Center-left party changes stance on budget bill, raising red flags

The government is facing increased risk of failing to pass a constitutional amendment bill allowing it to cap court-ordered debt repayments (known as precatórios) scheduled for next year. The bill is pivotal to free budget space in order to finance President Jair Bolsonaro’s new cash-transfer scheme, set to replace and expand the 18-year-old Bolsa Família program. Mr. Bolsonaro hopes the new handouts will improve his flagging popularity numbers.

After the Supreme Court temporarily suspended the use of budgetary grants commonly used to whip votes, the center-left Democratic Labor Party (PDT) announced it will establish a party line in opposition to the bill. In last week’s first-round vote, 15 PDT members sided with the government, sparking an internal crisis within the group. 

Presidential hopeful and PDT member Ciro Gomes threatened not to run in the 2022 election if the party maintained its support for the government’s bill. The party’s House whip Wolney Queiroz says the change will guarantee “unity” within the ranks after heads failed to establish a formal party line in the first-round vote.

The government still believes it will receive enough votes to approve the bill. Government whip Ricardo Barros said at least 50 lawmakers who were absent in the first round will bolster their ranks.

Uncertainty around the vote has rocked Brazilian markets. Moreover, investors have disapproved of the government’s decision to break with fiscal responsibility principles in order to boost the president’s re-election chances.

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