Government assesses removing ‘excess’ debt from court orders from spending ceiling – Economy

BRASILIA – The government is already beginning to discuss internally a “plan B” for the billion dollar bill for precatory (amounts owed by the government after the final court decision) in 2022, calculated at BRL 89.1 billion.

Although the minister of Economy, Paulo Guedes, insists on the need to parcel out the higher value debts, ministers involved in the negotiations recognize that the Constitutional Amendment Proposal (PEC) sent by the government faces resistance and is viewed with suspicion by parliamentarians and the financial market. Surveys made in Congress point out that the text of the PEC will not be approved. For this reason, this wing wants to open a dialogue – including with governors who are creditors of R$ 16.6 billion in court orders in 2022 – and reach a more “palatable” outcome.

Among the solutions considered possible is to remove only the “excess” growth of judicial debts from the reach of the spending ceiling (the rule that limits the advance of expenses to inflation and is today the government’s anchor to indicate the sustainability of the accounts) , that is, around R$ 30 billion higher than expected for 2022, maintaining a similar rule for subsequent years. Another option is to remove the expenditure on court orders from the ceiling and recalculate the limit since its origin, in 2016.

The alternatives are still under discussion within the government and also with the National Congress and, therefore, there is no definition of the path to be taken. The diagnosis, however, is that there are communication problems that need to be addressed and the need to “adjust the narrative” and give greater transparency to the solution chosen. One of the problems was to associate the approval of the PEC with an increase in the average benefit value of the new Bolsa Família to R$ 400, which sources consulted by the report indicate that it was not and is not under consideration.

In this wing of the government, the assessment is that the problem of precatoria was treated in a “nebulous” way, which contributed to the noise and uncertainty, which in recent weeks fueled the rise of the dollar and interest rates in the financial market. According to a member of the government, regardless of the option chosen, it is necessary to be clear about this information so that anyone can “do the math” of what will be the space for new expenses in the spending ceiling in 2022.

The government had an additional space of around R$ 30 billion in the spending ceiling next year to expand the Bolsa Família, renamed as Brazil Aid. On the eve of sending the proposal to Congress, the bill for the precatório – called “meteor” by Guedes – appeared in an amount above the R$ 57 billion programmed by the economic team. Spending on lawsuits occupied the slack that would have been the social program, which led the government to propose the payment in installments.

In the financial market, there is fear that the government will use the PEC to maneuver the Budget and create additional spending space in 2022, with an eye on the president’s reelection Jair Bolsonaro. Initial government calculations pointed to an “extra” of R$7.8 billion in the year to come with the measure. The economic team has revised the calculations and now says there won’t be any leftovers.

A member of the government heard by the Estadão/Broadcast it guarantees that, even with the new solutions for judicial debts, artifices are not being sought to create additional space within the ceiling and be able to spend more in an election year, but rather to solve the problem of precatório without major turbulence.

For this wing, one of the communication problems is the association between the PEC and the launch of Auxílio Brasil with a boosted value. Although some have seen this link as a chance to “encourage” Congress to approve the payment of judicial debts in installments, there are government members who argue that the increase in precatório not only compromises the social program, but also other budget expenses.