by Marcela Ayres
BRASILIA (Reuters) -The government is evaluating whether the temporary benefit that will boost the new Bolsa Família will be paid outside the ceiling, which would require a license for an expenditure of around 30 billion reais, or whether there will be an option for a change in the rule spending ceiling to accommodate it, said on Wednesday the Minister of Economy, Paulo Guedes.
In an online participation in a forum promoted by the Brazilian Association of Real Estate Developers (Abrainc), Guedes confirmed that Auxílio Brasil will pay a minimum amount of 400 reais to beneficiaries, as demanded by President Jair Bolsonaro, but that a significant portion of this increase will be limited to 2022 , year of presidential elections in the country.
“We are now looking for the final formatting of these 400 reais”, said Guedes.
“By synchronizing the adjustments –on the one hand the mandatory expenses, salaries, on the other hand the ceiling–, or asking for a waiver with a limited number, just over 30 billion (BRL)”, he added.
Regarding the first option, Guedes pointed out that the adjustment of salaries –a mandatory government expenditure– follows an index (INPC of the previous year), while the spending ceiling another (IPCA for the 12 months until June of the previous year). A change towards synchronization mentioned by the minister would represent, according to him, an anticipation of the revision of the spending ceiling, which, according to the Constitution, could only happen in 2026.
Internal calculations by the Ministry of Economy are that the mismatch between the two indexes demands that the 2022 budget project already sent to Congress be updated to include around 18 billion reais more for social security benefits.
Whatever the decision, it is political, said Guedes. At various times in his speech, the minister sought to stress that his portfolio had prepared a more structural solution for the increase in the program, which involved the approval of the Income Tax reform.
The idea was that the taxation of dividends, contained in the text, would be the source of revenue for the new program. As Bolsa Família is an ongoing expense, the Fiscal Responsibility Law (LRF) requires that permanent changes in its format be compensated for.
As the measure did not advance in the Senate, the government had to look into other ways to support the most vulnerable in the post-pandemic, justified the minister.
POLICY
“We will continue to fight for reforms. The timing, I always said, of reforms is politics. If the policy wanted, it would reform the Income Tax and give us a permanent program”, said Guedes.
“Since the policy did not deliver the Income Tax reform to the Senate, we have to adopt the same look of solidarity with the weakest, the same look of social protection, but we cannot achieve the same permanent level. There is a component that is transitory because we are without the source, which would be taxes on capital income”, he added.
Guedes defended that the government seeks to be “reformist and popular” and “not “populist”, amid widespread criticism that circumventing the spending ceiling would be an electoral measure and would not represent an effective change for Bolsa Família.
The implementation of temporary aid leaves for 2023 –and for the election winner– the real solving of the issue, since, apart from the extra benefit, the program will not have had its budget structurally modified despite the reality left by the crisis, with 14 millions of unemployed Brazilians.
The day before, the news about the plan to pay part of Brazil’s Aid outside the spending ceiling soured the mood of the markets, causing the stock market to fall, rising future interest rates and rising the dollar against the real.
Earlier this Wednesday, Bolsonaro had confirmed the value of the program at 400 reais, but ensuring that there would be respect for the ceiling. Currently, the average benefit of Bolsa Família is around 190 reais.
The Minister of Citizenship, João Roma, said in a speech at Planalto in the afternoon that Bolsa Família would be increased by 20% and that the additional transitional benefit was being tailored within the concepts of fiscal responsibility. According to Roma, the queue for the new Bolsa Família will close in December and the program’s audience will jump from 14.7 million families to 16.9 million.
In order to make an income transfer program of 400 reais viable in 2022, the government came up with the solution of using the Bolsa Família budget plus temporary aid that, as it is not structured as a continued expense, will not need to be defined as a source of income, a source with direct knowledge of the matter told Reuters.
The original idea was for Bolsa Família to maintain its budget of 34.7 billion reais planned for next year.
But, in order to strengthen the amount paid to the beneficiaries, the idea of creating a temporary aid, at a cost of around 50 billion reais, came up. Part of the aid would be paid within the spending ceiling and up to 30 billion reais would be left out. As it has a limited duration, this expense would not need compensation by the LRF.
(By Marcela Ayres; Edited by Maria Pia Palermo)
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