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Brazil has billions in public funds, but can’t use it against the coronavirus

. Jun 29, 2020
Brazil has billions in public funds, but can't use it against the coronavirus Image: Salomé Gloanec/TBR

President Jair Bolsonaro recently sanctioned a law to scrap a BRL 8.6 billion public fund used to contain the weakening of the Brazilian currency and pay the public debt. Now, this money goes straight to the Treasury Department and cannot be used to fight the Covid-19 pandemic. While this decision was widely criticized, the president’s hands were tied, as Brazilian legislation prohibited him from using the fund for anything else other than taming the rise of the U.S. Dollar or paying off public debt. According to the Economy Ministry, Brazil has 281 of these public funds that pool federal money to be used in specific areas, such as education, health, the prison system, and telecommunications.

</p> <p>The existence of these funds goes back to 1922, when they were created to help guarantee that part of Brazil&#8217;s tax revenue would be set aside for areas deemed as vital for development. But as time passed, the solution became a problem: the number of public funds skyrocketed, and the money stopped being put to good use.</p> <p>Last year, Economy Minister Paulo Guedes <a href="https://g1.globo.com/economia/noticia/2019/11/05/governo-propoe-extincao-da-maior-parte-dos-fundos-publicos.ghtml">submitted a constitutional amendment bill</a> to extinguish most of these funds, suggesting the country had almost BRL 220 billion on hand that it couldn&#8217;t use, due to restrictive legislation.</p> <p>The decision on whether to go through with scrapping these funds will come down to the Senate — but the bill is only likely to see a vote after the Covid-19 pandemic. While the money could be put to good use during the health crisis, President Jair Bolsonaro may not want to get rid of them just yet, eyeing these funds as useful political instruments in his bid to win support in Congress.</p> <p>The president has sought to get into bed with the so-called &#8220;Big Center&#8221; of Congress — a group of largely faceless conservative parties that will happily jump into any ruling coalition in exchange for positions in the government and access to money. In one of these gestures toward the Big Center, the government handed control of the National Education Development Fund (FNDE) over to the right-wing Progressistas party. With a budget forecast at BRL 30 billion for this year, the fund will now be used by the Big Center outfit to get close to mayors and governors to gain support for the 2020 municipal elections.</p> <h2>Brazilian states in dire need</h2> <p>Projections from the Economy Ministry show Brazil&#8217;s public deficit hitting BRL 700 billion in 2020 — a huge increase from 2019&#8217;s shortfall of just BRL 61 billion. But almost 30 percent of this amount is already in federal accounts, with Mr. Guedes estimating balances of almost BRL 220 billion in the country&#8217;s public funds.</p> <p>If the government was allowed to use this money, it is unlikely that the deficit would fall, but the administration would no longer have to issue public bonds. Meanwhile, Brazil&#8217;s states are <a href="https://oglobo.globo.com/economia/a-espera-de-socorro-da-uniao-estados-preveem-atraso-nos-salarios-de-servidores-apos-queda-na-arrecadacao-24425964?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=newsdiaria">desperately waiting</a> for aid from the federal government to pay their outstanding debts, which include salaries, pensions, and other monthly expenses. Congress approved aid to these local administrations but President Bolsonaro delayed the ratification of the legislation.&nbsp;</p> <p>This delay is seen as a powerful political tool, as some of the states in desperate debt — Minas Gerais, Rio Grande do Sul, and <a href="https://oglobo.globo.com/economia/mesmo-com-socorro-do-governo-rio-deve-comecar-atrasar-salario-de-servidor-em-setembro-24425988?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=newsdiaria">Rio de Janeiro</a> — have shown little support for the president. Rio de Janeiro Governor Wilson Witzel, for instance, has become one of Mr. Bolsonaro&#8217;s most <a href="https://brazilian.report/opinion/2020/06/01/former-bolsonaro-allies-turn-anti-fascist-as-opposition-grows/">outspoken critics</a>. Politicians <a href="https://brazilian.report/power/2020/05/27/is-there-foul-play-in-rio-de-janeiros-covid-19-corruption-probe/">without money</a> are politicians in <a href="https://brazilian.report/coronavirus-brazil-live-blog/2020/05/26/breaking-feds-target-rio-governor-wilson-witzel/">trouble</a>.</p> <p>Amid this fight for funds, the federal government wants to pay its debts in order to have something to show for when the re-election campaign comes around in 2022. At the same time, states and municipalities are hoping to turn in results for the same reason, with cities going to the polls later this year. But at the end of the day, it is the population that suffers, as billions of reais lay dormant, which could be put to good use.

 
Brenno Grillo

The Brazilian Report's correspondent in Brasília, Brenno has worked as a journalist since 2012, specializing in coverage related to law and the justice system. He has worked for O Estado de S. Paulo, Portal Brasil, ConJur, and has experience in political campaigns.

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