Without defaulting on IOUs, Bolsonaro won’t be able to boost cash transfers

Bruno Funchal. Photo: Antonio Cruz/ABr

Bruno Funchal, Brazil’s Treasury Secretary, told private investors on Friday that boosting the sums paid by federal cash-transfer programs are conditional on getting Congress to pass a constitutional amendment allowing the administration to spread court-ordered payments across several years.

The government has over BRL 90 billion (USD 17.1 billion) in IOU bonds (known as precatórios) due this year. Yesterday, Economy Minister Paulo Guedes said these payments cannot be met without the government breaking the federal spending cap — which is an impeachable offense. By spreading the payments, the government would free around BRL 30 billion on the federal budget ahead of the 2022 election.

Speaking at an online event promoted by brokerage firm XP, Mr. Funchal said President Bolsonaro’s idea of doubling average payments to very poor families dependent on handouts will cost up to BRL 28 billion in 2022. The president is trying to boost his approval ratings by jacking up social programs, which offer some relief to households battling the pandemic recession, rampant inflation, and a deep long-lasting crisis.

In another statement that jarred with investors, Mr. Funchal said the government “is merely a passenger when it comes to inflation,” arguing that, as prices go up at a rapid pace, the government loses budgetary space. The remarks come just one day after Central Bank Chairman Roberto Campos Neto said the monetary authority would do anything within its power to tame inflation.