Government division encourages PECs war to lower fuels, and Economy fears kamikaze effect

The race for a solution to lower fuel prices opened a war of PECs (proposed amendments to the Constitution) in the National Congress, in the opinion of palace assistants.

The dispute is fueled by a division within the government itself, in which different members of the political wing support different proposals. The initiatives also put the House and Senate in search of protagonism in an agenda with strong electoral appeal.

The Ministry of Economy, in turn, was run over by all sides and remained isolated in the defense of more restrained measures, which do not risk the situation of public accounts so much.

This Thursday (3), two proposals were presented: one in the Chamber, which authorizes a wide exemption from taxes on fuels, and another in the Senate, which goes further and includes the extension of gas assistance to a greater number of families, diesel of R$ 1,200 to truck drivers and a subsidy of R$ 5 billion to avoid tariffs on urban buses.

Although protocolled by deputy Christino Áureo (PP-RJ), the text of the Chamber was written in the Civil House, commanded by Minister Ciro Nogueira (PP), and had the blessing of President Jair Bolsonaro (PL).

The presentation of the deputy’s text took government allies, congressional leaders and ministers by surprise, who learned about the proposal in the press.

The president had already been calling for priority solutions for fuel prices, which have driven inflation and may reach a new peak in the third quarter, the height of the election campaign. For more than six months the government had been working on a proposal.

Bolsonaro is second in the polls, behind former president Luiz Inácio Lula da Silva (PT).

The Chamber’s project allows for the cutting of rates on diesel, ethanol, gasoline and cooking gas. The impact is estimated at BRL 54 billion, but could reach BRL 75 billion if electricity is included.

Therefore, the PEC was already considered very bad by the technicians of the Economy. Many members of the folder did not even have prior access to the text and were taken by surprise.

Hours later, the Senate text was filed, which was dubbed “PEC Kamikaze” within Minister Paulo Guedes’ team, as it could “set the economy on fire”.

By granting unrestricted tax exemptions and also creating and expanding expenses, the impact tends to exceed R$100 billion, although the exact calculations are still being refined.

This proposal has the support of at least three ministers from the political wing and was presented by Senator Carlos Fávaro (PSD-MT), a supporter of the president of the House, Rodrigo Pacheco (PSD-MG), who endorsed the text.

This Friday (4), the 27 signatures necessary for the PEC to be filed and to begin processing were gathered. Senators from various political fields adhered to the text, including some close to the Planalto, such as the government leader in Congress, Eduardo Gomes (MDB-TO) and the deputy leader in the Senate Marcos Rogério (PL-RO).

Fávaro is also of the same acronym as Senator Alexandre Silveira (PSD-MG), who, even before taking office, participated in meetings on the fuel issue at Palácio do Planalto.

Silveira was the main candidate to present the text and was even invited to assume the leadership of the government in Congress. But, after declining the Planalto proposal, it also ceased to be the favorite to file the PEC drafted by the government.

Also this Friday, Pacheco received at the Senate’s official residence Fávaro, Silveira and the leader of the minority, Jean Paul Prates (PT-RN) to discuss the fuel proposals. It was decided that the PEC presented should move forward quickly, but without mishap. It must, for example, go through at least the CCJ (Constitution and Justice Commission), before going to the plenary.

Members of Guedes’ team say they have no reaction in the face of the avalanche of investments for more spending and resignations.

Although the strategy is to defend the exemption of diesel only, sources of the economic team recognize that it is not yet known how to act, since the Civil House itself and the Presidency have endorsed a broader text – in this case, that of the Chamber.

The Economy was against sending PECs, as constitutional changes do not pass through the pen of the President of the Republic —they are enacted directly by Congress.

But even in this adverse scenario, the expectation was to have the government’s political articulators and the base in Congress to bar unwanted measures, which went beyond the diesel tax exemption. This perspective was undermined by the Civil House’s digital in the Chamber’s broad text.

In the Planalto, the assessment was that the economic team resisted the proposal as a whole, so at all times it criticized some point of the PEC.

Although the text went over Guedes’ wishes, the calculation for the choice of the Chamber involved the perception of a more consolidated government base in the House. With that, according to government sources, it would be easier to control the content of the text and the deadline for processing, so that the PEC is approved quickly.

The equation also involves a gesture to the president of the Chamber, Arthur Lira (PP-AL), who had been asking the Senate to vote on projects already approved by deputies to change the collection of ICMS (Tax on Circulation of Goods and Services) on fuel. Lira did not want to leave the leading role of the possible solution with Pacheco.

Even so, the sudden arrival of the text to the Chamber displeased members of the base, among them the government leader in the House, Ricardo Barros (PP-PR), who was left out of the initial articulations.

In addition to the PECs, two other proposals dealing with fuels must be processed quickly in the Senate. After the meeting at the official residence, with President Pacheco, it was decided that these projects will be put to a vote in the plenary on the 15th of this month.

Present at the meeting, minority leader Jean Paul Prates stated that Pacheco and the other participating senators came to the conclusion that there is no incompatibility or even competition between the PEC and the other two bills.

The PT congressman even stated that the proposed amendment to the Constitution may be important to meet possible needs not covered in the other two proposals, which will be processed before and are under his rapporteurship.

One of the aforementioned proposals has already been approved by the CAE (Commission on Economic Affairs). One of the main points of this bill is the creation of a tax on the export of oil and derivatives, whose resources will be allocated to an account to mitigate the impact of greater fluctuations in fuel prices.

The other proposal, already approved by the Chamber of Deputies, proposes changes to the ICMS rules for fuels