Haddad had a growing participation in PEC that expands public spending

With the mission of preserving in the Chamber the deadline and the values ​​approved by the senators for the extra expenses next year, the future Minister of Finance, Fernando Haddad, was personally involved in the negotiation with the President of the House, Arthur Lira (PP- AL).

The text of the PEC (proposed amendment to the Constitution) of Gastança approved in the Senate increases by R$ 168 billion annually the Budget of the elected government of Luiz Inácio Lula da Silva (PT) in 2023 and 2024, in addition to paving the way for other possibilities of spending. Deputies are pressing for a reduction from the current two years to just one year for the possibility of an expanded budget and for a cut of around R$ 10 billion in the amount allowed outside the spending ceiling.

Since joining the economy’s transition group, at the end of November, Haddad has been monitoring the progress of the text. Its participation in the negotiations increased, until it reached the active discussion of central points of the text approved in the Senate.

In debates with the Chamber, he has already met twice with Lira and a third meeting is planned. The president of the Chamber, however, began the week consulting leaders of the House to measure the climate in relation to the text.

Initially, the PEC tended to be voted on this Wednesday (14). However, Lira signaled that the vote could be left for next week.

In addition to the deadline and the total extra-ceiling expenses, the deputies are under threat from excerpts included by the senators —such as the device that allows resources forgotten in the PIS/Pasep accounts to be used to fund investments outside the spending ceiling —which, according to Haddad said this Wednesday (14), it was a request made by the current government.

According to Caixa Econômica Federal, there were R$ 24.6 billion in PIS/Pasep quotas that could be withdrawn by 10.6 million people in the update made in August.

Another passage is the one that removes from the spending ceiling the financing of international organizations, such as the IDB (Inter-American Development Bank), on the grounds that they are intended for projects to improve productivity and efficiency of the economy, such as infrastructure.

These points should be intensely debated, and deputies against them intend to use the so-called suppressive amendments —in which parts are only withdrawn, which reduces the chances of the text returning to the Senate (if there is no change of merit with the withdrawal, the proposal no need to go back to the previous House).

With Lira’s support, the parliamentarians also want to wait for the judgment that deals with the constitutionality of the rapporteur’s amendments. The issue was debated again this Wednesday at the STF (Federal Supreme Court). The president of the STF, Rosa Weber, voted to prohibit the use of the amendments to respond to requests from parliamentarians or people outside Congress. The court will resume the trial this Thursday (15) with the vote of Minister André Mendonça.

This context makes political negotiation more intricate in the Chamber. The rapporteur’s amendment is used as a bargaining chip in political negotiations between Planalto and Congress, and the outcome in the Judiciary may affect the processing of the PEC in the Legislative (since Lula was quite emphatic during the campaign against the instrument, which in the opinion of the surroundings of Lira may have stimulated an unfavorable decision by the STF).

Haddad’s participation in the PEC articulations came after the invitation to the ministry made by Lula, during the COP 27, in Egypt. Haddad says that, at the time, the president-elect asked him to start learning about economic issues.

Involvement in the PEC began after knowing that he would occupy Fazenda

In the Senate, Haddad maintained constant contact, especially with the President of the House, Rodrigo Pacheco. On the Sunday (4th) prior to the vote, he attended a dinner at the senator’s house.

According to interlocutors, although Haddad was not the protagonist of the articulation of the PEC, he was consulted and participated in the discussions.

One of the decisive points that Haddad worked on was the inclusion of a device that obliges the elected government to submit a new proposal for a fiscal framework by August 31, 2023.

The proposal was already under discussion, but, according to people involved in the negotiations, the device would not have entered the final version of the text without the approval of the future minister –who will be responsible for formulating and proposing the new rule.

Another crucial item was the reduction in total expenses, which occurred in the final stretch of the text’s processing in the Senate. Haddad maintained dialogue with former governor and senator-elect Wellington Dias (PT-PI) and senator Jacques Wagner (PT-BA), who gave the green light for the withdrawal of BRL 30 billion from the proposal, reducing the value to BRL 145 billion with the support of the future minister.

Last Sunday (11), the future finance minister was at a meeting with Lula and the general rapporteur for the Budget, senator Marcelo Castro (MDB-PI), to hammer out the distribution of funds released by the PEC among the ministries.

In general terms, the PEC that reached the Chamber foresees a ceiling expansion of around R$ 145 billion in 2023 and 2024 to guarantee the payment of a Brazilian Aid (which will once again be called Bolsa Família) of R$ 600 and more an additional BRL 150 per child up to six years old, in addition to increasing the budget of several folders. Initially, the proposal authorized BRL 175 billion in extra spending.

The group of economists had already warned Haddad and Lula that an additional between R$135 billion and R$150 billion could accommodate the government’s initial demands, such as the housing program Minha Casa, Minha Vida and Farmácia Popular.

In internal conversations, Haddad showed support for the idea of ​​maintaining “spending neutrality”, that is, keeping spending as a proportion of GDP (Gross Domestic Product) at a relatively stable level compared to that observed in 2022.

The figure of R$ 145 billion complies with this precept, in the assessments of the transition. But the text also released another BRL 23 billion for investments outside the ceiling in case of extraordinary revenues, in addition to providing for the use of BRL 24 billion from PIS / Pasep for investments, and to remove from the ceiling expenses of banked public teaching institutions by own revenue and donations to the environmental area that pass through the Executive.