On Tuesday (9), the Chamber of Deputies approved the Proposal for a Constitutional Amendment (PEC) of the Precatório and sent the text to the Federal Senate, where it may undergo changes, or even be rejected. An important issue from an economic point of view, as it paves the way for the government to break the Spending Ceiling, the PEC is also a way for the Jair Bolsonaro government to make its re-election viable in 2022, as it will have more money to spend.
Precatório are judicial debts of the Union with individuals and legal entities, generally public servants such as teachers, health professionals, technicians in some area of civil service, or general service professionals. These labor debts, tax debts or any other issue in which the government is defeated drag on for years in court until they receive a final sentence, which becomes part of the mandatory budget expenditures.
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This year, federal court orders are around BRL 54.7 billion and in the 2022 Budget the forecast was to pay an amount in the region of BRL 89.1 billion, a factor that led the Minister of Economy, Paulo Guedes, to nickname it the theme of “meteor”.
In addition, the Spending Ceiling, instituted by the Michel Temer (MDB) government and placed by the market as a major containment point for public spending, was also changed with the PEC. Until now, the budget lock took into account the inflation of the 12 months accumulated until June of the previous year and froze government spending – which operated with a lower inflation rate –, but now it will consider the IPCA of the previous year.
As the current inflationary situation in Brazil is very different from when the ceiling went into effect, in 2017, the economic team has gained an opening to spend more. The PEC opens up a fiscal space of R$91 billion to make possible spending in a campaign year and, mainly, to boost the Auxílio Brasil, a new income transfer program that will reach families in extreme poverty with installments of R$400 up to the end of elections.
Why is the PEC important to the government?
Bolsonaro manages, with the PEC approved (the Senate’s approval still needs), to push the “meteors” of the precatório to the following governments, putting the responsibility of payments to the next presidents. The text provides that the limit on expenditure on court orders will be valid until the end of the spending cap regime (2036).
A projection made by the Precatory Commission of the Brazilian Bar Association (OAB) indicates that the public debt could reach R$ 1.5 trillion by 2036 if the government continues to pay forward.
With popularity at a low, largely due to the troubled economic and social conduct during the Covid-19 pandemic, the government needs to generate a positive agenda to pull votes in next year.
In recent days, the government has even tried to put a vision of patriotism in the PEC, indicating that those who vote against the text vote against the poorest. Yesterday (9), Bolsonaro said in an interview to a government website that the opposing deputies are affecting “the people of Bolsa Família”.
Now, with a social program to call his own, the president hopes to make the PEC viable in the Senate in up to two weeks and the Ministry of Economy should start the first payments of Auxílio Brasil in December.
Another BRL 600 million will be used to pay the gas allowance, subsidizing up to 50% of the value of the cylinder for low-income families, in addition to providing another BRL 3.6 billion for the so-called “diesel bag”, which will transfer R $400 to about 750,000 truck drivers.
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