The high inflation that has always helped to scratch images of presidents may, to a certain extent, have contributed to the reelection of most governors who won the election in the first round. Not because of the unpopular inflation itself, but because of the popular surge in tax collection and state investments. In the first half of this year, in comparison with January to June 2018, the same period of dispute of the last election, the average collection of the states increased by 21.7%, according to the fiscal reports submitted by the states to the National Treasury Secretariat (STN) . However, the average spending of states on public services more than doubled, from R$ 13.4 billion (in figures already corrected by the IPCA) to R$ 31.4 billion in the first half of this year.
In an election climate, the increase in spending above revenue is, of course, a regionalized version of the fiscal bomb that has been armed by the Bolsonaro government for the next year. It is the free-for-all of reelection, which pleases voters. The federal government itself has given a little help to partner states. In June, the three that had the largest overdue debts banked by the central government, according to the Report on Guarantees Honored by the Union, were Rio de Janeiro (R$ 709.93 million), Minas Gerais (R$ 518.77 million) and Goiás ( R$ 77.58 million) – all of them with governors who support the president for the second round. In total, according to the National Treasury Secretariat, the Union paid R$ 1.36 billion in commitments from governors at the end of the first semester. The amounts were paid because the Union is guarantor of states and municipalities in credit operations with financial institutions.
The fact is that among the state governments that increased investments the most were some of those that had the best performances in their electoral corrals. At the top of the ranking, Minas Gerais anabolized spending by 498.2% compared to January to June 2018, with an injection of BRL 955.7 million. Therefore, it may not have been a coincidence that governor Romeu Zema (Novo) renewed his term for another four years with 56.18% of the votes, while in the same backyard his ally Bolsonaro (43.6%) lost to Lula (48. two%). In Rio de Janeiro, where governor Cláudio Castro (PL) was preferred by 56.67% of voters, expenses were boosted by 441.8% in the first half of the year. As in Pará, where Helder Barbalho (MDB), the best approved in the country with 70.4% of the votes, investments doubled in the same period (100.6%). The collection data indicate that the state funds guided many voters to vote, and help to explain Bolsonaro’s defeat in places where governors sympathetic to the president were reelected, such as the aforementioned case of Minas Gerais.
While federal revenue reached R$ 1.089 trillion from January to June, a real increase of 11% (IPCA) over the first half of last year, according to the Federal Revenue, the state’s cash gained, on average, almost double that percentage. The turning point took place in February, when the collection of states and municipalities reached R$ 440 billion, the best result since 2014, according to economist Vilma Pinto, director of the Independent Fiscal Institution of the Senate (IFI), in a report by the Value. The figure also represents an increase of 20% over 2021. In the assessment of economist Antonio Pires, economist at the Brazilian Institute of Economics of the Getulio Vargas Foundation (FGV Ibre), the pace of expansion of expenses, much higher than what was calculated before and above the GDP growth, reflects the electoral calendar and improved revenues. “This is a very positive result if we can exclude political contamination of investment decisions from the analysis,” said Pires. “But if there is no economic recovery in the next two or three years, these investments will become a huge headache for governors.”
Although the recent improvement in the fiscal situation of state governments and the Federal District is undeniable, four complicating factors make the picture more uncertain in the coming years, according to a study by Cláudio Hamilton Matos dos Santos, planning and research economist at the Directorate of Macroeconomic Studies and Policies. (Dimac) from IPEA. The first is the medium-term trend of growth in spending on idle servers. The second is the uncertainty about the continuity of the adjustment in progress since 2014 in expenditures with active personnel. The third is the sustainability of the current framework of public investments. The fourth and final challenge for the public accounts in the coming years is the sustainability of the current benign situation of revenues, given the recent changes in the maximum rates of the Tax on the Circulation of Goods and Services (ICMS) levied on fuels. Whichever governor or president is in charge of the states and the country, it is indisputable that the balance of errors or successes in the fiscal field will be paid by the voter.
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