Budget issues the latest chapter in Brazil’s ongoing crisis

When Congress finally approved the 2021 federal budget at the end of last week, it appeared that a huge weight was finally lifted off the government’s back. But celebrations were put on ice when it became apparent that the budget proposal was little more than an unworkable farce, sparking a crisis that could lead the administration to breach fiscal responsibility rules. 

Problems began with the delay. 

By only approving the budget three months after the usual deadline, the proposal was based on government estimates made in August of last year — now extremely outdated. In mid-2020, Brazil’s benchmark interest rate was estimated to ht 2.6 percent — it has since been raised and further hikes are expected — GDP growth estimates for 2021 were optimistic, and inflation was far below the current level of 5.2 percent.

While this problem could have been avoided by an amendment by the Economy Ministry, lawmakers managed to create an even bigger mess.

To appease his colleagues, budget rapporteur Senator Márcio Bittar allocated a record BRL 48.8 billion (USD 8.47 billion) to parliamentary grants — individual budgetary allowances used by politicians to fund projects in their constituencies. To do this, Mr. Bittar slashed BRL 26.5 billion from the government’s...