comply with court decisions due to “total lack of resources”, it will need to cancel trips and may switch its entire operation to remote work —which, in practice, tends to make inspection actions unfeasible in a government that already supports historical records of fires and deforestation, in addition to the advance of illegal mining and logging.

At the Ministry of Justice, the lack of funds for issuing passports led the PF (Federal Police) to suspend the production of new passports on November 19th. Activities were partially resumed after a release of BRL 37.4 million —half of the amount requested by the agency.

The delicate situation led Lula’s transition technical group to ask for an increase of R$ 200 million later this year to pay expenses, including per diems for PF and PRF (Federal Highway Police) agents. There is a fear that the lack of money will compromise the organization of Lula’s inauguration ceremony on January 1st.

The transition team is studying alternatives, such as mobilizing federal police officers who are completing the training course at the corporation’s academy in the country’s capital, or postponing the payment of agents who act in the inauguration until 2023

The PRF, in turn, informed the regional superintendencies that non-essential maintenance services on vehicles cannot be carried out without prior approval due to lack of resources.

The measure happens due to lack of funds, and the corporation’s negotiations with the ministries of Justice and Economy are still in progress to make the budget complementation feasible. The current budget for fleet maintenance is BRL 31 million, of which BRL 38.9 million has already been spent.

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