House committee approves ‘desperation bill’ and biofuel subsidies

On Thursday afternoon, a House special committee approved a bill declaring a state of emergency until the end of the year and granting the Brazilian government the right to spend an extra BRL 41 billion (USD 7.6 billion) on social policies and stimulus programs. 

The 36-1 majority in the committee reflects the overwhelming support the bill obtained in the Senate last week. All but one senator voted in favor of the constitutional amendment proposal — despite the glaring fiscal risks it brings to the budget. Previously reportedly nicknamed the “kamikaze bill” by the Economy Ministry, the proposal is now being called the “desperation bill” by opponents, and the “benefits bill” by its backers.

Over 60 percent of the extra spending will be used to pay for a 50-percent increase in payments of the Auxílio Brasil cash-transfer program, President Jair Bolsonaro’s flagship social policy. The bill also includes a stimulus package for truckers, taxi drivers, and senior citizens.

The Independent Fiscal Institution (IFI) — a watchdog that monitors public spending and operates under the Senate’s umbrella — said the bill “further weakens spending cap rules and reduces confidence in [Brazil’s] commitment to fiscal discipline.”

A separate bill, approved simultaneously, provides subsidies for biofuel producers. It aims to keep biofuels more competitively priced against diesel and gasoline, which have gotten cheaper at the pump in recent days since Congress approved a fuel tax cap.

The decision by the House committee opens the door for a final floor vote. The chamber must hold a minimum number of sittings before voting on constitutional amendments, which is why the House held a one-minute session earlier today.