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Guedes asks for help to make budget ends meet

. Dec 04, 2020
Guedes asks for help to make budget ends meet Economy Minister Paulo Guedes. Photo: Alan Santos/PR

Despite a record-smashing GDP growth rate of 7.7 percent in the third quarter, the immediate future of the Brazilian economy remains uncertain. We are two weeks from the end of the legislative year and the 2021 budget has yet to be approved. Meanwhile, the government has been unable to propose a welfare program that would replace the coronavirus emergency salary — the massive stimulus program that prevented an even bigger economic downfall amid the pandemic.

Major signs of uncertainty can be gleaned from the recent public declarations of Economy Minister Paulo Guedes.

</p> <p>The <a href="https://brazilian.report/business/2018/11/29/chicago-boys-chile-brazil-paulo-guedes/">Chicago School-educated libertarian</a> is the administration&#8217;s ultimate austerity hawk, but even he has expressed his desire for a &#8220;flexible&#8221; primary deficit goal in 2021. Essentially, he wants to be able to change the deficit targets — initially set at BRL 139 billion, or USD 27 billion — as the government updates its revenue estimates.</p> <p><strong>The Brazilian Report</strong> spoke with senior officials in Mr. Guedes&#8217; team, who say the Economy Ministry is engaged in a behind-the-scenes lobbying effort to have its proposals approved by the Federal Accounts Court (TCU), a sort of audit tribunal that monitors public spending. In an October report, the court called &#8220;flexible&#8221; deficit targets unconstitutional.</p> <p>Mr. Guedes is attempting a highly risky maneuver.</p> <p>One board member at the TCU told <strong>The Brazilian Report</strong> that flexible targets are in violation of Brazil&#8217;s Fiscal Responsibility Law and constitute what is known in Brasília lingo as &#8220;fiscal pedaling&#8221; — an <a href="https://br.reuters.com/article/idINL1N1272OH20151008">impeachable offense</a> that served as grounds for ousting Dilma Rousseff from the presidency in 2016.</p> <p>Crime or no crime, an impeachment process can only move forward if the House Speaker so decides, which makes the February 2021 speaker&#8217;s election all the more consequential. The Supreme Court will decide by next week whether incumbent Rodrigo Maia — who is disliked by President Jair Bolsonaro — will be allowed to run for another two-year term in charge of the House.</p> <h2>Guedes not the only asking form a little push from the accounts court</h2> <p>The Economy Minister is by no means the first member of the government to try and negotiate his way around TCU rules. Earlier this year, <a href="https://brazilian.report/power/2020/09/25/sacked-health-minister-lifts-lid-on-bolsonaro-covid-19-response/">former Health Ministry Luiz Henrique Mandetta</a> met multiple times with the court&#8217;s members to request special treatment due to the massive spending required by the coronavirus effort.</p> <p>Speaking to <strong>The Brazilian Report</strong>, Mr. Mandetta denies asking for &#8220;a less rigorous analysis&#8221; of his accounts. &#8220;I asked them to be on the ministry&#8217;s side during the decision-making process at a time when the market [for medical supplies and inputs] was completely distorted. TCU auditors took part in our budget-related meetings during that entire period,&#8221; he said, via text message.</p> <p>During an event organized by the Public Management School at the Paraná State Accounts Court, Mr. Mandetta argued in favor of special treatment for health administrators during the pandemic:</p> <p>&#8220;The exceptional conditions of this crisis shouldn&#8217;t be used to harbor misdeeds, of course. But they should be taken into consideration by auditors who could flag false cases of overpricing in public procurement. One possibility is auditing by means of comparison with price averages over a longer period of time — as historic averages are outdated due to a cut-throat race for supplies and equipment.&#8221;</p> <p>His pleas were successful, and the TCU allowed the government to spend the remainder of this year’s <a href="https://brazilian.report/newsletters/brazil-daily/2020/10/30/squabbles-over-2021-budget-could-throw-brazil-into-shutdown/">budget</a> until December 2021. Normally, spending permissions expire at the turn of the calendar year. The move could create a “parallel budget” of BRL 40 billion (USD 7.6 billion), something the Economy Ministry was originally against.

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Débora Álvares

Débora Álvares has worked as a political reporter for newspapers Folha de S.Paulo, O Estado de S.Paulo, Globo News, HuffPost, among others. She specializes in reporting on Brasilia, working behind-the-scenes coverage at the Executive, Legislative, and Judiciary branches of government.

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