Economic team is warned to anticipate new fiscal rule

In his inauguration speech, Finance Minister Fernando Haddad announced that he will present the new fiscal framework in the first half of this year. Afterwards, he said, in an interview, that he might have a proposal in April. Specialists in public accounts, some linked to the PT, warn that the economic team should prioritize the presentation of the proposal at the end of February, at the most, at the beginning of March.

The perception is that postponing the presentation of this proposal increases the risk of political pressure on the processing of the new fiscal rule and also on the budget proposal for next year. On the other hand, anticipating it would be one more item to reinforce the scenario of stability in the economy when the government faces radical movements in the streets.

Historically, a new government finds it easier to guide and approve its proposals in Congress at the beginning of the term. The further one advances in the calendar, the greater the pressure from the Legislature and interest groups for changes, often contrary to the original suggestion of the Executive, tends to be. There is an understanding that it is bad to postpone priorities, even if there is legal space for this.

According to what was approved in the PEC (Proposed Amendment to the Constitution) in December of last year, the President of the Republic must submit to Congress, by means of a complementary law, a new fiscal regime by August 31st. But political time is not always regimental, recalls a member of the PT, who prefers not to have his name mentioned and remembers the pitfalls of politics when important issues are pushed to the Executive in Congress.

An example is in the procedures of the distant, but didactic year of 2007, during the first term of Luiz Inácio Lula da Silva (PT).

A survey carried out by Folha at the time showed that the PT controlled more than three-quarters of the Chamber, the largest base since 1990, and also had a majority of nominal votes in the Senate.

However, that year, the government was being run over by a succession of political setbacks, including denunciations that ended up weakening Senator Renan Calheiros, a strategic ally. Renan ended up being acquitted in the two processes opened by the opposition artillery, but the government’s agenda ran aground in the House.

It was the first year of the second term, and the Lula administration suffered the defeat of not approving a vital budget item, the extension of the CPMF (Provisional Contribution on Financial Transactions). a revenue of billions for a score of 45 to 49 – there were only four votes left to extend the tribute.

The defense for the presentation of the fiscal rule still in the first quarter of this year also considers the procedures of the Budget.

The draft LDO (Law of Budgetary Guidelines) must be sent to the Executive for Congress by April 15 of each year, and be returned for sanction by July 17 of the same year. Within this schedule, without a new fiscal framework being presented beforehand, the start of the 2024 budget discussion, which should be 100% Lula, will have to be based on the rule that is in effect, and which the government rejects, the spending ceiling .

There are alternatives to change the Budget proposal later on, so it is certain that the part referring to the federal government in the LDO project runs the risk of being a simulation. It will be necessary to wait to see how the discussion, both of the content of the Budget and of the new rule, will evolve in Congress.

“I think some kind of mismatch is inevitable, but we cannot know whether it will be serious”, says economist Daniel Couri, executive director of Ifi (Independent Fiscal Institution), linked to the Senate. “We went through this more than once. Last year, for example, we had to wait for the elections and the Transition PEC to define the Budget.”

Economist Manoel Pires claims that it is necessary to be reasonable in the charges at the beginning of a government, as it is certain that no economic team would have a consensual fiscal rule in the first two weeks.

However, Pires, who coordinates the Center for Economic Policy and the Fiscal Policy Observatory at FGV Ibre (Brazilian Institute of Economics of the Getulio Vargas Foundation), recalls that there is a rite to be followed and knowing how to calibrate it is in the essence of politics.

“There will be a time of formulation, maturation, conversation with people from the private sector, to see if people like the new rule, understand it, then, having a more general positive evaluation, you publicize it, present it, discuss it in Congress and approve it “, says Piers.

“You can’t anticipate this rite too much, because then you do something bad, not very mature and that later, up front, has to change, but you can’t postpone it too much either because that ends up creating obstacles for sequencing the government’s agenda. minister needs to conduct within these principles.”

Lula 3 already has several starting points for a discussion on the new tax regime.

It received numerous contributions from economists outside the government and also has a proposal written by the group of economists responsible for making the diagnosis of the former Ministry of Economy during the transition of government.

Of the four members of this group, André Lara Resende and Persio Arida are not in government, but two of them know the topic in depth: Guilherme Mello, the current secretary of Economic Policy, and Nelson Barbosa, who was appointed to a BNDES board.

According to Sheet As it turned out, the framework suggested by this group replaces the current spending cap rule with a new spending target-based regime.

The Chamber’s Budget and Financial Inspection consultant Ricardo Volpe states that the ideal would be to have a good rule in place before the LDO project, but points out that the question of the deadline for submitting and dealing with the new fiscal rule collides with a previous question: what will be , after all, the one that will prevail in the internal discussion of Lula’s third government.

“Political will can be built, but I believe that political decision is lacking”, says Volpe. “What model will the government ultimately want?”

Volpe, who contributed to the elaboration of the proposal for a new Treasury rule and follows the discussion on the subject, reinforces that some PT economists, since the campaign, have defended the replacement of the spending cap for the return of the primary result rule, adopted in all the previous PT gestures.

“I think it’s a mistake if that happens, because it will encourage everyone to spend more”, he says. “But the risk is there.”