PEC creates a snowball of R$ 580 billion in unpaid court orders, estimates Chamber consultancy

A survey prepared by the Chamber’s Budget and Financial Inspection consultancy estimates that the PEC (Proposed Amendment to the Constitution) of the Precatório should generate a snowball of R$ 580 billion in unpaid precatório by 2036.

The text, which was approved by the Chamber and is still pending analysis by the Senate, creates an annual limit for the government to pay court sentences.

The measure is defended by President Jair Bolsonaro’s team with the objective of opening up space in the federal accounts to pay for Brazil Aid. The idea is also to allow for other expenses, as is the case with the promise made by the agent for salary adjustment to public servants.

The survey that estimates the impact of the PEC was produced by consultants Ricardo Volpe and Sérgio Sambosuke at the request of deputies.

The model starts from some assumptions to simulate the volume of court orders that may be issued in the coming years.

The accounts consider the period until 2036, the final year in which the spending ceiling is in effect, a rule that limits federal public spending to inflation variation.

In the scenario treated by consultants as prudential, inflation will be 10% in 2021, 5% in 2022 and 3.25% in the following years. The calculation considers that the volume of court sentences will follow the rate of inflation year after year.

The document also considers that 20% of court orders will be paid in advance with a 40% discount. The PEC allows holders of these bonds to authorize advance payment, as long as there is a reduction in value.

The calculations do not consider the effect of another instrument established by the proposal, the meeting of accounts between the Union and regional governments. Through it, for example, if a state holds a federal precatório of BRL 1 billion and, at the same time, has a debt of BRL 1 billion with the Union, these amounts can be annulled.

“As for the volume of court orders not paid as a result of the payment ceiling for court decisions, the amount of accumulated and corrected court orders to be paid at the end of 2036 was estimated at R$ 580 billion”, the consultants say.