Economist Guilherme Mello, a member of the quartet that takes care of the economic area in Lula’s transition team, said in an interview published by the newspaper Folha de S. Paulo this Saturday (19.nov.2022) there will be a consensus in the group: the spending cap rule will need to be modified and Brazil will need a new framework of rules for public accounts.
In addition to Guilherme, the economic core of the transition includes economists André Lara Resende, Persio Arida and Nelson Barbosa,
Mello declared that the different suggestions for the reform of the ceiling rule presented, such as that of the National Treasury and that of economists Arminio Fraga and Monica de Bolle, are being studied and will be considered in the discussions.
The economist defends that the new ceiling rule comes in a complementary law. Currently, the spending limit is in the constitution. It would first be necessary to remove it from the constitutional rule, through a PEC (Proposed Amendment to the Constitution). Mello did not rule out including an authorization of this type in the ceiling-breaking PEC, which was presented to party leaders this week. The economist points out, however, that the group has not yet made a decision on suggestions for the proposal.
“In my personal opinion, it would be important to do as it was with the LRF (Fiscal Responsibility Law), with a complementary law. This is a question that will have to be decided by Congress. There is no finalized discussion, in the sense of what the transition group’s suggestions will be, either for the PEC or for the new framework [fiscal] or tax reform. Nothing has been finalized,” he said.🇧🇷
Mello said that the group has received collaborations from economists, such as Felipe Salto, Monica de Bolle and Arminio Fraga, and from congressmen on what to do with the fiscal framework. “Our plan is to read them, analyze them, discuss among ourselves and make a diagnosis of the current framework, show the challenges and dilemmas that arise, and present a suggestion. It doesn’t have to be a closed proposal, but a suggestion on how we think it should be handled. But we are still in the initial moment of receiving data and suggestions”🇧🇷
“The economics group was formed a week ago, and we have less than a month to complete the diagnosis. We’ve already had 3 meetings. We have a huge advantage these days with something called WhatsApp. We are in permanent assemblysaid Mello.
The economist was questioned about why they had not made the request for an increase in the Budget in parallel with the commitment to change the fiscal rule. He declared that, at this moment, it is necessary to quickly guarantee a space for the payment of Bolsa Família, which is “at risk” without the approval of a PEC or any legal measure that allows the increase of R$ 600. He also declared that it is necessary to recompose the social programs that are underfunded.
“It needs some public investment. It is a text that is open to discussion by congressmen. Does this mean there will be no rule discussion? Not. We said throughout the campaign that there will be a rediscussion of tax rules. Lula says this. Now, this discussion has to be done with the new Congress, because it is a structural change, as well as the discussion of tax reform. They will occur when we have appointed ministers, sworn in president and new Congress, and they will be placed at a negotiating table that will also include society. The PEC does not have that objective”declared the economist.
“The Lula government will have, as it always has, a commitment to fiscal responsibility. But this commitment will not be at the expense of the poorest, of social responsibility. This PEC is a 1st measure, required by the inheritance that the current government bequeathed us. During the election, Bolsonaro himself said that, if elected, he would change the fiscal rule and change the Budget that he himself sent”he stated.
Regarding the tax reform, Mello said that the economy group has not yet reached a discussion of proposals. “Initially, we are raising the theme of the group’s organization, the work methodology and also the issue of expenses, the PEC, the debate on the fiscal framework. But, for example, the idea of creating a VAT (Value Added Tax) is widespread. The importance of simplifying the structure of indirect taxes, of reducing the regressivity of these taxes, of fighting the tax war. All of this is agreement. The format we will discuss”.
Mello said he thought it was important to discuss the tax reform on consumption and on income in parallel. “If you are going to approve everything together, if you go separately, but that the formulation be done together, which is what makes it possible to change the current Brazilian tax balance, which is very heavy and which penalizes the poorest”🇧🇷
The economist also said in the interview that it is not prudent to think of a shock to change the fuel tax exemption in a 1st moment and that the market reactions on the economic policy that will be adopted by Lula is wrong.
“The market is a space of very sharp and very quick perceptions. I’m sure anyone who reads the president’s statements [eleito] Lula, not only the most recent ones, but the historical set, clearly understands what is at stake. I think these things pass, one hour the market is more discouraged, in another, more excited”said.
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