Instituted in 2016 as a new and powerful anchor for the country’s fiscal accounts following years of largesse, Brazil’s federal spending cap is dead. And, ironically, it was dismantled on the watch of an orthodox, pro-market, right-wing Economy minister, who has failed in his attempts to convince elites that it would be possible to grant a “waiver” to boost social spending without jeopardizing the current legal framework.
Meanwhile, the government’s congressional coalition is preparing a constitutional amendment bill which, in practice, frees up around BRL 80 billion (USD 14 billion, or just under 1 percent of Brazil’s GDP) to be spent in 2022 — on top of the Executive’s budget proposal submitted in August.
This fiscal wiggle room relates to the government’s registered warrants, known in Brazil as precatórios. Lawmakers’ proposal is to cap the total repayments the government will be forced to make next year, as well as remove these payments from federal spending ceiling rules.
The money freed up from this piece of budget juggling would largely be used to boost cash transfers to poor families — with President Bolsonaro concerned about his dipping popularity figures — and to keep around BRL 20 billion in parliamentary grants, funds used by lawmakers to finance projects in their constituencies.
Laws can only go so far
The spending cap will be joining a list of 11 other nominally active fiscal rules determining how the government can spend...
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