Congress poised to weaken deficit goals

Congressman Danilo Forte of Ceará. Photo: Vinicius Loures/CD

Congressman Danilo Forte, the rapporteur of the 2024 Budgetary Directives Law (which sets guidelines for next year’s budget), on Tuesday said he’s “open” to reviewing the goal of a zero deficit budget set by the government’s new fiscal framework.

Mr. Forte told newspaper O Estado de S. Paulo that President Luiz Inácio Lula da Silva “put a damper” on legislative agenda items that could increase revenue by admitting that the government will have “a hard time” reaching a zero deficit in 2024.

Last Friday, in a news conference at the presidential palace, Lula said that a zero deficit is unlikely “because we do not want to cut on investment and public works.” Lula added that the financial market is “too greedy” by expecting zero deficit in 2024. On that day, Brazil’s main stock market index dropped 1.29 percent.

The Congressional Budget Committee held a public hearing earlier today, but Senator Daniella Ribeiro, the committee’s chair, has not yet scheduled a session to vote on the bill. This also gives time for the administration to modify the draft before a vote. Brazil holds a national holiday on Thursday, making a vote this week unlikely.

Mr. Forte previously said on Friday that Lula’s statement was a “reality check” and that it was time to “redo the math.” He also understood that Lula’s words were not just a green light for Congress to adopt looser deficit rules, but rather an “order” to do so. “Despite all of [Finance Minister Fernando Haddad’s] effort, the president himself threw in the towel,” he said.

Yesterday, an irritated Mr. Haddad was repeatedly asked by reporters about President Lula’s recent comments. He reaffirmed his goal of a fiscal balance and deflected blame for public account woes to the Supreme Court and Congress, which he said were maintaining and increasing tax privileges for corporations. Markets reacted negatively to Mr. Haddad’s comments, and the stock market fell 0.68 percent on Monday.