Confirmed this week by President Jair Bolsonaro in office for an eventual second term, Economy Minister Paulo Guedes wants a change in the fiscal framework to correct what he classifies as errors in the design of the spending ceiling. Lula’s team, on the other hand, wants a more “flexible” framework, with room to increase investments and reinforce public policies and government programs to which it has been waving in the campaign.
Guedes defends an expense control rule and insists that the “spirit of the spending cap”, created in the Michel Temer government, is good for the economy, although he considers that the rule has been poorly constructed. For him, in a new trend, the public debt reference is what “translates” fiscal sustainability.
With two proposals on the table, from the National Treasury and the Secretariat of Economic Policy (SPE), Guedes intends to adapt the two models in the guideline he outlined and which considers the incorporation of additional tools to reduce the debt and guarantee an improvement in public accounts, such as privatizations, divestments and what he calls the “unraveling of public banks”. For this reason, the fight for the BNDES to return R$ 90 billion of Treasury loans made to the public bank in the past has been fought.
With this return of Treasury resources and new tools, debt could fall more quickly and make room for spending growth above inflation. In the Treasury proposal, expenditure may grow above inflation depending on the level of indebtedness. There is a bonus of 0.5 percentage point in case of greater fiscal effort, the equivalent of R$ 8 billion.
Lula’s alternatives
The priorities of Lula’s team are the social, education, health and science and technology areas, as well as investments in projects capable of boosting economic growth. This is the case of the return of Minha Casa Minha Vida, the housing program of the PT governments that has received special attention from Lula in the campaign events.
Lula has already said and repeated that he wants to reinforce the primary results regime in the new fiscal framework and for that he has said that he will make surpluses within a responsible management of public accounts, if elected. This is the proposal that he likes the most, which also has a more flexible fiscal target model for the primary result, with the setting of “bands” with targets that vary according to the economic cycle.
In practice, this type of rule resembles the so-called business cycle-adjusted fiscal result targets. In the event of a deceleration and reduction in collection, there could be an increase in spending as a counter-cyclical measure. Another option is the discounting of priority investments and growth stimulators of the target.
Even so, with the articulation formed in the second round, Lula is being pressured to move towards the center with the definition of a rule that foresees control of expenses. The new ally, Senator Simone Tebet (MDB-MS), third in the elections, defended the definition of a fiscal anchor.
The information is from the newspaper. The State of São Paulo.
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