The Solicitor General’s Office has asked the Supreme Court to once again postpone a trial over the FGTS mandatory severance fund for workers. Depending on the verdict, the case could cost the federal government billions of reais.
The FGTS funds can be accessed by formal workers in limited circumstances. The money can be used to purchase real estate and is used by the government to finance infrastructure projects. FGTS funds are notoriously adjusted below inflation, resulting in a net loss for workers and subsidizing the housing programs.
In 2014, the center-left Solidarity party filed a lawsuit to replace the rate used to adjust FGTS funds. In April this year, Justices André Mendonça and Luís Roberto Barroso ruled that the FGTS should at least have the same rate of return as savings accounts. Nine justices have yet to vote.
The Solidarity party’s lawyers argue that the main purpose of the FGTS is as a mandatory retirement fund, and therefore it must be kept above inflation. The federal government has argued that the FGTS is also used to finance housing policies.
“There is great concern from the government regarding the impact of this trial, mainly on the sustainability of the housing finance system,” Solicitor General Jorge Messias said this week.
After meeting with government officials, including Finance Minister Fernando Haddad, Chief Justice Barroso previously postponed the remainder of the trial from October 18 to November 8. Labor Minister Luiz Marinho announced Tuesday that the government would ask for another postponement.
Mr. Messias has estimated that the new rate demanded by the Solidarity party would cost the federal government around BRL 8.6 billion (USD 1.7 billion) over four years — and would push the administration further away from its deficit targets.
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